EXHIBIT 2.1
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EXECUTION COPY
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STOCK PURCHASE AGREEMENT
AMONG
CI INVESTMENT HOLDINGS, INC.
AND
NORTEK, INC.
AND
WDS LLC
AS OF DECEMBER 19, 2003
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TABLE OF CONTENTS
1. PURCHASE AND SALE OF THE SHARES.......................................4
1.1. THE SHARES...................................................4
1.2. CONSIDERATION................................................4
1.3. THE CLOSING..................................................4
1.4. PURCHASE PRICE ADJUSTMENT....................................5
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................7
2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.................7
2.2. CHARTER DOCUMENTS............................................7
2.3. CAPITALIZATION...............................................8
2.4. AUTHORITY RELATIVE TO THIS AGREEMENT.........................8
2.5. TITLE TO SHARES..............................................8
2.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...................8
2.7. COMPLIANCE WITH LAW; PERMITS.................................9
2.8. FINANCIAL STATEMENTS........................................10
2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS........................10
2.10. NO UNDISCLOSED LIABILITIES..................................11
2.11. LITIGATION..................................................12
2.12. EMPLOYEE BENEFIT PLANS......................................12
2.13. EMPLOYER RELATIONS..........................................14
2.14. MATERIAL CONTRACTS..........................................15
2.15. SUFFICIENCY OF ASSETS.......................................16
2.16. TITLE TO PROPERTIES.........................................16
2.17. INSURANCE...................................................17
2.18. WARRANTY CLAIMS.............................................17
2.19. TRANSACTIONS WITH AFFILIATES................................17
2.20. TAXES.......................................................18
2.21. ENVIRONMENTAL MATTERS.......................................19
2.22. REAL ESTATE.................................................19
2.23. INTELLECTUAL PROPERTY.......................................20
2.24. BROKERS.....................................................21
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER..........................21
3.1. ORGANIZATION................................................21
3.2. AUTHORIZATION...............................................21
3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS..................22
3.4. LITIGATION..................................................22
3.5. INVESTMENT REPRESENTATION...................................22
3.6. FINANCING...................................................23
3.7. BROKERS.....................................................23
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER.................23
4.1. REPRESENTATIONS AND WARRANTIES..............................24
4.2. PERFORMANCE OF OBLIGATIONS..................................24
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4.3. SELLERS' CERTIFICATE........................................24
4.4. NO MATERIAL ADVERSE EFFECT..................................24
4.5. INJUNCTIONS.................................................24
4.6. GOVERNMENTAL APPROVALS......................................24
4.7. FUNDING.....................................................24
4.8. RELEASE OF TRANSFERRED COMPANIES............................24
4.9. NO PROCEEDINGS..............................................25
4.10. TRANSITION SERVICES AGREEMENT...............................25
4.11. OPINION.....................................................25
4.12. TRANSFER OF CWD.............................................25
4.13. GENERAL.....................................................25
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS...................25
5.1. REPRESENTATIONS AND WARRANTIES..............................25
5.2. PERFORMANCE OF OBLIGATIONS..................................26
5.3. BUYER'S CERTIFICATE.........................................26
5.4. INJUNCTIONS.................................................26
5.5. GOVERNMENTAL APPROVALS......................................26
5.6. OPINION.....................................................26
5.7. GENERAL.....................................................26
6. COVENANTS OF THE PARTIES.............................................27
6.1. ACCESS TO PREMISES AND INFORMATION..........................27
6.2. CONDUCT OF BUSINESS PRIOR TO CLOSING........................27
6.3. REASONABLE EFFORTS..........................................28
6.4. CONFIDENTIALITY.............................................28
6.5. BUSINESS RECORDS............................................29
6.6. REGULATORY AUTHORIZATIONS AND CONSENTS; FILINGS UNDER
HSR ACT; THIRD PARTY CONSENTS...............................29
6.7. NO SECTION 338 ELECTION.....................................30
6.8. WARN........................................................30
6.9. FURTHER ASSURANCES..........................................30
6.10. NOTIFICATION; SUPPLEMENTS TO DISCLOSURE LETTER..............30
6.11. CONFLICTS OF INTEREST.......................................31
6.12. TAX MATTERS.................................................31
6.13. TAX INDEMNIFICATION.........................................34
6.14. ACTIONS WITH RESPECT TO FINANCING...........................35
6.15. CLAIMS UNDER SELLER INSURANCE POLICIES......................37
6.16. RELEASE OF PARTIES AND THEIR AFFILIATES.....................37
6.17. PAYMENT IN FULL OF CERTAIN TRANSFERRED COMPANY INDEBTEDNESS.38
6.18. NO SOLICITATION OF ACQUISITION PROPOSALS....................38
6.19. NON-COMPETITION; NON-SOLICITATION...........................38
6.20. POST-CLOSING LIMITATIONS....................................40
6.21. PAYMENT OF YEAR END BONUSES.................................41
6.22. TRANSFER OF CWD.............................................41
6.23. POST-CLOSING ENVIRONMENTAL SAMPLING.........................41
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7. TERMINATION; EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.42
7.1. TERMINATION.................................................42
7.2. EFFECT OF TERMINATION.......................................43
8. SURVIVAL; GENERAL INDEMNIFICATION....................................43
8.1. SURVIVAL....................................................43
8.2. OBLIGATION OF THE SELLERS TO INDEMNIFY......................43
8.3. LIMITATIONS ON INDEMNIFICATION BY SELLERS...................45
8.4. OBLIGATION OF THE BUYER TO INDEMNIFY........................46
8.5. LIMITATIONS ON INDEMNIFICATION BY BUYER.....................46
8.6. PROCEDURE FOR INDEMNIFICATION...............................47
8.7. SOLE AND EXCLUSIVE REMEDY...................................49
8.8. TREATMENT OF INDEMNIFICATION PAYMENTS.......................50
9. DEFINITIONS..........................................................50
10. MISCELLANEOUS........................................................58
10.1. NOTICES.....................................................58
10.2. EXPENSES OF TRANSACTION.....................................59
10.3. ENTIRE AGREEMENT............................................59
10.4. SEVERABILITY................................................59
10.5. AMENDMENT; WAIVER...........................................59
10.6. PARTIES IN INTEREST.........................................59
10.7. ASSIGNMENT..................................................60
10.8. GOVERNING LAW...............................................60
10.9. CONSENT TO JURISDICTION.....................................60
10.10. WAIVER OF JURY TRIAL........................................60
10.11. RELIANCE....................................................61
10.12. SPECIFIC ENFORCEMENT........................................61
10.13. NO WAIVER...................................................61
10.14. INVESTIGATION; NO ADDITIONAL REPRESENTATIONS................61
10.15. NEGOTIATION OF AGREEMENT....................................61
10.16. CONSTRUCTION................................................61
10.17. HEADINGS....................................................62
10.18. COUNTERPARTS................................................62
10.19. USAGE.......................................................62
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STOCK PURCHASE AGREEMENT
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THIS AGREEMENT (this "AGREEMENT") is made as of December 19, 2003 among
CI INVESTMENT HOLDINGS, INC., a Delaware corporation (the "BUYER"), NORTEK,
INC., a Delaware corporation ("NORTEK"), and WDS LLC, a Delaware limited
liability company and a wholly-owned subsidiary of Nortek ("WDS" and, together
with Nortek, the "Sellers").
WHEREAS, WDS owns all of the outstanding shares (the "SHARES") of
capital stock of PLY GEM INDUSTRIES, INC., a Delaware corporation ("PLY GEM"
and, together with its Subsidiaries listed in Section 2.1 of the Disclosure
Letter as of the Closing Date, the "TRANSFERRED COMPANIES"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from WDS, and WDS will sell to the Buyer, all of the Shares in
exchange for the Purchase Price (as defined below);
NOW, THEREFORE, in consideration of these premises, the respective
covenants of the Buyer and the Sellers set forth below and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1. THE SHARES. Subject to compliance with all the terms and
conditions of this Agreement and in reliance on the representations and
warranties set forth herein, WDS agrees to sell to the Buyer, and the Buyer
agrees to purchase from WDS, at the Closing (as defined below) all of the Shares
for the Purchase Price.
1.2. CONSIDERATION. Subject to any increase under Section 6.2
hereof, the consideration to be paid by the Buyer to WDS for the Shares shall be
cash in the total amount (the "PURCHASE PRICE") of $560,000,000 MINUS the
aggregate principal amount of the Indebtedness listed in EXHIBIT 6.17
outstanding at the Closing MINUS the aggregate of the Stock Option Adjustment
Amounts for all Class A Stock Options cancelled in connection with the
transactions contemplated hereby.
1.3. THE CLOSING. Subject to the terms and conditions of this
Agreement (including without limitation the provisions of Sections 4 and 5
hereof), the closing of the transactions contemplated hereby (the "CLOSING")
shall be held at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP,
1285 Avenue of the Americas, New York, New York, as soon as practicable
following the satisfaction or waiver by the applicable party of all of the
conditions to the Closing set forth in Sections 4 and 5, including without
limitation the termination or expiration of the waiting period (including any
extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), and in any event within three business days
following such satisfaction or waiver (the actual day on which the Closing takes
place being referred to herein as the "CLOSING DATE"). The Closing shall take
place at 10:00 a.m. local time on the Closing Date. Subject to the terms and
conditions of this Agreement, at the Closing the following transactions will
take place:
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(a) WDS will deliver to the Buyer a stock certificate or
certificates representing all of the Shares, together with a separate stock
power or powers duly executed in blank, in proper form for transfer, and with
all appropriate stock transfer stamps affixed;
(b) The Buyer will deliver to WDS the Purchase Price by wire
transfer of immediately available funds to an account specified by the Sellers
at least two business days prior to the Closing; and
(c) Each party will deliver to the other such certificates and
other documents as are contemplated hereby or as may reasonably be requested by
the other party to evidence compliance with the terms hereof.
1.4. PURCHASE PRICE ADJUSTMENT.
(a) As soon as practicable and in any event not later than sixty
(60) days after the Closing Date, the Sellers shall cause Ernst & Young LLP, or
such other nationally recognized independent accounting firm chosen by the
Sellers, at the expense of the Transferred Companies, to prepare and deliver to
the Sellers and the Buyer a balance sheet for Ply Gem as of immediately prior to
the Closing (the "CLOSING BALANCE SHEET"), together with a statement (the
"STATEMENT") setting forth in reasonable detail the determination of the Net
Working Capital of Ply Gem based upon amounts set forth on the Closing Balance
Sheet (the "CLOSING NET WORKING CAPITAL"). The Buyer shall cause the Transferred
Companies to give the Sellers and their authorized representatives reasonable
access to all books, records, personnel, offices and other facilities and
properties of the Transferred Companies and their accountants as the Sellers may
require to prepare the Closing Balance Sheet and the Statement. The Closing
Balance Sheet and the Statement shall be prepared in accordance with GAAP,
applied in a manner consistent with the preparation of the Financial Statements.
The Closing Balance Sheet and the Statement shall be final and binding on the
Buyer and the Sellers, subject to the process of objection provided in this
Section 1.4 below.
(b) The Buyer may dispute the amounts reflected on the Closing
Balance Sheet and Statement, but only on the basis that (1) the Closing Balance
Sheet and the Statement have not been prepared in accordance with the provisions
of Section 1.4(a) or (2) there has been an error in mathematical calculation
relating to the Statement. If the Buyer disagrees with the amount of the Closing
Net Working Capital on such basis, the Buyer may, within thirty (30) days after
the deliveries of the Closing Balance Sheet and the Statement, deliver a notice
to the Sellers (the "DISPUTE NOTICE") setting forth the Buyer's calculation of
the Closing Net Working Capital and specifying, in reasonable detail, those
items or amounts in the Closing Balance Sheet and Statement affecting the
calculation of the Closing Net Working Capital as to which it disagrees and the
reasons for such disagreement. If prior to the conclusion of such 30-day period
the Buyer notifies the Sellers in writing that it will not provide any Dispute
Notice or if no Dispute Notice is delivered within such 30-day period, the
Closing Net Working Capital, as set forth on the Statement, shall become final,
conclusive and binding on the parties hereto for all purposes of this Section
1.4.
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(c) If the Buyer delivers a Dispute Notice to the Sellers within
the 30-day period described above, the parties shall use reasonable efforts to
reach agreement on the disputed items or amounts in order to determine the
Closing Net Working Capital. If the Sellers and the Buyer do not resolve all
disputed items or amounts set forth in the Dispute Notice within fifteen (15)
days after delivery of a Dispute Notice, the remaining disputed items and
amounts will be submitted to a nationally recognized independent accounting firm
in the U.S. mutually agreed to by the Buyer and the Sellers (the "INDEPENDENT
ACCOUNTANTS") for resolution of such disputed items and amounts. The parties
will have the opportunity to present their positions with respect to such
disputed items and amounts to the Independent Accountants, and such disputed
items and amounts shall be resolved by the Independent Accountants in accordance
with the requirements of Section 1.4(a). The Independent Accountants shall
prepare a written report setting forth the resolution of such disputed items and
amounts and calculating the revised amount of Closing Net Working Capital, which
shall be delivered to each of the Sellers and the Buyer promptly, but in no
event later than thirty (30) days after such disputed items and amounts are
submitted to the Independent Accountants. Such revised amount of Closing Net
Working Capital shall not reflect any difference from the amount of Closing Net
Working Capital set forth on the Statement other than differences required to
reflect the resolution of such disputed items and amounts by the Independent
Accountants. The revised amount of Closing Net Working Capital set forth on the
Independent Accountants' written report shall be final, conclusive and binding
upon the Sellers and the Buyer. The procedures set forth in this Agreement for
resolution of disputes concerning the Closing Net Working Capital shall be final
and binding on all of the parties, and shall not be subject to appeal of any
kind. The fees and disbursements of the Independent Accountants shall be
allocated between the Buyer, on the one hand, and the Sellers, on the other
hand, such that the Buyer's share of such fees and disbursements shall be in the
same proportion that the aggregate amount of the disputed items and amounts
submitted by the Buyer to the Independent Accountants that are unsuccessfully
disputed by the Buyer (as finally determined by the Independent Accountants)
bears to the total amount of such disputed items and amounts so submitted by the
Buyer to the Independent Accountants. Each of the Sellers and the Buyer shall
execute a reasonably acceptable engagement letter, if requested to do so by the
Independent Accountants, and shall provide reasonable access to their respective
employees who are responsible for financial matters and in the case of the
Buyer, to the books and records of the Transferred Companies.
(d) If the Closing Net Working Capital, as finally determined in
accordance with this Section 1.4, is less than $47,668,000 (the "TARGET NET
WORKING CAPITAL"), the Sellers shall pay, within five (5) business days after
the final determination of the Closing Net Working Capital, an amount to the
Buyer equal to such difference. If the Closing Net Working Capital, as finally
determined in accordance with this Section 1.4, is more than the Target Net
Working Capital, the Buyer shall pay, within five (5) business days after the
final determination of the Closing Net Working Capital, an amount to WDS equal
to such difference. Any payment made pursuant to this Section 1.4 shall be made
by wire transfer of immediately available funds to an account designated by the
payee, and shall be deemed by the parties to be an adjustment to the Purchase
Price. The amount of any such payment due under this Section 1.4(d) shall bear
interest at the rate of 6% per annum from and including the Closing Date through
the date of payment.
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2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
In order to induce the Buyer to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, the Sellers jointly and
severally represent and warrant to the Buyer that:
2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Transferred Companies and Nortek is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all corporate power and authority necessary to own, lease
and operate its properties and assets and to carry on its business as it is now
being conducted. WDS is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all limited liability company power and authority necessary to own, lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Each of the Transferred Companies is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties and assets owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for any such failure to be so duly qualified or
licensed and in good standing that has not had a Material Adverse Effect. A true
and complete list of all Subsidiaries of Ply Gem, together with the jurisdiction
of incorporation and the authorized capitalization of each such Subsidiary, and
the percentage of each such Subsidiary's outstanding capital stock owned by Ply
Gem or another such Subsidiary, is set forth in Section 2.1 of the disclosure
letter delivered simultaneously with the execution and delivery of this
Agreement (the "DISCLOSURE LETTER"). All of the outstanding shares of capital
stock of each of the Subsidiaries of Ply Gem are duly authorized, validly
issued, fully paid and nonassessable, and were issued in compliance with the
registration and qualification requirements of all applicable securities Laws
and all applicable Contracts, and all of such shares owned by Ply Gem or another
such Subsidiary are owned free and clear of all Liens. Except for the
Subsidiaries of Ply Gem set forth in Section 2.1 of the Disclosure Letter, none
of the Transferred Companies owns any equity interest in, or any security which
by its terms is convertible into or exchangeable or exercisable for, or any
option, warrant or other right to purchase, or is a party to any agreement,
arrangement or commitment to purchase, any equity interest in, any corporation,
partnership, joint venture or other business association or entity, and there
are no commitments, arrangements, undertakings or obligations of any of the
Transferred Companies to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any Person that is not a
Subsidiary set forth in Section 2.1 of the Disclosure Letter.
2.2. CHARTER DOCUMENTS. The Sellers have heretofore made available
to the Buyer a complete and correct copy of the Charter of each of the
Transferred Companies as in effect on the date of this Agreement. The Charters
of each of the Transferred Companies are in full force and effect and no
Transferred Company is in violation of any of the provisions of its Charter. The
minute books (or comparable records) of each of the
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Transferred Companies have heretofore been made available to the Buyer, have
been maintained in the Ordinary Course of Business, and accurately reflect in
all material respects all transactions and actions referred to in such minutes
and consents in lieu of meetings. The stock books (or comparable records) of
each of the Transferred Companies have heretofore been made available to the
Buyer and are true and complete in all material respects.
2.3. CAPITALIZATION. The authorized capital stock of Ply Gem
consists of 3,000 shares of common stock, $0.01 par value. As of the date
hereof, 100 shares of common stock of Ply Gem are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and were issued in
compliance with the registration and qualification requirements of all
applicable securities Laws and all applicable Contracts. Except as set forth in
the preceding sentence, no shares of capital stock or other voting securities of
Ply Gem are issued, reserved for issuance or outstanding. There are no options,
warrants or other rights, securities, agreements, arrangements or commitments of
any character obligating the Sellers or any Transferred Company to issue,
transfer, grant or sell any shares of capital stock of, or other equity
interests in, any Transferred Company. There are no bonds, debentures, notes or
other indebtedness of any Transferred Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of any Transferred Company are required to
vote.
2.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Sellers have all
necessary power and authority (corporate or otherwise) to execute and deliver
this Agreement and to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Sellers and the consummation by the Sellers
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate or limited liability company action on the part of the
Sellers. This Agreement has been duly and validly executed and delivered by the
Sellers, and assuming the due authorization, execution and delivery by the
Buyer, constitutes a legal, valid and binding obligation of the Sellers,
enforceable against the Sellers in accordance with its terms.
2.5. TITLE TO SHARES. WDS is the sole record and beneficial owner
of, and has good and valid title to, the Shares free and clear of any Lien,
except for restrictions on transfer imposed by applicable securities Laws. Upon
delivery to the Buyer of the stock certificates representing the Shares and
payment for the Shares at the Closing as provided in this Agreement, WDS will
convey to the Buyer good and valid title to the Shares, free and clear of any
Lien, other than those created by the Buyer and restrictions on transfer imposed
by applicable securities Laws.
2.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 2.6(a) of the
Disclosure Letter, the execution and delivery of this Agreement by the
Sellers do not, and the performance of this Agreement by the Sellers
and the consummation of the transactions contemplated hereby will not,
(i) violate the Charter of either Seller, (ii) violate the Charter of
any Transferred Company, (iii) contravene, conflict with or result in a
violation of, or constitute a failure to comply with, any Laws or
Orders applicable to the Shares or any Transferred Company or the
Sellers or by which any properties or assets owned or used by any
Transferred Company are bound or affected, (iv) contravene, conflict
with or result in a violation of any of the terms or requirements of,
or give any Governmental Authority the right to revoke, withdraw,
suspend, cancel, terminate or modify any Permit that is held by
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any Transferred Company or that otherwise relates to the business of,
or any of the properties or assets owned or used by, any Transferred
Company, or (v) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or give to third parties any rights of consent, termination,
amendment, modification, acceleration or cancellation of, or result in
the loss of any property, rights or benefits under, or result in the
imposition of any additional obligations under, or result in the
creation of a Lien on the Shares or any of the properties or assets
owned or used by any Transferred Company pursuant to any Contract to
which any Transferred Company or Seller is a party or by which the
Shares or any Transferred Company or Seller or any properties or assets
owned or used by any Transferred Company or Seller are bound or
affected, except as to clauses (iii), (iv) and (v) above for any such
violation, breach, default, right, alteration or other occurrence that
would not reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Sellers do not, and the performance of this Agreement by the Sellers
and the consummation of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority to be obtained or
made by the Sellers or any Transferred Company except (i) for
compliance with applicable disclosure requirements, if any, under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "EXCHANGE ACT"), and compliance with the
pre-merger notification requirements of the HSR Act and any similar
foreign Laws listed in Section 2.6(b) of the Disclosure Letter and (ii)
where the failure to obtain any such consent, approval, authorization
or permit, or to make any such filing or notification, would not
reasonably be expected to have a material adverse effect on the ability
of the Sellers to perform their obligations under this Agreement and
would not reasonably be expected to have a Material Adverse Effect.
2.7. COMPLIANCE WITH LAW; PERMITS. Except as set forth in Section
2.7 of the Disclosure Letter:
(a) Since January 1, 2001, each Transferred Company has
been in compliance with all Laws and Orders applicable to the Shares or
any Transferred Company or by which any properties or assets owned or
used by any Transferred Company is bound or affected, except for any
failures to comply which would not reasonably be expected to have a
Material Adverse Effect. Since January 1, 2001, no Transferred Company
and no Seller has received any written notice from any Governmental
Authority regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any Law or Order applicable to
the Shares or any Transferred Company or by which any properties or
assets owned or used by any Transferred Company are bound or affected,
or (B) any actual, alleged, possible or potential obligation on the
part of any Transferred Company to undertake, or to bear all or any
portion of the cost of, any remedial action, which, in the case of
either clause (A) or clause (B), if such violation, failure to comply
or obligation were determined to be valid and enforceable, would
reasonably be expected to have a Material Adverse Effect.
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(b) The Transferred Companies hold all of the Permits
necessary to permit each Transferred Company to lawfully conduct and
operate its business in the manner in which such business is currently
conducted and to own and use its properties and assets in which such
properties and assets are currently owned and used, except for any
failure to hold any Permit which would not reasonably be expected to
have a Material Adverse Effect (the Permits so held being collectively
referred to herein as the "TRANSFERRED COMPANY MATERIAL PERMITS").
Section 2.7 of the Disclosure Letter sets forth a true and complete
list of each Transferred Company Material Permit. Each Transferred
Company Material Permit is valid and in full force and effect and,
since January 1, 2001, except as would not reasonably be expected to
have a Material Adverse Effect, (i) each Transferred Company has been
in compliance with all of the terms and requirements of each
Transferred Company Material Permit, and (ii) no Transferred Company
and no Seller has received any written notice from any Governmental
Authority regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with any term or requirement of any
Transferred Company Material Permit, or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension, cancellation
or termination of, or any modification to, any Transferred Company
Material Permit. Except as would not reasonably be expected to have a
Material Adverse Effect, all applications required to have been filed
for the renewal of any Transferred Company Material Permit have been
duly filed on a timely basis with the appropriate Governmental
Authorities, and all other material filings required to have been made
with respect to the Transferred Company Material Permits have been duly
made on a timely basis with the appropriate Governmental Authorities.
2.8. FINANCIAL STATEMENTS. The Sellers have furnished the Buyer
with copies of the following financial statements of Ply Gem and its
Subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada Inc.:
(a) the audited balance sheets as of December 31, 2002 and 2001 (the "AUDITED
BALANCE SHEETS") and the statements of operations and cash flow for the fiscal
years ended December 31, 2002, 2001 and 2000, including the accompanying notes,
which contain the unqualified report of Ernst & Young LLP (collectively the
"AUDITED FINANCIAL STATEMENTS"); and (b) the unaudited balance sheet as of
October 4, 2003 (the "MOST RECENT BALANCE Sheet") and the related statement of
operations, and cash flow for the nine-month period ended on such date,
including the accompanying notes (collectively, the "INTERIM FINANCIAL
STATEMENTS" and, together with the Audited Financial Statements, the "FINANCIAL
STATEMENTS"). The Financial Statements (i) present fairly in all material
respects the financial position of the Transferred Companies and the results of
operations of the Transferred Companies as of the respective dates thereof and
for the periods covered thereby and (ii) were prepared in accordance with GAAP,
applied on a consistent basis throughout the periods covered thereby (except as
disclosed therein). The Interim Financial Statements have been prepared on a
basis consistent with that of the Audited Financial Statements (except as
disclosed in the Interim Financial Statements) and have been reviewed by Ernst &
Young LLP in accordance with Statement on Auditing Standards No. 100.
2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.9 of the Disclosure Letter, since the date of the Most Recent Balance
Sheet, each Transferred Company has conducted its business in the Ordinary
Course of Business and there has not occurred:
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(a) any Material Adverse Effect or any event or circumstance that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect; (b) any change by any of the Transferred Companies in accounting
methods, principles or practices, except as may be required by GAAP and as
disclosed in the Interim Financial Statements; (c) any sale of or grant or other
creation of any Lien (other than Liens that will be discharged at Closing) on
any property or assets owned or used by any Transferred Company with a value in
excess of $500,000, except in the Ordinary Course of Business; (d) any (i)
increase in the salary or other compensation payable to any of the employees,
directors, officers or consultants of any Transferred Company, other than
customary compensation increases awarded in the Ordinary Course of Business,
(ii) payment or commitment to pay any bonus, or other additional salary or
compensation to any of the employees, directors, officers or consultants of any
Transferred Company, other than the payment or commitment to pay bonuses or
other additional salary or compensation in the Ordinary Course of Business,
(iii) grant of any severance or termination pay to any of the employees,
directors, officers or consultants of any Transferred Company, other than
pursuant to Transferred Company Plans, or (iv) increase of any benefits payable
under any existing severance or termination pay policies or employment
agreements with any of the employees, directors, officers or consultants of any
Transferred Company, other than pursuant to Transferred Company Plans; (e) any
one or more related capital expenditures by any Transferred Company involving
more than $500,000 in the aggregate; (f) any payment of any material Liabilities
of any Transferred Company otherwise than in the Ordinary Course of Business;
(g) any cancellation or waiver by any Transferred Company of any claim or right
which is material to the Transferred Companies considered as a whole or any
cancellation or waiver outside the Ordinary Course of Business by any
Transferred Company of any claim or right with a value to any Transferred
Company in excess of $500,000; (h) any termination (other than by expiration in
accordance with its terms), amendment or modification of any Contract which
would have been required to be listed on Section 2.14 of the Disclosure Letter
if the date of this Agreement was the date of the Most Recent Balance Sheet; (i)
any damage resulting from a single event to any properties or assets owned or
used by any Transferred Company with a value in excess of $500,000; (j) any
abandonment or cancellation of any Intellectual Property Rights which are
material to the Transferred Companies considered as a whole; (k) any incurrence,
assumption or guaranty by any Transferred Company of any Indebtedness of any
kind, other than Indebtedness which is incurred in the Ordinary Course of
Business, (l) any amendment of the Charter of any of the Transferred Companies;
(m) any split, combination, reclassification, or other modification of the terms
of the capital stock of any Transferred Company; (n) any issuance or sale of any
shares of capital stock of any Transferred Company or any security or obligation
which by its terms is convertible into or exchangeable for, or any option,
warrant or other right to purchase any such capital stock; (o) any merger or
consolidation with any Person or any acquisition of any capital stock or
business of any Person, or any consummation of any other business combination
transaction, in each case, whether in a single transaction or series of related
transactions; or (p) any agreement by any of the Transferred Companies to do any
of the foregoing.
2.10. NO UNDISCLOSED LIABILITIES. The Transferred Companies do not
have any liabilities, whether absolute, accrued, known, choate, contingent or
otherwise, except: (a) liabilities fully and adequately reflected or reserved
against on the face of the Most Recent Balance Sheet, (b) liabilities incurred
since the date of the Most Recent Balance Sheet in the
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Ordinary Course of Business, (c) liabilities that are the subject of another
representation or warranty set forth in this Section 2 and are disclosed
pursuant to such other representation or warranty or are not required to be so
disclosed, whether because such other representation or warranty is limited or
qualified with respect to time, dollar amount, Knowledge of the Sellers,
materiality, Material Adverse Effect or any similar qualification, (d)
liabilities disclosed in Section 2.10 of the Disclosure Letter, (e) liabilities
under, or incurred in connection with, this Agreement, and (f) liabilities which
would not reasonably be expected to have a Material Adverse Effect.
2.11. LITIGATION. Except as set forth in Section 2.11 of the
Disclosure Letter, there are no Proceedings pending or, to the Knowledge of the
Sellers, threatened against any of the Transferred Companies, by or before any
Governmental Authority, other than any Proceedings which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Except as would not reasonably be expected to have a Material Adverse Effect, to
the Knowledge of the Sellers, there are no outstanding Orders of any
Governmental Authority (a) against or involving any Transferred Company or any
of their respective businesses or any of their respective properties or assets,
owned, leased or operated, which Orders have continuing obligations that have
not to date been fully satisfied or (b) against or involving any officer or
director of any Transferred Company that prohibit such officer or director from
engaging in or continuing any material conduct, activity or practice relating to
the business of any Transferred Company.
2.12. EMPLOYEE BENEFIT PLANS.
(a) Section 2.12(a) of the Disclosure Letter contains a
list of all material "employee pension benefit plans" (as defined in
Section 3(2) of ERISA), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) and each other material severance or termination
pay, incentive or deferred compensation, bonus, stock purchase or
option, phantom stock or other equity-based compensation or change-in
control plan, policy, arrangement or agreement, whether written or oral
(each, a "PLAN"), maintained or contributed to by any Transferred
Company for the benefit of any United States employee or former
employee of any Transferred Company (all such Plans being referred to
herein as "TRANSFERRED COMPANY PLANS"). The Sellers have made available
to the Buyer copies of (i) each written Transferred Company Plan, (ii)
for each Transferred Company Plan, to the extent applicable, the most
recent (A) annual report on Form 5500 filed with the Internal Revenue
Service, (B) audited financial statements, and (C) actuarial reports,
(iii) the most recent summary plan description and summary of material
modification for each Transferred Company Plan for which such summary
plan description or summary of material modifications is required and
(iv) each trust agreement, group annuity contract or other funding
instrument relating to any Transferred Company Plan, if any. No
Transferred Company has any liability for any Plan other than a
Transferred Company Plan, except as would not reasonably be expected to
have a Material Adverse Effect. No Transferred Company has made any
legally enforceable agreement to modify the terms of any Transferred
Company Plan, other than such changes or amendments as may be required
by applicable Law or are made in the Ordinary Course of Business.
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(b) All Transferred Company Plans are in compliance in
all respects with their terms and applicable Law (including, where
applicable, the Code and ERISA), except where the failure to be in
compliance has not had or would not reasonably be expected to have a
Material Adverse Effect. Each Transferred Company Plan that is intended
to be tax-qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS to the effect that the
Transferred Company Plan satisfies the requirements of Section 401(a)
of the Code and that its related trust is exempt from taxation under
Section 501(a) of the Code and, to the Knowledge of the Sellers, there
are no facts or circumstances that would reasonably be expected to
cause the loss of such qualification, except such facts and
circumstances that may be corrected pursuant to Rev. Proc. 2003-44
without liability that would have or would reasonably be expected to
have a Material Adverse Effect. There is no pending or, to the
Knowledge of the Sellers, threatened lawsuit, material claim, lien or
other material claim or controversy relating to any Transferred Company
Plan, other than claims for benefits in the normal course.
(c) Except as set forth in Section 2.12(c) of the
Disclosure Letter, neither any Transferred Company nor any corporation,
trust, partnership or other entity that would be considered as a single
employer with a Transferred Company under Section 4001(b)(1) of ERISA
or Sections 414(b), (c), (m), or (o) of the Code (such corporation,
trusts, partnerships or other entities being referred to as "ERISA
AFFILIATES") maintains or contributes to, or within the preceding six
years has maintained or contributed to or had any obligation to
maintain or contribute to, any employee benefit plan subject to Title
IV of ERISA or Section 412 of the Code (any such plan, a "COMPANY
PENSION PLAN"). No Transferred Company, officer of any Transferred
Company or any of the Transferred Company Plans which are subject to
ERISA, including the Company Pension Plans, any trusts created
thereunder or any trustee or administrator thereof, has engaged in a
nonexempt "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject any Transferred Company or
any officer of any Transferred Company to any material tax or penalty
on prohibited transactions imposed by such Section 4975 or to any
material liability under Section 502(i) or 502(1) of ERISA.
(d) Except as set forth in Section 2.12(d) of the
Disclosure Letter, neither any Transferred Company nor any ERISA
Affiliate has incurred, or is reasonably expected to incur, any
material liability under Title IV of ERISA that has not been satisfied
in full and for which a Transferred Company would, or would reasonably
be expected to, incur any material liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation ("PBGC"). The
PBGC has not instituted proceedings to terminate any Company Pension
Plan (except multi-employer plans, as such term is defined in Section
3(37) of ERISA, each a "MULTIEMPLOYER PLAN") and, to the Knowledge of
the Sellers, no condition exists that presents a material risk that
such proceedings will be instituted.
(e) Except as set forth in Section 2.12(e) of the
Disclosure Letter, neither any Transferred Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any material
liability that has not been satisfied in full in connection a
Multiemployer Plan on account of a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in sections 4203 and
4205 of ERISA.
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(f) With respect to any Transferred Company Plans that
are "employee welfare benefit plans" within the meaning of ERISA
Section 3(1), (i) all such Transferred Company Plans are unfunded and
no such Transferred Company Plan is funded through a "welfare benefits
fund" (as such term is defined in Section 419(e) of the Code) and (ii)
each such Transferred Company Plan that is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code), complies in
all material respects with the applicable requirements of Section
4980B(f) of the Code.
(g) Except as set forth in Section 2.12(g) of the
Disclosure Letter, no Transferred Company has any obligation to provide
retiree medical or other post-employment welfare benefits to any person
(other than health care continuation coverage as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA").
(h) Except as set forth in Section 2.12(h) of the
Disclosure Letter, the consummation of the transactions contemplated by
this Agreement will not entitle any current or former employee of the
Transferred Company to severance benefits or any other payment
(including, without limitation, "excess parachute payments" as such
term is defined in Section 280G of the Code) or cause the acceleration
or vesting of any payment or benefits under any Transferred Company
Plan.
(i) Except as set forth in Section 2.12(i) of the
Disclosure Letter, with respect to any plan, policy, arrangement or
agreement that would be a Transferred Company Plan but for the fact
that it is not for the benefit of any United States employee or former
employee (the "FOREIGN PLANS"):
(i) each such plan has been administered in
accordance with its terms and complies with the requirements prescribed
by any and all laws, except such failure to do so as would not
reasonably be expected to have a Material Adverse Effect. The Sellers
have made available to the Buyer true and complete copies of the
material documents relating to the Foreign Plans. There is no pending
or, to the Knowledge of the Sellers, threatened lawsuit, material claim
or other material controversy relating to any Foreign Plan, other than
claims for benefits in the normal course; and
(ii) all employer and employee contributions to
each Foreign Plan required by law or by the terms of such Foreign Plan
have been made, or, if applicable, accrued in accordance with normal
accounting practices, except such failures to contribute or accrue as
would not have a Material Adverse Effect.
2.13. EMPLOYER RELATIONS. Except as disclosed in the Section 2.13 of
the Disclosure Letter, no employee of any Transferred Company is represented by
a union, and, to the Knowledge of the Sellers, no union organizing efforts have
been conducted since January 1, 2001 or are now being conducted. Except as
disclosed in Section 2.13 of the Disclosure Letter, no Transferred Company has
at any time since January 1, 2001 had, nor to the Knowledge of the Sellers is
there now threatened, any material strike, picket, work stoppage, work slowdown
or similar labor dispute involving the operations of employees of any
Transferred Company.
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2.14. MATERIAL CONTRACTS.
(a) Section 2.14 of the Disclosure Letter includes a true
and complete list of all of the following Contracts to which any
Transferred Company is a party or by which any Transferred Company or
any properties or assets owned or used by any Transferred Company are
bound or affected (each of the Contracts listed on Section 2.14 of the
Disclosure Letter shall be referred to herein collectively as the
"TRANSFERRED COMPANY MATERIAL CONTRACTS"):
(i) Any and all Contracts (other than the
Transferred Company Plans) with any current or former officer,
director, shareholder, employee, consultant or other agent of any
Transferred Company or any Affiliate of any of the foregoing, in each
case which are likely to involve payments by or on behalf of the
Transferred Companies in excess of $250,000 in any year;
(ii) Any and all other Contracts (other than the
Transferred Company Plans) with any current or former officer,
director, shareholder, employee, consultant or other agent of any
Transferred Company or any Affiliate of any of the foregoing, which are
subject, upon consummation of the sale of the Shares, to acceleration
of benefits having a cost to the Transferred Companies in excess of
$250,000 with respect to such Person;
(iii) All Contracts entered into on or after
January 1, 1998 to sell or otherwise dispose of any assets having a
fair market value in excess of $2,000,000, except sales of inventory in
the Ordinary Course of Business;
(iv) All Contracts pursuant to which any
Transferred Company has any obligation for Indebtedness (including any
guarantee thereof);
(v) All Contracts pursuant to which any
Transferred Company may be expected to perform services or deliver
goods with a value in excess of $2,500,000 in any year, except for
customer purchase orders issued or received in the Ordinary Course of
Business;
(vi) All Contracts pursuant to which the
Transferred Companies may be obligated to pay for goods and services to
be delivered or performed in excess of $2,500,000 in any year, except
for purchase orders issued in the Ordinary Course of Business;
(vii) Each joint venture agreement, partnership
agreement, and limited liability company agreement and each other
Contract (however named) involving a sharing of profits, losses, costs
or liabilities with any other Person, if such agreement or Contract is
material to the Transferred Companies considered as a whole;
(viii) Each Contract (or series of related
Contracts with Affiliated Persons) requiring capital expenditures from
and after the date of this Agreement by any Transferred Company in
excess of $500,000 in any year;
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(ix) Each Contract which contains a restriction
on any Transferred Company involving competing with a third party in
the business of any Transferred Company;
(x) Each Contract not otherwise described in
this Section 2.14(a) that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of any
Transferred Company in excess of $500,000;
(xi) Each Contract with any labor union or other
employee representative of a group of employees relating to wages,
hours and other conditions of employment; and
(xii) Each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
(b) Since January 1, 2001, except as would not reasonably
be expected to have a Material Adverse Effect, (i) each Transferred
Company has been in compliance with all applicable terms and
requirements of each Transferred Company Material Contract, (ii) to the
Knowledge of the Sellers, each other Person that is a party to any
Transferred Company Material Contract has been in compliance with all
applicable terms and requirements to such Contract and (iii) no
Transferred Company has given to or received from any other Person any
written notice regarding any actual, alleged, possible or potential
violation or breach of, or default under, or any threat to terminate,
any Transferred Company Material Contract.
2.15. SUFFICIENCY OF ASSETS. The facilities, machinery, equipment,
furniture, fixtures, vehicles, any related capitalized items and other property
of every sort and kind which the Transferred Companies own or have valid rights
to use are sufficient for the continued conduct and operation of the businesses
of the Transferred Companies considered as a whole after the Closing in the same
manner in all material respects as conducted and operated prior to the Closing
(assuming for this purpose receipt of any consents or waivers required under any
Contracts as a result of the transactions contemplated hereby).
2.16. TITLE TO PROPERTIES. The Transferred Companies own outright
and have good, valid and marketable title to all the properties and assets
(whether real, personal or mixed and whether tangible or intangible) which are
material to the Transferred Companies, considered as a whole, that they purport
to own, including all of the properties and assets reflected on the Most Recent
Balance Sheet and all of the properties and assets purchased or otherwise
acquired by any Transferred Company since the date of the Most Recent Balance
Sheet (but not including, however, property sold since the date of the Most
Recent Balance Sheet in the Ordinary Course of Business), in each case free and
clear of any Lien, except for (a) mortgages or security interests shown on the
Audited Balance Sheets or the Most Recent Balance Sheet as securing specified
liabilities with respect to which no material default (or event or circumstance
that, with or without notice or lapse of time or both, would constitute a
material default) exists; (b) mortgages or security interests incurred in
connection with the purchase of property or assets in the Ordinary Course of
Business after the date of the Most Recent Balance Sheet with respect to which
no material default (or event or circumstance that, with or without notice or
lapse of
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time or both, would constitute a material default) exists (such mortgages and
security interests being limited to the property or assets so acquired); (c)
Liens securing Taxes, assessments, governmental charges or levies, all of which
are not yet due and payable or are being contested in good faith, so long as
such contest does not involve any substantial danger of the sale, forfeiture or
loss of any assets; (d) inchoate workmen's, warehousemen's and similar Liens
arising or incurred in the Ordinary Course of Business that, except to the
extent reserved against on the Closing Balance Sheet, secure amounts that are
either (i) not past due and payable or (ii) are being contested in good faith;
(e) Liens that will be discharged in accordance with Section 4.8; and (f) Liens
set forth on Section 2.16 of the Disclosure Letter.
2.17. INSURANCE. Section 2.17 of the Disclosure Letter contains a
summary of the coverage provided under all policies or binders of fire,
liability, product liability, umbrella liability, real and personal property,
worker's compensation, vehicular, directors and officers liability, fiduciary
liability and other insurance covering occurrences after January 1, 2001 to
which any Transferred Company is a party or under which any Transferred Company,
or any director or other fiduciary of any Transferred Company, is or has been
covered at any time since January 1, 2001, and true and complete copies of such
policies or binders have been made available to the Buyer. Such policies and
binders are valid and binding in accordance with their terms and are in full
force and effect. Neither the Sellers nor any Transferred Company is in default
under, or has otherwise failed to comply with, in any material respect, any
provision contained in any such policy or binder. Except as would not reasonably
be expected to have a Material Adverse Effect, neither the Sellers nor any
Transferred Company has failed to give any notice or present any claim under any
such policy or binder in due and timely fashion. Except as set forth in Section
2.17 of the Disclosure Letter, neither the Sellers nor any Transferred Company
has received (x) any refusal of coverage or (y) any notice of cancellation or
non-renewal of any such policy or binder.
2.18. WARRANTY CLAIMS. Since January 1, 2001, there have been no (a)
citations or decisions by any Governmental Authority specifically stating that
any product manufactured, marketed or distributed at any time by any Transferred
Company (collectively, "TRANSFERRED COMPANY PRODUCTS") is defective or unsafe or
fails to meet any safety standards promulgated by such Governmental Authority or
(b) recalls ordered by any Governmental Authority with respect to any
Transferred Company Product. Except as would not reasonably be expected to have
a Material Adverse Effect or except pursuant to any Transferred Company's
standard merchandise return policies, which provide for the replacement or
return for credit of defective or damaged products or other returns for credit
at the request of the customer other than for the replacement or return for
credit of defective or damaged products, there are no pending or, to the
Knowledge of the Sellers, threatened warranty claims, against any Transferred
Company which would, in the aggregate, exceed the reserve for such claims
reflected in the Most Recent Balance Sheet, as such reserve has been adjusted in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
2.19. TRANSACTIONS WITH AFFILIATES. Neither the Sellers nor any of
their respective Affiliates (other than the Transferred Companies) are a party
to any Contract with any of the Transferred Companies other than Contracts
entered into in the Ordinary Course of Business and
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upon terms no less favorable to such Transferred Company than the terms that
would result from arms-length negotiations between unrelated parties.
2.20. TAXES. Except as set forth in Section 2.20 of the Disclosure
Letter:
(a) All Tax Returns required to be filed by, or which
include, any Transferred Company (for such periods as such Transferred
Company was owned directly or indirectly by Nortek) have been timely
filed (giving effect to extensions), all Taxes shown as due thereon
have been paid, and all such Tax Returns are true, complete and correct
in all respects, except as would not have a Material Adverse Effect.
The Transferred Companies have fully and timely paid all Taxes owed by
such companies (whether or not shown on any Tax Return). The Sellers
and the Transferred Companies have given or otherwise made available to
the Buyer copies of all Tax Returns, examination reports and statements
of deficiencies for taxable periods, or transactions consummated, for
which the applicable statutory periods of limitations have not expired.
(b) There are no outstanding liens for Taxes (other than
for current Taxes not yet due and payable) upon the assets of any
Transferred Company.
(c) There are no outstanding agreements extending or
waiving the statutory period of limitations applicable to any claim
for, or the period for the collection or assessment or reassessment of,
Taxes due from any of the Transferred Companies for any taxable period
and no request for any such waiver or extension is currently pending.
No audit or other Proceeding by any Governmental Authority is pending
or, to the Knowledge of the Sellers, threatened with respect to any
Taxes due from or with respect to any of the Transferred Companies, no
Governmental Authority has delivered to a Transferred Company or to
either of the Sellers written notice of any intention to assert any
deficiency or claim for additional Taxes against any of the Transferred
Companies, and no written claim has been delivered to a Transferred
Company or to either of the Sellers by any Governmental Authority in a
jurisdiction where none of the Transferred Companies file Tax Returns
that a Transferred Company is or may be subject to taxation by that
jurisdiction, and all such deficiencies of which written notice has
been delivered to a Transferred Company or to either of the Sellers for
Taxes asserted or assessed against any of the Transferred Companies
have been fully and timely paid, settled or properly reflected in the
Financial Statements.
(d) None of the Transferred Companies is a party to any
Contract relating to the sharing, allocation or indemnification of
Taxes, or any similar Contract (collectively, "TAX SHARING
AGREEMENTS"), or has any liability for Taxes of any Person (other than
members of the affiliated group, within the meaning of Section 1504(a)
of the Code, filing consolidated federal income tax returns of which
Nortek Holdings, Inc. is the common parent) under Treasury Regulation
ss. 1.1502-6, Treasury Regulation ss. 1.1502-78 or similar provision of
state, local or foreign Law, as a transferee or successor, by Contract,
or otherwise.
(e) None of the Transferred Companies has executed or
entered into a closing agreement pursuant to Section 7121 of the Code
or any similar provision of state, local,
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or foreign Tax Law, and none of the Transferred Companies is subject to
any private letter ruling of the IRS or comparable ruling of any other
Governmental Authority pertaining to Taxes.
(f) None of the transactions contemplated hereby,
individually or collectively, will give rise to the payment of any
amount that would not be deductible by the Buyer or the Transferred
Companies by reason of Section 280G of the Code.
(g) None of the Transferred Companies has any (i) "excess
loss accounts" or (ii) "deferred gains" with respect to any "deferred
intercompany transactions," within the meaning of Treasury Regulation
ss.ss. 1.1502-19 and 1.1502-13, respectively.
2.21. ENVIRONMENTAL MATTERS.
(a) Except in connection with the matters set forth in
Section 2.21(b) of the Disclosure Letter or as would not reasonably be
expected to have a Material Adverse Effect, each Transferred Company
has obtained all Permits that are required to be obtained under all
applicable Environmental Laws in connection with the operation of the
business of such Transferred Company and is in compliance with all
terms and conditions of such required Permits.
(b) Except as set forth in Section 2.21(b) of the
Disclosure Letter or except as would not reasonably be expected to have
a Material Adverse Effect, each Transferred Company is and has been in
compliance with all applicable Environmental Laws since the date that
such Transferred Company was acquired, directly or indirectly, by
Nortek.
(c) Except as set forth in Section 2.21(c) of the
Disclosure Letter, none of the Transferred Companies has entered into
any Contract with any Governmental Authority or any other Person by
which such Transferred Company has assumed responsibility, either
directly or as a guarantor or surety, for any Proceedings or
liabilities pursuant to Environmental Laws.
(d) Except as set forth in Section 2.21(d) of the
Disclosure Letter or except as would not reasonably be expected to have
a Material Adverse Effect, to the Knowledge of the Sellers, no event
has occurred or condition exists that has resulted in or would
reasonably be expected to result in Losses to the Transferred Companies
under Environmental Laws.
2.22. REAL ESTATE.
(a) The Transferred Companies own good and marketable fee
title to the land described in Section 2.22(a) of the Disclosure Letter
and to all of the buildings, structures and other improvements located
thereon (collectively, the "OWNED REAL PROPERTY") free and clear of all
Liens except for the matters listed in Sections 2.14 and 2.22(a) of the
Disclosure Letter and except for Liens of a type referred to in Section
2.16 of this Agreement. The Owned Real Property constitutes all of the
real property owned by the Transferred Companies on the date hereof.
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(b) Section 2.22(b) of the Disclosure Letter is a true
and complete schedule of all leases, subleases, licenses and other
agreements (collectively, the "REAL PROPERTY LEASES") under which the
Transferred Companies use or occupy or have the right to use or occupy,
now or in the future, any real property (other than warehouse leases
which involve annual lease payments of $50,000 or less) (the land,
buildings and other improvements covered by the Real Property Leases
being herein called the "LEASED REAL PROPERTY"), which Section includes
each amendment, modification and supplement thereto. The Sellers have
heretofore delivered to the Buyer true and complete copies of all Real
Property Leases (including all modifications, amendments and
supplements). Except as set forth in Sections 2.14 and 2.22(b) of the
Disclosure Letter or except as would not reasonably be expected to have
a Material Adverse Effect, each Real Property Lease is valid, binding
and in full force and effect, all rent and other sums and charges
payable by any of the Transferred Companies as tenant thereunder are
current, no written notice of material default or termination under any
Real Property Lease is outstanding, and no termination event or
condition or uncured material default on the part of any of the
Transferred Companies or, to the Knowledge of the Sellers, the
landlord, exists under any Real Property Lease. Except for the matters
listed in Sections 2.14 and 2.22(b) of the Disclosure Letter and except
for Liens of a type referred to in Section 2.16 of this Agreement, the
Transferred Companies hold the leasehold estate under and interest in
each Real Property Lease free and clear of all Liens.
(c) All of the land, buildings, structures and other
improvements used by the Transferred Companies in the conduct of the
business of the Transferred Companies are included in the Owned Real
Property and the Leased Real Property. The Leased Real Property and the
Owned Real Property are hereinafter collectively referred to as the
"REAL PROPERTY."
(d) The Sellers and the Transferred Companies have not
received written notice and have no Knowledge of any pending,
threatened or contemplated condemnation proceeding affecting the Real
Property or any part thereof or of any sale or other disposition of the
Real Property or any part thereof in lieu of condemnation.
2.23. INTELLECTUAL PROPERTY.
(a) The Transferred Companies own, or are licensed or
otherwise possess legally enforceable rights to use, license and
otherwise exploit all Intellectual Property used in and material to the
business of the Transferred Companies, taken as a whole, as currently
conducted or contemplated (collectively, the "TRANSFERRED COMPANY
INTELLECTUAL PROPERTY").
(b) Section 2.23(b) of the Disclosure Letter sets forth a
true and complete list of all registrations, issuances, filings and
applications for any Intellectual Property filed or owned by any of the
Transferred Companies. All of the rights of the Transferred Companies
in the Transferred Company Intellectual Property are valid and
enforceable. Each of the Transferred Companies has taken commercially
reasonable actions to maintain and protect each item of Transferred
Company Intellectual Property owned or purported to be owned by such
Transferred Company.
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(c) Section 2.23(c) of the Disclosure Letter sets forth a
true and complete list of each license agreement to which any of the
Transferred Companies is a party relating to Intellectual Property (the
"IP Licenses") that is material to the Transferred Companies taken as a
whole. All of the IP Licenses are valid, subsisting, in full force and
effect and binding upon the respective Transferred Company that is a
party thereto and, to the Knowledge of the Sellers, the other parties
thereto, in accordance with their terms. Each of the Transferred
Companies and, to the Knowledge of the Sellers, each other party
thereto, is in all material respects in compliance with all applicable
terms and requirements of each such IP License.
(d) Except as would not reasonably be expected to have a
Material Adverse Effect, none of the Intellectual Property, products or
services, owned, used, developed, provided, sold, licensed, imported or
otherwise exploited by the Transferred Companies, or made for, used or
sold by or licensed to the Transferred Companies by any Person
infringes upon or otherwise violates any Intellectual Property rights
of others. Except as would not reasonably be expected to have a
Material Adverse Effect, to the Knowledge of the Sellers, no Person is
infringing upon or otherwise violating the Intellectual Property rights
of the Transferred Companies. Except as would not reasonably be
expected to have a Material Adverse Effect, there are no claims pending
or, to the Knowledge of the Sellers, threatened, (i) contesting the
right of the Transferred Companies to use any of its products or
services or (ii) opposing or attempting to cancel any material rights
of the Transferred Companies in or to any Company Intellectual
Property.
2.24. BROKERS. No broker, finder or investment banker (other than
UBS Securities LLC and Daroth Capital Advisors LLC, the fees and expenses of
which will be paid by the Sellers) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Sellers or any of
the Transferred Companies.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
In order to induce the Sellers to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, the Buyer represents and
warrants to the Sellers that:
3.1. ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. The Buyer has made available to the Sellers a true, complete and
correct copy of the Charter of the Buyer, as in effect on the date hereof.
3.2. AUTHORIZATION. The Buyer has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Buyer and the consummation by
the Buyer of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer, and
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assuming the due authorization, execution and delivery by the Sellers,
constitutes a legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms.
3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Buyer do not, and the performance of this Agreement by the Buyer and
the consummation of the transactions contemplated hereby will not, (i)
violate the Charter of the Buyer, (ii) contravene, conflict with or
result in a violation of, or constitute a failure to comply with, any
Laws or Orders applicable to the Buyer or by which any properties or
assets owned or used by the Buyer are bound or affected, (iii)
contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Permit that
is held by the Buyer or that otherwise relates to the business of, or
any of the properties or assets owned or used by, the Buyer, or (iv)
result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give
to third parties any rights of consent, termination, amendment,
modification, acceleration or cancellation of, or result in the loss of
any property, rights or benefits under, or result in the imposition of
any additional obligations under, or result in the creation of a Lien
on any properties or assets owned or used by the Buyer pursuant to any
Contract to which the Buyer is a party or by which the Buyer or any
properties or assets owned or used by the Buyer are bound or affected,
except as to clauses (ii), (iii) and (iv) above for any such violation,
breach, default, right, alteration or other occurrence that would not
reasonably be expected to have a material adverse effect on the
properties, assets, business, financial condition or operating results
of the Buyer or on the ability of the Buyer to perform its obligations
under this Agreement or to consummate the transactions contemplated
hereby.
(b) The execution and delivery of this Agreement by the
Buyer do not, and the performance of this Agreement by the Buyer and
the consummation of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority to be obtained or
made by the Buyer except (i) for compliance with applicable disclosure
requirements, if any, under the Exchange Act and compliance with the
pre-merger notification requirements of the HSR Act and any similar
foreign Laws listed in Section 2.6(b) of the Disclosure Letter and (ii)
where the failure to obtain any such consent, approval, authorization
or permit, or to make any such filing or notification, would not
reasonably be expected to have a material adverse effect on the
properties, assets, business, financial condition or operating results
of the Buyer or on the ability of the Buyer to perform its obligations
under this Agreement or to consummate the transactions contemplated
hereby.
3.4. LITIGATION. There are no Proceedings pending or, to the
knowledge of the Buyer, threatened against the Buyer or any Affiliate of the
Buyer by or before any Governmental Authority that in any manner challenges or
seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby.
3.5. INVESTMENT REPRESENTATION. The Buyer is acquiring the Shares
for investment and not with a view to, or in connection with, any distribution
or sale thereof in violation of the
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Securities Act. The Buyer is an "accredited investor" within the meaning of
Regulation D adopted under the Securities Act.
3.6. FINANCING.
(a) The Buyer has obtained the commitment letter dated
the date hereof, a copy of which was provided to Nortek, from
Caxton-Iseman Capital, Inc. (the "EQUITY PROVIDER"), an Affiliate of
the Buyer, to provide equity financing in connection with the
transactions contemplated by this Agreement (the "EQUITY COMMITMENT
LETTER"). The Equity Commitment Letter has been duly authorized and
executed by all parties thereto and is in full force and effect.
(b) The Buyer has obtained the commitment letter attached
hereto as EXHIBIT 3.6(B) from UBS Securities LLC and UBS Loan Finance
LLC (collectively, the "DEBT PROVIDERS") to provide the amount of debt
financing set forth therein in connection with the transactions
contemplated by this Agreement (the "DEBT COMMITMENT LETTER," and
together with the Equity Commitment Letter, the "COMMITMENT LETTERS").
The Debt Commitment Letter has been duly authorized and executed by the
Buyer and, to the knowledge of the Buyer, by the Debt Providers, and is
in full force and effect. The obligations of the Debt Providers to fund
the commitments under the Debt Commitment Letter are not subject to any
condition which is not set forth expressly in the Debt Commitment
Letter. The Buyer is not aware of any fact, circumstance or occurrence
that makes any of the assumptions or statements set forth in the Debt
Commitment Letter inaccurate in any material respect or that causes the
Debt Commitment Letter to be ineffective; PROVIDED, that no
representation or warranty is made by the Buyer respecting any fact,
circumstance or occurrence that constitutes a breach of the Sellers'
representations, warranties or covenants under this Agreement.
(c) The Commitment Letters provide the Buyer with
aggregate financing in an amount sufficient to enable the Buyer to pay
the Purchase Price and pay all contemplated fees and expenses related
to the transactions contemplated by this Agreement and, to the
knowledge of the Buyer, to provide adequate working capital for the
Transferred Companies. Subject to the provisions of the Commitment
Letters, as of the date hereof and based upon information provided by
the Equity Provider and the Debt Providers, the Buyer expects to
receive the funding contemplated by the Commitment Letters not later
than February 27, 2004. To the knowledge of the Buyer, upon the
consummation of the transactions contemplated hereby, the Buyer and
each of the Transferred Companies will not: (i) be insolvent or left
with unreasonably small capital, (ii) have incurred debts beyond their
ability to pay such debts as they mature, or (iii) have their capital
impaired.
3.7. BROKERS. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of the Buyer in such manner as to give rise to
any valid claim against the Sellers or any of the Transferred Companies for any
brokerage or finder's commission, fee or similar compensation.
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER.
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The obligation of the Buyer to purchase the Shares and to consummate
the other transactions contemplated hereby is subject to the satisfaction, or
waiver by the Buyer, on or prior to the Closing Date of each of the following
conditions:
4.1. REPRESENTATIONS AND WARRANTIES. Other than the Specified
Seller Representations, the representations and warranties of the Sellers in
this Agreement (as such representations and warranties would read if all
limitations or qualifications therein as to materiality or Material Adverse
Effect (or similar concept) were deleted therefrom) shall, except for matters
that individually or in the aggregate have not had, and would not reasonably be
expected to have, a Material Adverse Effect, have been true and correct as of
the date hereof and as of the Closing Date as if made on and as of the Closing
Date, except for any such representations or warranties which were made as of a
specific date, the accuracy of which will be determined with reference to such
specified date; and the Specified Seller Representations shall have been true
and correct as of the date hereof and as of the Closing Date as if made on and
as of the Closing Date.
4.2. PERFORMANCE OF OBLIGATIONS. The Sellers shall have performed
and complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by them at or prior to the
Closing Date.
4.3. SELLERS' CERTIFICATE. The Sellers shall have delivered to the
Buyer a certificate signed on behalf of the Sellers by the chief executive
officer or chief financial officer of Nortek to the effect that each of the
conditions specified above in Sections 4.1 and 4.2 is satisfied.
4.4. NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect or any event or
circumstance that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
4.5. INJUNCTIONS. No Law or Order (including without limitation any
temporary, preliminary or permanent injunction or order) shall be in effect that
prohibits the consummation of the transactions contemplated by this Agreement.
4.6. GOVERNMENTAL APPROVALS. All Governmental Authorities, the
consent, authorization, approval or Permit of which is necessary under any
applicable Law (excluding consents, authorizations, approvals and Permits
relating to use, occupancy, Tax Liens and similar matters) for the consummation
of the transactions contemplated by this Agreement, shall have consented to,
authorized, permitted or approved such transactions, and any waiting periods
(and any extensions thereof) under the HSR Act or similar foreign Laws listed in
Section 2.6(b) of the Disclosure Letter shall have expired or been terminated.
4.7. FUNDING. The Buyer and/or the Transferred Companies shall have
received the amount of funds set forth in the Debt Commitment Letter as a result
of funding thereunder or as a result of funding from one or more alternative
sources of financing on terms no less favorable to the Buyer than under the Debt
Commitment Letter.
4.8. RELEASE OF TRANSFERRED COMPANIES. Each of the Transferred
Companies shall have been released as a borrower or guarantor, as applicable,
under the Credit Agreement and all
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Liens on the capital stock or assets of the Transferred Companies securing
amounts owed in respect of the Credit Agreement shall have been released or
terminated.
4.9. NO PROCEEDINGS. Since the date of this Agreement, there shall
not have been commenced or threatened in writing against the Buyer, or against
any Affiliate of the Buyer, any Proceeding which, in the reasonable judgment of
the Buyer, has a reasonable likelihood of success on the merits (a) involving
any challenge to, or seeking damages or other relief in connection with, the
transactions contemplated hereby or (b) that may have the effect of preventing,
delaying, making illegal, imposing limitations or conditions on or otherwise
interfering with the transactions contemplated hereby.
4.10. TRANSITION SERVICES AGREEMENT. Nortek shall have executed and
delivered, as of the Closing Date, a transition services agreement in form and
substance reasonably satisfactory to the Buyer and Nortek, containing the terms
set forth on EXHIBIT 4.10.
4.11. OPINION. The Buyer shall have received an opinion of Ropes &
Gray LLP, counsel to the Sellers, in a form reasonably acceptable to the Buyer,
regarding the authorization, execution and delivery by the Sellers, and the
enforceability against the Sellers, of this Agreement, together with a letter
permitting the Buyer's financing sources to rely upon such opinion.
4.12. TRANSFER OF CWD. Nortek shall have caused all of the assets
and liabilities constituting the CWD Windows and Doors division of Broan-NuTone
Canada Inc. to be transferred to CWD Windows and Doors, Inc. in accordance with
Section 6.22.
4.13. GENERAL. All instruments and legal and corporate proceedings
in connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Buyer, and the Buyer shall
have received counterpart originals, or certified or other copies, of all
documents, including records of corporate proceedings, that it may reasonably
request in connection therewith.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.
The obligation of the Sellers to effect the sale of the Shares and to
consummate the other transactions contemplated hereby is subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
5.1. REPRESENTATIONS AND WARRANTIES. Other than the representations
and warranties of the Buyer contained in Sections 3.1, 3.2, 3.6 and 3.7, the
representations and warranties of the Buyer in this Agreement (as such
representations and warranties would read if all limitations or qualifications
therein as to materiality or material adverse effect (or similar concept) were
deleted therefrom) shall, except for matters that individually or in the
aggregate have not had, and would not reasonably be expected to have, a material
adverse effect on the properties, assets, business, financial condition or
operating results of the Buyer or on the ability of the Buyer to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby, have been true and correct as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date, except for any such
representations or warranties which were made
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as of a specific date, the accuracy of which will be determined with reference
to such specified date; and the representations and warranties of the Buyer
contained in Sections 3.1, 3.2, 3.6 and 3.7 shall have been true and correct as
of the date hereof and as of the Closing Date as if made on and as of the
Closing Date.
5.2. PERFORMANCE OF OBLIGATIONS. The Buyer shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date.
5.3. BUYER'S CERTIFICATE. The Buyer shall have delivered to the
Sellers a certificate signed on behalf of the Buyer by the chief executive
officer or chief financial officer of the Buyer to the effect that each of the
conditions specified above in Sections 5.1 and 5.2 are satisfied.
5.4. INJUNCTIONS. No Law or Order (including without limitation any
temporary, preliminary or permanent injunction or order) shall be in effect that
prohibits the consummation of the transactions contemplated by this Agreement.
5.5. GOVERNMENTAL APPROVALS. All Governmental Authorities, the
consent, authorization, approval or Permit of which is necessary under any
applicable Law (excluding consents, authorizations, approvals and Permits
relating to use, occupancy, Tax Liens and similar matters) for the consummation
of the transactions contemplated by this Agreement, shall have consented to,
authorized, permitted or approved such transactions, and any waiting periods
(and any extensions thereof) under the HSR Act or similar foreign Laws listed in
Section 2.6(b) of the Disclosure Letter shall have expired or been terminated.
5.6. OPINION. The Sellers shall have received an opinion of Paul,
Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Buyer, in a form
reasonably acceptable to the Sellers, regarding the authorization, execution and
delivery by the Buyer, and the enforceability against the Buyer, of this
Agreement.
5.7. GENERAL. All instruments and legal and corporate proceedings
in connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Sellers, and the Sellers
shall have received counterpart originals, or certified or other copies, of all
documents, including records of corporate proceedings, that it may reasonably
request in connection therewith.
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6. COVENANTS OF THE PARTIES.
6.1. ACCESS TO PREMISES AND INFORMATION. Upon reasonable notice and
subject to reasonable supervision by the Sellers or their agents and to the
restrictions contained in any confidentiality agreement to which such party is
subject, on and prior to the Closing Date, the Sellers will permit, and will
cause the Transferred Companies to permit, the Buyer and its authorized
representatives (including, without limitation, any financing sources and their
respective authorized representatives) to have reasonable access during normal
operating hours to the respective records and books of the Transferred Companies
(the "RECORDS") in possession of the Transferred Companies or the Sellers (or
deliver copies thereof) and the premises, agents and personnel of any of the
Transferred Companies during normal business hours that relate in any manner to
the conduct or operations of the Transferred Companies on or prior to the
Closing Date. No investigation by the Buyer shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Sellers contained in
this Agreement. In order that the Buyer may have full opportunity to utilize
such access, the Sellers shall cause the Seller's authorized representatives,
the Transferred Companies and their authorized representatives to cooperate
fully with the Buyer and its authorized representatives (including, without
limitation, any financing sources and their respective authorized
representatives) in connection with their examination or investigation.
6.2. CONDUCT OF BUSINESS PRIOR TO CLOSING. Prior to the Closing,
except as otherwise contemplated by this Agreement, the Sellers agree that they
will cause the Transferred Companies to (a) conduct their business in the
Ordinary Course of Business and (b) conduct their respective businesses in a
manner such that the conditions to Closing set forth in Sections 4.1 and 4.2
would reasonably be expected to be satisfied. Without limiting the generality of
the foregoing, without the prior consent of the Buyer, the Sellers will cause
each of the Transferred Companies not to, and each of the Transferred Companies
shall not, take any action as a result of which any of the changes or events
listed in Section 2.9 (other than any action or event referred to in clause (a)
thereof) is likely to occur or enter into any Contract that, if in existence on
the date of this Agreement, would have been required to be listed in Section
2.14 of the Disclosure Letter (other than any extension or renewal of a Contract
listed on Section 2.14 of the Disclosure Schedule on terms substantially similar
to the terms of such Contract on the date hereof), except as expressly
contemplated by this Agreement. Notwithstanding the foregoing, (i) the Sellers
agree that they shall cause the transfer to Nortek or any of its Affiliates
(other than a Transferred Company) prior to Closing of (x) the real estate and
facility owned by Napco, Inc. in Butler, PA and (y) all of the stock of Studley
Canada Limited, and (ii) the Sellers shall approve in a timely manner the
request for capital expenditures totaling approximately $1,400,000 in respect of
the Fair Bluff, NC facility capacity expansion project and shall cause to be
spent the portion of such amount scheduled to be spent prior to the Closing in
accordance with the schedule set forth on EXHIBIT 6.2 hereto (it being
understood that the Sellers shall not have any responsibility to make any
expenditure of the remaining portion of such amount). Buyer acknowledges that
the Sellers operate a centralized cash management system and that substantially
all of the cash of the Transferred Companies has been, and will continue to be,
distributed to the Sellers; PROVIDED, HOWEVER, that the Sellers shall not remove
from the Transferred Companies any restricted cash held in connection with any
industrial revenue bond financing otherwise than in respect of the payment of
capital expenditures in connection with the facility or assets to which such
industrial
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revenue bond financing relates; PROVIDED, FURTHER, that the amount of any such
cash on account with the Transferred Companies as of the Closing Date shall
increase the Purchase Price payable under Section 1.2 dollar for dollar.
6.3. REASONABLE EFFORTS. Subject to the terms and conditions of
this Agreement, each of the parties agrees to use all reasonable commercial
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated hereby.
6.4. CONFIDENTIALITY.
(a) CONFIDENTIALITY AGREEMENT. The provisions of that
certain confidentiality letter agreement between the Buyer (or an
Affiliate of the Buyer) and UBS Securities LLC, dated September 8, 2003
relating to the Transferred Companies (the "CONFIDENTIALITY
AGREEMENT"), to the extent not inconsistent with the express terms of
this Agreement, are hereby ratified, confirmed and agreed to as though
fully set forth herein.
(b) CONFIDENTIALITY OBLIGATION OF THE SELLERS. From and
after the date of this Agreement and, in the event of the consummation
of the transactions contemplated hereby, from and after the Closing
Date, each of the Sellers, agrees, and agrees to cause each of their
respective authorized representatives, to keep confidential any and all
confidential information or documents relating to any Transferred
Company or the properties, assets, operations, business or results of
operations of any Transferred Company, and shall not disclose such
information or documents to any Person or use such information or
documents in any manner without the prior written consent of the Buyer
(other than in connection with the operation of the businesses of the
Transferred Companies in the Ordinary Course of Business prior to the
Closing).
(c) ANNOUNCEMENTS. Any announcement or disclosure by any
party hereto of the transactions contemplated hereby must be approved
in advance by each of the Buyer and the Sellers, which approval shall
not be unreasonably withheld.
(d) PERMITTED DISCLOSURES. No provision of this Section
6.4 shall be construed to prohibit (1) disclosures to appropriate
authorities of such information as may be legally required for federal
securities, Tax, accounting or other reporting purposes; (2)
disclosures by the Sellers or any of the Transferred Companies to
suppliers, customers, agents and independent contractors of any of the
Transferred Companies to the extent reasonably necessary, in the
Sellers' judgment and in consultation with the Buyer, to preserve the
business of the applicable Transferred Company or to facilitate the
transactions contemplated hereby; (3) confidential disclosures to legal
counsel, accountants, consultants and other authorized representatives
and financing sources and their respective legal counsels, accountants,
consultants and other authorized representatives; (4) confidential
disclosures to corporate parents and other corporate Affiliates; (5)
disclosures pursuant to the terms of an order of a court or other
governmental authority of competent jurisdiction; (6) disclosures
required in connection with legal proceedings; or (7) disclosures of
matters of which there is public knowledge other than as a result of
disclosures made in breach hereof.
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(e) RETURN OF CONFIDENTIAL INFORMATION. In the event that
the parties do not close the transactions contemplated hereby, each
party agrees, in addition to (and not instead of) any obligations set
forth in the Confidentiality Agreement, (1) within five business days
to return (or, at the option of the provider of such information,
destroy) all confidential information (including without limitation all
Evaluation Material, as defined in the Confidentiality Agreement) that
was provided by any other party in contemplation of the transactions
hereunder (and, in the case of destruction, provide written
certification of such destruction to the provider of such information);
(2) to refrain from using such confidential information; and (3) to
keep such confidential information strictly confidential.
(f) TAX DISCLOSURE. Notwithstanding any other provision
in this Agreement, the Confidentiality Agreement or in any other
written or oral understanding or agreement to which the parties hereto
are parties or by which they are bound, each party hereto (and its
representatives, agents and employees) may consult any tax advisor
regarding the tax treatment and tax structure of the transaction and
may disclose to any Person, without limitation, the tax treatment and
tax structure of the transaction and all materials (including opinions
or other tax analyses) that are provided relating to such treatment or
structure.
6.5. BUSINESS RECORDS. The Buyer acknowledges that the Sellers may
from time to time from and after the Closing require access to copies of certain
of the Records, and agrees that upon reasonable prior notice, it will, and will
ensure that the Transferred Companies will, during normal business hours,
provide the Sellers with either reasonable access to or copies of the Records.
6.6. REGULATORY AUTHORIZATIONS AND CONSENTS; FILINGS UNDER HSR ACT;
THIRD PARTY CONSENTS.
(a) Each party hereto shall use its reasonable commercial
efforts to obtain all authorizations, consents, Permits and approvals
of all Governmental Authorities that may be or become necessary for its
execution and delivery of, and the performance of its obligations
pursuant to, this Agreement, and the Buyer will cooperate fully with
the Sellers and the Transferred Companies in promptly seeking to obtain
all such authorizations, consents, Permits and approvals. As promptly
as practicable, and in any event within 10 business days after the date
of the execution of this Agreement or such later date as the Buyer and
the Sellers may agree in writing, the Sellers and the Buyer shall file
notifications under and in accordance with the HSR Act and any similar
foreign filings with respect to the transactions contemplated hereby,
seek early termination of any waiting period thereunder and supply as
promptly as practicable any additional information and documentary
material that may be requested by any Governmental Authority pursuant
to the HSR Act or similar foreign requirements. The parties shall
cooperate with each other in connection with the making of all such
filings or responses, including providing copies of all such documents
to the non-filing or non-responding party and its advisors prior to
filing or responding. The parties hereto shall not take any action that
will have the effect of delaying, impairing or impeding the receipt of
any required approvals or the termination or expiration of required
waiting periods.
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(b) The Sellers shall use all reasonable commercial
efforts to obtain all consents, waivers or other approvals from all
Persons (other than Governmental Authorities) listed in EXHIBIT 6.6(B)
(it being understood that no party shall be required to pay any money
to the Person from whom such consent, waiver or approval is sought
(other than reimbursement of the reasonable out-of-pocket costs of
providing the same) or otherwise undertake any new obligation to such
Person or waive any existing benefit or right in order to obtain any
such consent, waiver or approval). The parties will cooperate with each
other in exercising such reasonable efforts. The failure to obtain any
such consent, waiver or approval shall not constitute a failure to
fulfill any of the conditions set forth in Section 4 of this Agreement;
PROVIDED, HOWEVER, the Sellers shall, with respect to any Contract as
to which a required consent, waiver or approval is listed in EXHIBIT
6.6(B), arrange for Buyer to receive substantially the same benefits
under such Contract after the Closing to which the Buyer would have
been entitled if such consent, waiver or approval had been obtained.
6.7. NO SECTION 338 ELECTION. The Buyer and the Sellers hereby
agree that they will make no election pursuant to Section 338 of the Code (or
any corresponding election under state, local and foreign Tax law) with respect
to the purchase and sale of the stock of the Transferred Companies hereunder.
6.8. WARN. The Buyer shall indemnify the Sellers and their
Affiliates and defend and hold each of them harmless from and against any Losses
which may be incurred by any of them under WARN or under any state, local or
foreign law with respect to plant closing, layoff or relocation or the like or
with respect to any obligation to provide notice, payment or any other benefit
as a result of or arising out of any action taken by the Buyer or any of the
Transferred Companies following the Closing.
6.9. FURTHER ASSURANCES. From time to time after the Closing, at
the request of the Buyer, the Sellers shall execute and deliver any further
instruments and take such other action as the Buyer may reasonably request to
carry out the transactions contemplated hereby.
6.10. NOTIFICATION; SUPPLEMENTS TO DISCLOSURE LETTER.
(a) Each of the Sellers, on the one hand, and the Buyer,
on the other hand, agrees to give prompt notice to the other party of
any event or circumstance occurring or existing on or after the date of
this Agreement that, directly or indirectly, (i) may contravene,
conflict with or result in a violation or breach of (A) any
representation or warranty of such party contained in this Agreement,
whether made as of the date of this Agreement or as of the Closing
Date, or (B) any covenant or agreement of such Party contained in this
Agreement, or (ii) may render any of the conditions specified in
Sections 4 and/or 5 incapable of being satisfied before the Expiration
Date; PROVIDED, HOWEVER, that, except as set forth in Sections 6.10(b)
and 6.10(c) below, no such notification shall affect the
representations, warranties, covenants or agreements of the parties or
the conditions to the obligations of the parties under this Agreement.
(b) Prior to the Closing, the Sellers may supplement or
amend the Disclosure Letter with respect to any matter existing or
occurring at or prior to the date of this
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Agreement; PROVIDED, HOWEVER, that the Disclosure Letter shall not be
deemed supplemented or amended for purposes of the rights or
obligations of the Buyer under this Agreement unless and until the
Buyer has accepted such supplement or amendment in writing prior to the
Closing.
(c) Prior to the Closing, the Sellers may revise the
Disclosure Letter with respect to any matter arising after the date of
this Agreement by delivery of such proposed revision to the Buyer,
together with a statement as to whether the Sellers believe the
revision is a Routine Update or a Material Update. Any such revision
constituting a Routine Update shall constitute an effective amendment
of the Disclosure Letter for all purposes of this Agreement. If the
Buyer disputes that such revision constitutes a Routine Update by
delivering to the Sellers written notice of such dispute within ten
days of delivery of such revision, the parties shall retain all of
their rights under this Agreement respecting such disputed item. If,
despite such dispute, such proposed revision is a Routine Update, then
such revision shall constitute an effective amendment of the Disclosure
Letter. In the event such revision constitutes a Material Update, the
Buyer shall have ten days to provide a written notice to the Sellers
under Section 7.1(b)(1), with the provision of such notice and the
rights of the Buyer under Section 7.1(b) following delivery of such
notice being the sole remedy relating to matters set forth in the
Material Update, and if the Buyer does not provide such a notice within
such period, the Material Update shall constitute an effective
amendment of the Disclosure Letter for all purposes of this Agreement
(including for purposes of curing any misrepresentation or breach of
warranty that would have existed hereunder had the Material Update not
been made). If a Material Update is provided less than ten days before
the Expiration Date, the Expiration Date shall be extended until ten
days after the Material Update is so provided in order to afford the
Buyer an opportunity to review such Material Update as contemplated by
the immediately preceding sentence and, if prior to the end of such
ten-day period, the Buyer shall have provided a written notice to the
Sellers under Section 7.1(b), the Expiration Date shall occur not
sooner than the tenth day following the receipt by the Sellers of such
notice.
6.11. CONFLICTS OF INTEREST. Buyer hereby waives on its own behalf,
and agrees to cause each of the Transferred Companies to waive, any conflicts
that may arise in connection with (a) counsel representing any of the
Transferred Companies in connection with the transactions contemplated by this
Agreement representing the Sellers after the Closing and (b) the communication
by such counsel to the Sellers, in any such representation, of any fact known to
such counsel, including in connection with a dispute with the Buyer prior to, on
or following the Closing.
6.12. TAX MATTERS.
(a) TAX RETURNS AND TAX LIABILITY.
(i) The applicable income, deductions and
credits with respect to the Transferred Companies for taxable periods
ending on or before the Closing Date ("PRE-CLOSING PERIODS") will be
included in the Pre-Closing Combined Returns. The Sellers shall be
solely responsible for all Pre-Closing Taxes of the Transferred
Companies and
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the Combined Group. The Buyer shall be responsible for, and shall
indemnify and hold harmless the Sellers with respect to, all other
Taxes of the Transferred Companies.
(ii) The Sellers shall prepare or cause to be
prepared and shall file or cause to be filed all Tax Returns for the
Transferred Companies for Pre-Closing Periods which are required to be
filed (giving effect to any allowed extensions) after the Closing Date.
(iii) The Buyer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of the
Transferred Companies for Tax periods which end after the Closing Date.
In the case of each such Tax Return for a period which begins before
and ends after the Closing Date (a "STRADDLE PERIOD"), the Buyer shall
deliver a draft of such Tax Return to the Sellers at least fifteen (15)
days prior to the date such Tax Return is required to be filed (giving
effect to any allowed extensions) and shall not file such Tax Returns
without consent of Sellers, which consent shall not be unreasonably
withheld. Sellers shall pay to Buyer at least five (5) days before the
date on which Taxes are paid with respect to such Straddle Periods an
amount equal to the portion of such Taxes which relates to the portion
of such Straddle Period which ends on the Closing Date. For purposes of
determining in the case of any Taxes that are imposed on a periodic
basis the portion of such Tax which relates to the portion of such
Straddle Period ending on the Closing Date, such portion shall (x) in
the case of any Taxes other than Taxes based upon or related to income
or receipts, be deemed to be the amount of such Tax for the entire
Straddle Period multiplied by a fraction the numerator of which is the
number of days in the Straddle Period ending on the Closing Date and
the denominator of which is the number of days in the entire Straddle
Period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating
to a Straddle Period shall be taken into account as though the relevant
Taxable period ended on the Closing Date. For all purposes of Section
6.12 and 6.13, any income, deductions, credits and Taxes of the
Transferred Companies resulting from a transaction not in the Ordinary
Course of Business occurring on the Closing Date but after the Closing
shall be deemed to occur on the date following the Closing Date. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the
Transferred Companies.
(b) TAX REFUNDS. The Sellers shall be entitled to all
refunds of Pre-Closing Taxes. If the Buyer or any of the Transferred
Companies receives any refund with respect to Pre-Closing Taxes to
which the Sellers are entitled, the Buyer shall promptly pay (or cause
the relevant Transferred Companies to pay) the entire amount of such
refund (including interest) to the Sellers. If the Sellers receive any
refund to which the Buyer is entitled, the Sellers shall promptly pay
the entire amount of such refund (including interest) to the Buyer.
(c) TRANSFER TAXES. The Buyer agrees to pay any sales,
use, transfer, stock transfer or withholding or like Taxes related to
the transactions contemplated by this Agreement, other than Taxes
related to the transfer of the CWD Windows and Doors division of
Broan-NuTone Canada Inc. to CWD Windows and Doors, Inc. as
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contemplated by Section 6.22 of this Agreement, which Taxes shall be
the sole responsibility of the Sellers. If required in connection with
any Tax filing, the Sellers and the Buyer shall agree to a reasonable
allocation of the Purchase Price to the affected parcels of Real
Property.
(d) COOPERATION AND CONTROL OF TAX DISPUTES.
(i) The Buyer and the Sellers agree to cooperate
and to cause each of the Transferred Companies to cooperate with them
to the extent reasonably required after the Closing Date in connection
with (1) the filing, amendment, preparation and execution of all Tax
Returns with respect to any Transferred Company, and (2) any audit,
claim for refund, or administrative or judicial proceeding involving
any asserted Tax liability or refund with respect to any Transferred
Company (any such audit, claim for refund, or proceeding relating to an
asserted Tax liability referred to herein as a "CONTEST"). Within a
reasonable time (but not more than ten (10) days) after the Buyer or
any of the Transferred Companies or the Sellers receive official notice
of any such Contest, the Buyer or the Sellers, as the case may be,
shall notify or cause the applicable Transferred Company or Transferred
Companies to notify the other in writing of such Contest.
(ii) After the Closing Date, except in the case
of any Contest involving any asserted Tax liability or refund with
respect to any Transferred Company relating to a Pre-Closing Combined
Return, and except as provided in (iii) and (iv) below, Buyer shall
control the conduct, through counsel of its own choosing, of any
Contest; provided that the Buyer shall not be permitted to settle,
compromise, and/or concede any portion of such Contest in any manner
which would adversely affect the Sellers without the written consent of
Sellers, which consent shall not be unreasonably withheld or delayed.
(iii) In the case of a Contest after the Closing
Date that relates solely to Pre-Closing Taxes (including, without
limitation, any Pre-Closing Combined Returns), or any Taxes for which
the Seller may be responsible pursuant to Section 6.13(a)(iv), the
Sellers shall control the conduct of such Contest, but Buyer shall have
the right to participate in such Contest (or, in the case of a Contest
that relates to a Combined Tax Return of the Sellers, in any portion of
such Contest that related to any Transferred Company) at its own
expense, and the Sellers shall not be permitted to settle, compromise
and/or concede any portion of such Contest that is reasonably likely to
adversely affect Post-Closing Taxes without the written consent of
Buyer, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the preceding sentence, with respect to any Contest
other than a Contest that relates solely to a Combined Tax Return of
the Sellers, if the Sellers notify the Buyer in writing that they
decline to assume control of the conduct of any such Contest within 30
days following the receipt by the Sellers of notice from the Buyer
pursuant to Section 6.12(d)(i) of such Contest, Buyer shall have the
right but not the obligation to assume control of such Contest, and
shall be able to settle, compromise and/or concede such Contest;
provided, however, that the Sellers shall have no indemnification
obligations with respect to any matter with respect to which the Buyer
shall have assumed control if such matter shall be settled by the Buyer
without the prior written consent of the Sellers (which consent shall
not be unreasonably withheld or delayed).
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(iv) In the case of a Contest that relates to a
Straddle Period and includes issues in respect of both Pre-Closing and
Post-Closing Taxes, Buyer shall control the conduct of such Contest,
but the Buyer shall not be permitted to settle, compromise and/or
concede such Contest without the consent of the Sellers, which consent
shall not be unreasonably withheld or delayed.
(v) No loss, credit or other item of a
Transferred Company may be carried back without the Sellers' written
consent, which the Sellers may withhold in their sole and absolute
discretion, to a taxable period for which either Seller or any
subsidiary of the Sellers filed a Pre-Closing Combined Return with such
Transferred Company unless such carryback is required by law. The
Sellers shall promptly pay over to the Buyer the amount of any refund
(including interest) received as a result of such a permitted carryback
but may retain any refund (including interest) resulting from a
carryback not so permitted.
(vi) The Sellers agree to cooperate with the
Buyer, and the Buyer agrees to cooperate (and cause each of the
Transferred Companies to cooperate) with the Sellers, to the extent
necessary in connection with the filing of any information return or
similar document relating to the Buyer's acquisition of the Transferred
Companies.
6.13. TAX INDEMNIFICATION. Notwithstanding anything to the contrary
contained in this Agreement, the sole indemnification obligations of any party
hereunder in respect of Taxes shall be provided by this Section 6.13.
(a) TAX INDEMNIFICATION BY THE SELLERS. Subject to the
limitations contained in Sections 8.1 and 8.3, the Sellers jointly and
severally agree to indemnify, defend and hold harmless the Indemnified
Buyer Parties from and against any and all Losses based upon, arising
from or relating to:
(i) Pre-Closing Taxes;
(ii) Taxes of any member of an affiliated,
consolidated, combined or unitary group of which any of the Transferred
Companies was a member on or prior to the Closing Date by reason of
liability under Treasury Regulation ss.1.1502-6, Treasury Regulation
ss.1.1502-78 or comparable provision of foreign, state or local Law;
(iii) without duplication, Pre-Closing Taxes
imposed on an Indemnified Buyer Party as a result of (x) any inaccuracy
in or breach of any representation or warranty made by the Sellers in
Section 2.20 of this Agreement as of the date such representation or
warranty was made or as if such representation or warranty was made on
and as of the Closing Date or (y) a breach of a covenant or agreement
set forth in Section 6.12; and
(iv) Taxes required to be paid after the date
hereof by any of the Transferred Companies to any party under any Tax
Sharing Agreements in effect prior to the Closing (whether written or
not) or by reason of being, prior to Buyer's ownership, a
successor-in-interest or transferee of another entity.
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(b) TAX INDEMNIFICATION BY THE BUYER. Subject to the
limitations contained in Sections 8.1 and 8.5, the Buyer agrees to
indemnify, defend, and hold harmless the Indemnified Seller Parties
from and against all Losses based upon, arising from or relating to:
(i) any and all Post-Closing Taxes, and
(ii) any and all Taxes of the Buyer or any of its
Affiliates (other than the Transferred Companies).
(c) TAX INDEMNIFICATION PAYMENT PROCEDURES.
(i) Payment by an Indemnifying Party of any
amount due to an Indemnified Party under this Section 6.13 shall be
made within ten (10) days following written notice by the Indemnified
Party that payment of such amounts to the appropriate Governmental
Authority or other applicable Person is due by the Indemnified Party,
provided that the Indemnifying Party shall not be required to make any
payment earlier than five (5) business days before it is due to the
appropriate Governmental Authority or applicable Person. In the case of
a Tax that is contested in accordance with the provisions of Section
6.12(d), payment of such contested Tax will not be considered due
earlier than the date a "final determination" to such effect is made by
such Governmental Authority. For this purpose, a "final determination"
shall mean a settlement, compromise, or other agreement with the
relevant Governmental Authority, whether contained in an IRS Form 870
or other comparable form, or otherwise, or such procedurally later
event, such as a closing agreement with the relevant Governmental
Authority, and agreement contained in Internal Revenue Service form
870-D or other comparable form, an agreement that constitutes a
"determination" under Section 1313(a)(4) of the Code, a deficiency
notice with respect to which the period for filing a petition with the
Tax Court or the relevant state, local or foreign tribunal has expired
or a decision of any court of competent jurisdiction that is not
subject to appeal or as to which the time for appeal has expired.
(ii) All amounts required to be paid pursuant to
this Section 6.13 shall be paid promptly in immediately available funds
by wire transfer to a bank account designated by the Indemnified Party.
(iii) Any payments required pursuant to this
Section 6.13 that are not made within the time period specified in this
Section 6.13 shall bear interest at a rate and in the manner provided
in the Code for interest on underpayments of federal income Tax.
6.14. ACTIONS WITH RESPECT TO FINANCING.
(a) The Buyer and its Affiliates shall perform all
obligations required to be performed by them in accordance with and
pursuant to the Commitment Letters, shall maintain the same in full
force and effect, and shall not, without the prior written consent of
the Sellers, amend, terminate or waive any provisions under such
Commitment Letters if such amendment, termination or waiver would
adversely affect in any material respect
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the likelihood of the Buyer and/or the Transferred Companies receiving
the funds contemplated by the Commitment Letters prior to the
Expiration Date. The Buyer shall from time to time provide such
information as the Sellers may reasonably request regarding the status
of the financing for the transactions contemplated hereby and related
negotiations.
(b) The Buyer shall provide prompt written notice to the
Sellers following its receipt of notification by any financing source
under the Debt Commitment Letter of such source's refusal or intended
refusal to provide the financing described in the Debt Commitment
Letter and, in each case, the stated reasons therefor (if any). In any
such event, the Buyer shall use reasonable commercial efforts to
arrange a substitute for such financing on terms no less favorable to
the Buyer than under the Debt Commitment Letter as promptly as
practicable.
(c) The Sellers shall cooperate fully with the Buyer and
its Affiliates in connection with the fulfillment of its obligations
under this Section 6.14 and the fulfillment of the condition set forth
in Section 4.7, including without limitation, causing the Sellers, the
Transferred Companies and their respective officers, employees,
advisers and authorized representatives to (i) assist with the
preparation of such offering memoranda and documentation as is required
under the Commitment Letters, (ii) complete the work necessary to
permit the Transferred Companies to obtain the Transferred Companies'
Financials on a schedule that is consistent with the schedule for
Nortek receiving its audited financial statements for such year, and
(iii) meet with potential lenders and financing sources.
(d) The Sellers shall provide such assistance to and
cooperate with their independent auditors as such independent auditors
may reasonably request to enable them to complete the preparation of
the Transferred Companies' Financials, and to render an unqualified
opinion on the Transferred Companies' Financials. Upon the request of
the Buyer, the Sellers shall (i) use their commercially reasonable
efforts to cause their independent auditors to deliver to the
Securities and Exchange Commission (the "SEC") any auditor's consent
that is required to be included in any filing with the SEC that
includes or incorporates by reference the Transferred Companies'
Financials and (ii) to the extent the Buyer or any of its Affiliates
conducts or intends to conduct an offering of securities (and if the
registration statement, prospectus or offering memorandum for such
offering includes or incorporates by reference the financial statements
relating to the Transferred Companies), use their commercially
reasonable efforts to cause their independent auditors to deliver a
letter containing statements and information of the type ordinarily
included in accountant's "comfort letters" with respect to the
financial statements and financial information relating to the
Transferred Companies contained or incorporated by reference in any
such document relating to any such offering, in the case of each of (i)
and (ii) above, within the time period reasonably requested by the
Buyer or any of its Affiliates. In addition, in connection with any SEC
filing required to be made by the Buyer or any of its Affiliates (or
any SEC review of such filing), the Sellers shall permit the Buyer and
its authorized representatives to have reasonable access, during normal
business hours and upon reasonable advance notice, to the properties,
books and records of the Sellers and its Affiliates relating to the
Transferred Companies solely for
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the purpose of preparing any such SEC filing or responding to SEC
questions, comments or requests on such SEC filing; PROVIDED, HOWEVER,
that any information obtained by the Buyer and its authorized
representatives hereunder shall be governed by the Confidentiality
Agreement and any other reasonable confidentiality agreement requested
by the Sellers. The Buyer shall be solely responsible for all
reasonable costs and expenses incurred by the Sellers in performing
their obligations under this Section 6.14(d) (including all reasonable
fees and disbursements of the Sellers' independent auditors).
6.15. CLAIMS UNDER SELLER INSURANCE POLICIES. The Buyer acknowledges
that the Transferred Companies, former Subsidiaries of the Transferred
Companies, and parties with whom the Transferred Companies and such Subsidiaries
have done business (collectively, the "COVERED PARTIES") have been covered for
certain periods under insurance policies maintained by the Sellers or certain of
their Affiliates. The Sellers and the Buyer hereby agree that the coverage under
these policies will cease to apply to the Covered Parties for occurrences after
the Closing Date. The Sellers agree to allow the Covered Parties to continue to
be covered by the insurance policies of the Sellers for pre-Closing occurrences
related to the Covered Parties and the Sellers shall, and shall cause their
Affiliates to, cooperate fully in the processing of claims related to such
occurrences; PROVIDED, HOWEVER, that the Buyer or the Transferred Companies
reimburse the Sellers for all charges to Sellers or any of their Affiliates
incurred after the Closing Date in connection with claims under such policies
(including, without limitation, all retained or deductible amounts
(appropriately pro-rated), legal fees, premium tax payments and claim
administration fees), except to the extent that the Buyer is entitled to
indemnification from the Sellers for such charges under this Agreement. The
Buyer or the Transferred Companies shall, promptly after receipt of notice and
supporting documentation (and in any event within 30 days), reimburse the
Sellers for all such amounts charged to the Sellers.
6.16. RELEASE OF PARTIES AND THEIR AFFILIATES.
(a) The Buyer shall cause the Sellers and their
Affiliates to be released from all obligations, including without
limitation any obligations to provide stand-by letters of credit, in
respect of any Indebtedness of the Transferred Companies listed on
EXHIBIT 6.16(A) following the Closing; PROVIDED, that the Buyer shall
not be responsible for any failure of any Person holding such letters
of credit to abide by an agreement by which such holder is bound; and
PROVIDED, FURTHER, that in the event any amount is drawn under any such
letter of credit following the Closing, then the Buyer shall promptly
reimburse the Sellers in cash for the full amount drawn. The parties
will cooperate with each other and Nortek shall cause its lenders under
the Credit Agreement to cooperate with the parties in obtaining such
releases.
(b) The Sellers shall use their reasonable commercial
efforts to (i) seek to have the Transferred Companies and their
Affiliates replaced by the Sellers or otherwise released, from and
after the Closing, from all obligations in respect of the Contracts
listed in Part A of EXHIBIT 6.16(B) and (ii) assign to Ply Gem their
rights under the Contracts listed in Part B of EXHIBIT 6.16(B);
PROVIDED, HOWEVER, that the Sellers shall not be required to pay any
moneys to any counterparty to any such Contract (other than
reimbursement of the reasonable out-of-pocket costs of providing the
same) or otherwise
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undertake any new obligation to any of such counterparty (other than to
provide financial information respecting the Sellers, subject to
reasonable confidentiality provisions) or waive any benefit or right in
order to obtain any such replacement or release. The parties will
cooperate with each other in exercising such reasonable efforts. The
provisions of this Section 6.16(b) shall expire six months following
the Closing; PROVIDED, that no such expiration shall relieve the
Sellers of any liability for any breach of this provision occurring
while such provision is in effect.
6.17. PAYMENT IN FULL OF CERTAIN TRANSFERRED COMPANY INDEBTEDNESS.
The Sellers shall, prior to the Closing, (i) cause the release referred to in
Section 4.8 to be obtained and (ii) pay or cause to be paid in full or otherwise
terminated in a manner reasonably satisfactory to the Buyer to each Transferred
Company all Indebtedness owed to such Transferred Company by such Seller or any
Affiliate of such Seller. At and as of the Closing, any Indebtedness owed by any
Transferred Company to any Seller or to any Affiliate of any of the Sellers
shall be canceled, and all Indebtedness owed by any Transferred Company other
than the Indebtedness listed in EXHIBIT 6.17 shall be paid in full.
6.18. NO SOLICITATION OF ACQUISITION PROPOSALS. As an inducement to
the Buyer to enter into this Agreement, and in consideration of the time and
expense which it has devoted and will devote to the transactions contemplated
hereby during the period beginning on the date of this Agreement and ending on
the earlier of (a) the Closing Date and (b) the termination of this Agreement in
accordance with Section 7, except for the transactions contemplated hereby, the
Sellers shall not, and shall cause each Transferred Company and each of the
Affiliates and authorized representatives of each Transferred Company and the
Sellers not to, directly or indirectly, (i) initiate, solicit or encourage, or
respond to, any inquiry or proposal by any Person with respect to (a) a merger,
consolidation, share exchange, business combination, joint venture, liquidation,
dissolution or similar transaction involving any Transferred Company, (b) a
sale, lease, exchange or other disposition of all or any portion of the
business, properties or assets of any Transferred Company (other than in the
Ordinary Course of Business) or the outstanding shares of capital stock of, or
other ownership interests in, any Transferred Company or (c) a sale of any
securities of, or otherwise making an investment in, any Transferred Company
(each, an "ACQUISITION PROPOSAL"), or (ii) enter into any discussions,
negotiations or agreements concerning an Acquisition Proposal with, or provide
any information concerning any Transferred Company or afford any access to
properties, books and records of any Transferred Company to, or otherwise assist
or facilitate any effort relating to an Acquisition Proposal by, any Person. The
Sellers shall, and shall cause each Transferred Company and each of the
Affiliates and authorized representatives of each Transferred Company and the
Sellers to, immediately cease any existing discussions or negotiations with any
Person concerning any Acquisition Proposal.
6.19. NON-COMPETITION; NON-SOLICITATION.
(a) Each of the Sellers acknowledges that (v) the
Transferred Companies are engaged in the business of manufacturing and
marketing vinyl siding, windows, patio doors, fencing, railing and
decking for the residential repair/remodeling and new construction
markets (the "TRANSFERRED COMPANY BUSINESS"); (w) the Company Business
is conducted throughout the United States of America and Canada; (x)
its ownership until the Closing Date of the Transferred Companies has
given it trade secrets of and
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confidential information concerning the Transferred Companies; (y) the
agreements and covenants contained in this Section 6.19 are essential
to protect the business and goodwill of the Transferred Companies; and
(z) the Buyer would not purchase the Shares but for such agreements and
covenants. Accordingly, each covenants and agrees as follows:
(i) For a period of two (2) years commencing on
the Closing Date (the "RESTRICTED PERIOD"), no Seller shall, in the
United States of America or in Canada, directly or indirectly, (A)
engage in the Transferred Company Business for such Seller's own
account; (B) except as agreed to in writing by the Buyer and such
Seller, render any services to any Person engaged in the Transferred
Company Business or for use in competing with the Transferred Company
Business; (C) have an interest in any Person engaged in the Transferred
Company Business in any capacity, including as a partner, shareholder,
member, employee, principal, agent, trustee or consultant; PROVIDED,
HOWEVER, a Seller may own, directly or indirectly, solely as an
investment, securities of any Person traded on any national securities
exchange if such Seller is not a controlling Person of, or a member of
a group which controls, such Person and does not, directly or
indirectly, own 5% or more of any class of securities of such Person;
or (D) interfere in any material respects with business relationships
(whether formed prior to or after the date of this Agreement) between
any Transferred Company and customers or suppliers of any Transferred
Company; and
(ii) Without the prior written consent of the
Buyer, during the Restricted Period, no Seller shall, directly or
indirectly, hire or solicit any employee of any Transferred Company or
encourage any such employee to leave such employment or hire any such
employee who has left such employment within one (1) year of the
termination of such employment, except pursuant to a general
solicitation which is not directed specifically to any such employees.
(b) If any Seller breaches, or threatens to commit a
breach of, any of the provisions of Section 6.19, each of the Buyer and
each Transferred Company shall have the following rights and remedies,
each of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not
in lieu of, any other rights and remedies available to any of the Buyer
or any Transferred Company under law or in equity:
(i) The right and remedy to have such provision
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to each of the Buyer and each Transferred
Company and that money damages would not provide an adequate remedy to
the Buyer or any Transferred Company; and
(ii) The right and remedy to require each Seller
to account for and pay over to the Buyer or any Transferred Company, as
the case may be, all compensation, profits, monies, accruals,
increments or other benefits derived or received by such Seller as the
result of any transactions constituting a breach of such provision.
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(c) Each Seller acknowledges and agrees that as to it the
provisions of this Section 6.19 are reasonable and valid in
geographical and temporal scope and in all other respects. If any court
of competent jurisdiction determines that all or any part of any of
this Section 6.19 is invalid or unenforceable as to one or more of the
Sellers, the remainder of this Section 6.19 shall not be affected and
shall be given full effect as to the Sellers or such Seller, without
regard to the invalid portions.
(d) If any court of competent jurisdiction determines
that all or any part of this Section 6.19 is unenforceable as to one or
more of the Sellers, such court shall have the power to reduce the
scope of this Section 6.19, as to the Sellers or such Seller, and, in
its reduced form, such provision shall then be enforceable.
(e) The Buyer and each Seller intend to and confer
jurisdiction to enforce the provisions of this Section 6.19 upon the
courts of any jurisdiction within the geographical scope specified in
Section 6.19(a). If the courts of any one or more of such jurisdictions
hold the provisions of this Section 6.19 unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the Buyer
and each Seller that such determination not bar or in any way affect
the right of the Buyer or any Transferred Company to the relief
provided above in the courts of any other jurisdiction within the
geographical scope specified in Section 6.19(a), as to breaches of the
provisions of this Section 6.19 in such other respective jurisdictions,
the provisions of this Section 6.19 as they relate to each jurisdiction
being, for this purpose, severable into diverse and independent
covenants.
6.20. POST-CLOSING LIMITATIONS.
(a) Nortek shall not, directly or indirectly, sell,
lease, convey, transfer or otherwise dispose of all or substantially
all of its property and assets in a single transaction or a series of
related transactions (including without limitation in connection with
an internal corporate restructuring), unless the Person or Persons that
acquire or lease such property and assets shall expressly assume, by a
written instrument, executed and delivered to the Buyer, all of the
obligations of Nortek under this Agreement; PROVIDED that the sale,
lease, conveyance, transfer or disposition of either (but not both) of
the residential building products segment of Nortek (the "RESIDENTIAL
BUILDING PRODUCTS SEGMENT") or the air conditioning and heating
products segment of Nortek (the "HVAC SEGMENT") at a time when Nortek
and its Subsidiaries own both such segments shall not be deemed to
constitute a sale, lease, conveyance, transfer or disposition of all or
substantially all of Nortek's property and assets; and PROVIDED,
FURTHER, that in connection with the sale, lease, conveyance, transfer
or disposition of either (but not both) of the Residential Building
Products Segment or the HVAC Segment at a time when Nortek and its
Subsidiaries own both such segments, the Person or Persons that acquire
or lease such segment may expressly, unconditionally and irrevocably
assume, by a written instrument executed and delivered to the Buyer,
all of the obligations of the Sellers under this Agreement. In the
event that the Person or Persons acquiring or leasing such segment, as
contemplated by and in accordance with the immediately preceding
sentence, assume in writing the obligations of the Sellers under this
Agreement as provided above, the Sellers shall be fully, finally and
irrevocably released from all such obligations; PROVIDED, HOWEVER, the
Sellers shall not be released from a particular
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obligation set forth on EXHIBIT 6.20 hereto unless and until the
Sellers have caused the applicable Transferred Company to be fully,
finally and irrevocably released from such obligation. Nortek agrees
that promptly following the execution of definitive documentation with
respect to a sale, lease, conveyance, transfer or disposition pursuant
to which another Person or Persons are required to or will assume the
obligations of the Sellers under this Agreement as contemplated by and
in accordance with the foregoing provisions of this Section 6.20(a),
Nortek shall provide written notice to the Buyer of such execution and
reasonable details with respect thereto, including without limitation
the identity of the Person that has agreed to acquire or lease such
property and assets and the anticipated closing date.
(b) Nortek acknowledges and agrees that irreparable
injury to the Buyer may result if Nortek breaches any covenant of
Nortek contained in this Section 6.20 and that the remedy at law for
the breach of any such covenant may be inadequate. Accordingly, if
Nortek engages in any act in violation of the provisions of this
Section 6.20, the Buyer shall be entitled, in addition to such other
remedies and damages as may be available to it by law or under this
Agreement, to injunctive relief to enforce the provisions of this
Section 6.20.
6.21. PAYMENT OF YEAR END BONUSES. Prior to the Closing, the Sellers
shall pay a year-end bonus for the 2003 calendar year to the executive officers
of the Transferred Companies in an amount (each, a "Paid Bonus Amount")
determined on an individual basis in accordance with, and subject to, the terms
of the performance bonus plan applicable to such individual and based upon an
estimate by the Seller of the financial results of the applicable Transferred
Companies for the year-ended December 31, 2003 (the "Year End Estimates");
provided, however, if it is determined after the Closing and upon receipt of the
Transferred Companies' Financials that the Paid Bonus Amount paid to any such
executive officer is more than the amount (each an "Actual Bonus Amount")
calculated in accordance with the applicable bonus plan using the Transferred
Companies' Financials, the Buyer shall pay or cause to be paid to Nortek within
30 days of receipt of the Transferred Companies Financials an amount equal to
the difference between the aggregate Paid Bonus Amounts and the aggregate Actual
Bonus Amounts.
6.22. TRANSFER OF CWD. Prior to the Closing, Nortek shall transfer
or shall cause the transfer of all of the assets and liabilities constituting
the CWD Windows and Doors division of Broan-NuTone Canada Inc. to CWD Windows
and Doors, Inc. pursuant to written documentation reasonably acceptable to the
Buyer and on substantially the terms set forth on EXHIBIT 6.22 hereto. Except
for purposes of this Section 6.22 and for Section 4.2, it shall be assumed for
all purposes of this Agreement that the aforementioned transfer was consummated
as of the date of this Agreement.
6.23. POST-CLOSING ENVIRONMENTAL SAMPLING. The Buyer agrees that,
after the Closing, it shall not, and shall cause the Transferred Companies and
its and their respective Affiliates not to, initiate, conduct or authorize any
sampling and analysis of surface or subsurface soil or water (collectively,
"SAMPLING") at any of the Real Property, except for any such Sampling (i)
required, as reasonably determined by the Buyer, by applicable Environmental
Laws, (ii) required by a Governmental Authority, (iii) recommended by an
independent environmental consultant in a Phase I environmental site assessment
in connection with a proposed sale of such Real Property
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or of the stock of the Buyer, any direct or indirect parent company or any
Transferred Company or in connection with a material financing transaction of a
Transferred Company, or (iv) undertaken with the express written consent of the
Sellers. Promptly following the execution hereof, the Sellers and the Buyer
shall cooperate to cause the Buyer's environmental consultant to conduct
Sampling with respect to the environmental conditions at the Calgary facility of
CWD Windows and Doors disclosed in Section 2.21 of the Disclosure Letter (the
"CALGARY CONDITION"). After the Closing, any Transferred Company may engage in
Sampling with respect to the Calgary Condition based on the recommendation of
its environmental consultant.
7. TERMINATION; EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1. TERMINATION. The parties may not terminate this Agreement
other than as follows:
(a) The Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing.
(b) The Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (1) in
the event at any time after the date hereof the Sellers have breached
any representation, warranty, covenant or agreement contained in this
Agreement which would give rise to a failure of the conditions to
Closing set forth in Section 4.1 or 4.2 of this Agreement to be
satisfied if the Closing were to be held at such time, the Buyer has
notified the Sellers in writing of such failure, and the Sellers have
not effected a remedy to such failure within ten days following the
receipt by the Sellers of such notice, (2) any of the conditions set
forth in Section 4 is not capable of being satisfied prior to the
Expiration Date, provided that the Buyer is not then in breach of any
representation, warranty, covenant or agreement that would give rise to
the failure of a condition set forth in Section 5.1 or 5.2, or (3) if
the Closing shall not have occurred on or before March 31, 2004 (the
"EXPIRATION DATE") by reason of the failure of any condition precedent
under Section 4 hereof (unless the failure results primarily from the
Buyer itself willfully or intentionally breaching any representation,
warranty, covenant or agreement contained in this Agreement).
(c) The Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (1) in the
event at any time after the date hereof the Buyer has breached any
representation, warranty, covenant or agreement contained in this
Agreement which would give rise to a failure of the conditions to
Closing set forth in Section 5.1 or 5.2 of this Agreement to be
satisfied if the Closing were to be held at such time, the Sellers have
notified the Buyer in writing of such failure, and the Buyer has not
effected a remedy to such failure within ten days following the receipt
by the Buyer of such notice, (2) any of the conditions set forth in
Section 5 is not capable of being satisfied prior to the Expiration
Date, provided that the Sellers are not then in breach of any
representation, warranty, covenant or agreement that would give rise to
the failure of a condition set forth in Sections 4.1 or 4.2, or (3) if
the Closing shall not have occurred on or before the Expiration Date by
reason of the failure of any condition precedent under Section 5 hereof
(unless the failure results primarily from the Sellers themselves
willfully or intentionally breaching any representation, warranty,
covenant or agreement contained in this Agreement).
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7.2. EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 7.1 above, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party,
except that (a) the rights and obligations of the parties under Sections 6.4,
7.2 and 10 shall survive such termination, and (b) nothing herein shall relieve
any party from liability for any willful or intentional breach hereof occurring
prior to termination. The Confidentiality Agreement shall survive the
termination of this Agreement as set forth therein.
8. SURVIVAL; GENERAL INDEMNIFICATION.
8.1. SURVIVAL. Notwithstanding any right of the Buyer to
investigate fully the affairs of any Transferred Company and notwithstanding any
knowledge of facts determined or determinable by the Buyer pursuant to such
investigation or right of investigation, the Buyer has the right to rely fully
upon the representations, warranties, covenants and agreements of the Sellers
contained in this Agreement. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing. All representations and warranties contained in this Agreement shall
terminate and expire on the Survival Termination Date with respect to any claim
based upon, arising out of or otherwise in respect of any inaccuracy or breach
of any such representation or warranty that is not made prior to such date by
the Buyer giving written notice to the Sellers, except for the representations
and warranties of the Sellers contained in (a) Sections 2.1, 2.2, 2.3, 2.4, 2.5,
and 2.24, all of which representations and warranties shall survive without
limitation, (b) Sections 2.12 and 2.20 (but in the case of Section 2.12, only in
respect of any matter constituting a violation of Law or relating to a
controlled group liability), all of which representations and warranties shall
terminate and expire on the date which is 90 days after the date upon which the
liability to which any claim based upon, arising out of or otherwise in respect
of any inaccuracy or breach of any such representation or warranty may relate is
barred by all applicable statutes of limitations (including, without limitation,
all periods of extension, whether automatic or permissive), and (c) Section
2.21, all of which representations and warranties shall terminate and expire on
the date that is three (3) years after the Closing Date, with respect to any
claim based upon, arising out of or otherwise in respect of any inaccuracy or
breach of any such representation or warranty that is not made prior to such
date by the Buyer giving written notice to the Sellers. Except as otherwise
expressly provided in this Agreement, the covenants and agreements contained in
this Agreement shall survive the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
8.2. OBLIGATION OF THE SELLERS TO INDEMNIFY. Subject to the
limitations contained in Sections 8.1 and 8.3, the Sellers jointly and severally
agree to indemnify, defend and hold harmless the Buyer and its directors,
officers, employees, shareholders, partners, members, Affiliates, successors,
assigns, consultants, accountants, counsel, advisors and other agents or
representatives (collectively, the "INDEMNIFIED BUYER PARTIES") from and against
any and all Losses based upon, arising from or relating to:
(a) any inaccuracy in or breach of any representation or
warranty made by the Sellers in this Agreement or in any certificate or
other document delivered by the Sellers pursuant to this Agreement
(other than any inaccuracy in or breach of any such representation or
warranty set forth in Section 2.20, the indemnification for which is
exclusively provided by Section 6.13), including without limitation
Section 4.3, as of the date such
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representation or warranty was made or as if such representation or
warranty were made on and as of the Closing Date;
(b) any breach of any covenant or agreement of the
Sellers contained in this Agreement or any other document delivered by
the Sellers pursuant to this Agreement (except in respect of Taxes, the
indemnification for which is exclusively provided by Section 6.13);
(c) the conduct of business, the ownership or use of
properties or assets or the incurrence of any liability or obligation
by any Seller or any Seller's Subsidiaries or Affiliates or former
Subsidiaries or Affiliates, other than the Transferred Companies;
(d) the conduct of business, the ownership or use of
properties or assets or the incurrence of any liability or obligation
by the Transferred Companies based upon, arising from or relating to
any division, business unit, operations, Subsidiary or Affiliate of any
Transferred Company that was sold, discontinued or otherwise
transferred or disposed of prior to the Closing Date (collectively, the
"FORMER OPERATIONS"), and any obligation under any agreement pursuant
to which any Former Operation was sold, transferred, disposed of or
discontinued;
(e) (i) any liability of Studley Products, Inc. in
respect of the Production Service and Sales District Council Pension
Fund or (ii) any liability of any Transferred Company in respect of any
employee pension benefit plan (as such term is defined in Section 3(2)
of ERISA) subject to Title IV of ERISA in effect prior to the Closing,
other than the Ply Gem Industries, Inc. Group Pension Plan;
(f) any liabilities or obligations based upon, arising
from or relating to any lease under which any Former Operation is or
was a party and Ply Gem is a guarantor, co-tenant or other obligor,
including without limitation, the leases set forth in EXHIBIT 8.2(F);
(g) any Proceeding set forth in Section 2.11 of the
Disclosure Letter that is identified with a double asterisk;
(h) any liability arising from or under any Environmental
Law with respect to the conduct of business, the ownership or use of
properties or assets or the incurrence of any liability or obligation
by Thermal Gard, Inc. prior to the Closing;
(i) any Losses in respect of harm to human health arising
from the Calgary Condition;
(j) one-half (1/2) of any Losses (other than Losses
referred to above in Section 8.2(i)) in excess of $750,000 arising from
the Calgary Condition; or
(k) enforcing the indemnification provided for under this
Agreement.
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The provisions of Section 8.2(i) and 8.2(j) shall expire and have no
further force and effect with respect to any matter as to which the Indemnified
Buyer Parties shall not have made a claim in writing against the Sellers on or
prior to the fifth anniversary of the Closing Date unless prior to the Closing
the Buyer provides written notice to the Sellers that a Sampling conducted by a
nationally-recognized independent environmental consultant has determined that
contamination arising from the Calgary Condition appears likely to have migrated
beyond the borders of the Calgary facility.
8.3. LIMITATIONS ON INDEMNIFICATION BY SELLERS. The indemnification
provided for in Sections 6.13 and 8.2 shall be subject to the following
limitations:
(a) The Sellers shall not be obligated to pay any amounts
for indemnification under Section 8.2(a), except those based upon,
arising from or otherwise relating to Sections 2.1, 2.2, 2.3, 2.4, 2.5,
2.12 (but, in the case of Section 2.12, only in respect of any matter
constituting a violation of Law or relating to a controlled group
liability), 2.20 and 2.24 (the "SELLER BASKET EXCLUSIONS"), until the
aggregate amounts for indemnification under such Sections, exclusive of
those based on the Seller Basket Exclusions, equals $7,000,000 (the
"BASKET AMOUNT"), after the occurrence of which the Sellers shall be
obligated to pay in full all such amounts for such indemnification in
excess of the Basket Amount.
(b) The Sellers shall be obligated to pay any amounts for
indemnification based on the Seller Basket Exclusions (in accordance
with their liability as set forth in Sections 6.13 and 8.2) without
regard to the individual or aggregate amounts thereof and without
regard to whether all other indemnification payments shall have
exceeded, in the aggregate, the Basket Amount.
(c) The maximum amount of indemnification payments under
Section 8.2(a) to which the Indemnified Buyer Parties shall be entitled
to receive indemnification in connection with inaccuracies in or
breaches of representations or warranties of the Sellers referred to
therein (excluding those based upon, arising out of or otherwise in
respect of, the Seller Basket Exclusions), shall not exceed $50,000,000
in the aggregate (the "CAP AMOUNT").
(d) For all purposes of Section 6.13, Section 8.2(a) and
this Section 8.3, including for purposes of determining whether a
breach has occurred and determining the amount of any Loss, each
representation and warranty of the Sellers referred to therein (other
than Section 2.10) shall be considered without regard to any limitation
or qualification as to materiality or Material Adverse Effect (or
similar concept) set forth in such representation or warranty.
(e) Indemnification under Section 6.13 and Section 8.2 of
an Indemnified Buyer Party by the Sellers shall be limited to the
amount of any Loss that remains after deducting therefrom (and the
cumulative amount of all Losses for purposes of determining the Basket
Amount shall be reduced by the amount of) (i) any tax benefit actually
realized by such Indemnified Buyer Party and (ii) any insurance
proceeds or any
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indemnity, contribution or other similar payment actually received by
an Indemnified Buyer Party from any third party with respect thereto.
(f) None of the Indemnified Buyer Parties shall be
entitled to recover any Losses relating to any matter arising under one
provision of this Agreement to the extent that such Indemnified Buyer
Party has already recovered the full amount of such Indemnified Buyer
Party's Losses with respect to such matter pursuant to other provisions
of this Agreement. Without limiting the generality of the foregoing,
the operation of Section 1.4 is an exclusive remedy in respect of the
assets and liabilities and related items taken into account in
connection with the determination of the Closing Net Working Capital,
and no Indemnified Buyer Party shall be entitled to any additional
recourse in respect thereof, whether arising from a breach of a
representation or warranty or otherwise.
(g) The Sellers shall not be obligated to indemnify the
Indemnified Buyer Parties in respect of (i) any Losses which result
from matters discovered as a result of Sampling undertaken in breach of
the covenant in Section 6.23 of this Agreement or (ii) any Losses for
environmental remediation arising out of a breach or inaccuracy in the
representations and warranties in Section 2.21 beyond the standard for
such remediation in effect under applicable Environmental Laws on the
date hereof with respect to the use of the applicable facility or
property on the date hereof.
8.4. OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the
limitations contained in Sections 8.1 and 8.5, the Buyer agrees to, and, from
and after the Closing, agrees to cause each of the Transferred Companies to,
indemnify, defend and hold harmless the Sellers and their respective directors,
officers, employees, shareholders, partners, members, Affiliates, successors,
assigns, consultants, accountants, counsel, advisors and other agents or
representatives (collectively, the "INDEMNIFIED SELLER PARTIES") from and
against all Losses based upon, arising from or relating to:
(a) any inaccuracy in or breach of any representation,
warranty, covenant or agreement of the Buyer contained in this
Agreement or in any certificate or other document delivered by the
Buyer pursuant to this Agreement, including without limitation Section
5.3, as of the date such representation or warranty was made or as if
such representation or warranty were made on and as of the Closing
Date;
(b) any breach of any covenant or agreement of the Buyer
contained in this Agreement or any other document delivered by the
Buyer pursuant to this Agreement (except in respect of Taxes, the
indemnification for which is exclusively provided by Section 6.13); or
(c) enforcing the indemnification provided for in this
Section 8.4.
8.5. LIMITATIONS ON INDEMNIFICATION BY BUYER. The indemnification
provided for in Section 6.13(b) and Section 8.4 shall be subject to the
following limitations:
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(a) For all purposes of 6.13, Section 8.4(a) and this
Section 8.5, including for purposes of determining whether a breach has
occurred and determining the amount of any Loss, each representation
and warranty of the Buyer referred to therein shall be considered
without regard to any limitation or qualification as to materiality or
material adverse effect (or similar concept) set forth in such
representation or warranty.
(b) Indemnification under Section 6.13 and Section 8.4 of
an Indemnified Seller Party by the Buyer shall be limited to the amount
of any Loss that remains after deducting therefrom (i) any tax benefit
actually realized by such Indemnified Seller Party and (ii) any
insurance proceeds or any indemnity, contribution or other similar
payment actually received by an Indemnified Seller Party from any third
party with respect thereto.
(c) None of the Indemnified Seller Parties shall be
entitled to recover any Losses relating to any matter arising under one
provision of this Agreement to the extent that such Indemnified Seller
Party has already recovered the full amount of such Indemnified Seller
Party's Losses with respect to such matter pursuant to other provisions
of this Agreement.
8.6. PROCEDURE FOR INDEMNIFICATION. The party making a claim under
Section 6.13 or under this Section 8 is referred to as the "INDEMNIFIED PARTY,"
and the party against whom such claims are asserted under Section 6.13 or under
this Section 8 is referred to as the "INDEMNIFYING PARTY." All claims by any
Indemnified Party under Section 6.13 or under this Section 8 shall be asserted
and resolved as follows:
(a) NOTICE OF ASSERTED LIABILITY. After receipt by the
Indemnified Party of notice of any event or circumstance that may
result in a Loss for which the Indemnifying Party is or may be
obligated to pay amounts for indemnification under this Agreement
(each, an "ASSERTED LIABILITY"), the Indemnified Party shall give
notice of such Asserted Liability (the "CLAIMS NOTICE") to the
Indemnifying Party. The failure to give such notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations,
except to the extent that the Indemnifying Party forfeits material
rights or defenses by reason of such failure. The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall
indicate the amount (estimated, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the
Indemnified Party.
(b) NON-THIRD PARTY CLAIMS. If the Claims Notice from the
Indemnified Party pertains to an Asserted Liability other than a claim
or demand from a third party for which the Indemnifying Party is or may
be obligated to pay amounts for indemnification under this Agreement,
then the Indemnifying Party shall have 30 days following receipt of the
Claims Notice to make such investigation at the expense of the
Indemnifying Party of the Asserted Liability as the Indemnifying Party
deems necessary or desirable. For the purposes of such investigation,
the Indemnified Party agrees to make available to the Indemnifying
Party the information relied upon by the Indemnified Party to
substantiate the Asserted Liability. If the Indemnified Party and the
Indemnifying Party agree at or prior to the expiration of said 30 day
period (or any mutually agreed upon extension thereof) on the validity
and amount of such Asserted Liability, the Indemnifying Party
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shall immediately pay to the Indemnified Party the full amount of the
claim by wire transfer of immediately available funds to an account
designated by the Indemnified Party.
(c) OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS.
(i) If the Indemnifying Party elects to
compromise or defend an Asserted Liability that relates to a claim or
demand from a third party (including without limitation a Governmental
Authority) for which the Indemnifying Party is or may be obligated to
pay amounts for indemnification under this Agreement (a "THIRD PARTY
CLAIM"), it shall notify within 30 days following its receipt of the
applicable Claims Notice the Indemnified Party of its intent to do so,
and the Indemnified Party, at the expense of the Indemnifying Party,
shall cooperate in the compromise of, or defense against, such Asserted
Liability. During such 30 day period, the Indemnified Party (at the
Indemnifying Party's expense) shall make such filings, including
motions for continuance (and answers if a motion for continuance has
not been granted), as may be necessary to preserve the parties'
positions and rights with respect to such claim or demand.
(ii) If the Claims Notice pertains to a Third
Party Claim, the Indemnifying Party may elect to compromise or defend,
at its own expense and by its own counsel, such Third Party Claim;
PROVIDED, HOWEVER, that the Indemnifying Party shall not have the right
to defend or direct the defense of any Third Party Claim if it refuses
to acknowledge fully in writing its obligations to indemnify the
Indemnified Party in accordance with and subject to the provisions of
this Section 8.
(iii) If the Indemnifying Party elects not to
compromise or defend a Third Party Claim, fails to notify the
Indemnified Party of its election as provided in this Agreement or
refuses to acknowledge fully in writing its obligations to indemnify
the Indemnified Party in accordance with and subject to the provisions
of this Section 8, the Indemnified Party may pay, compromise or defend
such Third Party Claim and seek indemnification for any and all Losses
based upon, arising from or relating to such Third Party Claim;
PROVIDED, HOWEVER, that the Indemnifying Party shall have no
indemnification obligations with respect to any Third Party Claim which
shall be settled by the Indemnified Party without the prior written
consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed); PROVIDED, FURTHER, that
notwithstanding the foregoing, the Indemnified Party shall not be
required to refrain from paying any claim which has matured by a court
judgment or decree, unless an appeal is duly taken from such court
judgment or decree and exercise of such court judgment or decree has
been stayed, nor shall it be required to refrain from paying any claim
where the delay in paying such claim would result in the foreclosure of
a Lien upon any of the property or assets then held by the Indemnified
Party or where any delay in payment would cause the Indemnified Party
material economic loss.
(iv) The Indemnifying Party's right to direct the
defense shall include the right to compromise or enter into an
agreement settling any Third Party Claim; PROVIDED that, without the
prior written consent of the Indemnified Party (which consent
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shall not be unreasonably withheld or delayed), (x) no such compromise
or settlement shall obligate the Indemnified Party to agree to any
settlement which requires the taking of any action by the Indemnified
Party other than the delivery of a customary release, (y) such
compromise or settlement shall include an unconditional release of the
Indemnified Party and (z) such compromise or settlement shall not
require the taking by the Indemnified Party of any action or require
any modification by the Indemnified Party or by any Transferred Company
in any business practice. Notwithstanding anything to the contrary
contained in the preceding sentence, it is understood that (A) the
Indemnified Party shall be obligated to pay amounts in respect of any
such compromise or settlement for which the Indemnifying Party is not
obligated to indemnify the Indemnified Party under this Agreement and
(B) the Indemnified Party may withhold or delay its consent to any
compromise or settlement described in clause (x) or (z) above unless
all Losses associated with any action required to be taken by the
Indemnified Party in connection with such compromise or settlement
(other than the making of payments referred to in clause (A) of this
proviso) are included in the calculation of Losses for purposes of the
obligation of the Indemnifying Party to indemnify the Indemnified
Party. The Indemnified Party shall have the right to participate in the
defense of any Third Party Claim with counsel selected by it subject to
the Indemnifying Party's right to direct the defense. The fees and
disbursements of such counsel shall be at the expense of the
Indemnified Party; PROVIDED, HOWEVER, that if in the reasonable opinion
of counsel to any Indemnified Party, (I) there are or may be legal
defenses available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party or (II) there
exists a conflict or potential conflict of interest between the
Indemnifying Party and such Indemnified Party, the Indemnifying Party
shall be liable for the reasonable legal fees and expenses of separate
counsel to the Indemnified Party (but, in no event shall the
Indemnifying Party be responsible for the fees and expenses of more
than one separate counsel and, if necessary, one local counsel, for all
Indemnified Parties in respect of the applicable Third Party Claim). If
the Indemnifying Party chooses to defend any Third Party Claim, the
Indemnified Party shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary
or appropriate for such defense and otherwise provide full cooperation
in such defense.
(v) Notwithstanding anything to the contrary in
the foregoing provisions of this Section 8.6(c), the Buyer shall be
entitled to compromise or defend any claim or demand from a
Governmental Authority having regulatory power under applicable
Environmental Laws with respect to the matters for which Losses are
subject to indemnification under Section 8.2(j). The Sellers shall have
the right to participate in the defense of such claim or demand with
counsel selected by them subject to the Buyer's right to direct the
defense, and the fees and disbursements of such counsel shall be at the
expense of the Sellers.
8.7. SOLE AND EXCLUSIVE REMEDY. To the maximum extent permitted by
applicable Law, from and after the Closing, the remedies provided in Section
6.13 and this Section 8 shall be the sole recourse of all parties hereto in
respect of any rights, claims and causes of action (including any arising under
or based upon common law) in respect of this Agreement and the transactions
contemplated hereby. Nothing in this Section 8.7 shall limit any Person's right
to seek and obtain any equitable relief to which any Person shall be entitled
(including as provided
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in any Section of this Agreement) or to seek any remedy on account of any
Person's engaging in fraud or intentional misconduct.
8.8. TREATMENT OF INDEMNIFICATION PAYMENTS. It is the intention of
the parties to treat any indemnification payment made under this Agreement as an
adjustment to the Purchase Price for all federal, state, local and foreign Tax
purposes, and the parties agree to file their Tax Returns accordingly.
9. DEFINITIONS.
Certain capitalized terms are used in this Agreement with the specific
meanings defined below in this Section 9.
"ACTUAL BONUS AMOUNT" has the meaning set forth in Section 6.21.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"AGREEMENT" has the meaning set forth in the preamble.
"ASSERTED LIABILITY" has the meaning set forth in Section 8.6(a).
"AUDITED BALANCE SHEET" has the meaning set forth in Section 2.8.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section
2.8.
"BASKET AMOUNT" has the meaning set forth in Section 8.3(a).
"BUYER" has the meaning set forth in the preamble.
"CALGARY CONDITION" has the meaning set forth in Section 6.23.
"CAP AMOUNT" has the meaning set forth in Section 8.3(c).
"CHARTER" means the articles of incorporation, articles of
organization, certificate of incorporation, limited partnership agreement,
limited liability company operating agreement, and by-laws (or equivalent
charter documents) of any business entity.
"CLAIMS NOTICE" has the meaning set forth in Section 8.6(a).
"CLASS A STOCK OPTION" means a stock option issued by Nortek Holdings,
Inc. under its 2002 Stock Option Plan and constituting a "Class A" option under
such plan.
"CLOSING" has the meaning set forth in Section 1.3.
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"CLOSING BALANCE SHEET" has the meaning set forth in Section 1.4(a).
"CLOSING DATE" has the meaning set forth in Section 1.3.
"CLOSING NET WORKING CAPITAL" has the meaning set forth in Section
1.4(a).
"COBRA" has the meaning set forth in Section 2.12(g).
"CODE" means the Internal Revenue Code of 1986, as amended and the
regulations issued thereunder.
"COMBINED GROUP" means the affiliated group having Nortek Holdings,
Inc. as its common parent.
"COMBINED TAX RETURNS" means the consolidated federal income Tax Return
of the affiliated group having Nortek Holdings, Inc. as its common parent and
the combined or unitary state or local income Tax Returns of any groups having
Nortek Holdings, Inc. as their common parent.
"COMMITMENT LETTERS" has the meaning set forth in Section 3.6(b).
"COMPANY PENSION PLAN" has the meaning set forth in Section 2.12(c).
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section
6.4(a).
"CONTEST" has the meaning set forth in Section 6.12(d).
"CONTRACT" means any contract, agreement, deed, mortgage, lease,
license, instrument, note, commitment, undertaking, or arrangement.
"COVERED PARTIES" has the meaning set forth in Section 6.15.
"CREDIT AGREEMENT" means the Loan and Security Agreement dated as of
July 25, 2002 among Nortek certain of Nortek's Subsidiaries, Fleet Securities,
Inc., Fleet Capital Corporation, Fleet Capital Canada Corporation, Congress
Financial Corporation, General Electric Capital Corporation, CIT Group/Business
Credit, PNC Bank, National Association, and certain other parties, as from time
to time in effect.
"DEBT COMMITMENT LETTER" has the meaning set forth in Section 3.6(b).
"DEBT PROVIDERS" has the meaning set forth in Section 3.6(b).
"DISCLOSURE LETTER" has the meaning set forth in Section 2.1.
"DISPUTE NOTICE" has the meaning set forth in Section 1.4(b).
"ENVIRONMENTAL LAWS" means all applicable federal, state, foreign or
local laws or any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder relating to
pollution, protection of the environment or exposure to Hazardous Substances,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, noise, contaminants, or hazardous or toxic materials or
wastes or any other Hazardous Substance into ambient air, surface water, ground
water, or land or otherwise relating to the manufacture, processing,
distribution, use, presence, production,
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labeling, testing, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes.
"EQUITY COMMITMENT LETTER" has the meaning set forth in Section 3.6(a).
"EQUITY PROVIDER" has the meaning set forth in Section 3.6(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations issued thereunder.
"ERISA AFFILIATES" has the meaning set forth in Section 2.12(c).
"EXCHANGE ACT" has the meaning set forth in Section 2.6(b).
"EXPIRATION DATE" has the meaning set forth in Section 7.1(b).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2.8.
"FOREIGN PLAN" has the meaning set forth in Section 2.12(i).
"FORMER OPERATIONS" has the meaning set forth in Section 8.2(d).
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
government or political subdivision thereof, or any agency or instrumentality of
any such government or political subdivision, or any self-regulated organization
or other non-governmental regulating authority (to the extent that the rules,
regulations or orders of such authority have the force of law), or any
arbitrator, tribunal or court of competent jurisdiction.
"HAZARDOUS SUBSTANCE" means any pollutants, contaminants, hazardous or
toxic substance, material or waste, including any "hazardous substance" (as
defined in 42 U.S.C. ss. 9601(14)), asbestos-containing material, oil, gasoline
and any other petroleum-based substance, noise and electromagnetic emissions.
"HSR ACT" has the meaning set forth in Section 1.3.
"HVAC SEGMENT" has the meaning set forth in Section 6.20(a).
"INDEBTEDNESS" means with respect to any Person, all obligations
contingent or otherwise, in respect of: (a) borrowed money; (b) indebtedness
evidenced by notes, debentures or similar instruments; (c) capitalized lease
obligations; (d) the deferred purchase price of assets, services or securities
(other than ordinary trade accounts payable); (e) conditional sale or other
title retention agreements; (f) reimbursement obligations, whether contingent or
matured, with respect to letters of credit, bankers' acceptances, surety bonds,
other financial guarantees and interest rate protection agreements (without
duplication of other indebtedness supported or guaranteed thereby); and (g)
interest, premium, penalties and other amounts owing in respect of the items
described in the foregoing clauses (a) through (g). "INDEMNIFIED BUYER PARTIES"
has the meaning set forth in Section 8.2.
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"INDEMNIFIED PARTY" has the meaning set forth in Section 8.6.
"INDEMNIFIED SELLER PARTIES" has the meaning set forth in Section 8.4.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8.6.
"INDEPENDENT ACCOUNTANTS" has the meaning set forth in Section 1.4(c).
"INTELLECTUAL PROPERTY" means, as they exist anywhere in the world, all
copyrights and mask works, whether or not registered, any all renewals and
extensions thereof, domain names, Internet addresses and other computer
identifiers, computer software programs (including all source code, object code,
specifications, designs and documentation related to such programs), Patents,
Trade Secrets, Trademarks and IP Licenses.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in Section
2.8.
"IP LICENSES" has the meaning set forth in Section 2.23(c).
"IRS" means the Internal Revenue Service.
"KNOWLEDGE OF THE SELLERS" means the actual knowledge of any of (a) Lee
D. Meyer, John Wayne, Mark Watson, Bryan Sveinson or Shawn Poe or (b) the
executive officers of Nortek.
"LAW" means any law, statute, constitution, treaty, code, ordinance,
regulation or other requirement of any Governmental Authority.
"LEASED REAL PROPERTY" has the meaning set forth in Section 2.22(b).
"LIEN" means any mortgage, deed of trust, lease, option, right of first
refusal, pledge, lien, security interest, charge, claim, equitable interest,
encumbrance, restriction on transfer, conditional sale or other title retention
device or arrangement (including a capital lease), transfer for the purpose of
subjection to the payment of any Indebtedness, or restriction on the creation of
any of the foregoing, whether relating to any property or right or the income or
profits therefrom.
"LOSSES" means losses, liabilities, judgments, damages, deficiencies,
awards, fines, penalties, expenses, fees, costs, or amounts paid in settlement
(including interest and reasonable costs or expenses (including, without
limitation, attorneys' fees and costs)), arising out of any incident, event,
circumstance or Proceeding asserted or initiated or otherwise occurring or
existing in respect of any matter; PROVIDED, HOWEVER, that Losses shall not
include any of the foregoing in the nature of punitive damages (other than
punitive damages payable to a Governmental Authority or other third party in
respect of a Third Party Claim).
"MATERIAL ADVERSE EFFECT" means any change, effect or circumstance that
is materially adverse (i) to the properties, assets, business, financial
condition or operating results of the Transferred Companies taken as a whole;
PROVIDED, HOWEVER, that no change, effect or
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circumstance shall be deemed (either alone or in combination) to constitute, nor
shall be taken into account in determining whether there has been or may be, a
Material Adverse Effect to the extent that it arises out of or relates to: (a) a
general deterioration in the economy or in the industries in which the
Transferred Companies operate, (b) the outbreak or escalation of hostilities
involving the United States, the declaration by the United States of a national
emergency or war or the occurrence of any other calamity or crisis, including an
act of terrorism, (c) the disclosure of the fact that the Buyer is the
prospective acquirer of the Transferred Companies, (d) the announcement of the
possibility or pendency of the transactions contemplated hereby or any similar
transaction involving any of the Transferred Companies, (e) any change in
accounting requirements or principles imposed upon any of the Transferred
Companies or any change in applicable laws, rules or regulations or the
interpretation thereof, or (f) compliance with the terms of, or the taking of
any action required by, this Agreement, or (ii) on the ability of any Seller to
perform its obligations under this Agreement or to consummate the transactions
contemplated hereby.
"MATERIAL UPDATE" means any revision to the Disclosure Letter provided
by the Sellers to the Buyer pursuant to Section 6.10(c) with respect to which,
when considered together with all previous supplements or amendments that the
Buyer has accepted under Section 6.10(b) and all Routine Updates and Material
Updates that have resulted in amendments to the Disclosure Letter, the Sellers
would not be able to provide an accurate certificate as contemplated by Section
4.3 hereof.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 2.12(d).
"MOST RECENT BALANCE SHEET" has the meaning set forth in Section 2.8.
"NET WORKING CAPITAL" means current assets within the meaning of GAAP
(other than cash and cash equivalents, deferred or current income taxes,
intercompany accounts receivable from Nortek or any of its Subsidiaries, and
assets in respect of fire retardant treated wood products), reduced in the case
of inventories of Napco, Inc. by revision of a LIFO adjustment consistent with
the adjustment made in the preparation of the Target Net Working Capital, minus
current liabilities within the meaning of GAAP (other than any such liabilities
in respect of Indebtedness, deferred or current income taxes, intercompany
accounts payable to Nortek or any of its Subsidiaries, and liabilities in
respect of fire retardant treated wood products), calculated in a manner
consistent with the calculation of the Target Net Working Capital as set forth
on EXHIBIT 9. In calculating the foregoing, all assets and liabilities of Former
Operations shall be excluded.
"NORTEK" has the meaning set forth in the preamble.
"ORDER" means any judgment, injunction, award, decision, decree,
ruling, verdict, writ or order of any nature of any Governmental Authority.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the Transferred Companies, consistent with past practice and custom.
"OWNED REAL PROPERTY" has the meaning set forth in Section 2.22(a).
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"PAID BONUS AMOUNT" has the meaning set forth in Section 6.21.
"PATENTS" means any patents, patent applications and inventions,
designs and improvements described and claimed therein, patentable inventions
and other patent rights (including any divisions, continuations,
continuations-in-part, reissues, reexaminations, or interferences thereof,
whether or not patents are issued on any such applications and whether or not
any such applications are modified, withdrawn or resubmitted).
"PBGC" has the meaning set forth in Section 2.12(d).
"PERMIT" means any license, permit, exemption, consent, waiver,
authorization, right, certificate of occupancy, franchise, order or approval
issued, granted, given or otherwise made available by or under the authority of,
or registration with, any Governmental Authority or pursuant to any Law.
"PERSON" means any present or future natural person or any corporation,
association, partnership, joint venture, limited liability, joint stock or other
company, business trust, trust, organization, business or government or any
governmental agency or political subdivision thereof.
"PLAN" has the meaning set forth in Section 2.12(a).
"PLY GEM" has the meaning set forth in the recitals.
"POST-CLOSING TAXES" means Taxes of the Transferred Companies for
periods or portions thereof beginning after the Closing Date.
"PRE-CLOSING COMBINED RETURNS" means Combined Tax Returns for
Pre-Closing Periods.
"PRE-CLOSING PERIODS" has the meaning set forth in Section 6.12(a).
"PRE-CLOSING TAXES" means Taxes of the Transferred Companies for
periods or portions thereof ending on or before the Closing Date.
"PROCEEDING" means any action, cause of action, suit, claim, complaint,
demand, audit, dispute, litigation or legal, administrative or arbitral
proceeding or investigation, whether at law, in equity or in arbitration, before
any Governmental Authority.
"PURCHASE PRICE" has the meaning set forth in Section 1.2.
"REAL PROPERTY" has the meaning set forth in Section 2.22(c).
"REAL PROPERTY LEASES" has the meaning set forth in Section 2.22(b).
"RECORDS" has the meaning set forth in Section 6.1.
"RESIDENTIAL BUILDING PRODUCTS SEGMENT" has the meaning set forth in
Section 6.20(a).
"RESTRICTED PERIOD" has the meaning set forth in Section 6.19(a)(i).
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"ROUTINE UPDATE" means any revision to the Disclosure Letter provided
by the Sellers to the Buyer pursuant to Section 6.10(c) with respect to which,
when considered together with all previous supplements or amendments that the
Buyer has accepted under Section 6.10(b) and all Routine Updates and Material
Updates that have resulted in amendments to the Disclosure Letter, the Sellers
would nevertheless be able to provide an accurate certificate as contemplated by
Section 4.3 hereof.
"SAMPLING" has the meaning set forth in Section 6.23.
"SEC" has the meaning set forth in Section 6.14(d).
"SECURITIES ACT" means the Securities Act of 1933, as amended and the
regulations issued thereunder.
"SELLER BASKET EXCLUSIONS" has the meaning set forth in Section 8.3(a).
"SELLERS" has the meaning set forth in the preamble.
"SHARES" has the meaning set forth in the recitals.
"SPECIFIED SELLER REPRESENTATIONS" means the representations and
warranties in Sections 2.1, 2.2, 2.3, 2.4, 2.5 and 2.24 hereof.
"STATEMENT" has the meaning set forth in Section 1.4(a).
"STOCK OPTION ADJUSTMENT AMOUNT" shall mean, with respect to each Class
A Stock Option cancelled in connection with the transactions contemplated
hereby, the amount represented by the product of (a) the number of shares of
common stock of Nortek Holdings, Inc. issuable upon exercise of such Class A
Stock Option and (b) the difference between $69.25 and the exercise price per
share for such Class A Stock Option.
"STRADDLE PERIOD" has the meaning set forth in Section 6.12(a).
"SUBSIDIARY" means with respect to any Person, any corporation or other
legal entity of which such Person owns, directly or indirectly, 50% or more of
the outstanding stock or other equity interests or the holders of which are
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
"SURVIVAL TERMINATION DATE" means the ninetieth day following the
receipt of audited financial statements of Ply Gem for the fiscal year ended
December 31, 2004; PROVIDED that in no event shall the Survival Termination Date
be later than June 30, 2005.
"TARGET NET WORKING CAPITAL" has the meaning set forth in Section
1.4(d).
"TAX RETURNS" means any and all reports, returns, declarations, claims
for refund, elections, disclosures, estimates, information reports or returns or
statements required to be supplied to a governmental authority in connection
with Taxes, including any schedule or attachment thereto or amendment thereof.
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"TAX SHARING AGREEMENTS" has the meaning set forth in Section 2.22(d).
"TAXES" means (i) any and all federal, state, provincial, local,
foreign and other taxes, levies, fees, imposts, duties, and similar governmental
charges (including any interest, fines, assessments, penalties or additions to
tax imposed in connection therewith or with respect thereto) including, without
limitation (x) taxes imposed on, or measured by, income, franchise, profits or
gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and
services, use, real or personal property, capital stock, license, branch,
payroll, estimated withholding, employment, social security (or similar),
unemployment, compensation, utility, severance, production, excise, stamp,
occupation, premium, windfall profits, transfer and gains taxes, and customs
duties, and (ii) any transferee liability in respect of any items described in
clause (i) above.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8.6(c).
"TRADE SECRETS" means any trade secrets, know-how, inventions,
processes, procedures, databases, confidential business information and other
proprietary information and rights (whether or not patentable or subject to
copyright, mask work or trade secret protection).
"TRADEMARKS" means any trademarks, service marks, trade dress, trade
names, brand names, designs, logos, or corporate names, whether or not
registered, and all registrations and applications for registration thereof, and
all goodwill related thereto.
"TRANSFERRED COMPANIES" has the meaning set forth in the recitals. For
purposes of this Agreement, the CWD Windows and Doors division of Broan-NuTone
Canada Inc. prior to the date of this Agreement, shall be deemed to be a
Transferred Company.
"TRANSFERRED COMPANIES' FINANCIALS" means the audited financial
statements of the Transferred Companies for the year ended December 31, 2003.
"TRANSFERRED COMPANY BUSINESS" has the meaning set forth in Section
6.19(a).
"TRANSFERRED COMPANY INTELLECTUAL PROPERTY" has the meaning set forth
in Section 2.23(a).
"TRANSFERRED COMPANY MATERIAL CONTRACTS" has the meaning set forth in
Section 2.13(a).
"TRANSFERRED COMPANY MATERIAL PERMITS" has the meaning set forth in
Section 2.7(b).
"TRANSFERRED COMPANY PLAN" has the meaning set forth in Section
2.12(a).
"TRANSFERRED COMPANY PRODUCTS" has the meaning set forth in Section
2.18.
"WARN" means the Worker Adjustment and Retraining Notification Act of
1988.
"WDS" has the meaning set forth in the preamble.
"YEAR END ESTIMATES" has the meaning set forth in Section 6.21.
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10. MISCELLANEOUS.
10.1. NOTICES. All notices, requests, demands, claims and other
communications required or permitted hereunder shall be in writing and shall be
sent by nationally recognized overnight courier, registered mail or certified
mail. Any notice, request, demand, claim, or other communication required or
permitted hereunder shall be deemed duly given, as applicable, (a) one business
day following the date sent when sent by overnight delivery or (b) five business
days following the date mailed when mailed by registered or certified mail
return receipt requested and postage prepaid to the following address:
If to the Sellers, to:
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02902
Tel.: (401) 751-1600
Fax: (401) 751-4610
Attention: Kevin W. Donnelly, Esq.
- with a copy to -
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110-2624
Tel.: (617) 951-7000
Fax: (617) 951-7050
Attention: John B. Ayer, Esq.
If to the Buyer, to it at:
CI Investment Holdings, Inc.
c/o Caxton-Iseman Capital, Inc.
667 Madison Avenue
New York, New York 10021
Tel.: (212) 774-5801
Fax: (212) 832-9450
Attention: Frederick J. Iseman
- with a copy to -
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Tel.: (212) 373-3000
Fax: (212) 757-3990
Attention: Carl L. Reisner, Esq.
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Notwithstanding the foregoing, any party may send any notice, request,
demand, claim, or other communication required or permitted hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, messenger service, facsimile transmission,
ordinary mail, or electronic mail); PROVIDED, HOWEVER, that no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications required or permitted hereunder are to be delivered by
giving the other party notice in the manner herein set forth.
10.2. EXPENSES OF TRANSACTION. Whether or not the transactions
provided for herein are consummated, each of the parties hereto will assume and
bear all expenses, costs and fees (including legal and accounting fees and
expenses) incurred by such party in connection with the preparation, negotiation
and execution of this Agreement and the transactions contemplated hereby;
PROVIDED, HOWEVER, that, in the event the transactions contemplated hereby are
not consummated by reason of the failure of any conditions in Section 4 to be
satisfied or the termination of this Agreement pursuant to Section 7.1(b)(1) or
(2), the filing fee for any filing under the HSR Act or similar foreign
requirement required to be made in connection with this Agreement will be shared
one-half (1/2) by the Buyer and one-half (1/2) by the Sellers.
10.3. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Letter and the agreements, certificates and other documents contemplated hereby
or required to be delivered hereunder) sets forth the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes any prior agreement or understanding (other than the Confidentiality
Agreement), whether oral or written, relating to the subject matter of this
Agreement.
10.4. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or under
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
10.5. AMENDMENT; WAIVER. This Agreement may be amended, modified or
supplemented by the parties hereto at any time, but only by an instrument in
writing executed by each of the Buyer and the Sellers. The terms of this
Agreement may be waived by any party hereto at any time, but only by an
instrument in writing executed by the party waiving compliance, and no such
waiver will be applicable except in the specific instance for which it is given.
10.6. PARTIES IN INTEREST. Subject to Section 10.7, this Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any right, benefit or remedy of any
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nature whatsoever under or by reason of this Agreement, including, without
limitation, by way of subrogation.
10.7. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and permissible assigns of
the Sellers and the Buyer. This Agreement and any rights and obligations
hereunder shall not be assigned, hypothecated or otherwise transferred by any
party hereto (by operation of law or otherwise) without the prior written
consent of the other party hereto, except that, from and after the Closing, the
Buyer may assign, in its sole discretion, any or all of its rights, interests
and obligations under this Agreement to any of its Affiliates, to any successor
to all or substantially all of its business or assets or to any bank or other
financial institution that may provide financing for the transactions
contemplated hereby.
10.8. GOVERNING LAW. This Agreement, and all claims arising under,
related to, or in connection therewith shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any other jurisdiction.
10.9. CONSENT TO JURISDICTION. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state courts of the State of New York, New York County or the United
States District Court located in the State of New York, New York County for the
purpose of any and all actions, suits or proceedings arising in whole or in part
out of, related to, based upon or in connection with this Agreement or the
subject matter hereof, (b) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such action brought in one of the
above-named courts should be dismissed on grounds of FORUM NON CONVENIENS,
should be transferred to any court other than one of the above-named courts, or
should be stayed by reason of the pendency of some other proceeding in any other
court other than one of the above-named courts, or that this Agreement or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
agrees not to commence any such action other than before one of the above-named
courts nor to make any motion or take any other action seeking or intending to
cause the transfer or removal of any such action to any court other than one of
the above-named courts whether on the grounds of inconvenient forum or
otherwise. Each party hereby (x) consents to service of process in any such
action in any manner permitted by New York law; (y) agrees that service of
process made in accordance with clause (x) or made by registered or certified
mail, return receipt requested, at its address specified pursuant to Section
10.1 hereof, shall constitute good and valid service of process in any such
action; and (z) waives and agrees not to assert (by way of motion, as a defense,
or otherwise) in any such action any claim that service of process made in
accordance with clause (x) or (y) does not constitute good and valid service of
process.
10.10. WAIVER OF JURY TRIAL. To the extent not prohibited by
applicable law that cannot be waived, each party hereby waives, and covenants
that it will not assert (whether as plaintiff, defendant or otherwise), any
right to trial by jury in any forum in respect of any issue, claim,
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demand, action or cause of action arising in whole or in part under, related to,
based on or in connection with this Agreement or the subject matter hereof,
whether now existing or hereafter arising and whether sounding in tort or
contract or otherwise. Any party hereto may file an original counterpart or a
copy of this Section 10.10 with any court as written evidence of the consent of
each such party to the waiver of its right to trial by jury.
10.11. RELIANCE. Each of the parties hereto acknowledges that it has
been informed by each other party that the provisions of Sections 10.9 and 10.10
above constitute a material inducement upon which such party is relying and will
rely in entering into this Agreement, and each such party agrees that any breach
by such party of any of the provisions of Sections 10.9 or 10.10 above would
constitute a material breach of this Agreement.
10.12. SPECIFIC ENFORCEMENT. Each party acknowledges and agrees that
the other party would be irreparably damaged in the event that this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that each party hereto shall be entitled to
an injunction (without having to post bond or undertake any similar action) to
specifically enforce the terms of this Agreement, in addition to any other
remedy to which such party may be entitled hereunder, at law or in equity.
10.13. NO WAIVER. No failure or delay on the part of any party hereto
in the exercise of any right hereunder shall impair such right or be construed
to be a waiver of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or of any other right.
10.14. INVESTIGATION; NO ADDITIONAL REPRESENTATIONS. Neither the
Buyer nor the Sellers has made, or is making, any representation, warranty,
covenant or agreement, express or implied, with respect to the matters contained
in this Agreement other than the explicit representations, warranties, covenants
and agreements set forth herein. The Buyer acknowledges and agrees that it (a)
has made its own inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Transferred Companies, and (b) has been
furnished with or given adequate access to such information about the
Transferred Companies as it has requested.
10.15. NEGOTIATION OF AGREEMENT. Each of the parties acknowledges
that it has been represented by independent counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement. Each party and
its counsel cooperated in the drafting and preparation of this Agreement and the
documents referred to herein, and any and all drafts relating thereto shall be
deemed the work product of the parties and may not be construed against any
party by reason of its preparation. Accordingly, any rule of law or any legal
decision that would require interpretation of any ambiguities in this Agreement
against the party that drafted it is of no application and is hereby expressly
waived.
10.16. CONSTRUCTION. The inclusion of any information in the
Disclosure Letter shall not be deemed an admission or acknowledgment, in and of
itself and solely by virtue of the inclusion of such information in the
Disclosure Letter, that such information is required to be listed in the
Disclosure Letter or that such items are material to the Transferred Companies.
The headings, if any, of the individual sections of each of the Disclosure
Letter are inserted for convenience only
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and shall not be deemed to constitute a part thereof or a part of the Agreement.
Disclosure of any fact or item in any Disclosure Letter or supplement to any
Disclosure Letter hereto referenced by a particular Section in this Agreement
shall not be deemed disclosed with respect to any other Section in this
Agreement or the Disclosure Letter unless an explicit cross-reference appears
indicating the other Sections in this Agreement or the Disclosure Letter to
which such fact or item also relates or unless the relevance of such fact or
item to such other Section in this Agreement or the Disclosure Letter is
reasonably apparent on the face of such fact or item, whether or not such
Section (or any portion thereof) of this Agreement contemplates that items with
respect to such Section are set forth in the Disclosure Letter. 10.17. HEADINGS.
The headings contained in this Agreement are inserted only for reference as a
matter of convenience and in no way define, limit, or describe the scope or
intent of this Agreement, and shall not affect in any way the meaning or
interpretation of this Agreement.
10.18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed an original for all purposes and all of which together
shall constitute one and the same instrument.
10.19. USAGE. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used in this Agreement in their plural or singular
forms, respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their respective duly authorized officers as of the day
and year first written above.
The Buyer: CI INVESTMENT HOLDINGS, INC.
By: /s/ Frederick J. Iseman
---------------------------------------
Name: Frederick J. Iseman
Title: President
The Sellers: NORTEK, INC.
By: /s/ Richard L. Bready
---------------------------------------
Name: Richard L. Bready
Title: Chairman, President & CEO
WDS LLC
By: /s/ Richard L. Bready
---------------------------------------
Name: Richard L. Bready
Title: President
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