EXHIBIT 10.16
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EXECUTION COPY
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT dated as of February 12, 2004 (this
"AGREEMENT") by and between Nortek, Inc., a Delaware corporation (the "SELLER"),
and Ply Gem Industries, Inc., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement dated as of December
19, 2003 (as amended and in effect from time to time, the "PURCHASE AGREEMENT")
among the Seller, WDS LLC and Ply Gem Investment Holdings, Inc., a Delaware
corporation (the "BUYER"), the Seller and WDS LLC have agreed to sell, upon the
terms and subject to conditions set forth therein, all of the outstanding shares
of stock of the Company to the Buyer; and
WHEREAS, Section 4.10 of the Purchase Agreement provides that it is a
condition precedent to the obligation of the Buyer to consummate the
transactions contemplated by the Purchase Agreement, that the Seller enter into
a transition services agreement containing the terms and conditions set forth
herein; and
WHEREAS, the Company desires that Seller provide on a transitional
basis certain Services (as defined below) to the Company and its Subsidiaries
(as defined in the Purchase Agreement) to support the business activities of the
Company and its Subsidiaries during a transition period following the Closing
Date and the Seller is willing to provide, or cause its Affiliates (as defined
in the Purchase Agreement) to provide, such Services to the Company and its
Subsidiaries on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, and subject to the
terms and conditions herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Any capitalized term used and not otherwise
defined herein shall have the meaning assigned to it in the Purchase Agreement.
2. SERVICES.
(a) Commencing on the date hereof and continuing
throughout the Term (as defined below), unless earlier terminated
pursuant to the terms of this Agreement or except as expressly noted
otherwise, the Seller shall provide, or cause its Affiliates to
provide, to the Company and its Subsidiaries, in connection with the
conduct of their business activities, the services described on
SCHEDULE A attached hereto (the "SERVICES") along with consultation and
assistance with taking over the Services. The Seller shall provide each
of the Services to the Company on substantially the same basis as
provided to the Company prior to the date hereof. The parties agree
that the Seller may use third party service providers in connection
with the provision of the Services hereunder, consistent with the past
practices of the Seller; PROVIDED, HOWEVER, the Seller will not
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materially increase its use of such third party service providers in
connection with the provision of the Services without the prior written
consent of the Company.
(b) The Seller agrees that it shall use all reasonable
commercial efforts to obtain all consents, licenses, waivers or other
approvals from all Persons with respect to the software programs set
forth on SCHEDULE B hereto (the "CONSENTS"), to the extent necessary
for the Seller and its Affiliates to fully provide all of the Services
(it being understood that no party shall be required to pay any money
to the Person from whom such Consent 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,
unless the Seller is not able to arrange for the Company to receive the
same benefits from and after the Closing to which the Company would
have been entitled if such Consent had been obtained, in which case the
Seller shall be required to pay such money or undertake such new
obligation or waive such existing benefit or right in order to obtain
such Consent). The parties will cooperate with each other in exercising
such reasonable efforts. If any such Consent is not obtained, the
Seller shall, with respect to any such software program, arrange for
the Company to receive substantially the same benefits under such
software program after the date hereof until the end of the Term to
which the Company would have been entitled if such consent, waiver or
approval had been obtained.
3. REIMBURSEMENT OF EXPENSES.
(a) During each 30-day period during the Term, the
Company and its Subsidiaries shall pay to the Seller an amount equal to
the applicable Monthly Cost (as defined below) for such period plus the
actual and direct reasonable out-of-pocket expenses incurred by the
Seller or its Affiliates during such period in respect of the provision
of the Services (it being understood that such out-of-pocket expenses
shall not include any indirect costs and expenses, such as a portion of
salaries for employees providing such Services or overhead costs
attributable to such Services) (collectively, the "TRANSITION SERVICES
EXPENSES"). The Seller shall prepare, on or before the 30th day after
the end of each 30-day period during the Term, a statement that
provides in reasonable detail the Services provided and the Transition
Services Expenses incurred during such period (the "MONTHLY
STATEMENT"), accompanied by commercially reasonable supporting
documentation for such Transition Services Expenses (other than the
Monthly Cost). The Seller shall provide such additional information
relating to the Transition Services Expenses as may be reasonably
requested by the Company.
(b) "MONTHLY COST" shall mean, for each 30-day period
during the Term, the amount set forth below applicable to such 30-day
period:
PERIOD AMOUNT
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1-30 $ 0
31-60 $ 0
61-90 $10,000
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91-120 $20,000
121-150 $30,000
151-180 $40,000
(c) The Company shall pay the Transition Services
Expenses for each 30-day period within 30 days after presentation of
the Monthly Statement for such 30-day period, by wire transfer of
immediately available funds, to an account or accounts of the Seller
designated in writing by the Seller. If the Company fails to make any
payment within such 30-day period, the Seller may terminate the Term if
such payment is not made by the Company within 10 days of written
notice to the Company.
4. TERM OF SERVICES.
(a) Subject to Section 4(b), the obligations of the
Seller to provide the Services hereunder shall commence on the date
hereof and, except where expressly noted otherwise on SCHEDULE A, shall
continue in effect until the date which is 180 days after the date of
this Agreement (the "TERM").
(b) Any and all of the Services (including any portion of
a specific Service) are terminable by written notice by the Company to
the Seller at any time.
5. INDEMNIFICATION; LIABILITY.
(a) The Company hereby agrees to indemnify and hold
harmless, and to cause each of the other Transferred Companies to
indemnify and hold harmless on a joint and several basis, the Seller,
its Affiliates, and the officers, managers, employees, agents,
successors and assigns of any of them with respect to any Losses
incurred by any of them arising out of or related to the Services
furnished under this Agreement, whether arising out of breach of
warranty, strict liability, tort, contract, fiduciary liability under
ERISA or otherwise, other than Losses which result from the Seller's
gross negligence, willful misconduct or bad faith in performing its
obligations hereunder.
(b) The Seller hereby agrees that under no circumstances
shall the Company, the Transferred Companies or any of their respective
officers, managers, employees, agents, successors and assigns be liable
for any Losses other than as expressly set forth in Section 5(a) above,
and that under no circumstances shall such persons be liable for any
Losses in the nature of punitive damages (other than punitive damages
payable to a Governmental Authority or other third party).
(c) The Company hereby agrees that under no circumstances
shall the Seller, its Affiliates, or the directors, officers, managers,
employees, agents, successors and assigns of any of them be liable for
any Losses directly or
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indirectly arising out of, relating to or in connection with this
Agreement or the performance or non-performance of Services hereunder,
other than that the Seller may be liable for Losses which result from
the Seller's gross negligence, willful breach or bad faith in
performing its obligations hereunder; PROVIDED, that in no event shall
any such Losses include any special, incidental, consequential, lost
profits, expectation, punitive or other indirect damages.
(d) In no event shall the Seller have any liability for
Losses under Section 5(c) arising out of the performance or
nonperformance of Services hereunder that are reasonably expected to be
avoided, in whole or in part, by the re-performance or performance of
such Services, unless (i) the Company has notified the Seller in
writing in reasonable detail of the circumstances of the allegedly
inadequate performance, (ii) the Company has given the Seller a
reasonable opportunity to re-perform or perform the applicable Services
and (iii) the Seller has failed to re-perform or perform such Services
in the manner required by this Agreement within a reasonable time
period thereafter.
6. RECORDS RETENTION. During the Term, the Seller and its
Affiliates shall maintain the agreements, documents, books, records and files
(collectively, the "RECORDS") relating to the provision of the Services
hereunder. Promptly following expiration of the Term (or at such earlier date
this Agreement is terminated) or the termination of any of the Services during
the Term, and in any event within five days after such expiration or
termination, the Seller shall arrange with the Company for the Records relating
to the provision of all of the Services or the Services so terminated, as the
case may be, to be delivered to the Company. During the Term, upon reasonable
written notice and subject to Section 9 hereof, the Seller shall furnish or
cause to be furnished to the Company and its directors, officers, employees,
consultants, counsel, accountants and other authorized representatives, access,
during business hours and upon reasonable prior written notice, such Records and
shall permit such persons to examine and copy such Records to the extent
reasonably requested by the Company as reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any returns,
reports or forms or defense of any claim or assessment.
7. FURTHER ASSURANCES. The Company and the Seller shall execute
such documents and other papers and take such further action as the other party
may reasonably request in order to carry out the provisions hereof and provide
the Services hereunder.
8. POST-TERM COOPERATION. The parties acknowledge that, although
the Company and its personnel and agents shall have full responsibility from and
after the expiration of the Term for making arrangements other than with the
Seller or its Affiliates with respect to all of the Services provided by the
Seller prior thereto, the Seller and its personnel and agents may have certain
information with respect to certain Services that the Company and its personnel
and agents may occasionally seek access to from time to time from and after the
expiration of the Term to address the matters covered by such Services.
Therefore, in furtherance of the Seller's obligations under Section 6.9 of the
Stock Purchase Agreement, the Seller agrees, subject to Section 9 hereof, from
and after the expiration of the Term, to cooperate with the Company and to use
reasonable efforts to make available its personnel and agents, upon reasonable
prior notice and during normal business hours, to the Company and its personnel
and agents for reasonable
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requests for information in connection with the matters identified with an
asterisk on SCHEDULE A. Nothing in this Section 8 shall be construed to obligate
the Seller to incur any out-of-pocket costs or expenses, take any action which
is not consistent with any of its contractual obligations existing on the date
hereof or other legal obligations or which may otherwise expose it to liability,
maintain or retain any of its personnel or agents, or take any action that would
interfere with ordinary day-to-day business activities of its personnel or
agents.
9. CONFIDENTIAL INFORMATION. The parties acknowledge and agree
that, notwithstanding any provision herein to the contrary, the Seller has no
obligation, during the Term or otherwise, to disclose or provide any information
which the Seller, any of its Affiliates or any of their respective directors,
officers, managers, employees or agents is required by law, contract existing on
the date hereof or other legally enforceable obligation to maintain in
confidence or with any information if disclosing or providing such information
would result in the loss of any attorney-client or similar privilege with
respect to such information. The Seller represents and warrants that it is not
bound on the date hereof by any such contract that prevents the Seller, any of
its Affiliates or any of their respective directors, officers, managers,
employees or agents from providing or disclosing any such information in
connection with providing any Services.
10. LIMITED WARRANTY. WITH RESPECT TO ANY LICENSED MATERIALS
PROVIDED IN CONNECTION WITH THE SERVICES, THE SELLER PROVIDES SUCH LICENSED
MATERIALS TO THE COMPANY AS IS, AS AVAILABLE AND WITH ALL FAULTS. THE SELLER
EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO
THE IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, AND ANY WARRANTY ARISING OUT OF A COURSE OF DEALING.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by the internal laws
of the State of New York, without giving effect to conflict of laws
principles thereof, and shall be binding upon the parties and inure to
the benefit of the successors and assigns of the respective parties
hereto.
(b) This Agreement and all rights hereunder may not be
assigned by any party hereto except with the prior written consent of
the other party hereto.
(c) All notices and other communications hereunder shall
be given in accordance with the provisions set forth in Section 10.1 of
the Purchase Agreement to the parties hereto at the following
addresses:
If to the Company, to:
Ply Gem Industries, Inc.
303 West Major
Kearney, MO 64060
Tel.: (800) 800-2244
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Fax: (816) 903-4330
Attention: Shawn K. Poe
with copies to:
Ply Gem Investment Holdings, Inc.
c/o Caxton-Iseman Capital, Inc.
500 Park Avenue, 8th Floor
New York, New York 10022
Tel.: (212) 774-5801
Fax: (212) 832-9450
Attention: Frederick Iseman
if to the Seller, to:
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02902
Tel.: (401) 751-1600
Fax: (401) 751-4610
Attention: Kevin W. Donnelly, Esq.
(d) Nothing contained herein shall create a partnership,
joint venture, agency or employment relationship among the parties
hereto. No employees of either of the parties hereto shall be the agent
or employee of the other party hereto.
(e) This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes
all prior agreements with respect thereto. This Agreement may be
amended, and any provision waived, only in writing signed by the party
or parties against whom such amendment or waiver is sought to be
enforced.
(f) This Agreement may be executed in counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their authorized officers as of the day first above
written.
NORTEK, INC.
By: /s/ Kevin Donnelly
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Name: Kevin Donnelly
Title:
PLY GEM INDUSTRIES, INC.
By: /s/ Lee D. Meyer
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Name: Lee D. Meyer
Title:
SCHEDULE A
TRANSITION SERVICES
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FINANCIAL ACCOUNTING SUPPORT
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Seller to continue to provide accounting support consistent with past practice
to include, without limitation:
1. Maintain the Company's consolidated general ledger.
2. Provide monthly financial closing support (corporate accruals and reserve
computations).
3. Prepare consolidated monthly financial statements using the Nortek "I-file"
format, until such time the Company has installed a consolidation and
reporting system.
4. The Company shall have the right to utilize the Nortek I-file format, even
after the expiration of the Term; PROVIDED, that the Seller has no
obligation to maintain, service, support or update Nortek I-file after the
Term and the Seller shall have no liability of any type in respect of the
continued use of the Nortek I-file format after the Term.
5. General support during the 2003 close and E&Y audit.
6. Assistance in transitional tax planning, compliance and reporting matters,
including the preparation of state tax returns and coordinating the
preparation of the 2003 federal return by E&Y.
7. Assistance on transition of existing telecommunications (MCI) agreement,
the Microsoft license agreement, the UPS shipping agreement and the
LeasePlan USA and Emkay vehicle lease agreements.
LEGAL
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1. Seller to continue to provide support of its internal counsel consistent
with past practice to include, but not limited to: trademarks, patents,
copyrights, purchase contracts, real estate, legal entities and litigation,
including the suits covered under the indemnification clause in the
Purchase Agreement.*
REAL ESTATE
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2. Provide assistance with transitional matters relating to owned and leased
real property, including the lease obligations covered under the
indemnification clause in the Purchase Agreement.*
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ENVIRONMENT, HEALTH & SAFETY
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3. Provide assistance on environmental matters including on new and existing
licenses and/or permits related to the Company.*
4. Continue to provide risk management consultation and assistance consistent
with past practices, recognizing that the Company will be obtaining new
stand-alone policies at Closing.*
EMPLOYEE BENEFITS
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5. Provide routine administration services consistent with the Seller's past
practice, for the Ply-Gem Pension Plan and for the following 401(k) plans:
Great Lakes Window, Inc. 401(k) Savings Plan
Variform, Inc. 401(k) Savings Plan
Napco, Inc. Salary Investment Plan
Napco, Inc. Profit Sharing Plan and Trust
Napco Window Systems, Inc. 401(k) Savings Plan
Napco Window Systems, Inc. Profit Sharing Plan and Trust
Kroy Building Products, Inc. 401(k) Savings Plan
However, the Services contemplated under this Agreement shall be purely
ministerial in nature and shall not be provided in a fiduciary capacity with
respect to the plans under ERISA. The actions of the Seller and its officers,
managers and employees shall be as agents for the plan fiduciaries appointed by
the Company. In addition, various plans shall name the Company as "named
fiduciary" and the Company shall be responsible for executing all documents and
providing all information that is required for Seller to provide the services
contemplated hereunder.
Specifically, the Seller undertakes to provide the following services in
connection with the qualified retirement plans listed above; PROVIDED, HOWEVER,
that the Company shall respond promptly and in any event by the dates requested
by the Seller in connection with the provision of information, review of
documents, distribution of materials and execution of documents as reasonably
requested.
1. Preparation of Annual Report, Form 5500 for each Plan, to be signed by the
Company.
2. Preparation of a "summary annual report" for each Plan for distribution by
Company personnel.
3. Coordination with Plan auditors for preparation of any certified financial
statements required for Form 5500.
4. Monitor remittance of employee and company contributions to Plans.
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5. Process domestic relations orders ("QDRO's"); referral to outside counsel
as necessary pursuant to procedures currently in effect.
6. Coordinate with legal counsel to maintain legal compliance with respect to
the form of Plan documents; and prepare determination letter requests for
Plans using procedures currently in effect.
7. Coordinate with legal counsel the adoption of any plan amendments and
related corporate resolutions deemed necessary for compliance or that may
be otherwise reasonably requested by the Company.
8. Process distribution of benefits requests in the event of death,
disability, hardship, termination of employment pursuant to Plan documents
and procedures currently in effect.
9. Process loan requests to the extent provided for in Plan documents.
10. Monitor third party contractors' testing for compliance under Sections
401(k), 402(g), 410 and 415 of the Code.
11. Maintain Database (Corporate-wide) (defined contribution plan only).
12. Monitor release and allocation of forfeitures under Plans.
13. Monitor preparation of annual account statements for Plans' participants
for distribution by Company personnel
14. Monitor reporting of Plan distributions on Form 1099R to Plans'
participants and beneficiaries.
15. Preparation of annual reports with the Pension Benefit Guaranty
Corporation, to be signed by the Company.
16. Monitor suspension of benefits procedures for post normal retirement age
employees.
17. Monitor preparation of periodic benefit statements for Plans' participants
for distribution by Company personnel.
18. Monitor income tax reporting of plan distributions to Plans' participants
and beneficiaries.
19. Monitor preparation of annual Actuarial Report by third party vendor.
20. Process and distribute participant communications
21. Other ministerial actions that are usual and customary under procedures
currently in effect.
SCHEDULE B
REQUIRED CONSENTS
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1. Nortek I-file format