-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AAKbsm6zNCc8iJezIjE8uNW1hKdxyUpttGqxgqCP1RMyDHtRzplozFj6wBW/aVs7 jdBBosh5QCyVTifKG5Zg8A== 0000950135-01-501850.txt : 20010702 0000950135-01-501850.hdr.sgml : 20010702 ACCESSION NUMBER: 0000950135-01-501850 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTEK INC CENTRAL INDEX KEY: 0000072423 STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430] IRS NUMBER: 050314991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64130 FILM NUMBER: 1671269 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4017511600 MAIL ADDRESS: STREET 1: 50 KENNEDY PLAZA CITY: PROVIDENCE STATE: RI ZIP: 02903 S-4 1 b39754nis-4.txt NORTEK, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ NORTEK, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3634 05-0314991 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
50 KENNEDY PLAZA PROVIDENCE, RHODE ISLAND 02903-2360 TELEPHONE: (401) 751-1600 FACSIMILE: (401) 751-4610 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ KEVIN W. DONNELLY, ESQ. VICE PRESIDENT AND GENERAL COUNSEL NORTEK, INC. 50 KENNEDY PLAZA PROVIDENCE, RHODE ISLAND 02903-2360 TELEPHONE: (401) 751-1600 FACSIMILE: (401) 751-4610 (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS FOR EACH REGISTRANT) ------------------------ COPY TO: JOHN B. AYER, ESQ. ROPES & GRAY ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110 TELEPHONE: (617) 951-7000 FACSIMILE: (617) 951-7050 ------------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ 9 7/8 Series B Senior Subordinated Notes due 2011........................ $250,000,000 $962.50 $240,625,000 $60,157 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f)(1) and 457(c) under the Securities Act of 1933 on the basis of the average of the bid and ask prices of the 9 7/8 Senior Subordinated Notes due 2011 in the PORTAL Market on June 27, 2001. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JUNE 29, 2001 PROSPECTUS NORTEK, INC. OFFER TO EXCHANGE ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2011 ($250,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING) FOR 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2011 ------------------------ We are offering to exchange our 9 7/8% Series B Senior Subordinated Notes due 2011, or exchange notes, for all of our outstanding 9 7/8% Senior Subordinated Notes due 2011, or notes. We are making this exchange offer on the terms and conditions set forth in this prospectus and the accompanying letter of transmittal. We have registered the exchange notes under the Securities Act of 1933, while we have not registered the notes. The form and terms of the exchange notes and the notes are identical in all material respects, except for various transfer restrictions and registration rights relating to the notes. The exchange offer will remain open for not less than 30 days from the date we mail notice of the exchange offer to note holders. We will accept for exchange all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , unless we extend this exchange offer. You may withdraw the tender of your notes at any time prior to this date and time. Although our offer is subject to customary conditions, it is not conditioned upon any minimum principal amount of notes being tendered for exchange. Information about the exchange notes: - The exchange notes will mature on June 15, 2011. - We will pay interest on the exchange notes every six months, on June 15 and December 15, beginning on December 15, 2001. - We may redeem the exchange notes at any time after June 15, 2006. - If we sell certain assets and do not use the proceeds as specified in the indenture or experience a specific kind of change in control, we must offer to repurchase all or a portion of the exchange notes. - The exchange notes are subordinated to all of our current and future senior indebtedness, except indebtedness that expressly provides otherwise. The exchange notes are also effectively subordinated in right of payment to all indebtedness and other liabilities (including trade payables) of our subsidiaries. We will not receive any proceeds from the issuance of the exchange notes. We will pay all the expenses incurred by us in connection with this exchange offer and issuance of the exchange notes. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for notes where the notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business 180 days after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." YOU SHOULD CAREFULLY REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 11 IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. Neither the Securities and Exchange Commission (the Commission) nor any state securities commission has approved or disapproved of our offer of the exchange notes or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is . 3 TABLE OF CONTENTS
PAGE Where You Can Find More Information......................... ii Summary..................................................... 1 Risk Factors................................................ 11 Use of Proceeds............................................. 15 Capitalization.............................................. 16 Selected Historical Consolidated Financial Data............. 18 Description of Exchange Notes............................... 21 The Exchange Offer.......................................... 51 Description of Outstanding Indebtedness..................... 60 United States Federal Income Tax Considerations............. 63 Plan of Distribution........................................ 67 Legal Matters............................................... 67 Experts..................................................... 67
--------------------------- THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. YOU MAY REQUEST THIS INFORMATION AT NO COST, BY WRITING OR CALLING US AT THE FOLLOWING ADDRESS OR TELEPHONE NUMBER: NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360, ATTENTION: ALMON C. HALL (TELEPHONE NUMBER: (401) 751-1600). IN ORDER TO ENSURE TIMELY DELIVERY OF THIS INFORMATION, YOU MUST REQUEST THIS INFORMATION NO LATER THAN 5 BUSINESS DAYS IN ADVANCE OF THE DATE ON WHICH YOU EXPECT TO MAKE YOUR DECISION WITH RESPECT TO THE EXCHANGE OFFER. IN ANY EVENT, YOU MUST REQUEST THIS INFORMATION PRIOR TO [ ]. This prospectus contains summaries of the terms of several material documents. These summaries include the terms that we believe to be material, but are qualified in their entirety by reference to the full and complete text of the related documents. We will make copies of these documents available to you at your request. This exchange offer is not being made to, and we will not accept surrenders for exchange from, holders of the outstanding notes in any jurisdiction in which the exchange offer or its acceptance would not comply with the securities or blue sky laws of such jurisdiction. All resales must be made in compliance with state securities or blue sky laws. Compliance may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. YOU SHOULD READ THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER YOUR NOTES. ------------------------ i 4 WHERE YOU CAN FIND MORE INFORMATION The following documents or portions thereof filed with the SEC are incorporated into this prospectus by reference: - Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Commission on March 16, 2001; - Our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2001, filed with the Commission on May 9, 2001; - Our definitive proxy statement for our 2001 Annual Meeting of Stockholders, filed with the Commission on March 27, 2001; - Our Current Report on Form 8-K, filed with the Commission on January 29, 2001; - Our Current Report on Form 8-K, filed with the Commission on January 31, 2001; - Our Current Report on Form 8-K, filed with the Commission on June 6, 2001; - Our Current Report on Form 8-K, filed with the Commission on June 8, 2001; and - Our Current Report on Form 8-K, filed with the Commission on June 13, 2001. All other documents filed by us with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the date of this prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference in this prospectus and to be a part hereof from the date of the filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein by reference, or contained in this prospectus, shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently dated or filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. We will provide to any prospective investor, including any beneficial owner, to whom a copy of this prospectus is delivered a copy of any and all information that has been incorporated by reference herein. Such information will be provided upon written or oral request and at no cost to the requester. Such requests can be made by contacting Almon C. Hall, Vice President, Controller and Chief Accounting Officer, 50 Kennedy Plaza, Providence, RI 02903-2360, (401) 751-1600. In addition, all reports, proxy statements and other information filed by us with the Commission can be read and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. In addition, such reports, proxy statements and other information concerning us can be inspected at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. ii 5 SUMMARY This summary contains basic information about us and this offering. Because it is a summary, it does not contain all of the information that you should carefully consider before investing in the Notes. You should read the entire prospectus carefully, including the section entitled "Risk Factors," as well as our consolidated financial statements and the related notes to our consolidated financial statements incorporated by reference in this prospectus. We are a diversified manufacturer of residential and commercial building products, operating within three principal segments: - residential building products, - air conditioning and heating products, and - windows, doors and siding products. Through these segments, we manufacture and sell a wide variety of products for the residential and commercial construction market, the manufactured housing market, and the do-it-yourself and professional remodeling and renovation markets, primarily in the United States, Canada and Europe. The level of residential replacement and remodeling, new residential construction and non-residential construction significantly impact our performance. Interest rates, seasonality, inflation, consumer spending habits and unemployment are several factors that affect these levels. Our principal executive offices are located at 50 Kennedy Plaza, Providence, Rhode Island 02903-2360 (Telephone Number: (401) 751-1600). RESIDENTIAL BUILDING PRODUCTS We manufacture and distribute built-in products primarily for the residential new construction, do-it-yourself and professional remodeling and renovation markets. The principal products that we sell through this segment are: - kitchen range hoods, - built-in exhaust fans (such as bath fans and fan, heater and light combination units), - indoor air quality products, - bath cabinets, - door chimes, - radio intercoms, and - central vacuum systems. We are the largest supplier in North America of range hoods, bath fans and combination units, indoor air quality products (such as continuous-ventilation systems and energy-recovery ventilators) and one of the leading suppliers in Western Europe, South America and the Middle East of luxury "Eurostyle" range hoods. We sell these products to distributors and dealers of electrical and lighting products, kitchen and bath dealers, retail home centers and original equipment manufacturers under the Broan(R), NuTone(R), Nautilus(R), Venmar(R), vanEE(R), and Best(R) brand names, among others. A key component of our operating strategy for this segment is to introduce new products that capitalize on our strong brand names and on our extensive distribution system. We offer a broad array of products with various features and styles across a range of price points. We believe that our variety of product offerings helps us maintain and improve our market position for our principal products. At the same time, we believe that our status as a low-cost producer, which is in large part due to our advanced manufacturing processes, provides us with a competitive advantage. Our primary residential building products compete with many domestic and international suppliers in various markets. 1 6 We compete with suppliers of competitive products primarily on the basis of quality, distribution, delivery and price. Although we believe we compete favorably with other suppliers of residential building products, some of our competitors in this area have greater financial and marketing resources than we do. AIR CONDITIONING AND HEATING PRODUCTS We manufacture and sell heating, ventilating, and air conditioning ("HVAC") and humidification systems for custom-designed commercial applications and for manufactured and site-built residential housing. Commercial HVAC Products We manufacture and sell HVAC systems that are custom-designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. We design these systems primarily to operate on building rooftops (including large self- contained walk-in units) or on individual floors within a building, and to have cooling capacities ranging from 40 to 600 tons. We market our commercial HVAC products under the Governair(R), Mammoth(R), Temtrol(TM), Venmar(R), Ventrol(R), Webco(TM), Vapac(R), Cubit(R), Qualitair(R) and Edenaire(R) brand names, among others. The market for commercial HVAC equipment is divided into standard and custom-designed equipment. Standard equipment suppliers generally have a larger share of the overall commercial HVAC market than custom-designed equipment suppliers, including us. Unlike standard equipment, our commercial HVAC equipment can be designed to match a customer's exact space, capacity and performance requirements. Our packaged rooftop and self-contained walk-in equipment rooms maximize a building's rentable floor space because our equipment is located outside the building. In addition, the manner of construction and timing of installation of commercial HVAC equipment can often favor custom-designed systems over standard systems. We sell our commercial HVAC products primarily to contractors, commercial office building owners and developers, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. We seek to maintain strong relationships nationwide with design engineers, owners and developers, and the persons who are most likely to value the benefits and long-term cost efficiencies of our custom-designed equipment. We estimate that about half of our air conditioning and heating product commercial sales in 2000 came from replacement and retrofit activity, which generally produces higher profit margins and is typically less cyclical than new construction activity. We continue to develop product and marketing programs to increase market penetration in the growing replacement and retrofit market. We believe that we are among the largest suppliers of custom-designed commercial HVAC products in the United States. Our three largest competitors in the commercial HVAC market are York International Corporation (which sells under the "Pace" and "Miller-Picking" trade names), McQuay International (a subsidiary of OYL Corporation), and The Trane Company (a subsidiary of American Standard Inc.). We compete primarily on the basis of engineering support, quality, design and construction flexibility and total installed system cost. Although we believe that we compete favorably with respect to some of these factors, most of our competitors have greater financial and marketing resources than we do and they enjoy greater brand awareness. However, we believe that our ability to produce equipment that meets the performance characteristics required by the particular product application provides us with advantages that some of our competitors do not enjoy. Our Eaton-Williams Group Limited subsidiary manufactures and markets custom and standard air conditioning and humidification equipment throughout Western Europe under the Vapac(R), Cubit(R), Qualitair(R) and Edenaire(R) brand names, among others. 2 7 Residential HVAC Products We manufacture and sell air conditioners, heat pumps and furnaces for the residential and light commercial markets. For site-built homes and light commercial structures, we market these products under the licensed names Frigidaire(R), Tappan(R), Philco(R), Kelvinator(R) and Gibson(R). Within the United States and Canada residential markets we are one of the largest suppliers of these products for manufactured homes. In the manufactured housing market, we market these products under the Intertherm(R) and Miller(R) brand names. Demand for replacing and modernizing existing equipment and the level of manufactured housing shipments and housing starts are the principal factors that affect the market for our residential HVAC products. We anticipate that the replacement market will continue to expand as a large number of previously installed heating and cooling products become outdated or reach the end of their useful lives. We sell our manufactured housing products to manufactured housing builders and, through distributors, to manufactured housing retailers and owners. The majority of our sales to manufactured housing builders consists of furnaces designed and engineered to meet or exceed certain standards mandated by HUD and other federal agencies. These standards differ in several important respects from the standards for furnaces used in site-built residential homes. The after-market channel of distribution includes sales of both new and replacement air conditioning units and heat pumps and replacement furnaces. We believe that we have one major competitor in the furnace segment of this market, Evcon Industries, Inc., a subsidiary of York International Corporation, which markets its products primarily under the "Coleman" name. We compete with most major industry manufacturers for the air conditioning segment of the market. We sell residential HVAC products for use in site-built homes through independently-owned distributors who sell to HVAC contractors. The site-built residential HVAC market is very competitive. In this market, we compete with, among others, Carrier Corporation, Rheem Manufacturing Company, Lennox Industries Inc., The Trane Company, York International Corporation and Goodman Manufacturing Co., L.P. We compete in both the manufactured housing and site-built markets on the basis of breadth and quality of our product line, distribution, product availability and price. We believe that we compete favorably with respect to these factors, although most of our competitors have greater financial and marketing resources and enjoy greater brand awareness than we do. We estimate that more than half of our sales of residential HVAC products in 2000 came from the replacement market, which tends to be less cyclical than the new construction market. WINDOWS, DOORS AND SIDING PRODUCTS Windows and Doors We manufacture and sell: - wood, clad, composite (wood and vinyl) and vinyl windows and patio doors, - steel and composite entry doors, - glass and polycarbonate skylights, and - sunrooms, under the Crestline(R), Vetter(R), Kenergy(R), Great Lakes Gold(R), PLY GEM(R), Uniframe(R), Monitor(TM), Napco(R), Napco Premium(TM), Napco Prime(TM), Peachtree(R), Vintage(TM), Image(TM), Thermal-Gard(R), CWD(TM), Ambassador(TM), Regency(TM), Diplomat(TM), Envoy(TM) and Consul(TM) brand names, among others. We market these products to both the home improvement and the new construction markets through wholesale, millwork and specialty distributors, large contractors, home centers and lumber yards. We differentiate ourselves from our competition with a multiple brand strategy, multiple channels of distribution, an established distribution network that utilizes custom design and manufacturing capabilities, 3 8 and a trained field sales and service support network. Our ability to sell in full truckload and less than truckload quantities is tailored to large home center chains (one of the fastest growing segments in the industry), which prefer to purchase windows directly from the manufacturer. Our ability to offer a broad product line and our focus on home centers are important to our sales and marketing strategy. Siding and Exterior Products We manufacture vinyl siding, skirting, aluminum trim coil, siding, soffit and accessories and vinyl fencing, railing and decking for use in both remodeling and new construction applications, including manufactured housing and light commercial. Vinyl siding's share of the overall exterior market continues to grow due to its low maintenance, durability, high performance and ease of installation compared to alternative siding materials (including wood, metal and masonry). We market these products under the Variform(R), Timber Oak(R), Varigrain Preferred(R), Camden Pointe(TM), Duragrain(R), Hampton III(R), Contractors Choice(R), Nostalgia Series(TM), Varitek(TM), Varibest(R), Proguard(TM), Georgia-Pacific(R), Chateau(R), Chateau Legacy(R), Chateau Nobility(R), Napco(R), American Splendor(TM), American Herald(R), American 76 Collection(R), Sunnybrook(R), Olde Providence(TM), Richwood(R), Kroy(R), Timberlast(TM), Classic Manor(TM) and Finyl Rail(TM) brand names, among others. We sell vinyl siding and accessories to specialty distributors (one-step distribution) who, in turn, sell directly to remodeling contractors and builders, or to wholesale building materials distributors (two-step distribution), who sell to home centers and lumberyards who, in turn, sell to remodeling contractors, builders and consumers. We believe that we are able to compete on favorable terms as a result of our distribution coverage, high quality, innovative products and production efficiency. We also manufacture a line of injection molded siding components for the remodeling and new construction markets. Siding components include blocks, which allow for the flush mounting of items like light fixtures to the exterior of a home, and gable vents, which provide attic ventilation. We sell these products to home centers, lumberyards and wholesale building materials distributors. RECENT DEVELOPMENTS We believe net sales and EBITDA for the second quarter of 2001 will be comparable to the second quarter of 2000, which were approximately $601 million and approximately $73 million, respectively. See "Risk Factors -- Forward Looking Statements." 4 9 THE EXCHANGE OFFER The exchange offer relates to the exchange of up to $250,000,000 aggregate principal amount of our outstanding 9 7/8% Senior Subordinated Notes due 2011 for an equal aggregate principal amount of our new 9 7/8% Series B Senior Subordinated Notes due 2011. The exchange notes will be obligations of Nortek entitled to the benefits of the indenture governing the outstanding notes. REGISTRATION RIGHTS AGREEMENT..................... You are entitled to exchange your notes for exchange notes with terms that are identical in all material respects to the notes. The exchange offer is intended to satisfy these rights. After the exchange offer is complete, you may no longer be entitled to the benefits of the rights granted under the registration rights agreement that we entered into as part of the sale of the notes. THE EXCHANGE OFFER............ We are offering to exchange $1,000 principal amount of exchange notes which have been registered under the Securities Act for each $1,000 principal amount of notes that were sold on June 12, 2001 in a transaction exempt from registration under the Securities Act in accordance with Rule 144A. Each of your notes must be properly tendered and accepted in order to be exchanged. We will exchange all notes that are properly tendered and not validly withdrawn. As of this date, there are $250,000,000 in aggregate principal amount of notes outstanding. We will issue the exchange notes on or promptly after the expiration of the exchange offer. EXPIRATION DATE............... The exchange offer will expire at 5:00 p.m., New York City time, on , unless we decide to extend the exchange offer. CONDITIONS TO THE EXCHANGE OFFER......................... The exchange offer is subject to the condition that it does not violate applicable law or interpretations of the staff of the Commission. If we determine that applicable federal law does not permit the exchange offer, we may terminate the offer. The exchange offer is not conditioned upon any minimum principal amount of notes being tendered. The holders of notes have certain rights under the registration rights agreement should we fail to consummate the exchange offer. RESALES OF THE EXCHANGE NOTES......................... Based on interpretations of the staff of the Commission, we believe that you may offer for resale, resell or otherwise transfer the exchange notes without complying with the registration and prospectus delivery requirements of the Securities Act if you: - acquire the notes issued in the exchange offer in the ordinary course of your business; - are not participating, do not intend to participate, and have no arrangement or undertaking with anyone to participate, in the distribution of the notes issued to you in the exchange offer; and - are not an "affiliate" of ours as defined in Rule 405 of the Securities Act. 5 10 We have based our belief on the interpretation of the staff of the Commission set forth in no-action letters issued to other companies. We have not, however, requested the Commission to issue an interpretation with respect to resales of the exchange notes, and we do not expect to do so in the future. If any of these conditions are not satisfied and you transfer any exchange notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We will not be responsible for or indemnify you against any liability you may incur. Each broker-dealer that receives exchange notes for its own account in exchange for notes, where such notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. See "Plan of Distribution." This offer is not being made to, nor will we accept surrenders for exchange from, holders of outstanding notes in any jurisdiction in which this offer or its acceptance would not comply with the securities or blue sky laws of that jurisdiction. Furthermore, persons who acquire the exchange notes are responsible for compliance with these securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. ACCRUED INTEREST ON THE EXCHANGE NOTES AND THE NOTES....................... Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders of notes who exchange their notes for exchange notes will receive the same interest payment on December 15, 2001 (the first interest payment date with respect to the notes and the exchange notes to be issued pursuant to the exchange offer) that they would have received had they not accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. PROCEDURES FOR TENDERING NOTES......................... If you wish to tender your notes for exchange pursuant to the exchange offer, you must transmit to State Street Bank and Trust Company, as exchange agent, on or prior to the expiration date either: - a properly completed and duly executed copy of the letter of transmittal accompanying this prospectus, or a facsimile of such letter of transmittal, together with your outstanding notes and any other documentation required by such letter of transmittal, at the address set forth on the cover page of the letter of transmittal; or - if you are effecting delivery by book-entry transfer, a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company in which you acknowledge and agree to be bound by 6 11 the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of a confirmation of book-entry transfer. In addition, you must deliver to the exchange agent on or prior to the expiration date: - if you are effecting delivery by book-entry transfer, a timely confirmation of book-entry transfer of your outstanding notes into the account of the exchange agent at The Depository Trust Company pursuant to the procedures for book-entry transfers described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering;" or - if necessary, the documents required for compliance with the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." By executing and delivering the accompanying letter of transmittal or effective delivery by book-entry transfer, you are representing to us that, among other things, (i) the person receiving the exchange notes pursuant to the exchange offer, whether or not such person is the holder of notes, is receiving them in the ordinary course of business, (ii) neither the holder of notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such exchange notes and that such holder of notes is not engaged in, and does not intend to engage in, a distribution of the exchange notes and (iii) neither the holder of notes nor any such other person is an "affiliate" of ours within the meaning of Rule 405 under the Securities Act. SPECIAL PROCEDURES FOR BENEFICIAL OWNERS............. If you are a beneficial owner of notes and your name does not appear on a security listing of The Depository Trust Company as the holder of such notes or if you are a beneficial owner of notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender such notes in the exchange offer, you should promptly contact the person in whose name your notes are registered and instruct such person to tender on your behalf. If you, as a beneficial holder of notes, wish to tender on your own behalf you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. GUARANTEED DELIVERY PROCEDURES.................... If you wish to tender your notes and time will not permit the letter of transmittal or any of the documents required by the letter of transmittal to reach the exchange agent by the expiration date, or the procedure for book-entry transfer cannot be completed on time or certificates for your notes cannot be delivered on time, you may tender your notes pursuant to the guaranteed delivery procedures described in this prospectus 7 12 under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." SHELF REGISTRATION STATEMENT..................... If any changes in law or of the applicable interpretation of the staff of the Commission do not permit us to effect the exchange offer, upon the request of any holder of the notes under certain circumstances, or if we have not consummated the exchange offer within 210 days from the date of the original issuance of the notes, we have agreed to register the notes on a shelf registration statement and use our best efforts to cause such shelf registration statement to be declared effective by the Commission. We have agreed to maintain the effectiveness of the shelf registration statement for, under specified circumstances, up to two years from the date of the original issuance of the notes to cover resales of the notes. WITHDRAWAL RIGHTS............. You may withdraw the tender of your outstanding notes at any time prior to 5:00 p.m., New York City time, on the expiration date. ACCEPTANCE OF OUTSTANDING NOTES AND DELIVERY OF EXCHANGE NOTES....................... Subject to certain conditions, we will accept for exchange any and all outstanding notes that are properly tendered and not validly withdrawn. The exchange notes issued pursuant to the exchange offer will be delivered promptly following the expiration date. U.S. FEDERAL INCOME TAX CONSEQUENCES................ The exchange of notes for the exchange notes should not be a taxable exchange for United States federal income tax purposes. See "United States Federal Income Tax Considerations." USE OF PROCEEDS............... We will not receive any proceeds from the issuance of the exchange notes. We will pay all of our expenses relating to the exchange offer. EXCHANGE AGENT................ State Street Bank and Trust Company is serving as exchange agent in connection with the exchange offer. The exchange agent can be reached at 2 Ave. de Lafayette, Boston, MA, 02111. For more information with respect to the exchange offer, please contact the exchange agent at 617-662-1603 or send your questions by facsimile to the exchange agent at 617-662-1452. 8 13 SUMMARY OF THE EXCHANGE NOTES GENERAL....................... The form and terms of the exchange notes are identical in all material respects to the form and terms of the outstanding notes except that: - the exchange notes will bear a Series B designation; - we will have registered the exchange notes under the Securities Act and, therefore, they generally will not bear legends restricting their transfer; and - the exchange notes will not provide for the payment of liquidated damages (except in certain limited circumstances, set forth in the registration rights agreement). The exchange notes will evidence the same debt as the outstanding notes and will be entitled to the benefits of the indenture under which the notes were issued. NOTES OFFERED................. We are offering a total of $250.0 million in principal amount of 9 7/8% Series B Senior Subordinated Notes due 2011. MATURITY DATE................. The exchange notes will mature on June 15, 2011. INTEREST...................... We will pay interest on the exchange notes at a fixed annual rate of 9 7/8%. We will pay the interest due on the exchange notes in cash every six months on June 15 and December 15. We will make the first payment on December 15, 2001. RANKING....................... The exchange notes will be unsecured senior subordinated obligations. - The exchange notes will be subordinated to all of our existing and future senior debt, including our 8 7/8% Senior Notes due 2008 (the "8 7/8% Notes"), our 9 1/8% Senior Notes due 2007 (the "9 1/8% Notes") and our 9 1/4% Senior Notes due 2007 (the "9 1/4% Notes"). - The exchange notes will rank equal to all of our existing and future unsecured senior subordinated debt. - The exchange notes will rank ahead of all of our existing and future debt that expressly provides that it is subordinated to the exchange notes. - In addition, the exchange notes will be effectively subordinated to indebtedness and other liabilities (including trade payables) of our subsidiaries. As of March 31, 2001, on a pro forma basis after giving effect to the sale of the notes, the application of the net proceeds therefrom and the exchange offer, there would be approximately: - $703.9 million of our outstanding debt ranking senior to the exchange notes. - $544.4 million of indebtedness and other liabilities (including trade payables) of our subsidiaries. 9 14 - No outstanding debt ranking equal to or subordinated to the exchange notes. OPTIONAL REDEMPTION........... We may redeem some or all of the exchange notes at our option at any time after June 15, 2006 at the redemption prices set forth under "Description of Exchange Notes -- Optional Redemption" plus any interest that is accrued and unpaid on the date we redeem the exchange notes. MANDATORY REDEMPTION.......... Following certain asset sales, we must offer to repurchase the exchange notes at the price set forth under "Description of Exchange Notes -- Certain Covenants -- Limitation on Use of Proceeds from Asset Sales." CHANGE OF CONTROL............. Following certain changes of control, we must offer to repurchase the exchange notes at the price set forth under "Description of Exchange Notes -- Change of Control." CERTAIN COVENANTS............. We will issue the exchange notes under an indenture with State Street Bank and Trust Company, as trustee under the indenture. The indenture will, among other things, restrict our ability to: - make investments and other restricted payments; - incur additional debt; - issue preferred stock of our subsidiaries; - create liens; - enter into transactions with affiliates; - sell our assets or assets of our subsidiaries; and - enter into mergers and consolidations. RISK FACTORS.................. You should carefully consider all the information in this prospectus. In particular, you should evaluate the specific risk factors set forth under "Risk Factors" for a discussion of certain risks involved in making an investment in the exchange notes. 10 15 RISK FACTORS You should carefully consider the following factors, in addition to other information in this prospectus, before purchasing the exchange notes being offered. RISKS RELATED TO THE EXCHANGE OFFER OUR SUBSTANTIAL DEBT COULD NEGATIVELY IMPACT OUR BUSINESS AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE EXCHANGE NOTES. We have a substantial amount of debt. After giving pro forma effect to the sale of the notes, the exchange offer and the redemption of our 9 7/8% Senior Subordinated Notes due 2004, as of March 31, 2001, we would have had approximately $1,089.1 million of total debt outstanding and a debt to equity ratio of approximately 4.0 to 1.0. The terms of the exchange notes and our other outstanding debt limit, but do not prohibit, us from incurring additional debt. The amount of total debt that we incur could have important consequences to you, including the following: - our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancing indebtedness, or other purposes could be impaired; - a substantial portion of our cash flow from operations will be dedicated to paying principal and interest on our debt, thereby reducing funds available for expansion or other purposes; - we may be more leveraged than some of our competitors, which may result in a competitive disadvantage; - our financing agreements contain certain restrictions that restrict the ability of certain of our subsidiaries to pay dividends to us or to make other distributions to us (see "Description of Outstanding Indebtedness"); - our failure to comply with the restrictions in our or our subsidiaries' financing agreements could have a material adverse effect on us; - some of our subsidiaries' debt agreements have floating rates of interest, which could make us more vulnerable to changes in prevailing interest rates; and - our significant amount of debt could make us more vulnerable to changes in general economic conditions or increases in prevailing interest rates. Our and our subsidiaries' ability to make principal and interest payments of our debt (including the exchange notes) will be dependent upon our future performance, which is subject to financial, economic and other factors that are beyond our control. We cannot assure you that our current level of operating results will continue or improve. We believe that we will need to access the capital markets in the future to raise the funds to repay our debt. We have no assurance that we will be able to complete a refinancing or that we will be able to raise any additional financing, particularly in view of our anticipated high levels of debt and the restrictions under our current debt agreements, including the applicable indentures. If we are unable to refinance our current debt or we cannot raise additional financing, we may default on our debt obligations. If we default on our debt obligations, virtually all of our other debt, including the exchange notes, could become immediately due and payable. 11 16 THE TERMS OF OUR DEBT COVENANTS COULD LIMIT HOW WE CONDUCT OUR BUSINESS AND OUR ABILITY TO RAISE ADDITIONAL FUNDS. The agreements which govern the terms of our debt, including the Indenture for the exchange notes and our other outstanding debt, contain covenants that restrict our ability to: - make investments and other restricted payments; - incur additional debt; - issue preferred stock of our subsidiaries; - create liens; - engage in transactions with affiliates; - sell our assets or assets of our subsidiaries; and - enter into mergers and consolidations. Our future financing arrangements will likely contain similar or more restrictive covenants. As a result of these restrictions, we may be: - limited in how we conduct our business; - unable to raise additional debt or equity financing to operate during general economic or business downturns; and - unable to compete effectively or to take advantage of new business opportunities. These restrictions may affect our ability to grow in accordance with our plans. OUR PAYMENT OBLIGATIONS ON THE EXCHANGE NOTES ARE SUBORDINATE TO ALL OF OUR EXISTING AND FUTURE SENIOR DEBT AND, EFFECTIVELY, TO OUR SUBSIDIARIES' DEBT. The exchange notes will be subordinate in right of payment to all of our existing and future senior debt, including indebtedness which we may incur under our Company Credit Facility. The Indenture permits us to incur additional senior debt. Because the exchange notes are subordinate, if we become insolvent or undertake a liquidation or reorganization, all of our senior debt must be repaid in full before we can repay any of the outstanding principal of, interest on and other payments with respect to, the exchange notes. At March 31, 2001, after giving effect to the sale of the notes, the exchange offer and the redemption of our 9 7/8% Senior Subordinated Notes due 2004, the exchange notes would have been subordinated to approximately $703.9 million of our outstanding debt ranking senior to the exchange notes. In certain circumstances if we default on our senior debt, we will be prohibited from making any payments of principal of, interest on and other payments with respect to, the exchange notes. See "Description of Exchange Notes". The exchange notes are only our obligation, and are not our subsidiaries' obligation. Because we conduct our operations entirely through subsidiaries, our cash flow and our ability to service debt, including the exchange notes, depend on our subsidiaries' cash flow and loans and dividends that they pay to us. Our subsidiaries are legally distinct from us and they have no obligation to pay any amounts that we owe under the exchange notes or to make any funds available for us to make such payments. Some of the agreements governing our subsidiaries, including the Ply Gem Credit Facility, restrict the ability of our subsidiaries to pay dividends or make other distributions to us. See "Description of Outstanding Indebtedness." In addition, while we directly or indirectly own all of the stock or membership interests of most of our subsidiaries, if we cease to own all of the stock or membership interests of a subsidiary, we may be restricted in our ability to receive dividends or other distributions from that subsidiary. We are restricted in the amount and terms of loans from subsidiaries that we do not wholly own. 12 17 Our right to the assets and earnings of our subsidiaries and our ability to use our subsidiaries' assets and earnings to fund required payments of principal of and interest on our debt, including the exchange notes, are subordinate to the rights of the creditors of those subsidiaries. At March 31, 2001, after giving effect to the sale of the notes, the exchange offer and the redemption of our 9 7/8% Senior Subordinated Notes due 2004, the exchange notes would have been effectively subordinated to approximately $544.4 million of indebtedness for borrowed money (including under the Ply Gem Credit Facility), trade payables, accrued liabilities and other liabilities of our subsidiaries. See "Description of Exchange Notes -- General." WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL REPURCHASE PROVISIONS OF OUR INDENTURE. We will be required to offer to repurchase the exchange notes at 101% of principal, plus accrued and unpaid interest and certain liquidated damages, if any, through the date of repurchase, upon the occurrence of a "change of control" as defined in the indenture governing the exchange notes. Certain events involving such a change of control could result in acceleration of, or similar repurchase obligations with respect to, other of our or our subsidiaries' indebtedness. We cannot assure you that we will have sufficient resources to repurchase the exchange notes in the event we become obligated to do so, particularly in the event of the acceleration of, or the need to comply with repurchase obligations with respect to, other indebtedness that is senior to the exchange notes. If we fail to repurchase all of the tendered exchange notes in the event of a "change of control," it is an event of default under the indenture, which may result in the acceleration of the maturity of the exchange notes. The change of control repurchase provisions may be deemed to have anti-takeover effects and may delay, defer or prevent a merger, tender offer or other takeover attempt. See "Description of Exchange Notes -- Change of Control", "-- Certain Covenants" and "-- Events of Default and Remedies." THERE WILL BE NO PUBLIC TRADING MARKET FOR THE EXCHANGE NOTES AND YOUR ABILITY TO TRANSFER THEM IS LIMITED. No active trading market currently exists for the exchange notes. If these securities are traded after we issue them, they may trade at a discount from the initial offering price of the notes, depending on prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our financial condition, performance and prospects, as well as recommendations of securities analysts. The initial purchasers of the notes have informed us that they intend to make a market in the exchange notes. They are not obligated to do so, however, and may discontinue such market making at any time without notice. In addition, any market making activities will be subject to the limitations imposed by the Securities Act and the Exchange Act and may be limited during the effectiveness of a registration statement relating to the exchange notes. We cannot assure you that an active trading market for the exchange notes will develop, or if one does develop, that it will be sustained. In addition, changes in the overall market for high yield securities and changes in our financial performance or prospects or in the prospects for companies in our industry generally may adversely affect the liquidity of the trading market in the exchange notes and the market price quoted for the exchange notes. See "Description of Exchange Notes" and "The Exchange Offer." All resales must be made in compliance with state securities or "blue sky" laws. Compliance with these laws may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements. YOUR FAILURE TO EXCHANGE YOUR NOTES IN THE EXCHANGE OFFER WILL RESTRICT YOUR ABILITY TO RESELL THEM. Untendered outstanding notes that you do not exchange for the registered exchange notes pursuant to the exchange offer will remain restricted securities, subject to the following restrictions on transfer: - you may resell only if registered pursuant to the Securities Act or if an exemption from registration is available; 13 18 - the notes will bear a legend restricting transfer in the absence of registration or an exemption; and - a holder of the notes who wants to sell or otherwise dispose of all or any part of its notes under an exemption from registration under the Securities Act, if requested by us, must deliver to us an opinion of independent counsel experienced in Securities Act matters, reasonably satisfactory in form and substance to us, that an exemption is available. RISKS RELATED TO OUR BUSINESS A SIGNIFICANT PORTION OF OUR WORKFORCE IS UNIONIZED AND LABOR DISRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS. As of March 31, 2001, approximately 20% of our workforce was subject to various collective bargaining agreements. Collective bargaining agreements covering approximately 4% of our workforce will expire in 2001. We cannot assure you that we will be able to negotiate these or other collective bargaining agreements on the same or more favorable terms as the current agreements or at all and without production interruptions, including labor stoppages. OUR BUSINESS IS SENSITIVE TO ECONOMIC CYCLES AND TO THE AVAILABILITY AND PRICING OF RAW MATERIALS, AND ADVERSE CHANGES IN THESE FACTORS COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS. A significant percentage of our sales of residential and commercial building products is attributable to new residential and nonresidential construction, which are affected by cyclical factors such as interest rates, seasonality, inflation, consumer spending habits and employment. This exposure to cyclicality in the new construction market is partially offset by our increasing emphasis on the repair and replacement markets, which are typically less cyclical. In addition, we are dependent upon raw materials (including, among others, steel, copper, packaging material, plastics, resins, glass, wood and aluminum) and components that we purchase from third parties. Accordingly, our results of operations and financial condition have in the past been, and may again in the future be, adversely affected by such cyclicality and increases in raw material or component costs or their lack of availability. IF WE FAIL TO INTEGRATE THE BUSINESSES WE HAVE RECENTLY ACQUIRED OR THAT WE WILL ACQUIRE IN THE FUTURE, IT COULD NEGATIVELY IMPACT ON OUR BUSINESS. We have made a significant number of acquisitions since the beginning of 1997, and we will continue to review future acquisition opportunities. We cannot assure you that we will continue to locate and secure acquisition candidates on terms and conditions that are acceptable to us. There are several risks in acquisitions, including: - the difficulty and expense that we incur in connection with the acquisition; - the difficulty and expense that we incur in the subsequent assimilation of the operations of the acquired company into our operations; - adverse accounting consequences of conforming the acquired company's accounting policies to ours; - the difficulty in operating acquired businesses; - the diversion of management's attention from our other business concerns; and - the potential loss of key employees previously employed at acquired companies. We cannot assure you that any acquisition we may make will be successfully integrated into our on-going operations or that we will achieve our estimated cost savings from the acquisition. If the operations of an 14 19 acquired business do not meet expectations, we may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. BECAUSE WE COMPETE AGAINST COMPETITORS WITH SUBSTANTIALLY GREATER RESOURCES, WE FACE EXTERNAL COMPETITIVE RISKS THAT MAY NEGATIVELY IMPACT OUR BUSINESS. Substantially all of the markets in which we operate are highly competitive and many of our competitors and potential competitors have substantially greater resources than we have. These competitive factors could require us to reduce prices or increase spending on product development, marketing and sales that would adversely affect our operating results. ACTUAL EVENTS OR RESULTS COULD BE MATERIALLY DIFFERENT FROM THOSE SET FORTH IN OUR FORWARD-LOOKING STATEMENTS. This prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this prospectus, words such as "intends," "plans," "estimates," "believes," "anticipates" and "expects" or similar expressions are intended to identify forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties, over which we have no control, that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and operating results to differ include the availability and cost of certain raw materials (including, among others, steel, copper, packaging materials, plastics, resins, glass, wood and aluminum) and purchased components, the level of domestic and foreign construction and remodeling activity affecting residential and commercial markets, interest rates, employment, inflation, foreign currency fluctuations, consumer spending levels, exposure to foreign economies, the rate of sales growth, price, and product and warranty liability claims. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made (including the date of any incorporated document in the case of any forward-looking statement contained therein). We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Readers are also urged to carefully review and consider the various disclosures made by us in our periodic reports filed with the SEC. USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the exchange notes. 15 20 CAPITALIZATION The following table shows our capitalization as of March 31, 2001: (A) on an actual basis; and (B) on a pro forma basis as adjusted to reflect: - the sale of the notes and the exchange offer, and - the redemption of our 9 7/8% Senior Subordinated Notes due 2004. You should read this table in conjunction with our consolidated financial statements and the related notes included in our Form 10-K for the fiscal year ended December 31, 2000 and our Form 10-Q for the three months ended March 31, 2001, incorporated by reference in this prospectus.
MARCH 31, 2001 ---------------------- AS ACTUAL ADJUSTED --------- --------- (DOLLARS IN MILLIONS) Short-term debt: Short-term borrowings..................................... $ 12.4 $ 12.4 Current maturities of long-term debt...................... 10.0 10.0 -------- -------- Total short-term debt............................. 22.4 22.4 ======== ======== Long-term debt: Notes, mortgage notes and other........................... 127.6 127.6 9- 7/8% Senior Subordinated Notes due 2011................ -- 247.3 9- 1/4% Senior Notes due 2007............................. 174.3 174.3 9- 1/8% Senior Notes due 2007............................. 308.1 308.1 8- 7/8% Senior Notes due 2008............................. 209.4 209.4 9- 7/8% Senior Subordinated Notes due 2004................ 204.2 -- -------- -------- Total long-term debt(1)........................... 1,023.6 1,066.7 -------- -------- Stockholders' investment(2): Preference stock, $1.00 par value; 7,000,000 shares authorized, none issued................................ -- -- Common stock, $1.00 par value; 40,000,000 shares authorized; 18,772,031 shares issued................... 18.8 18.8 Special common stock, $1.00 par value; 5,000,000 shares authorized; 820,614 shares issued...................... 0.8 0.8 Additional paid-in capital................................ 209.1 209.1 Retained earnings(3)...................................... 182.5 178.7 Accumulated other comprehensive loss...................... (23.9) (23.9) Less: Treasury stock, at cost, 8,377,844 common shares and 290,110 special common shares.......................... (111.7) (111.7) -------- -------- Total stockholders' investment.................... 275.6 271.8 -------- -------- Total capitalization.............................. $1,299.2 $1,338.5 ======== ========
- --------------- (1) Long-term debt is net of $3.8 million (actual) and $5.9 million (as adjusted) of unamortized debt discount. (2) Excludes (i) 3,042,777 shares of common stock, $1.00 par value (the "Common Stock"), at March 31, 2001 which have been reserved for issuance pursuant to options and the conversion of the Company's special common stock, $1.00 par value (the "Special Common Stock"), (ii) 2,179,916 shares of Special Common Stock at March 31, 2001 which have been reserved for issuance pursuant to options and (iii) 109,247 shares of Series A Participating Preference Stock (the "Preference 16 21 Stock") which may be issuable upon exercise of rights under the Rights Agreement, as amended and restated as of April 2, 1996, between the Company and State Street Bank and Trust Company. (3) Reflects the impact on retained earnings of the approximately $2.9 million redemption premium to be incurred in connection with the redemption of our 9 7/8% Senior Subordinated Notes due 2004, and the elimination of approximately $2.9 million of unamortized deferred debt costs and debt discounts net of the related federal income tax benefits of approximately $2.0 million. 17 22 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The selected consolidated operating and balance sheet data for each of the five years in the period ended December 31, 2000 have been derived from our consolidated financial statements which were audited by Arthur Andersen LLP, independent public accountants. The selected consolidated operating and balance sheet data for the three months ended April 1, 2000 and March 31, 2001 and as of the end of each such period have been derived from our unaudited condensed consolidated financial statements, which reflect, in our opinion, all adjustments of a normal recurring nature necessary for a fair statement of the interim periods presented. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results of operations to be expected for the full year. The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2000 and the Unaudited Condensed Consolidated Financial Statements and the Notes thereto and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2001, incorporated by reference into this prospectus and the information contained in "Use of Proceeds" and "Capitalization" included elsewhere herein. Certain amounts in the prior period's financial statements have been reclassified to conform to the presentation at December 31, 2000 and March 31, 2001 respectively. 18 23
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, -------------------- ---------------------------------------------------- APRIL 1, MARCH 31, 1996 1997 1998 1999 2000 2000 2001 -------- -------- -------- -------- -------- -------- --------- (IN MILLIONS EXCEPT PER SHARE DATA AND RATIOS) STATEMENT OF OPERATIONS DATA(1)(2): Net sales.................................. $ 841.5 $1,128.7 $1,725.7 $1,987.9 $2,194.8 $ 491.6 $ 467.3 Cost of products sold...................... 626.1 857.8 1,322.8 1,497.5 1,679.0 374.2 360.8 Selling, general and administrative expense.................................. 150.9 182.0 255.4 291.4 327.3 81.8 82.1 Amortization of goodwill and intangible assets................................... 3.5 5.9 14.4 20.5 23.1 5.8 5.8 -------- -------- -------- -------- -------- -------- -------- Operating earnings......................... 61.0 83.0 133.1 178.5 165.4 29.8 18.6 Gain on businesses sold.................... -- -- 4.0 -- -- -- -- Interest expense(3)........................ (28.4) (50.2) (86.3) (96.5) (97.4) (24.3) (25.3) Investment income.......................... 6.0 9.9 10.5 8.0 7.6 1.9 2.2 -------- -------- -------- -------- -------- -------- -------- Earnings (loss) from continuing operations before income tax provision (benefit).... 38.6 42.7 61.3 90.0 75.6 7.4 (4.5) Income tax provision (benefit)............. 14.9 16.3 27.3 40.7 34.0 3.4 (2.1) -------- -------- -------- -------- -------- -------- -------- Earnings (loss) from continuing operations............................... 23.7 26.4 34.0 49.3 41.6 4.0 (2.4) (Loss) earnings from discontinued operations............................... (1.7) (5.2) 1.2 -- -- -- -- Extraordinary loss from debt retirements... -- -- (0.2) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss)........................ $ 22.0 $ 21.2 $ 35.0 $ 49.3 $ 41.6 $ 4.0 $ (2.4) ======== ======== ======== ======== ======== ======== ======== Earnings (loss) per share from continuing operations(2)(4): Basic.................................... $ 2.26 $ 2.75 $ 3.11 $ 4.19 $ 3.71 $ 0.35 $ (0.22) Diluted.................................. 2.23 2.68 3.06 4.11 3.70 0.35 (0.22) Net earnings (loss) per share(2)(4): Basic.................................... $ 2.10 $ 2.21 $ 3.20 $ 4.19 $ 3.71 $ 0.35 $ (0.22) Diluted.................................. 2.07 2.15 3.15 4.11 3.70 0.35 (0.22) Weighted average number of shares (in thousands): Basic.................................... 10,485 9,605 10,923 11,763 11,202 11,484 10,916 Diluted.................................. 10,641 9,855 11,113 11,982 11,246 11,549 10,916 OTHER DATA(2): Capital expenditures....................... $ 19.8 $ 22.5 $ 41.4 $ 42.5 $ 41.3 $ 7.7 $ 14.4 Depreciation and amortization excluding non-cash interest........................ 19.8 26.7 42.1 55.5 59.8 15.6 15.7 EBITDA(5).................................. 80.8 109.7 175.2 234.0 225.2 45.4 34.3 Ratio of earnings to fixed charges(6)...... 2.3 1.8 1.7 1.9 1.7 1.3 -- CASH FLOW STATEMENT DATA: Net cash provided by (used in) operating activities............................... $ 47.3 $ 85.1 $ 101.2 $ 100.5 $ 99.3 $ (38.5) $ (38.7) Net cash (used in) provided by investing activities............................... (5.2) (423.4) (351.4) (91.8) (29.7) 25.4 (17.5) Net cash (used in) provided by financing activities............................... (38.3) 423.1 212.2 (15.7) (18.0) (1.0) 5.8
YEAR ENDED DECEMBER 31, ---------------------------------------------------- APRIL 1, MARCH 31, 1996 1997 1998 1999 2000 2000 2001 -------- -------- -------- -------- -------- -------- --------- (IN MILLIONS) BALANCE SHEET DATA: Cash, cash equivalents and marketable securities(7)............................ $ 97.8 $ 168.2 $ 223.5 $ 126.4 $ 151.4 $ 81.8 $ 104.2 Working capital............................ 163.1 341.8 337.2 327.0 362.5 334.2 366.0 Total assets............................... 589.0 1,302.8 1,685.8 1,791.4 1,836.8 1,819.8 1,825.8 Total debt................................. 280.3 853.5 1,024.8 1,037.6 1,042.0 1,036.9 1,046.0 Stockholders' investment................... 118.8 128.1 217.6 259.8 282.2 261.6 275.6
- --------------------- (1) Acquisitions have been accounted for under the purchase accounting method and dispositions have been accounted for as described in Note 2 of the Notes to the Consolidated Financial Statements of Nortek included in our Form 10-K for the fiscal year ended December 31, 2000, incorporated by reference in this prospectus. 19 24 (2) In the fourth quarter of 1997, we adopted a plan to discontinue our plumbing products business. Accordingly, the results of the plumbing products business have been excluded from earnings from continuing operations and classified separately as discontinued operations for all applicable periods presented. See Note 9 of the Notes to the Consolidated Financial Statements of Nortek included in our Form 10-K for the fiscal year ended December 31, 2000, incorporated by reference in this prospectus. (3) In the first quarter of 2001, we adopted Financial Accounting Standards Board SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS No. 133"). Adoption of this accounting method resulted in an approximate $800,000 non-cash charge to interest expense ($.04 per share, net of tax) for our interest rate collar agreement. This amount was recorded in our balance sheet as a liability at March 31, 2001 representing the fair value of the derivative instrument. The cumulative effect of adopting this accounting method as of December 31, 2000 was not material. (4) In 1997, we adopted the provisions of SFAS No. 128, Earnings Per Share. This statement, issued by the FASB in February 1997, establishes standards for computing and presenting EPS and applies to entities with publicly held common stock. This statement replaces the presentation of primary EPS with a presentation of basic EPS and replaces the presentation of fully-diluted EPS with diluted EPS. All periods presented have been restated to conform to SFAS No. 128. (5) "EBITDA" is operating earnings from continuing operations plus depreciation and amortization (other than amortization of deferred debt expense and debt discount). EBITDA differs from Consolidated Cash Flow as defined in the Indenture. See "Description of Exchange Notes -- Certain Definitions." EBITDA should not be considered as an alternative to net earnings as a measure of our operating results or to cash flows as a measure of liquidity. EBITDA principally differs from net increase (decrease) in unrestricted cash and cash equivalents shown on our Consolidated Statement of Cash Flows, prepared in accordance with accounting principles generally accepted in the United States, in that EBITDA does not reflect capital expenditures, borrowings, principal and interest payments under debt and capital lease obligations, income tax payments and cash flows from operating, investing and financing activities. (6) For purposes of calculating this ratio, "earnings" consist of earnings (loss) from continuing operations before income tax provision (benefit) and fixed charges. "Fixed charges" consist of interest expense and the estimated interest portion of rental payments on operating leases. Such earnings were insufficient to cover fixed charges by approximately $4.5 million for the three months ended March 31, 2001. (7) Includes restricted cash, investments and marketable securities in the amounts of approximately $5.7 million, $6.3 million, $13.8 million, $11.2 million and $10.9 million at December 31, 1996, 1997, 1998, 1999 and 2000, respectively, and $10.9 million and $8.1 million at April 1, 2000 and March 31, 2001, respectively. 20 25 DESCRIPTION OF EXCHANGE NOTES GENERAL The exchange notes will be issued pursuant to an indenture (the "Indenture") dated as of June 12, 2001 between the Company and State Street Bank and Trust Company, a Massachusetts banking corporation, as trustee (the "Trustee"). The terms of the exchange notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of the Indenture. The exchange notes are subject to all such terms, and holders of the exchange notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes issued in the original offering, except that: - the exchange notes will bear a Series B designation; - the exchange notes have been registered under the Securities Act and, therefore, will generally not bear legends restricting their transfer; and - the exchange notes will not provide for the payment of liquidated damages (except in certain circumstances set forth in the registration rights agreement dated as of June 12, 2001 by and between the Company and the initial purchasers of the notes). See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The exchange notes will evidence the same debt as the notes issued in the original offering and will be entitled to the benefits of the Indenture. The exchange notes will rank equally with the notes issued in the original offering if all of these notes are not exchanged pursuant to the exchange offer and will vote together with the notes on all matters voted upon under the Indenture. The following summary of certain provisions of the Indenture and the exchange notes does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions included in the Indenture of certain terms used below. Copies of the Indenture will be made available to holders of exchange notes as set forth below under "-- Additional Information." The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." As discussed in detail below under "-- Subordination," the exchange notes will be subordinate in right of payment to all Senior Indebtedness of the Company, including the Existing Senior Notes and all future Indebtedness of the Company, if any, pursuant to the Company Credit Facility. The exchange notes also will be structurally subordinated to all Indebtedness and other obligations (including trade payables) of the Company's Subsidiaries, including all existing and future Indebtedness of the Company's Subsidiaries, if any, pursuant to the Company Credit Facility or the Ply Gem Credit Facility. At March 31, 2001, on a pro forma basis after giving effect to the sale of the notes, the application of the net proceeds therefrom and the exchange offer, the exchange notes would have been subordinated to approximately $703.9 million of outstanding debt ranking senior to the exchange notes and $544.4 million of indebtedness for borrowed money, trade payables, accrued liabilities and other liabilities of the Company's Subsidiaries. The Indenture will permit the Company to incur additional Indebtedness, including additional Senior Indebtedness, in the future, subject to certain restrictions. Although the Indenture contains certain covenants and provisions that afford certain protections to holders of the exchange notes (the "Holders"), such covenants and provisions would not necessarily afford the Holders protection in the event of a highly leveraged transaction involving the Company, including a leveraged transaction initiated or supported by the Company, the management of the Company or any affiliate of either party. See "-- Certain Covenants" below. 21 26 PRINCIPAL, MATURITY AND INTEREST The exchange notes will be general unsecured senior subordinated obligations of the Company. The Company will issue $250,000,000 aggregate principal amount of exchange notes in this offering. Subject to the covenant described below under "-- Certain Covenants -- Limitation on Additional Indebtedness," the Company may issue additional notes (the "Additional Notes") under the Indenture. The exchange notes offered hereby and any Additional Notes that the Company subsequently issues under the Indenture would be treated as a single class for all purposes under the Indenture. The exchange notes will mature on June 15, 2011. Interest on the exchange notes will accrue at the rate of 9 7/8% per annum and will be payable semi-annually on each June 15 and December 15 commencing on December 15, 2001, to Holders of record on the immediately preceding May 15 or November 15, as the case may be, whether or not a business day. Interest on the exchange notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the exchange notes will be payable by wire transfer of immediately available funds to the Holders; provided that payments of interest and Liquidated Damages, if any, may be made at the office or agency of the Company maintained for such purpose or, at the option of the Company, by check mailed to the Holders of the exchange notes at their respective addresses set forth in the register of Holders. Unless otherwise designated by the Company, the Company's office or agency for such purpose will be the corporate trust office of the Trustee in Boston, Massachusetts. The exchange notes will be issued only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Trustee is Paying Agent and Registrar under the Indenture. The Company may act as Paying Agent or Registrar under the Indenture, and the Company may change the Paying Agent or Registrar without notice to the Holders of the exchange notes. SUBORDINATION The payment of the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the exchange notes will be subordinated in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior Indebtedness of the Company, whether outstanding on the issue date of the exchange notes or incurred after that date. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness will be entitled to receive payment in full of such Senior Indebtedness before the Holders will be entitled to receive any payment of the principal of, premium, if any, interest on, or Liquidated Damages, if any, with respect to the exchange notes; and (2) until such Senior Indebtedness is paid in full, any distribution to which the Holders would be entitled but for this provision will be made to the holders of Senior Indebtedness as their interests may appear, except that the Holders may receive Equity Interests and any debt securities that are subordinated to Senior Indebtedness to at least the same extent as the exchange notes. The Company may not pay the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the exchange notes or make any deposit for the purpose of the discharge of its liabilities under the Indenture and may not repurchase, redeem or otherwise retire any exchange notes (collectively, "pay the exchange notes") if: (1) a default in the payment of principal or interest on any Senior Indebtedness occurs and is continuing beyond any applicable grace period, or 22 27 (2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (A) the default has been cured or waived and any such acceleration has been rescinded, or (B) such Senior Indebtedness has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the exchange notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Blockage Notice") and ending 179 days thereafter, or earlier if such Payment Blockage Period is terminated: - by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, - by repayment in full of such Designated Senior Indebtedness, or - because the default giving rise to such Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the next preceding paragraph), unless the holders of such Designated Senior Indebtedness or the representative of such holders will have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the exchange notes after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. As a result of the subordination provisions described above, in the event of the Company's insolvency, liquidation, reorganization, dissolution or other proceedings, the Holders may recover less ratably than creditors of the Company who are holders of Senior Indebtedness. As of March 31, 2001, the Company had approximately $703.9 million of Senior Indebtedness outstanding. The Company will be able to incur additional Senior Indebtedness in the future as described under "-- Certain Covenants -- Limitation on Additional Indebtedness." OPTIONAL REDEMPTION The exchange notes will be redeemable by the Company, in whole or in part, on or after June 15, 2006 at the following redemption prices (expressed as a percentage of the principal amount) if redeemed during the 12-month period beginning June 15 of the years indicated below, in each case, together with accrued and unpaid interest and Liquidated Damages, if any, to the redemption date:
YEAR PERCENTAGE - ---- ---------- 2006............................................ 104.938% 2007............................................ 103.292% 2008............................................ 101.646% 2009 and thereafter............................. 100.000%
Notice of the redemption must be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at such Holder's registered address. If any exchange note is to be redeemed in part only, the notice of redemption relating to that exchange note will state the principal amount thereof to be redeemed and a new exchange note in principal amount equal to the unredeemed portion will be issued in the name of the Holder upon cancellation of the original exchange note. On and after the redemption date, interest ceases to accrue on exchange notes or portions of exchange notes called for redemption, unless the Company shall default in the payment of the redemption price. If less than all the outstanding exchange notes are to be redeemed at any time, selection 23 28 of the exchange notes for redemption will be made by the Trustee by lot or, if such method is prohibited by the rules of any stock exchange on which the exchange notes are then listed, any other method the Trustee considers reasonable; provided that exchange notes shall be redeemed in principal amounts of $1,000 or integral multiples thereof. MANDATORY REDEMPTION The Company is not required to make mandatory redemption or sinking fund payments with respect to the exchange notes. However, as described below, the Company may be obligated, under certain circumstances, to make an offer to purchase (i) all outstanding exchange notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, upon a Change of Control; and (ii) outstanding exchange notes with a portion of the Excess Proceeds of Asset Sales at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. See "-- Change of Control" and "-- Certain Covenants -- Limitation on Use of Proceeds from Asset Sales." CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder will have the right to require the repurchase of all or any part of such Holder's exchange notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Immediately following any Change of Control, the Company is required to mail a notice to the Trustee and to each Holder stating: (i) that the Change of Control Offer is being made pursuant to the Repurchase Upon Change of Control covenant of the Indenture and that all exchange notes tendered will be accepted for payment; (ii) the amount of the Change of Control Payment and the purchase date (the "Change of Control Payment Date"), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed; (iii) that any exchange note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment thereof, all exchange notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date; (v) that Holders electing to have any exchange notes purchased pursuant to a Change of Control Offer will be required to surrender the exchange notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third business day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw exchange notes they have tendered on the terms and conditions set forth in such notice; and (vii) that Holders whose exchange notes are being purchased only in part will be issued new exchange notes (or book-entry notation made with respect thereto) equal in principal amount to the unpurchased portion of the exchange notes tendered; provided that the portion of each exchange note purchased and each such new exchange note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 or an integral multiple thereof. On the Change of Control Payment Date, the Company will, to the extent lawful, (i) accept for payment all exchange notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn, (ii) deposit with the Paying Agent an amount sufficient to pay the Change of Control Payment in respect of all exchange notes or portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be delivered to the Trustee all exchange notes so tendered and not withdrawn together with an Officers' Certificate specifying the exchange notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of exchange notes so tendered and not withdrawn the Change of Control Payment in respect of such exchange notes, and the Trustee will promptly authenticate and mail to such Holder a new exchange note (or cause to be transferred by book entry) equal in principal amount to any unpurchased portion of the exchange notes surrendered; provided that each such new exchange note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company 24 29 will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of exchange notes triggered by a Change of Control. A "Change of Control" will be deemed to have occurred at such time as any of the following events occur: (i) there is consummated any consolidation or merger of the Company with or into another corporation, or all or substantially all of the assets of the Company are sold, leased or otherwise transferred or conveyed to another Person (other than pursuant to a bona fide pledge of assets to secure Indebtedness made in accordance with the Indenture), and the holders of the Company's common stock outstanding immediately prior to such consolidation, merger, sale, lease or other transfer or conveyance or one or more Exempt Persons do not hold, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or at least a majority of the Equity Interests of such Person; (ii) there is filed a report on Schedule 13D or 14D-1 (or any successor schedule, form or report) pursuant to the Exchange Act disclosing that any person (defined, solely for the purposes of the Change of Control provision, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the combined voting power of all the Company's then outstanding securities entitled to vote generally for the election of directors; provided, however, that a person shall not be deemed to be the beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or (iii) during any consecutive two- year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred under clause (ii) of the immediately preceding paragraph solely by virtue of the Company, any Subsidiary of the Company, any employee stock ownership plan or any other employee benefit plan of the Company or any such Subsidiary, any other person holding securities of the Company for or pursuant to the terms of any such employee benefit plan, or any Exempt Person, filing or becoming obligated to file a report on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of securities of the Company, whether equal to or greater than 50% of the combined voting power of the Company's then outstanding securities entitled to vote generally for the election of directors or otherwise. The Change of Control purchase feature may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of the incumbent management. Although the Company has from time to time received and considered proposals which might involve a Change of Control, the Change of Control purchase feature was not adopted as a result of management's knowledge of any specific effort to accumulate shares of Common Stock or to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of antitakeover provisions. Instead, the Change of Control purchase feature is a standard term contained in other similar debt offerings and the terms of such feature result from negotiations between the Company and the initial purchasers of the notes. Subject to the limitations discussed below, the 25 30 Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. The Company Credit Facility, if any, and future agreements relating to Senior Indebtedness to which the Company becomes a party may prohibit the Company from purchasing the exchange notes following a Change of Control and may provide that certain change of control events with respect to the Company would constitute a default under those agreements. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing the exchange notes, the Company could seek the consent of its lenders to the purchase of the exchange notes or could attempt to refinance the indebtedness that contains that prohibition. If the Company does not obtain a consent or repay that indebtedness, it will remain prohibited from purchasing the exchange notes. The Company's failure to purchase tendered exchange notes following a Change of Control would constitute an Event of Default under the Indenture which would likely cause an event of default under the indentures governing the Existing Senior Notes and the Company Credit Facility, if any, and possibly under other agreements relating to Senior Indebtedness of the Company or indebtedness of the Company's Subsidiaries. Under those circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders. The Company's ability to repurchase the exchange notes following a Change of Control may also be limited by its then existing financial resources. The occurrence of a Change of Control would also require the Company to offer to purchase the Existing Senior Notes at 101% of the principal amount thereof. Neither the Board of Directors of the Company nor the Trustee may waive the Change of Control repurchase feature of the Indenture. One of the events that constitutes a Change of Control under the Indenture is a sale, lease or other transfer or conveyance of all or substantially all of the assets of the Company. There is no precise established definition under applicable law of the term "substantially all" and, accordingly, if the Company were to engage in transactions in which it disposed of less than all of its assets, a question could arise as to whether such disposition was of "substantially all" of its assets and whether because of such disposition the Company was required to repurchase the exchange notes as a result of a Change of Control. CERTAIN COVENANTS Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend on, or make any distribution in respect of the Company's or any of its Restricted Subsidiary's Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by the Company or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of the Company or such Restricted Subsidiary, as the case may be; (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of the Company or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by the Company or any Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary); (iii) prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date any Indebtedness of the Company that is subordinate in right of payment to the exchange notes (other than in connection with any refinancing of such Indebtedness permitted by the Indenture); or (iv) make any Investment other than Permitted Investments (each such action described in any of clauses (i) through (iv) above being referred to as a "Restricted Payment"), if, at the time of such Restricted Payment, (1) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (2) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the issue date of the notes (including, without duplication, Restricted Payments described in the next succeeding paragraph), exceeds the sum of (A) 50% of the cumulative Consolidated Net Income of the Company for the period commencing on July 5, 1998 through the last 26 31 day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (provided that if the amount of such cumulative Consolidated Net Income divided by the number of full fiscal quarters of the Company in the applicable period exceeds $5,250,000, then such amount shall equal (i) 50% of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period plus (ii) 75% of the amount in excess of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period) (or, if the cumulative Consolidated Net Income of the Company shall be a deficit, minus 100% of such deficit); (B) the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by the Company (other than from a Restricted Subsidiary of the Company) from the issuance and sale at any time after May 1, 1998 of either Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock; (C) an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by the Company or any of its Restricted Subsidiaries after the issue date of the Notes as a dividend or other distribution from any Unrestricted Subsidiary; and (D) the Fair Market Value of any Investment held by either the Company or any Restricted Subsidiary of the Company in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of the Indenture; or (3) the Company could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of the Limitation on Additional Indebtedness covenant. After giving pro forma effect to the sale of the notes, the exchange offer and the redemption of the Company's 9 7/8% Senior Subordinated Notes due 2004 from the proceeds of the sale of the notes, approximately $95.2 million would have been available for Restricted Payments as of April 27, 2001. The foregoing provisions shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof, (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of the Indenture; (ii) the declaration and payment by a Restricted Subsidiary of the Company which is required to file periodic reports under Section 13 or 15(d) of the Exchange Act (a "Reporting Subsidiary") of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends; provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for the immediately preceding fiscal year; (iii) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of the Company or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $7,500,000 in the aggregate in any fiscal year of the Company; or (iv) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company that is subordinated in right of payment to the exchange notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock). Limitation on Additional Indebtedness. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an "incurrence") any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that the Company may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of the Company for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0. 27 32 The foregoing limitations shall not apply, without duplication, to: (i) Existing Indebtedness; (ii) Indebtedness of the Company represented by the exchange notes and the Indenture (not to exceed $250,000,000 aggregate principal amount for purposes of this clause (ii)); (iii) Indebtedness of the Company and its Restricted Subsidiaries under the Company Credit Facility; provided that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iii) and outstanding on such date, shall not exceed the greater of (a) $75,000,000 and (b) the sum of 85% of Eligible Receivables of the Company and its Subsidiaries plus 65% of Eligible Inventory of the Company and its Subsidiaries; (iv) Indebtedness of (a) Broan-NuTone Canada, Inc. and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility; provided that (1) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iv) and outstanding on such date, shall not exceed the greater of (x) $50,000,000 (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (iii) above) and (2) such Indebtedness shall be secured only by Liens on assets of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries, and (b) the Company under its limited guarantee of not more than $30,000,000 (Canadian) of the Indebtedness of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility; (v) Indebtedness of NuTone and any NuTone Subsidiary not exceeding at any time $6,000,000 in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of NuTone and any NuTone Subsidiary; (vi) Indebtedness of the Company to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (provided that such Indebtedness is contractually subordinated in right of payment to the Notes) or Indebtedness of any Subsidiary of the Company that is a Restricted Subsidiary to the Company or to any other Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary; provided that if the Company or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary or ceases to be a Restricted Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of the Company or ceases to be a Restricted Subsidiary; (vii) Indebtedness of the Company and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements; provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements relate to Indebtedness permitted to be incurred under the Indenture and the notional principal amount of the obligations of the Company and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (viii) Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers; 28 33 (ix) Indebtedness incurred by the Company and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30,000,000 in aggregate outstanding principal amount; (x) Acquired Indebtedness incurred by a Restricted Subsidiary of the Company to the extent such Indebtedness could have been incurred by the Company under the Consolidated Cash Flow Coverage Ratio test set forth in the preceding paragraph of this Limitation on Additional Indebtedness covenant, after giving pro forma effect to the acquisition of such Restricted Subsidiary by the Company; (xi) Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of the Indenture if immediately prior to such designation such Subsidiary was an Unrestricted Subsidiary; provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Limitation on Additional Indebtedness covenant; and provided, further, that none of the Company or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent the Company or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of this Limitation on Additional Indebtedness covenant (other than solely in accordance with clause (vi) above or this clause (xi)). (xii) Indebtedness of the Company and its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds incurred or provided in the ordinary course of business; (xiii) Indebtedness of (a) Nortek Holding B.V. and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek Holding B.V. and its Subsidiaries and (b) the Company under its limited guarantee of not more than $20,000,000 of any such Indebtedness of Nortek Holding B.V. and its Subsidiaries; (xiv) other Indebtedness of the Company and its Restricted Subsidiaries not to exceed at any time $35,000,000 in aggregate outstanding principal amount; (xv) Liens permitted under the Limitation on Liens covenant; and (xvi) Indebtedness ("Refinancing Indebtedness") created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute or refund ("refinance"), Indebtedness described in the preceding paragraph or referred to in clauses (i) through (xiv) above; provided, however, that (a) the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced, (1) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (iii) through (v) and (xiv) above, shall not, when added to all other Indebtedness outstanding under such clause, exceed the aggregate amount of Indebtedness permitted to be incurred under such clause (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof), and (2) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (i), (ii) and (vi) through (xiii) above, shall not exceed the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness (plus accrued interest on the Indebtedness to be refinanced and the 29 34 amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof); (b) such Refinancing Indebtedness shall be subordinated in right of payment to the exchange notes at least to the same extent as the Indebtedness to be refinanced; (c) such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence; (d) the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of the Company, shall not be used to refinance Indebtedness of the Company or another Subsidiary of the Company; and (e) the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced. For purposes of this Limitation on Additional Indebtedness covenant, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness. Limitation on Other Senior Subordinated Indebtedness. The Company shall not incur any Indebtedness that is contractually subordinated in right of payment to any Senior Indebtedness of the Company and contractually senior in right of payment to the exchange notes. Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries. The Company shall not (i) permit any of its Restricted Subsidiaries to issue or sell to any Person except the Company or a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or (ii) sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued or sold to the Company or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (except to the issuer thereof, the Company or any of its other Wholly-Owned Subsidiaries that is a Restricted Subsidiary). Limitation on Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on (i) any Principal Property, (ii) any shares of Capital Stock of any Restricted Subsidiary of the Company held by the Company or (iii) any Indebtedness owed by any Restricted Subsidiary of the Company to the Company if, in the case of clause (i), (ii) or (iii), such Lien secures Indebtedness or any other obligation or liability which is pari passu in right of payment with the exchange notes or subordinated in right of payment to the exchange notes without making effective provision for all of the exchange notes and all other amounts due under the Indenture to be directly secured equally and ratably with (or, if the Indebtedness or other obligation or liability to be secured by such Lien is subordinated in right of payment to the exchange notes, prior to) the Indebtedness or other obligation or liability secured by such Lien. The foregoing limitation does not apply to (i) Liens existing on the issue date of the notes; (ii) Liens with respect to the assets of a Restricted Subsidiary of the Company granted by such Restricted Subsidiary to the Company to secure Indebtedness owing to the Company; (iii) Liens in respect of Indebtedness permitted by clause (xii) of the Limitation on Additional Indebtedness covenant; (iv) Liens securing Refinancing Indebtedness incurred to refinance Indebtedness that has been secured by a Lien permitted under the Indenture; provided that such Liens do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (v) Permitted Liens. Limitation on Certain Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by the Company or any of its Restricted Subsidiaries, (ii) pay or repay any Indebtedness owed to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iii) make loans or advances to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iv) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary or (v) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company 30 35 except, in each case, for such encumbrances or restrictions existing under or by reason of (a) applicable law, (b) the Indenture, (c) customary nonassignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries, (d) any instrument governing Indebtedness of a Person acquired by the Company or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired, (e) agreements existing as of the issue date of the notes, (f) the Company Credit Facility, (g) the Ply Gem Credit Facility, (h) the Broan-NuTone Canada, Inc. Credit Facility, (i) any other agreement pursuant to which any Restricted Subsidiary of the Company incurs Indebtedness in accordance with the Limitation on Additional Indebtedness covenant, and (j) any agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (d), (e), (f), (g), (h) or (i) above; provided that the terms and conditions of any such encumbrances and restrictions are not materially less favorable to the Holders than those under the agreement or instrument evidencing the Indebtedness being refinanced. The foregoing shall not restrict the ability of any Restricted Subsidiary of the Company to grant any Lien to the extent otherwise permitted in the Indenture. Repurchase upon Change of Control. See "-- Change of Control" above. Limitation on Use of Proceeds from Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and (ii) at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, "Cash Proceeds") or indebtedness for borrowed money of the Company or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of the Company whose stock is purchased by the transferee. Any Net Cash Proceeds (a) in excess of the amount of cash applied by the Company or any Restricted Subsidiary of the Company during the period beginning 12 months prior to the date of the Asset Sale (but not prior to the issue date of the notes) and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by the Company and its Subsidiaries as of the issue date of the notes or at the date of such Asset Sale and (b) not applied within 12 months after the date of the Asset Sale to reduce Indebtedness of the Company (other than Indebtedness which is by its terms subordinated in right of payment to the exchange notes) or any Restricted Subsidiary of the Company shall be deemed to be "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15,000,000, the Company shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to purchase the exchange notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the principal amount plus accrued and unpaid interest, if any, thereon and Liquidated Damages, if any, to the date fixed for the closing of such offer, substantially in accordance with the procedures for a Change of Control Offer described in the Repurchase upon Change of Control covenant. To the extent that the aggregate amount of exchange notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company may use the remaining Excess Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate principal amount of exchange notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the exchange notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the exchange notes. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws are applicable in connection with the repurchase of exchange notes pursuant to an Excess Proceeds Offer. Limitation on Transactions with Affiliates. Except as otherwise permitted by the Indenture, the Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any Investment, loan, advance, guarantee or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or 31 36 dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless (i) such transaction or series of transactions is in the best interests of the Company or such Restricted Subsidiary based on all relevant facts and circumstances; (ii) such transaction or series of transactions is fair to the Company or such Restricted Subsidiary and on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arms' length basis from a Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and (iii) (a) with respect to a transaction or series of related transactions involving aggregate payments in excess of $5,000,000, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions complies with clauses (i) and (ii) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $15,000,000, the Company receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to the Company from a financial point of view. Certain transactions subject to this covenant, such as the repurchase of Capital Stock from, or an Investment in, an Affiliate of the Company or any of its Restricted Subsidiaries may also be subject to the Limitation on Restricted Payments covenant. The foregoing limitation shall not apply to: (i) any payment of money or issuance of securities by the Company or any Restricted Subsidiary of the Company pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors' and officers' liability insurance; (ii) reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of the Company or any of its Restricted Subsidiaries and reimbursement of expenses related thereto; or (iii) transactions between the Company and any Restricted Subsidiary of the Company, or between one Restricted Subsidiary of the Company and another Restricted Subsidiary of the Company; provided that not more than 20% of any such Restricted Subsidiary is owned by any Affiliate of the Company or any of its Restricted Subsidiaries (other than the Company or a Wholly-Owned Subsidiary of the Company which is a Restricted Subsidiary). Payments for Consents. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the exchange notes unless such consideration is offered to be paid or agreed to be paid to all Holders which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Rule 144A Information Requirement. The Company has agreed that, if it is not subject to and in compliance with the informational requirements of Sections 13 or 15(d) of the Exchange Act at any time while the exchange notes constitute "restricted securities" within the meaning of the Securities Act, it will furnish to the holders or beneficial holders of the exchange notes and prospective purchasers of the exchange notes designated by the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company either exchanges all of the notes for the exchange notes or has registered under the Securities Act and continues to maintain a registration statement with respect to the resale of all of the exchange notes pursuant to the Registration Rights Agreement. Provision of Reports. The Indenture provides that whether or not required by the rules and regulations of the Commission, so long as any exchange notes are outstanding, the Company will furnish to the Holders (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and 32 37 its Subsidiaries and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors or prospective investors who request it in writing. MERGER, CONSOLIDATION OR TRANSFER OF ASSETS The Company shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, unless: (1) the Company shall be the continuing Person, or the Person, if other than the Company, formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company or of the Company and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the exchange notes and the Indenture, and the Indenture remains in full force and effect; (2) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (3) the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the "surviving entity"), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of the Limitation on Additional Indebtedness covenant; and (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of the Company immediately before such transaction. In connection with any such consolidation, merger or transfer, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with the Indenture and that all conditions precedent therein provided for relating to such transactions have been complied with. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, in accordance with the second preceding paragraph, the successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor Person had been named as the Company in the Indenture, and when a successor Person assumes all the obligations of its predecessor under the Indenture or the exchange notes, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the exchange notes. With respect to the transfer of all or substantially all of the assets of the Company or of the assets of the Company and its Subsidiaries on a consolidated basis, there is no precise established definition of the term "substantially all" under applicable law. Accordingly, if the Company were to engage in transactions in which it disposed of less than all of its assets or the Company or a Subsidiary of the Company were to engage in transactions in which less than all of the assets of the Company and its Subsidiaries on a consolidated basis were disposed of, a question could arise as to whether such disposition was of "substantially all" of the assets of the Company or of the Company and its Subsidiaries on a consolidated 33 38 basis, as the case may be, and, therefore, whether the transaction was subject to the foregoing provisions of the Indenture. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an "Event of Default": (1) the Company defaults in the payment, when due and payable, whether or not prohibited by the subordination provisions of the Indenture, of (i) interest on or Liquidated Damages, if any, with respect to any exchange note and the default continues for a period of 30 days, or (ii) principal of or premium, if any, on any exchange notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise; (2) the Company fails to comply with any of the provisions set forth under "Merger, Consolidation or Transfer of Assets" above; (3) the Company fails to comply with any of its covenants or agreements in the exchange notes or the Indenture (other than those referred to in clause (1) or (2) above) and such failure continues for the period and after receipt by the Company of the notice specified below; (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such indebtedness or guarantee is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15,000,000 or more; (5) the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any bankruptcy law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing its inability to pay its debts generally as they become due; (6) a court of competent jurisdiction enters an order or decree under any bankruptcy law that: (A) is for relief against the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding; (B) appoints a custodian of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; or (C) orders the liquidation of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary), and such order or decree with respect to clause (A), (B) or (C) remains unstayed and in effect for 60 days; or (7) final judgments for the payment of money which in the aggregate exceed $15,000,000 shall be rendered against the Company or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days. A Default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the exchange notes at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." In the case of any Event of Default (other than as a result of the failure to comply with the Repurchase upon Change of Control covenant) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay if the Company then had elected to redeem the exchange notes, an equivalent premium shall also become and be immediately due and payable to the extent 34 39 permitted by law, anything in the Indenture or in the exchange notes contained to the contrary notwithstanding. In the case of an Event of Default as a result of a failure to comply with the Repurchase upon Change of Control covenant occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay pursuant to the Repurchase upon Change of Control covenant, such premium shall also become and be immediately due and payable at such time as the principal and interest on the exchange notes become due and payable pursuant to the acceleration provisions of the Indenture to the extent permitted by law, anything in the Indenture or in the exchange notes contained to the contrary notwithstanding. If any Event of Default (other than an Event of Default specified in clause (5) or (6) above) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the exchange notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by such Holders), may, and such Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, accrued interest on, and Liquidated Damages, if any, with respect to the exchange notes to be due and payable immediately. If an Event of Default specified in clause (5) or (6) above occurs, all unpaid principal of, premium, if any, accrued interest on and Liquidated Damages, if any, with respect to the exchange notes then outstanding shall ipso facto become and be immediately due and payable without declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the exchange notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences (except an acceleration due to default in payment of the principal of, premium, if any, accrued interest on, and Liquidated Damages, if any, with respect to the exchange notes) if all existing Events of Default have been cured or waived except non-payment of the principal of, premium, if any, accrued interest on, and Liquidated Damages, if any, with respect to the exchange notes that have become due solely because of the acceleration. Subject to certain restrictions set forth in the Indenture, the Holders of at least a majority in principal amount of the outstanding exchange notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a default in the payment of the principal of, premium, if any, interest on, or Liquidated Damages, if any, with respect to the exchange notes or a Default under a provision which requires consent of all Holders to amend. When a Default or Event of Default is waived, it is cured and ceases. A Holder may not pursue any remedy with respect to the Indenture or the exchange notes unless: (i) the Holder gives to the Trustee written notice that an Event of Default is continuing; (ii) the Holders of at least 25% in aggregate principal amount of any exchange notes outstanding make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee reasonable indemnity or security against any loss, liability or expense satisfactory to the Trustee; (iv) the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity or security; and (v) during such 30-day period the Holders of a majority in aggregate principal amount of the outstanding exchange notes do not give the Trustee a direction which is inconsistent with the request. DISCHARGE AND DEFEASANCE When (1) the Company delivers to the Trustee all outstanding exchange notes (other than exchange notes replaced because of mutilation, loss, destruction or wrongful taking) for cancellation or (2) all outstanding exchange notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption as described above, and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to all outstanding exchange notes, and in the case of either clause (1) or (2) the Company pays all other sums payable under the Indenture by the Company, then the Indenture will, subject to certain surviving provisions, cease to be of further effect. 35 40 The Company will be permitted to, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding exchange notes ("Legal Defeasance") except for: (1) the rights of Holders to receive payments in respect of the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the exchange notes when the payments are due from the trust referred to below; (2) the Company's obligations with respect to the exchange notes concerning issuing temporary notes, registration of exchange notes, mutilated, destroyed, lost or stolen exchange notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith; and (4) the Legal Defeasance provisions of the Indenture. In addition, the Company will be permitted to, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with those obligations will not constitute a Default with respect to the exchange notes. In the event Covenant Defeasance occurs, certain events (not including non-payment and bankruptcy and insolvency events) described under "-- Events of Default and Remedies" will no longer constitute Events of Default with respect to the exchange notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Company will be required to deposit irrevocably with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, Government Securities or a combination thereof, in an amount that will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the outstanding exchange notes on the stated maturity or on the applicable date fixed for redemption, as the case may be, and the Company must specify whether the exchange notes are being defeased to maturity or to a particular date fixed for redemption; (2) in the case of Legal Defeasance, the Company will have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that: (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon, the opinion of counsel will confirm that, the Holders of the outstanding exchange notes will not recognize income, gain or loss for federal income tax purposes as a result of the Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, the Company will have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding exchange notes will not recognize income, gain or loss for federal income tax purposes as a result of the Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred; (4) 91 days pass after the deposit is made and during the 91-day period no Default described in clause (5) or (6) under "-- Events of Default and Remedies" occurs with respect to the Company which is continuing at the end of the period; 36 41 (5) no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto; (6) the Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (7) the Company will have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company or with the intent of preferring the Holders of exchange notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) the Company will have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent to the Legal Defeasance or the Covenant Defeasance have been satisfied. TRANSFER AND EXCHANGE A Holder may transfer or exchange exchange notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any exchange note selected for redemption. Also, the Registrar is not required to transfer or exchange any exchange note for a period of 15 days before a selection of exchange notes to be redeemed. The registered Holder will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Subject to certain exceptions, with the written consent of the Holders of at least a majority in aggregate principal amount of the exchange notes then outstanding, the Company and the Trustee may amend the Indenture or the exchange notes, or may waive compliance by the Company with any provision of the Indenture or the exchange notes. However, without the consent of each Holder affected, a waiver or an amendment to the Indenture or the exchange notes may not: (i) reduce the percentage of principal amount of the exchange notes whose Holders must consent to an amendment or waiver; (ii) make any change to the Stated Maturity of the principal of, premium, if any, interest on, or Liquidated Damages, if any, with respect to the exchange notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any exchange note payable in money or securities other than that stated in the exchange note; (iii) waive a default in the payment of the principal of, premium, if any, interest on, or Liquidated Damages, if any, with respect to any exchange note; (iv) make any change in the provisions of the Repurchase upon Change of Control covenant or the Limitation on Use of Proceeds of Asset Sales covenant; or (v) make any change in the amendment provisions of the Indenture. Notwithstanding the foregoing, without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the exchange notes (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with the provisions described under "Merger, Consolidation or Transfer of Assets"; (iii) to provide for uncertificated exchange notes in addition to or in place of certificated exchange notes so long as such uncertificated exchange notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended; (iv) to make any other change that does not adversely affect the rights of any Holder; or (v) to comply with any requirement of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act. 37 42 CONCERNING THE TRUSTEE State Street Bank and Trust Company is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with respect to the exchange notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest it must eliminate such conflict within 90 days, or apply to the Commission for permission to continue or resign. The Holders of not less than a majority in principal amount of the then outstanding exchange notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing (and shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care and skill of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holders, unless they shall have offered to the Trustee reasonable security or indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Indebtedness" means, with respect to any Person, Indebtedness of such Person (i) assumed in connection with an acquisition of assets or properties from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person provided such Person was not immediately prior thereto an Unrestricted Subsidiary (in each case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Restricted Subsidiary). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise. "Allowable Subsidiary Loans" means Indebtedness of the Company to a Restricted Subsidiary of the Company not to exceed the Net Cash Proceeds received by the Company as a result of such Restricted Subsidiary becoming less than a Wholly-Owned Subsidiary through the sale of Equity Interests in compliance with the terms of the Indenture; provided that (i) all such Allowable Subsidiary Loans are contractually subordinated in right of payments to the exchange notes and (ii) the total amount of all Allowable Subsidiary Loans at any time outstanding does not exceed $35,000,000. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance or other transfer or disposition by such Person of any of its assets or properties (including by way of a sale-and-leaseback and including the sale, issuance or other transfer of any of the Capital Stock of any Subsidiary of such Person), in a single transaction or through a series of related transactions, for aggregate consideration received by such Person or a Subsidiary of such Person (but if such Person is the Company or any Restricted Subsidiary of the Company, only if such Subsidiary is a Restricted Subsidiary of the Company), net of out-of-pocket costs relating thereto (including, without limitation, legal, accounting and investment banking fees and sales commissions), in excess of $5,000,000. For purposes of this definition, consideration shall include, without limitation, any indebtedness for borrowed money of such Person or such Subsidiary that is assumed by the transferee of any assets or any such indebtedness of any Subsidiary 38 43 of such Person whose stock is purchased by the transferee. Notwithstanding anything to the contrary in the foregoing provisions of this definition, the term "Asset Sale", with respect to any Person, shall not include (i) the sale, lease or other transfer or disposition of assets acquired and held for resale in the ordinary course of business; (ii) the sale, lease or other transfer or disposition of assets in accordance with the provisions described under "Merger, Consolidation or Transfer of Assets"; (iii) the sale, lease or other transfer or disposition of damaged, worn-out or obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of the business of such Person or its Subsidiaries; (iv) the abandonment of assets or properties which are no longer useful in the business of such Person or its Subsidiaries and are not readily saleable; (v) the granting of any Lien permitted under the Limitation on Liens covenant (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure); (vi) any sale, lease, assignment or other disposition by such Person or its Subsidiaries if such Person has outstanding senior debt securities all of which are rated BBB- or higher by S&P and have not been placed on credit watch by S&P for a possible downgrade or are rated Baa3 or higher by Moody's and have not been placed on credit watch by Moody's for a possible downgrade; or (vii) the sale or other transfer or disposition of receivables in connection with an asset securitization transaction by such Person or its Subsidiaries. "Average Life" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment (assuming the exercise by the obligor of such debt security of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such debt security multiplied by the amount of such principal payment by (ii) the sum of all such principal payments. "Broan-NuTone Canada, Inc. Credit Facility" means a credit facility between Broan-NuTone Canada, Inc. or any of the Canadian Subsidiaries, and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time. "Canadian Subsidiary" means any Subsidiary of Broan-NuTone Canada, Inc. and any Subsidiary of the Company whose headquarters is located in Canada. "Capital Lease Obligations" means, with respect to any Person, all obligations under leases of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP, and for purposes of the Indenture the amount of such obligations at any time shall be the aggregate capitalized amount thereof at such time, as determined in accordance with GAAP. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock (including common or preferred stock), partnership interests or any other participation right or other interest in the nature of an equity interest in such Person. "Cash Equivalents" means (i) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (ii) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, BBB- or better by S&P or Moody's or the equivalent of such rating by a successor rating agency, (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia which is rated, at the time as of which any Investment therein is made, P-1 or better by Moody's or A-1 or better by S&P, or the equivalent of such rating by a successor rating agency, (iv) Investments in mutual funds, money market funds, investment pools and other savings vehicles, substantially all of the assets of which are invested in Investments 39 44 described in clause (i), (ii) or (iii) above, and (v) in the case of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries, (a) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by Canada or any instrumentality or agency thereof (provided that the full faith and credit of Canada is pledged in support thereof), (b) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, A or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency and (c) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of Canada or any province thereof which is rated, at the time as of which any Investment therein is made, R-1 or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency. "Commodity Agreement" means any agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the prices of commodities used by the Company or any of its Subsidiaries in the ordinary course of business. "Company Credit Facility" means one or more credit facilities (other than the Ply Gem Credit Facility) between the Company or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Company Credit Facility." All Company Credit Facilities are referred to collectively in the Indenture as the "Company Credit Facility." "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of such Person and its Subsidiaries (or if such Person is the Company, the amortization expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP, excluding any amortization expense included in Consolidated Interest Expense. "Consolidated Cash Flow" means, with respect to any Person for any period, the sum of, without duplication, (i) Consolidated Net Income of such Person for such period, (ii) Consolidated Interest Expense of such Person for such period, (iii) Consolidated Income Tax Expense of such Person for such period, (iv) Consolidated Depreciation Expense of such Person for such period, (v) Consolidated Amortization Expense of such Person for such period , and (vi) the amount, not to exceed 10% of Consolidated Cash Flow of such Person for such period (which amount shall be excluded in determining such Consolidated Cash Flow), by which (A) other non-cash items of expense that reduce Consolidated Net Income of such Person for such period exceed (B) other non-cash items of expense that increase Consolidated Net Income of such Person for such period. "Consolidated Cash Flow Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated Cash Flow of such Person for such period to Consolidated Interest Expense of such Person for such period; provided, however, that Consolidated Cash Flow and Consolidated Interest Expense shall be calculated on a pro forma basis after giving effect, as if occurring at the beginning of such period, to (i) the incurrence of Indebtedness giving rise to the need to calculate the Consolidated Cash Flow Coverage Ratio and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (ii) the incurrence, during such period or since the last day of such period, of any Indebtedness (other than Indebtedness incurred for working capital purposes), and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (iii) the acquisition by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) of any company or business during such period or since the last day of such period and (iv) the sale or other disposition of assets or properties outside the ordinary course of business by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such 40 45 Person if such Person is not the Company) and the actual application of the proceeds therefrom during such period or since the last day of such period. "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation and depletion expense of such Person and its Subsidiaries (or if such Person is the Company, the depreciation and depletion expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes (including franchise, net worth or similar taxes) of such Person and its Subsidiaries (or if such Person is the Company, the provision for such taxes of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries (or if such Person is the Company, the interest expense of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, all original issue discount and other interest portion of any deferred payment Indebtedness and all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing less any interest income included in Consolidated Net Income for such period, but excluding any deferred financing fees otherwise includible in Consolidated Interest Expense for such period; (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries (or if such Person is the Company, such interest expense paid, accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries) during such period as determined on a consolidated basis in accordance with GAAP; and (iii) all cash dividends or other distributions declared or paid on any Capital Stock (other than common stock or preferred stock that is not Redeemable Stock or, with respect to the Company, Special Common Stock) of such Person and its Subsidiaries (or if such Person is the Company, all such dividends or other distributions declared or paid on any such Capital Stock of the Company and its Restricted Subsidiaries) for such period as determined on a consolidated basis in accordance with GAAP; provided, however, that any Indebtedness bearing a floating rate of interest shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (or if such Person is the Company, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries) for such period, before discontinued operations, extraordinary items and the cumulative effect of a change in accounting principles, determined on a consolidated basis in accordance with GAAP; provided that there shall also be excluded from Consolidated Net Income (but only to the extent included in calculating such Consolidated Net Income): (i) any net gains or losses in respect of dispositions of assets other than in the ordinary course of business; (ii) any gains from currency exchange transactions not in the ordinary course of business consistent with past practice; (iii) any gains or losses realized from the termination of any employee pension benefit plan; (iv) any gains or losses realized upon the refinancing of any Indebtedness of such Person or any of its Subsidiaries (or if such Person is the Company, any gains or losses realized upon the refinancing of any Indebtedness of Company and its Restricted Subsidiaries); (v) any gains or losses arising from the destruction of property or assets due to fire or other casualty; (vi) any gains or losses from the revaluation of property or assets; (vii) the net income (or loss) of any Person that is not a Subsidiary of such first Person (or that is not a Restricted Subsidiary of the Company if such first Person is the Company) except to the extent of cash dividends or distributions paid to such first Person by such other Person in such period; (viii) the net income (or loss) of any Subsidiary of such first Person except to the extent of the interest of such Person in such Subsidiary; (ix) the net income of any Subsidiary of such Person (or if such Person is the Company, of any Restricted Subsidiary of the Company) that is subject to any restriction or limitation on the payment of dividends and other distributions (including loans or advances) by operation of the terms of its charter or by agreement, instrument, judgment, decree, order or 41 46 governmental regulation applicable to such Subsidiary (or such Restricted Subsidiary, if applicable) to the extent of such restriction or limitation in such period; (x) the net income of any Person acquired in a pooling transaction for any period prior to the date of such acquisition; and (xi) the excess of (a) the consolidated compensation expense recorded by the Company in the computation of net earnings of the Company in respect of shares of Capital Stock (other than Redeemable Stock) or other Equity Interests awarded, pursuant to a plan or other arrangement approved by the Board of Directors of the Company (or of a Reporting Subsidiary, if applicable), to or for the benefit of any employee, officer or director of the Company or any of its Subsidiaries or to or by any employee stock ownership plan or similar trust for the benefit of any such employee, officer or director, over (b) the amount of consolidated income tax benefit recorded by the Company in connection with such consolidated compensation expense of the Company. "Consolidated Net Worth" means, with respect to any Person at any date of determination, the sum of the Capital Stock, additional paid-in capital and cumulative translation, pension and other adjustment account plus retained earnings (or minus accumulated deficit), excluding amounts attributable to Redeemable Stock, any Capital Stock convertible into Indebtedness, or treasury stock, of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in currency values to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary on the issue date of the notes or becomes a party or a beneficiary thereafter. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" means (i) any Indebtedness (and all Obligations of the Company with respect thereto) outstanding under the Company Credit Facility, (ii) any Indebtedness (and all Obligations of the Company with respect thereto) represented by the 8 7/8% Notes, the 9 1/8% Notes or the 9 1/4% Notes and (iii) any other Senior Indebtedness permitted to be incurred under the Indenture the original principal amount of which is $25,000,000 or more and that has been designated by the Company as "Designated Senior Indebtedness." "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors of the Company is required to deliver a Board Resolution under the Indenture, a member of such Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "8 7/8% Notes" means any of the Company's 8 7/8% Senior Notes due August 1, 2008 issued under the indenture dated as of July 31, 1998 between the Company and State Street Bank and Trust Company. "Eligible Inventory" means, with respect to any Person, the finished goods, raw materials and work-in-process of such Person less any applicable reserves, each of the foregoing determined on the FIFO method of accounting in accordance with GAAP. "Eligible Receivables" means, with respect to any Person, the trade receivables of such Person less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP. "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock). "Exempt Person" means (i) Richard L. Bready, (ii) any Person which is an Affiliate of Richard L. Bready or (iii) any other Affiliate of such Person so long as such Person is an Affiliate of Richard L. Bready. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries in existence on the issue date of the notes, including without limitation all Indebtedness outstanding under the Ply Gem Credit Facility on such date. 42 47 "Existing Investments" means (i) Investments of the Company and its Restricted Subsidiaries in existence on the issue date of the notes and (ii) Investments to be made pursuant to commitments authorized by the Board of Directors of the Company prior to the issue date of the notes in Ecological Engineering Associates, L.P. in an amount not to exceed $3,000,000 (including such Investments made prior to the issue date of the notes). "Existing Senior Notes" means the 8 7/8% Notes, the 9 1/8% Notes and the 9 1/4% Notes. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets of the Company or any of its Subsidiaries shall be determined by the Board of Directors of the Company or, if such subsidiary is a Reporting Subsidiary, of such Reporting Subsidiary, acting in good faith, and evidenced by a Board Resolution of the Company or such Reporting Subsidiary, as the case may be, delivered to the Trustee. "GAAP" means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that with respect to the obligations of the Company described under "Certain Covenants" and "Merger, Consolidation or Transfer of Assets" and the definitions used therein, GAAP shall be determined on the basis of such principles as in effect on the issue date of the Notes. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged. "Indebtedness" means, with respect to any Person, without duplication, any indebtedness, contingent or otherwise, (i) with respect to borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or consisting of reimbursement obligations with respect to letters of credit, or (ii) representing the deferred and unpaid balance of the purchase price of any property excluding any such balance that constitutes a trade payable or an accrued liability, in each case arising in the ordinary course of business, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP, and shall also include, to the extent not otherwise included, (a) any Capital Lease Obligations, (b) the maximum fixed repurchase price of any Redeemable Stock, (c) indebtedness secured by a Lien to which the property or assets owned or held by such Person is subject, whether or not the obligations secured thereby shall have been assumed, (d) guaranties of items that would be included within this definition to the extent of such guaranties, and (e) net liabilities in respect of Commodity Agreements, Currency Agreements and Interest Rate Agreements. For purposes of the immediately preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture; provided that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be without duplication (y) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (z) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the Fair Market Value at such date of any property or asset subject to a Lien securing the Indebtedness of others or the amount of the Indebtedness secured. The amount of any Indebtedness issued at a discount shall be equal to the gross proceeds of such issuance (and not the face amount of any bond, note, debenture or similar instrument representing such Indebtedness). 43 48 "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary thereof. "Investment" means, with respect to any Person, (i) any direct or indirect loan or other extension of credit (other than extensions of trade credit by such Person on commercially reasonable terms and relating to the sale of property or services in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to any other Person, or (ii) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person. "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease intended as security, any option or other agreement to sell or give any security interest and any filing of or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a financing statement covering leased goods under a lease not intended as security). "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement. "9 1/8% Notes" means any of the Company's 9 1/8% Senior Notes due September 1, 2007 issued under the indenture dated as of August 26, 1997 between the Company and State Street Bank and Trust Company. "9 1/4 Notes" means any of the Company's 9 1/4% Senior Notes due March 15, 2007 issued under the indenture dated as of March 17, 1997 between the Company and State Street Bank and Trust Company. "Net Cash Proceeds" means the aggregate Cash Proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reasonable reserve in accordance with GAAP for adjustments in respect of the sale price of such asset or assets. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company or any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. 44 49 "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive Officer or President and the Treasurer, Chief Financial Officer or Chief Accounting Officer of such Person. "Permitted Investments" means any of the following: (i) Cash Equivalents; (ii) Existing Investments; (iii) Investments by the Company or a Restricted Subsidiary of the Company in any Subsidiary of the Company that is a Restricted Subsidiary or any other Person that concurrently with the making of such Investment becomes a Subsidiary of the Company that is a Restricted Subsidiary; (iv) guaranties by Restricted Subsidiaries of the Company permitted under the Limitation on Additional Indebtedness covenant; (v) Indebtedness of the Company to any Restricted Subsidiary of the Company; provided that such Indebtedness is contractually subordinated in right of payment to the exchange notes; (vi) Investments by the Company or any of its Restricted Subsidiaries in debt securities or debt instruments having maturities of 10 years or less and (A) issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (B) with a rating of BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent of such rating by a successor rating agency; (vii) any Investment by Broan-NuTone Canada, Inc. and or any Canadian Subsidiary in debt securities or debt instruments having maturities of 10 years or less and issued or fully guaranteed or insured by Canada or an instrumentality or agency thereof or rated, at the time of such Investment, BBB- or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency, so long as the aggregate amount of all such Investments by Broan-NuTone Canada, Inc. and any Canadian Subsidiaries that are Restricted Subsidiaries does not exceed $15,000,000 at any one time outstanding; (viii) loans and advances to officers and directors of the Company or any Restricted Subsidiary of the Company made in the ordinary course of business or pursuant to any employee benefit plan, up to $10,000,000 in the aggregate at any one time outstanding; (ix) loans and advances to vendors, suppliers and contractors of the Company or any Restricted Subsidiary of the Company and made in the ordinary course of business; (x) the receipt by the Company or any of its Restricted Subsidiaries of consideration other than Cash Proceeds in any Asset Sale made in compliance with the terms of the Indenture; (xi) so long as no Default or Event of Default shall have occurred and be continuing, other Investments made after the issue date of the notes not exceeding in the aggregate at any time outstanding (A) $40,000,000, if at the time of the making of such Investment the exchange notes are not rated BB+ or better by S&P or Bal or better by Moody's, or (B) $50,000,000, if at the time of the making of such Investment the exchange notes are rated BB+ or better by S&P or Bal or better by Moody's; (xii) any Lien permitted under the Limitation on Liens covenant; and (xiii) Investments by Restricted Subsidiaries of the Company not exceeding in the aggregate $10,000,000 at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term in the Indenture; provided that for purposes of this clause (xiii) an instrument referred to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100,000,000. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries, taken as a whole; (vi) Liens securing Purchase Money Obligations permitted to be incurred by the provisions of the 45 50 Indenture; (vii) leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of the Company or any of its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or any of its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capital Lease Obligation; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any Person existing at the time (A) such Person becomes a Restricted Subsidiary of the Company or (B) such Person or such property becomes a part of the Company or any Restricted Subsidiary of the Company; (xii) Liens in favor of the Company or any Restricted Subsidiary of the Company; (xiii) Liens securing any real property or other assets of the Company or any Restricted Subsidiary of the Company in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the Company or such Restricted Subsidiary of the Company; (xiv) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary of the Company that does not give rise to an Event of Default; (xv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvii) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Company Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements; and (xviii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the issue date of the notes. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Ply Gem Credit Facility" means one or more credit facilities between Ply Gem Industries, Inc. or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Ply Gem Credit Facility." All Ply Gem Credit Facilities are referred to collectively in the Indenture as the "Ply Gem Credit Facility." "Principal Property" means any manufacturing or processing plant, warehouse or other building used by the Company or any Restricted Subsidiary of the Company, other than a plant, warehouse or other building that, in the good faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by the Company and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of the Company. "Purchase Money Obligations" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed by the Company or a Restricted Subsidiary of the Company in connection with the acquisition of assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased. 46 51 "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the exchange notes), or upon the happening of any event, matures or is mandatorily redeemable or is redeemable at the sole option of the holder thereof, in whole or in part, prior to the Stated Maturity of the exchange notes. "Registration Rights Agreement" means the registration rights agreement dated as of the issue date of the notes between the Company and the Initial Purchasers named therein. "Restricted Subsidiary" means (i) any Subsidiary of the Company in existence on the issue date of the notes, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary", (ii) any Subsidiary of the Company (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of the Company; provided that immediately after giving effect to the designation referred to in clause (iii), no Default or Event of Default shall have occurred and be continuing and the Company could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of the Limitation on Additional Indebtedness covenant. The Company shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers' Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence. "Senior Indebtedness" means all Indebtedness of the Company (including Specified Senior Indebtedness), whether outstanding on the issue date of the notes or thereafter incurred (unless, in the case of any particular Indebtedness, the instrument under which such Indebtedness is incurred expressly provides that such Indebtedness shall not be senior or superior in right of payment to the exchange notes), and all Obligations of the Company with respect thereto, but excluding: (i) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (ii) amounts owed for goods, materials or services purchased in the ordinary course of business or for compensation to employees; (iii) any Indebtedness in respect of any Capital Lease Obligation created, incurred, assumed or guaranteed prior to or, unless designated in the instrument evidencing such Capital Lease Obligation as "Senior Indebtedness", after the issue date of the notes; (iv) any Indebtedness represented by Redeemable Stock; and (v) any Indebtedness that is incurred in violation of the Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the Commission, as such regulation is in effect on the date of the Indenture. "Specified Senior Indebtedness" means (i) any Indebtedness outstanding under the Company Credit Facility and (ii) any Indebtedness represented by the 8 7/8% Notes, the 9 1/8% Notes or the 9 1/4% Notes. "Stated Maturity" means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency). "Subsidiary" of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. 47 52 "Trustee" means the party named as the "Trustee" in the first paragraph of the Indenture until a successor replaces it pursuant to the applicable provisions of the Indenture and, thereafter, shall mean such successor. "Unrestricted Subsidiary" means, until such time as any of the following shall be designated as a Restricted Subsidiary of the Company by the Board of Directors of the Company as provided in and in compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary of the Company or of a Restricted Subsidiary organized or acquired after the date of the Indenture that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of the Company that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company; provided that (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in the "Limitation on Restricted Payments" covenant, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in accordance with the Limitation on Restricted Payments covenant; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. The Company shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers' Certificate certifying that such designation has been made and that such designation complies with the requirements of the Indenture and all conditions thereto have been satisfied. "Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary (other than directors' qualifying shares) is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries). BOOK-ENTRY, DELIVERY AND FORM Except as explained in the next paragraph, the exchange notes to be resold will initially be represented by one or more permanent global exchange notes in definitive, fully registered form without interest coupons (each a "Global Note"). Each Global Note registered in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary") will be deposited on the issue date of the exchange notes, with, or on behalf of the Depositary, or will remain with the Trustee under the FAST Balance Certificate Agreement between the Depositary and the Trustee (the nominee or the Trustee, in this capacity, is called the "Global Holder"). Exchange notes that are issued as described below under the subheading "Certificated Securities" will be issued in the form of registered definitive certificates (the "Certificated Securities"). Upon the transfer of Certificated Securities, the Certificated Securities may, unless all Global Notes have previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Note representing the principal amount of exchange notes being transferred, subject to the transfer restrictions specified in the Indenture. The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts 48 53 of its Participants. Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities including banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through Participants or Indirect Participants. The Company expects that under procedures established by the Depositary: (a) upon deposit of the Global Notes, the Depositary will credit the accounts of Participants with portions of the principal amount of the Global Notes; and (b) ownership of the exchange notes evidenced by the Global Notes will be shown on, and the transfer of ownership will be effected only through, records maintained by the Depositary (with respect to the interests of the Participants), the Participants and the Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer exchange notes evidenced by the Global Note will be limited to that extent. Accordingly, the owner of a beneficial interest in a Global Note must rely on the Depositary's procedures, or if the owner is not a Participant or an Indirect Participant, on the procedures of the Participant through which they own the beneficial interest in the exchange notes, to exercise any of its rights as a holder of the exchange notes under the Indenture or the Global Note. The Company understands that under existing industry practice, (i) if the Company requests a holder of the exchange notes to take action, the Depositary would authorize the Participants to take such action and the Participants would authorize owners owning beneficial interests through them to take such action, and (ii) if the owner of a beneficial interest in a Global Note requests the Company to take any action that the owner is entitled to take, the Depositary, or the Participants through which the owners hold their beneficial interests, would act upon the instruction of the owners. So long as the Global Holder is the registered owner of any exchange notes, the Global Holder will be considered the sole holder under the Indenture of any exchange notes evidenced by the Global Notes. Beneficial owners of exchange notes evidenced by the Global Notes will not be considered the owners or holders under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of the Depositary or for maintaining, supervising or reviewing any records of the Depositary relating to the exchange notes. Payments of the principal of, premium and liquidated damages, if any, and interest on any exchange notes registered in the name of the Global Holder on the applicable record date will be payable by the Trustee to or at the direction of the Global Holder in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the exchange notes, including the Global Notes, are registered as the owners for the purpose of receiving payments. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of these amounts to beneficial owners of exchange notes. The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with these payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Participants and Indirect Participants to the beneficial owners of the exchange notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. Certificated Securities Subject to certain conditions, any person having a beneficial interest in a Global Note may, upon request to the Trustee, exchange its beneficial interest for exchange notes in the form of Certificated 49 54 Securities. Upon any issuance, the Trustee is required to register the Certificated Securities in the name of, and cause the same to be delivered to, the person or persons requesting the exchange (or the nominee of the person requesting the exchange). In addition, if: (a) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and a successor depositary is not appointed by the Company within 90 days; or (b) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of exchange notes in the form of Certificated Securities; then, upon surrender by the Global Holder of its Global Note, exchange notes in certificated form will be issued to each person that the Global Holder and the Depositary identify as being the beneficial owner of the related exchange notes. Neither the Company nor the Trustee will be liable for any delay by the Global Holder or the Depositary in identifying the beneficial owners of exchange notes. The Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Holder or the Depositary for all purposes. SAME DAY SETTLEMENT AND PAYMENT The Company will make payments in respect of the exchange notes represented by the Global Notes (including principal, premium, if any, interest and liquidated damages, if any) by wire transfer of immediately available funds to the accounts specified by the Global Holder. With respect to exchange notes in certificated form, the Company will make all payments of principal, premium, if any, interest and liquidated damages, if any, by wire transfer of immediately available funds to the accounts specified by the holders or, if no account is specified, by mailing a check to each holder's registered address. The exchange notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in the Depositary's Same-Day Funds Settlement System. Therefore, any permitted secondary market trading activity in the exchange notes will be required by the Depositary to be settled in immediately available funds. The Company expects that secondary trading in any certificated exchange notes will also be settled in immediately available funds. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the Indenture without charge by writing to Nortek, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903-2360, Attention: Almon C. Hall, Vice President, Controller and Chief Accounting Officer or Kevin W. Donnelly, Vice President, General Counsel and Secretary. 50 55 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We originally sold the notes on June 12, 2001 to Bear, Stearns & Co. Inc. and Dresdner Kleinwort Wasserstein - Grantchester, Inc. (the "Initial Purchasers") pursuant to a purchase agreement dated June 7, 2001. The Initial Purchasers subsequently resold the notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the purchase agreement, we entered into a registration rights agreement with the Initial Purchasers in which we agreed to: (1) use our best efforts to file a registration statement registering the exchange notes with the Commission within 90 days after the original issuance of the notes; and (2) use our best efforts to have the registration statement relating to the exchange notes declared effective by the Commission within 165 days after the original issuance of the notes. We have agreed to keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date on which notice of the exchange offer is mailed to the holders of the notes. This prospectus covers the offer and sale of the exchange notes pursuant to the exchange offer and the resale of exchange notes received in the exchange offer by any broker-dealer who held notes, other than notes purchased directly from us or one of our affiliates. For each note surrendered to us pursuant to the exchange offer, the holder of the surrendered note will receive an exchange note having a principal amount equal to that of the surrendered note. Interest on each exchange note will accrue from the last date on which interest was paid on the surrendered note or, if no interest has been paid, from the date of original issuance of the surrendered note. Although we have not requested, and do not intend to request, the Commission to issue an interpretation with respect to the resales of the exchange notes, we believe that under existing Commission interpretations, the exchange notes will be freely transferable by Holders other than our affiliates after the exchange offer without further registration under the Securities Act if the Holder represents that it is acquiring the exchange notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the exchange notes and that it is not one of our affiliates, as such terms are interpreted by the Commission. If our belief is inaccurate, Holders who transfer exchange notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration may incur liability under the Securities Act. We do not assume or indemnify Holders against such liability. Broker-dealers ("Participating Broker-Dealers") receiving exchange notes in the exchange offer will have a prospectus delivery requirement with respect to resales of such exchange notes. While the Commission has not taken a position with respect to this particular transaction, under existing Commission interpretations relating to transactions structured substantially like the exchange offer, Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to exchange notes (other than a resale of an unsold allotment from the original sale of the notes) with the prospectus contained in the registration statement relating to the exchange offer. Under the registration agreement, we are required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the registration statement relating to the exchange offer in connection with the resale of such exchange notes. A holder of notes (other than certain specified holders) tendering notes in the exchange offer is required to represent that: - any exchange notes to be received by it will be acquired in the ordinary course of business; - the holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes; and 51 56 - it is not one of our "affiliates" as defined in Rule 405 of the Securities Act or, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent practicable. If a holder of notes is a broker-dealer that will receive exchange notes for its own account in exchange for notes that were acquired as a result of market-making or other trading activities, the holder of notes will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. In the event that - applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer; - any holder of notes (1) is prohibited by law from participating in the exchange offer, (2) may not resell the exchange notes to the public without delivering a prospectus and the prospectus relating to the exchange offer is not appropriate for these resales, or (3) is a broker-dealer and owns notes acquired directly from us or any of our affiliates; or - for any other reason, we do not consummate the exchange offer within 210 days after issuance of the original notes; we will, at our cost, - as promptly as practicable, and, in any event, on or prior to 45 days thereafter, file a shelf registration statement covering resales of the notes or the exchange notes, as the case may be, - use our best efforts to cause the shelf registration statement to be declared effective under the Securities Act, within 90 days of such determination and - keep the shelf registration statement effective for the earlier of two years after the date the notes were originally issued or the date on which all notes covered by the shelf registration statement have been sold or cease to be outstanding. An Initial Purchaser or holder of a note is ineligible to participate in the exchange offer if such Initial Purchaser or holder of notes cannot execute the letter of transmittal because it is unable to make the required representations therein. We will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom the shelf registration statement was filed copies of the prospectus that is a part of the shelf registration statement, notify each holder of notes when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the notes or the exchange notes, as the case may be. A holder selling notes or exchange notes pursuant to the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration agreement that are applicable to such holder (including certain indemnification obligations). If: (a) we fail to file any registration statement required by the registration rights agreement on or before the date specified for the filing; (b) any required registration statement is not declared effective by the Commission on or before the latest date specified for effectiveness (the "Effectiveness Target Date"); (c) we fail to consummate the exchange offer within 45 days of the Effectiveness Target Date; or (d) the shelf registration statement or the registration statement relating to the exchange offer is declared effective but thereafter ceases to be effective or usable in connection with resales of notes or 52 57 exchange notes in accordance with and during the periods specified in the registration rights agreement (each event referred to in clauses (a) through (d) above, a "Registration Default"); then we will pay liquidated damages to the holders of the notes or the exchange notes, with respect to the first 90-day period immediately following the occurrence of a Registration Default in an amount equal to $.05 per week per $1,000 principal amount of notes or exchange notes held by a holder. The amount of the liquidated damages will increase by an additional $.05 per week per $1,000 principal amount of notes or exchange notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.25 per week per $1,000 principal amount of notes or exchange notes. All accrued liquidated damages will be paid by us on each interest payment date. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, we will accept all notes validly tendered prior to 5:00 p.m., New York City time, on the expiration date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their notes pursuant to the exchange offer in integral multiples of $1,000. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes except for the following: (1) the exchange notes bear a Series B designation and different CUSIP number from the notes; (2) the exchange notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer; and (3) the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions providing for liquidated damages in certain circumstances relating to the timing of the exchange offer, all of which rights will terminate when the exchange offer is terminated. The exchange notes will evidence the same debt as the notes and will be entitled to the benefits of the indenture. As of the date of this prospectus, $250.0 million aggregate principal amount of the notes is outstanding. Solely for reasons of administration and no other reason, we have fixed the close of business on [ ] as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. Only a registered holder of notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the indenture may participate in the exchange offer. There will be no fixed record date, however, for determining registered holders of the notes entitled to participate in the exchange offer. The holders of notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the indenture. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission. We shall be deemed to have accepted validly tendered notes when, as and if the holder of such note has validly tendered such note to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If any tendered notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth in this prospectus or otherwise, the certificates for any such unaccepted notes will be returned, without expense, to the tendering holder as promptly as practicable after the expiration date. Those holders who tender notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to 53 58 the exchange of notes. We will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "-- Fees and Expenses." EXPIRATION DATES; EXTENSIONS; AMENDMENTS The "expiration date" will be 5:00 p.m., New York City time, on [ ], unless we, in our sole discretion, extend the exchange offer, in which case the expiration date will be the latest date to which the exchange offer is extended. Notwithstanding the foregoing, we will not extend the expiration date beyond [ ]. We have no current plans to extend the exchange offer. In order to extend the expiration date, we will notify the exchange agent of any extension by oral or written notice and will make a public announcement of such extension, in each case prior to 9:00 a.m., New York City time, no later than the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion, to (1) delay accepting any notes; (2) extend the exchange offer; or (3) terminate the exchange offer if any of the conditions set forth below under "-- Conditions of the Exchange Offer" shall not have been satisfied, in each case by giving oral or written notice of such delay, extension or termination to the exchange agent, and to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement of such event. If we amend the exchange offer in a manner determined by us to constitute a material change, we will promptly disclose the amendment by means of a prospectus supplement that will be distributed to the registered holders of the notes, and the exchange offer will be extended for a period of five to ten business days, as required by law, depending upon the significance of the amendment and the manner of disclosure to the registered holders, assuming the exchange offer would otherwise expire during such five to ten business day period. Without limiting the manner in which we may choose to make public announcement of any delay, extension, termination or amendment of the exchange offer, we will not have an obligation to publish, advertise, or otherwise communicate any such public announcement other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from their date of issuance. Interest is payable semiannually on June 15 and December 15 of each year, commencing on December 15, 2001, at the rate of 9 7/8% per annum. Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders who exchange their notes for exchange notes will receive the same interest payment on December 15, 2001 that they would have received had they not accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. PROCEDURES FOR TENDERING Only a registered holder of notes may tender such notes in the exchange offer. To effectively tender in the exchange offer, a holder must complete, sign and date a copy or facsimile of the letter of transmittal, have the signatures thereon guaranteed if required by the letter of transmittal or an "Agent's Message" (as defined below), and mail or otherwise deliver such letter of transmittal or such facsimile, together with the notes and any other required documents, to the exchange agent at the address set forth below under "Exchange Agent" for receipt on or prior to the expiration date. Delivery of the notes also may be made 54 59 by book-entry transfer in accordance with the procedures described below. If you are effecting delivery by book-entry transfer, (1) confirmation of such book-entry transfer must be received by the exchange agent prior to the expiration date; and (2) you must transmit to the exchange agent on or prior to the expiration date a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company ("DTC") in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of the confirmation of book-entry transfer. By executing the letter of transmittal or effecting delivery by book-entry transfer, each holder is making to us those representations set forth under the heading "-- Resale of the Exchange Notes." The tender by a holder of notes will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. The method of delivery of the notes and the letter of transmittal and all other required documents to the exchange agent is at the election and sole risk of the holder. As an alternative to delivery by mail, holders of notes may wish to consider overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the exchange agent on or prior to the expiration date. You should not send any letters of transmittal or notes to us. Holders may request that their respective brokers, dealers, commercial banks, trust companies or nominees effect the above transactions for such holders. The term "holder" with respect to the exchange offer means any person in whose name notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose notes are held of record by DTC who desires to deliver such notes by book-entry transfer at DTC. If your notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender, you should promptly contact the person in whose name the notes are registered and instruct such registered holder to tender on your behalf. If a beneficial owner wishes to tender on his or her own behalf, the holder must, prior to completing and executing the letter of transmittal and delivering the notes, either make appropriate arrangements to register ownership of the notes in his or her name or to obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (defined below) unless the notes are tendered: (1) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or (2) for the account of an Eligible Institution. If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed, such guarantee must be by a participant in a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If the letter of transmittal is signed by a person other than the registered holder of any notes listed therein, such notes must be endorsed or accompanied by properly completed bond powers, signed by such registered holder as such registered holder's name appears on such notes with the signature thereon guaranteed by an Eligible Institution. If the letter of transmittal or any notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and submit with the letter of transmittal evidence satisfactory to so act. We understand that the exchange agent will make a request, promptly after the date of this prospectus, to establish accounts with respect to the notes at the book-entry transfer facility of DTC for 55 60 the purpose of facilitating this exchange offer, and subject to the establishment of these accounts, any financial institution that is a participant in the book-entry transfer facility system may make book-entry delivery of notes by causing the transfer of such notes into the exchange agent's account with respect to the notes in accordance with DTC's procedures for such transfer. Although delivery of the notes may be effected through book-entry transfer into the exchange agent's account at the book-entry transfer facility, unless the holder of notes complies with the procedures described in the following paragraph or the guaranteed delivery procedures described below, an appropriate letter of transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the exchange agent at its address set forth below before the expiration date. The delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent. The exchange agent and DTC have confirmed that the exchange offer is eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer notes to the exchange agent in accordance with the procedures for transfer established under ATOP. DTC will then send an Agent's Message to the exchange agent. The term "Agent's Message" means a message transmitted by DTC that, when received by the exchange agent, forms part of the confirmation of a book-entry transfer and that states that DTC has received an express acknowledgment from the DTC participant that such participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce such agreement against such participant. In the case of an Agent's Message relating to guaranteed delivery, the term means a message transmitted by DTC and received by the exchange agent that states that DTC has received an express acknowledgment from the DTC participant that such participant has received and agrees to be bound by the Notice of Guaranteed Delivery. We will determine all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered notes in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all notes not validly tendered or any notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects, irregularities or conditions of tender as to particular notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to the tender of notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give such notification. Tenders of notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any notes received by the exchange agent that are not validly tendered and as to which the defects or irregularities have not been cured or waived, or if notes are submitted in a principal amount greater than the principal amount of notes being tendered by such tendering holder, such unaccepted or non-exchanged notes will be returned by the exchange agent to the tendering holders (or, in the case of notes tendered by book-entry transfer into the exchange agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such unaccepted or non-exchanged notes will be credited to an account maintained with such book-entry transfer facility), unless otherwise provided in the letter of transmittal designated for such notes, as soon as practicable following the expiration date. GUARANTEED DELIVERY PROCEDURES Those holders who wish to tender their notes and (1) whose notes are not immediately available; or (2) who cannot deliver their notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date; or (3) who cannot complete the procedures for book-entry transfer before the expiration date; 56 61 may effect a tender if: (1) the tender is made through an Eligible Institution; (2) before the expiration date, the exchange agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number or numbers of such notes and the principal amount of notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the expiration date, either (a) that a copy or facsimile of the letter of transmittal, together with the certificate(s) representing the notes and any other documents required by the letter of transmittal, will be deposited by the Eligible Institution with the exchange agent or (b) that a confirmation of book-entry transfer of such notes into the exchange agent's account at DTC, will be delivered to the exchange agent; and (3) either (a) a copy or facsimile of such properly completed and executed letter of transmittal, together with the certificate(s) representing all tendered notes in proper form for transfer and all other documents required by the letter of transmittal, or (b) if applicable, confirmation of a book-entry transfer into the exchange agent's account at DTC, are actually received by the exchange agent within five business days after the expiration date. Upon request, the exchange agent will send a Notice of Guaranteed Delivery to holders who wish to tender their notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of notes may be withdrawn at any time on or prior to the expiration date. To validly withdraw a tender of notes in the exchange offer, the exchange agent must receive a telegram, telex, letter or facsimile transmission notice of withdrawal at its address set forth herein on or prior to the expiration date. Any such notice of withdrawal must: (1) specify the name of the person having deposited the notes to be withdrawn (the "Depositor"); (2) identify the notes to be withdrawn, including the certificate number or numbers and the aggregate principal amount of such notes or, in the case of notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which such notes were tendered, including any required signature guarantees, or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the notes to register the transfer of such notes into the name of the person withdrawing the tender; and (4) specify the name in which any such notes are to be registered, if different from the name of the Depositor. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices in our sole discretion, and our determination will be final and binding. Any notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no exchange notes will be issued in exchange for withdrawn notes unless those notes are validly retendered. Any notes that have been tendered but that are not accepted for exchange because of the rejection of the tender due to uncured defects or the prior termination of the exchange offer, or which have been validly withdrawn, will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the expiration date. 57 62 CONDITIONS OF THE EXCHANGE OFFER The offer is subject to the condition that the exchange offer, or the making of any exchange by a holder of notes, does not violate applicable law or any applicable interpretation of the staff of the Commission. If there has been a change in policy of the Commission such that, in the reasonable opinion of our counsel, there is a substantial question whether the exchange offer is permitted by applicable federal law, we have agreed to seek a no-action letter or other favorable decision from the Commission allowing us to consummate the exchange offer. If we determine that the exchange offer is not permitted by applicable federal law, we may terminate the exchange offer. In connection with any termination we may: (1) refuse to accept any notes and return any notes that have been tendered by the holders thereof; (2) extend the exchange offer and retain all notes tendered prior to the expiration date, subject to the rights of the holders of tendered notes to withdraw their tendered notes; or (3) waive the termination event with respect to the exchange offer and accept all properly tendered notes that have not been properly withdrawn. If the waiver of a termination event constitutes a material change in the exchange offer, we will disclose the change by means of a supplement to this prospectus that will be distributed to each registered holder of notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver, if the exchange offer would otherwise expire during such period. EXCHANGE AGENT State Street Bank and Trust Company, the Trustee under the indenture, has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the Notice of Guaranteed Delivery should be directed to the exchange agent addressed as follows: By Hand Delivery, Overnight Courier, or Registered or Certified Mail: State Street Bank and Trust Company 2 Ave. de Lafayette Boston, MA 02111 Attention: Exchanges/Meaghan Haight Facsimile: 617-662-1452 Phone: 617-662-1603 Any requests or deliveries to an address or facsimile number other than as set forth above will not constitute a valid delivery. FEES AND EXPENSES We will bear the expenses of soliciting tenders. We are making the principal solicitation by mail, but our officers, employees and affiliates may make additional solicitations in person, by telegraph or telephone. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will pay the exchange agent, however, reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with the exchange offer. We will pay the cash expenses incurred in connection with the exchange offer. Such expenses include fees and expenses of the exchange agent and the Trustee, accounting and legal fees and printing costs, among others. We will pay all transfer taxes, if any, applicable to the exchange of the notes in the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the notes in the exchange 58 63 offer, then the amount of any such transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of or exemption from such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the notes, which is face value, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The costs of the exchange offer will be amortized over the term of the exchange notes. CONSEQUENCES OF FAILURE TO EXCHANGE The notes that are not exchanged for exchange notes in the exchange offer will remain restricted securities. Accordingly, those notes may be resold only as follows: (1) to us, upon redemption or otherwise; (2) (a) so long as the notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (b) in accordance with Rule 144 under the Securities Act, or (c) pursuant to another exemption from the registration requirements of the Securities Act and based upon an opinion of counsel reasonably acceptable to us; (3) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act; or (4) pursuant to an effective registration statement under the Securities Act. Persons who acquire the exchange notes are responsible for compliance with the state securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. 59 64 DESCRIPTION OF OUTSTANDING INDEBTEDNESS The following is a description of our principal debt obligations for borrowed money other than the exchange notes that will exist following the sale of the notes, the exchange offer and the redemption of the 9 7/8% Senior Subordinated Notes due 2004. PLY GEM CREDIT FACILITY Our Ply Gem Industries, Inc. subsidiary ("Ply Gem") has outstanding borrowings under a credit facility provided by a syndicate of lenders (as amended, the "Ply Gem Credit Facility"). At March 31, 2001, the aggregate amount of outstanding borrowings under the Ply Gem Credit Facility was approximately $74.1 million. Ply Gem has not been required to make any mandatory prepayments with proceeds from asset sales since March 31, 2001. Loans under the Ply Gem Credit Facility, at the option of Ply Gem, bear interest at a rate equal to: (i) a fluctuating interest rate per annum in effect from time to time, equal to the higher of (A) the prime rate publicly announced by Fleet and (B) 1/2 of one percent per annum above the federal funds rate; or (ii) the London InterBank Offer Rate plus a spread, which spread fluctuates between 30 and 107.5 basis points based on certain financial ratios of Ply Gem; provided, however, that the applicable interest rate will increase by 200 basis points during the continuance of any monetary default or event of default. Interest on the loans under the Ply Gem Credit Facility is payable quarterly in arrears. In addition, Ply Gem pays a facility fee on the aggregate principal amount available under the Ply Gem Credit Facility, which fluctuates between 20 and 30 basis points based on certain financial ratios of Ply Gem. The facility fee is payable quarterly in arrears. The Ply Gem Credit Facility is secured by a first-priority lien on (i) all shares of capital stock of substantially all of Ply Gem's present operating subsidiaries, (ii) all of the present and future accounts receivable and inventory of Ply Gem and substantially all of its operating subsidiaries and (iii) all proceeds and products of the foregoing. In addition, Ply Gem and substantially all of its present operating subsidiaries have guaranteed the Ply Gem Credit Facility. All borrowings outstanding under the Ply Gem Credit Facility are due and payable no later than August 26, 2002. Ply Gem is also required to make mandatory prepayments of a portion of the net proceeds of asset sales. Ply Gem may prepay borrowings under the Ply Gem Credit Facility, in whole or in part without premium or penalty. The Ply Gem Credit Facility contains representations and warranties, covenants (including, without limitation, the financial covenants described below) and events of default customary for credit facilities of such type, except that there are no restrictions on the payment of dividends by Ply Gem unless a default exists, or would result from the payment of such dividend, under the Ply Gem Credit Facility. The Ply Gem Credit Facility requires Ply Gem at all times to have consolidated net worth of at least $375 million, minus the lesser of $25 million or the actual losses incurred by Ply Gem on the sale of certain unprofitable subsidiaries. Under the Ply Gem Credit Facility, Ply Gem also is required to maintain (i) a ratio of consolidated current assets to consolidated current liabilities that equals or exceeds 2.0 to 1.0 and (ii) a ratio of consolidated EBITDA to consolidated interest expense of at least 3.5 to 1.0. Furthermore, Ply Gem must not permit its consolidated funded debt to consolidated EBITDA for the four most recent consecutive full fiscal quarters to exceed the following amounts: 2.5 to 1.0 on March 31, 2001; 2.5 to 1.0 on June 30, 2001; 2.5 to 1.0 on September 29, 2001; 2.5 to 1.0 on December 31, 2001; and 2.0 to 1.0 on March 30, 2002 and thereafter. 60 65 SENIOR NOTES 9 1/4 Senior Notes We issued senior notes under an indenture dated March 17, 1997. The terms of these senior notes are as follows: - Principal Amount -- $175.0 million - Maturity -- March 15, 2007 - Interest Rate -- 9 1/4% - Interest Payments -- Every six months on March 15 and September 15 - Optional Redemption -- The 9 1/4% Senior Notes are redeemable in whole or in part prior to maturity at our option at any time on or after March 15, 2002, at a premium declining to par in 2005. - Mandatory Redemption -- Upon a change of control, we are required to make an offer to purchase the 9 1/4% Senior Notes at a purchase price equal to 101% of their principal amount. We may also be required to make an offer to purchase the 9 1/4% Senior Notes if we sell certain assets and do not apply the proceeds as specified in the indenture. - Ranking -- The 9 1/4% Senior Notes rank equally with all of our existing and future senior debt and are senior in right of payment to all of our existing and future subordinated debt, including the Notes. - Basic Covenants of the Indenture -- The 9 1/4% Senior Notes indenture contains certain covenants that, among other things, limit our ability to: - make investments and other restricted payments, - incur additional debt, - issue preferred stock of our subsidiaries, - enter into transactions with affiliates, - create liens, - sell our assets or assets of our subsidiaries, or - enter into mergers and consolidations. 9 1/8 Senior Notes We issued senior notes under an indenture dated August 26, 1997. The terms of these senior notes are as follows: - Principal Amount -- $310.0 million - Maturity -- September 1, 2007 - Interest Rate -- 9 1/8% - Interest Payments -- Every six months on March 1 and September 1 - Optional Redemption -- The 9 1/8% Senior Notes are redeemable in whole or in part prior to maturity at our option at any time on or after September 1, 2002, at a premium declining to par in 2005. - Mandatory Redemption -- Upon a change of control, we are required to make an offer to purchase the 9 1/8% Senior Notes at a purchase price equal to 101% of their principal amount. We may also 61 66 be required to make an offer to purchase the 9 1/8% Senior Notes if we sell certain assets and do not apply the proceeds as specified in the indenture. - Ranking -- The 9 1/8% Senior Notes rank equally with all of our existing and future senior debt and are senior in right of payment to all of our existing and future subordinated debt, including the Notes. - Basic Covenants of the Indenture -- The 9 1/8% Senior Notes indenture contains certain covenants that, among other things, limit our ability to: - make investments and other restricted payments, - incur additional debt, - issue preferred stock of our subsidiaries, - enter into transactions with affiliates, - create liens, - sell our assets or assets of our subsidiaries, or - enter into mergers and consolidations. 8 7/8 Senior Notes We issued senior notes under an indenture dated July 31, 1998. The terms of these senior notes are as follows: - Principal Amount -- $210.0 million - Maturity -- August 1, 2008 - Interest Rate -- 8 7/8% - Interest Payments -- Every six months on February 1 and August 1 - Optional Redemption -- The 8 7/8% Senior Notes are redeemable in whole or in part prior to maturity at our option at any time on or after August 1, 2003, at a premium declining to par in 2006. - Mandatory Redemption -- Upon a change of control, we are required to make an offer to purchase the 8 7/8% Senior Notes at a purchase price equal to 101% of their principal amount. We may also be required to make an offer to purchase the 8 7/8% Senior Notes if we sell certain assets and do not apply the proceeds as specified in the indenture. - Ranking -- The 8 7/8% Senior Notes rank equally with all of our existing and future senior debt and are senior in right of payment to all of our existing and future subordinated debt, including the Notes. - Basic Covenants of the Indenture -- The 8 7/8% Senior Notes indenture contains certain covenants that, among other things limit our ability to: - make investments and other restricted payments, - incur additional debt, - issue preferred stock of our subsidiaries, - enter into transactions with affiliates, - create liens, - sell our assets or assets of our subsidiaries, or - enter into mergers and consolidations. 62 67 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material United States federal income tax consequences relevant to the purchase, ownership and disposition of the exchange notes. The following summary is not binding on the Internal Revenue Service (the "IRS") or the courts and we cannot assure you that the IRS or any court will take a similar view with respect to the tax consequences described below. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect and all of which are subject to change, possibly on a retroactive basis. This summary applies only to those persons who purchased notes in the offering at the original "issue price" within the meaning of the Code (generally, the first price at which a substantial amount of notes is sold for cash, other than to bond houses, brokers and other persons acting in the capacity of underwriters), exchange those notes for exchange notes in the exchange offer and who hold the exchange notes as "capital assets" (generally, assets held for investment) within the meaning of the Code. It does not address the tax consequences to special classes of investors, including: - financial institutions, - brokers or dealers in securities, - tax-exempt organizations, - insurance companies, - partnerships or flowthrough entities, - Subchapter S corporations, - persons holding Notes as part of a straddle, hedge or conversion transaction, - persons whose functional currency is not the United States dollar, or - non-United States persons. For purposes of this summary, a "United States person" is: - a citizen or resident of the United States, - a corporation or other entity treated as a corporation for United States federal income tax purposes created or organized in or under the laws of the United States or any political subdivision thereof, - an estate the income of which is subject to United States federal income taxation regardless of its source, - a trust if: - a United States court is able to exercise primary supervision over the administration of the trust and - one or more United States persons have the authority to control all substantial decisions of the trust, - a certain type of trust in existence on August 20, 1996, which was treated as a United States person under the Code in effect immediately prior to such date and which has made a valid election to be treated as a United States person under the Code and - any person otherwise subject to U.S. federal income tax on a net income basis in respect of its worldwide taxable income. A United States holder is a beneficial owner of an exchange note that is a United States person. A non-United States holder is a beneficial owner of an exchange note that is not a United States holder. 63 68 State, local or foreign tax consequences of ownership of the exchange notes are not summarized. Purchasers of exchange notes should consult their own tax advisors with respect to the particular consequences to them of the purchase, ownership and disposition of the exchange notes and the applicability of any state, local or foreign tax laws, as well as with respect to the possible effects of changes in United States federal and other tax laws. STATED INTEREST ON THE EXCHANGE NOTES Payments of stated interest on the exchange notes generally will constitute "qualified stated interest" that is taxable to a United States holder as ordinary interest income at the time it is accrued or received in accordance with the holder's method of accounting for United States federal income tax purposes. EXCHANGE OFFER, REGISTRATION RIGHTS, LIQUIDATED DAMAGES Because the economic terms of the exchange notes and the notes are identical, your exchange of notes for exchange notes under this offer will not constitute a taxable exchange of notes. Even if you received exchange notes in exchange for notes on which additional interest was paid because of a registration default, the exchange should not be taxable because the exchange would occur by operation of the notes' original terms. As a result, you should not recognize taxable gain or loss when you receive the exchange notes in exchange for notes, your holding period in the exchange notes should include your holding period in the notes, and your basis in the exchange notes should equal your basis in the notes. In certain circumstances, we may be obligated to repurchase the exchange notes and we have the option to redeem some or all of the exchange notes at certain times under certain circumstances. Based on our current expectations, we intend to take the position that the likelihood of a redemption or repurchase of the exchange notes is remote and likewise do not intend to treat the possibility of any premium payable on a redemption or repurchase as affecting the yield to maturity or the maturity date of the exchange notes. You may not take a contrary position unless you disclose your contrary position in the manner required by applicable Treasury Regulations. If the IRS takes a different position or if, contrary to our expectations, we repurchase or redeem the exchange notes, the amount and timing of the income that you must recognize may be affected. You should consult your tax adviser with respect to the contingent payments described above. DISPOSITION OF THE EXCHANGE NOTES Generally, any sale, redemption or other taxable disposition of an exchange note will result in taxable gain or loss equal to the difference between the sum of the amount of cash and the fair market value of property received (other than amounts attributable to accrued but unpaid stated interest on an exchange note) and the holder's adjusted tax basis in the exchange note. For this purpose, a holder's adjusted tax basis in an exchange note typically would equal the cost of the exchange note, increased by the amount of accrued interest included in such holder's gross income, and decreased by all principal payments previously received by such holder, in respect of the exchange note. Any gain or loss upon a sale or other disposition of an exchange note generally will be capital gain or loss, and will be long-term capital gain or loss if the exchange note has been held by the holder for more than one year. Certain holders (including individuals) are eligible for preferential rates of United States federal income taxation in respect of long-term capital gains. The deduction of capital losses is subject to certain limitations under United States federal income tax laws. Holders should be aware that the resale of an exchange note may be affected by the "market discount" rules of the Code, under which a subsequent purchaser acquiring an exchange note at a market discount generally would be required to include as ordinary income a portion of gain realized upon the disposition or retirement of such exchange note to the extent of the market discount that accrued while the exchange note was held by such purchaser. 64 69 You should consult your tax adviser regarding the treatment of capital gains and losses. U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS Interest on Exchange Notes. The payment to a non-United States holder of interest that is not effectively connected with a United States trade or business on an exchange note will not be subject to United States federal withholding tax pursuant to the "portfolio interest exception," provided that (1) the non-United States holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote, is not a "controlled foreign corporation" that is related to us, actually or constructively, through stock ownership and is not a bank that acquired the exchange notes in consideration for an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business and either (2)(A) the beneficial owner of the exchange notes certifies to us or our agent, under penalties of perjury, that it is not a United States holder and provides its name and address on IRS Form W-8BEN (or a suitable substitute form), or (B) a securities clearing organization, bank or other financial institution that holds the exchange notes on behalf of such non-United States holder in the ordinary course of its trade or business provides a statement to us or our agent under penalties of perjury in which it certifies that a Form W-8BEN or W-8IMY (or a suitable substitute form) has been received from the beneficial owner by it or by a qualifying intermediary between it and the beneficial owner and furnishes us or our agent with a copy thereof. The portfolio interest exception does not apply to a non-United States holder, and payments of interest made on the exchange note to any such non-United States holder will be subject to a 30% withholding tax, unless the beneficial owner of the exchange note provides us or our paying agent, as the case may be, with a properly executed (1) IRS Form W-8BEN, or a suitable substitute form, claiming an exemption from or reduction in the rate of withholding under the benefit of a tax treaty or (2) IRS Form W-8ECI, or a suitable substitute form, stating that interest paid on the exchange note is not subject to withholding tax because it is effectively connected with the beneficial owner's conduct of a trade or business in the United States. A non-United States holder may under certain circumstances be required to obtain a United States taxpayer identification number and make certain certifications to us. We may be required to report annually to the IRS and to each non-United States holder the amount of interest paid to, and the tax withheld, if any, with respect to each non-United States holder. If a non-United States holder of an exchange note is engaged in a trade or business in the United States and interest on the exchange note is effectively connected with the conduct of such trade or business, such non-United States holder will be subject to United States federal income tax on such interest in the same manner as if it were a United States holder. In addition, if such non-United States holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits, subject to adjustment, for that taxable year unless it qualifies for a lower rate under an applicable income tax treaty. Reporting. We may report annually to the IRS and to you the amount of interest paid to, and the tax withheld, if any, with respect to you. Dispositions of Exchange Notes. Any capital gain realized on the sale, exchange, redemption, retirement, or other taxable disposition of an exchange note by a non-United States holder generally will not be subject to United States federal income tax (provided that, in the case of proceeds representing accrued interest, the portfolio interest exemption applies) provided (1) such gain is not effectively connected with the conduct by such holder of a trade or business in the United States, (2) in the case of gains derived by an individual, such individual is not present in the United States for a period or periods aggregating 183 days or more in the taxable year of the disposition and certain other conditions are met and (3) the non-United States holder is not subject to tax pursuant to the provisions of United States federal income tax law applicable to certain expatriates. 65 70 Estate Tax. Subject to applicable estate tax treaty provisions, exchange notes held by an individual who is not a citizen or resident of the United States for federal estate tax purposes at the time of his or her death will not be includible in such person's gross estate for United States federal estate tax purposes if the interest on the exchange notes qualifies for the portfolio interest exemption from United States federal withholding tax under the rules described above. BACKUP WITHHOLDING A holder may be subject, under certain circumstances, to backup withholding at a 31 percent rate with respect to payments of interest received on, and proceeds from the sale (through a broker) of, an exchange note. Backup withholding generally applies if the holder: - fails to furnish his or her social security or other taxpayer identification number ("TIN") to us (or to another relevant payor) in the required manner, - furnishes an incorrect TIN and the IRS so notifies us (or such other payor), - is notified by the IRS that he or she has failed to report properly payments of interest or dividends and the IRS has notified us (or such other payor) that he or she is subject to withholding, or - fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the TIN provided is his or her correct number and that he or she is not subject to backup withholding. Recently enacted tax legislation reduces the backup withholding tax rate to (i) 30.5% for amounts paid after August 6, 2001 through the end of 2001, (ii) 30% for amounts paid during 2002 and 2003, (iii) 29% for amounts paid during 2004 and 2005, and (iv) 28% for amounts paid during 2006 through 2010. The backup withholding rate reductions will expire and the backup withholding rate will revert to 31% for amounts paid after December 31, 2010, unless Congress enacts tax legislation providing otherwise. Any amount withheld from a payment to a holder under the backup withholding rules is allowable as a credit against such holder's United States federal income tax liability, provided that the required information is furnished to the IRS. Certain holders (including, among others, corporations) are not subject to backup withholding. Generally, information reporting and backup withholding do not apply to payments that are subject to the 30% withholding tax on interest paid to a non-United States holder or to interest that is exempt from that tax by application of a tax treaty or special exception, provided that the non-United States holder provides the statement described in "-- U.S. Federal Income Tax Considerations for Non-United States Holders -- Interest on Exchange Notes" and we do not have actual knowledge or reason to know that the non-United States holder is a United States person. Also, generally, if payments are made to non-United States holders by a broker upon a sale of the exchange notes, the payments will not be subject to information reporting or backup withholding. Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder under the backup withholding rules will be allowed as a credit against such holder's United States federal income tax liability, and may entitle the holder to a refund, provided that the required information is furnished to the IRS. Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. 66 71 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for notes that the broker-dealer acquired as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Any broker-dealer may use this prospectus, as we may amend or supplement it from time to time, in connection with resales of exchange notes received in exchange for notes. For a period of 180 days after we complete the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. All resales must be made in compliance with state securities or blue sky laws. We assume no responsibility for compliance with these requirements. We will not receive any proceeds from any sales of the exchange notes by broker-dealers. Broker-dealers may sell exchange notes received for their own account pursuant to the exchange offer from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or at negotiated prices. Any resale of this type may be made directly to the purchaser or to or through broker-dealers who may receive compensation in the form of commissions or concessions from any broker-dealer and/or the purchasers of any exchange notes. Any broker-dealer that resells the exchange notes that it received for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any resale of exchange notes and any commissions or concessions received by these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holder of the notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. The initial purchasers have advised us that, following completion of this exchange offer, they intend to make a market in the exchange notes. However, the initial purchasers are under no obligation to do so, and they may discontinue any market activities with respect to the exchange notes at any time. LEGAL MATTERS The validity of the exchange notes offered by this prospectus will be passed upon for us by Ropes & Gray, Boston, Massachusetts. EXPERTS The consolidated financial statements incorporated by reference in this prospectus to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, and are incorporated herein in reliance upon the authority of said firm as experts in giving said report. 67 72 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You should rely only upon the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. NORTEK, INC. EXCHANGE OFFER $250,000,000 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2011 ------------------------------ NORTEK LOGO ------------------------------ [DATE] DEALER PROSPECTUS DELIVERY OBLIGATION Until , all dealers that effect transactions in the notes or the exchange notes, whether or not participating in the exchange offer, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 73 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 102(b)(7) of the DGCL permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL (relating to unlawful payment of dividends and unlawful stock purchase and redemption); or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Certificate of Incorporation provides that its directors shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exculpation from liabilities is not permitted under the DGCL as in effect at the time such liability is determined. The Company's By-Laws further provide that the Company shall indemnify its directors and officers to the fullest extent permitted by the DGCL. The directors and officers of the Company are covered under directors' and officers' liability insurance policies maintained by the Company. II-1 74 ITEM 21. EXHIBITS (a) The following exhibits are either filed with this registration statement or incorporated by reference: 4.1 Indenture dated as of June 12, 2001 between Nortek, Inc. and State Street Bank and Trust Company, as Trustee. 4.2 Registration Rights Agreement dated as of June 12, 2001 among Nortek, Inc., Bear, Stearns & Co. Inc. and Dresdner Kleinwort Wasserstein - Grantchester, Inc. 5.1 Opinion of Ropes & Gray* 12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Ropes & Gray (see Exhibit 5.1) 24.1 Powers of Attorney (included on signature page) 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1* 99.1 Form of Letter of Transmittal used in connection with the Exchange Offer* 99.2 Form of Notice of Guaranteed Delivery used in connection with the Exchange Offer* 99.3 Form of Exchange Agency Agreement*
- --------------- * To be filed by amendment. (b) Other financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or the accompanying notes incorporated by reference herein. ITEM 22. UNDERTAKINGS (1) The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (x) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (y) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (z) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 75 (2) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and where applicable, each filing of employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by that director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (4) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this registration statement, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request. (5) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective. II-3 76 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Providence, state of Rhode Island, on June 29, 2001. NORTEK, INC. By /s/ RICHARD L. BREADY ------------------------------------ Richard L. Bready Chairman of the Board, President and Chief Executive Officer and Director POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Richard L. Bready, Almon C. Hall and Kevin W. Donnelly, and each of them singly, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement on Form S-4 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on June 29, 2001.
SIGNATURE TITLE --------- ----- /s/ RICHARD L. BREADY Chairman of the Board, President, Chief Executive - ----------------------------------------------------- Officer and Director Richard L. Bready /s/ ALMON C. HALL Vice President and Controller (Chief Accounting - ----------------------------------------------------- Officer) Almon C. Hall /s/ RICHARD J. HARRIS Senior Vice President-Administration, Treasurer - ----------------------------------------------------- (Principal Financial Officer) and Director Richard J. Harris /s/ PHILLIP L. COHEN Director - ----------------------------------------------------- Phillip L. Cohen /s/ WILLIAM I. KELLY Director - ----------------------------------------------------- William I. Kelly /s/ J. PETER LYONS Director - ----------------------------------------------------- J. Peter Lyons
II-4 77 EXHIBIT INDEX 4.1 Indenture dated as of June 12, 2001 between Nortek, Inc. and State Street Bank and Trust Company, as Trustee. 4.2 Registration Rights Agreement dated as of June 12, 2001 among Nortek, Inc., Bear, Stearns & Co. Inc. and Dresdner Kleinwort Wasserstein - Grantchester, Inc. 5.1 Opinion of Ropes & Gray* 12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Ropes & Gray (see Exhibit 5.1) 24.1 Powers of Attorney (included on signature page) 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1* 99.1 Form of Letter of Transmittal used in connection with the Exchange Offer* 99.2 Form of Notice of Guaranteed Delivery used in connection with the Exchange Offer* 99.3 Form of Exchange Agency Agreement*
- --------------- * To be filed by amendment. EX-4.1 2 b39754niex4-1.txt INDENTURE DATED AS OF JUNE 12, 2001 1 Exhibit 4.1 EXECUTION COPY NORTEK, INC., Company, and STATE STREET BANK AND TRUST COMPANY, Trustee INDENTURE Dated as of June 12, 2001 Series A and Series B 9-7/8% Senior Subordinated Notes due June 15, 2011 2 INDENTURE, dated as of June 12, 2001, between Nortek, Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 9-7/8% Series A Senior Subordinated Notes due June 15, 2011 (the "Series A Notes") and the 9-7/8% Series B Senior Subordinated Notes due June 15, 2011 (the "Series B Notes"): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions. "Acquired Indebtedness" means, with respect to any Person, Indebtedness of such Person (i) assumed in connection with an acquisition of assets or properties from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person provided such Person was not immediately prior thereto an Unrestricted Subsidiary (in each case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Restricted Subsidiary). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise. "Agent" means any Registrar, Paying Agent or co-registrar. "Allowable Subsidiary Loans" means Indebtedness of the Company to a Restricted Subsidiary of the Company not to exceed the Net Cash Proceeds received by the Company as a result of such Restricted Subsidiary becoming less than a Wholly-Owned Subsidiary through the sale of Equity Interests in compliance with the terms of this Indenture, provided that (i) all such Allowable Subsidiary Loans are contractually subordinated in right of payments to the Notes and (ii) the total amount of all Allowable Subsidiary Loans at any time outstanding does not exceed $35,000,000. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance or other transfer or disposition by such Person of any of its assets or properties (including by way of a sale-and-leaseback and including the sale, issuance or other transfer of any of the Capital Stock of any Subsidiary of such Person), in a single transaction or through a series of related transactions, for aggregate consideration received by such Person or a Subsidiary of such Person (but if such Person is the Company or any Restricted Subsidiary of the Company, only if such Subsidiary is a Restricted Subsidiary of the Company), net of out-of-pocket costs relating thereto (including, without limitation, legal, accounting and investment banking fees and sales 3 commissions), in excess of $5,000,000. For purposes of this definition, consideration shall include, without limitation, any indebtedness for borrowed money of such Person or such Subsidiary that is assumed by the transferee of any assets or any such indebtedness of any Subsidiary of such Person whose stock is purchased by the transferee. Notwithstanding anything to the contrary in the foregoing provisions of this definition, the term "Asset Sale", with respect to any Person, shall not include (i) the sale, lease or other transfer or disposition of assets acquired and held for resale in the ordinary course of business; (ii) the sale, lease or other transfer or disposition of assets in accordance with the provisions of Article V hereof; (iii) the sale, lease or other transfer or disposition of damaged, worn-out or obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of the business of such Person or its Subsidiaries; (iv) the abandonment of assets or properties which are no longer useful in the business of such Person or its Subsidiaries and are not readily saleable; (v) the granting of any Lien permitted under Section 4.10 hereof (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure); (vi) any sale, lease, assignment or other disposition by such Person or its Subsidiaries if such Person has outstanding senior debt securities all of which are rated BBB- or higher by S&P and have not been placed on credit watch by S&P for a possible downgrade or are rated Baa3 or higher by Moody's and have not been placed on credit watch by Moody's for a possible downgrade; or (vii) the sale or other transfer or disposition of receivables in connection with an asset securitization transaction by such Person or its Subsidiaries. "Average Life" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment (assuming the exercise by the obligor of such debt security of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such debt security multiplied by the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" of any corporation means the Board of Directors of such corporation, or any duly authorized committee of such Board of Directors. "Board Resolution" means, with respect to any Person, a copy of a resolution or resolutions certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, as filed with the corporate records of such Person. "Broan-NuTone Canada, Inc. Credit Facility" means a credit facility between Broan-NuTone Canada, Inc. or any of the Canadian Subsidiaries, and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time. "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions in the Commonwealth of Massachusetts are authorized or required to close. "Canadian Subsidiary" means any Subsidiary of Broan-NuTone Canada, Inc. and any Subsidiary of the Company whose headquarters is located in Canada. 2 4 "Capital Lease Obligations" means, with respect to any Person, all obligations under leases of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP, and for purposes of this Indenture the amount of such obligations at any time shall be the aggregate capitalized amount thereof at such time, as determined in accordance with GAAP. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock (including common or preferred stock), partnership interests or any other participation right or other interest in the nature of an equity interest in such Person. "Cash Equivalents" means (i) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (ii) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, BBB- or better by S&P or Moody's or the equivalent of such rating by a successor rating agency, (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia which is rated, at the time as of which any Investment therein is made, P-1 or better by Moody's or A-1 or better by S&P, or the equivalent of such rating by a successor rating agency, (iv) Investments in mutual funds, money market funds, investment pools and other savings vehicles, substantially all of the assets of which are invested in Investments described in clause (i), (ii) or (iii) above, and (v) in the case of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries, (a) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by Canada or any instrumentality or agency thereof (provided that the full faith and credit of Canada is pledged in support thereof), (b) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, A or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency and (c) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of Canada or any province thereof which is rated, at the time as of which any Investment therein is made, R-1 or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency. "Commodity Agreement" means any agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the prices of commodities used by the Company or any of its Subsidiaries in the ordinary course of business. "Company Credit Facility" means one or more credit facilities (other than the Ply Gem Credit Facility) between the Company or any of its Subsidiaries and one or more banks or 3 5 other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Company Credit Facility." All Company Credit Facilities are referred to collectively in this Indenture as the "Company Credit Facility." "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of such Person and its Subsidiaries (or if such Person is the Company, the amortization expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP, excluding any amortization expense included in Consolidated Interest Expense. "Consolidated Cash Flow" means, with respect to any Person for any period, the sum of, without duplication, (i) Consolidated Net Income of such Person for such period, (ii) Consolidated Interest Expense of such Person for such period, (iii) Consolidated Income Tax Expense of such Person for such period, (iv) Consolidated Depreciation Expense of such Person for such period, (v) Consolidated Amortization Expense of such Person for such period , and (vi) the amount, not to exceed 10% of Consolidated Cash Flow of such Person for such period (which amount shall be excluded in determining such Consolidated Cash Flow), by which (A) other non-cash items of expense that reduce Consolidated Net Income of such Person for such period exceed (B) other non-cash items of expense that increase Consolidated Net Income of such Person for such period. "Consolidated Cash Flow Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated Cash Flow of such Person for such period to Consolidated Interest Expense of such Person for such period; provided, however, that Consolidated Cash Flow and Consolidated Interest Expense shall be calculated on a pro forma basis after giving effect, as if occurring at the beginning of such period, to (i) the incurrence of Indebtedness giving rise to the need to calculate the Consolidated Cash Flow Coverage Ratio and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (ii) the incurrence, during such period or since the last day of such period, of any Indebtedness (other than Indebtedness incurred for working capital purposes), and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (iii) the acquisition by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) of any company or business during such period or since the last day of such period and (iv) the sale or other disposition of assets or properties outside the ordinary course of business by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) and the actual application of the proceeds therefrom during such period or since the last day of such period. "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation and depletion expense of such Person and its Subsidiaries (or if such Person is the Company, the depreciation and depletion expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP. 4 6 "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes (including franchise, net worth or similar taxes) of such Person and its Subsidiaries (or if such Person is the Company, the provision for such taxes of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries (or if such Person is the Company, the interest expense of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, all original issue discount and other interest portion of any deferred payment Indebtedness and all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing less any interest income included in Consolidated Net Income for such period, but excluding any deferred financing fees otherwise includible in Consolidated Interest Expense for such period; (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries (or if such Person is the Company, such interest expense paid, accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries) during such period as determined on a consolidated basis in accordance with GAAP; and (iii) all cash dividends or other distributions declared or paid on any Capital Stock (other than common stock or preferred stock that is not Redeemable Stock or, with respect to the Company, Special Common Stock) of such Person and its Subsidiaries (or if such Person is the Company, all such dividends or other distributions declared or paid on any such Capital Stock of the Company and its Restricted Subsidiaries) for such period as determined on a consolidated basis in accordance with GAAP; provided, however, that any Indebtedness bearing a floating rate of interest shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (or if such Person is the Company, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries) for such period, before discontinued operations, extraordinary items and the cumulative effect of a change in accounting principles, determined on a consolidated basis in accordance with GAAP; provided that there shall also be excluded from Consolidated Net Income (but only to the extent included in calculating such Consolidated Net Income): (i) any net gains or losses in respect of dispositions of assets other than in the ordinary course of business; (ii) any gains from currency exchange transactions not in the ordinary course of business consistent with past practice; (iii) any gains or losses realized from the termination of any employee pension benefit plan; (iv) any gains or losses realized upon the refinancing of any Indebtedness of such Person or any of its Subsidiaries (or if such Person is the Company, any gains or losses realized upon the refinancing of any Indebtedness of [the] Company and its Restricted Subsidiaries); (v) any gains or losses arising from the destruction of property or assets due to fire or other casualty; (vi) any gains or losses from the revaluation of property or assets; (vii) the net income (or loss) of any Person that is not a Subsidiary of such first Person (or that is not a Restricted Subsidiary of the Company if such first Person is the Company) except to the extent of cash dividends or distributions paid to such first Person by such other Person in such period; (viii) the net income (or loss) of any Subsidiary of such first Person except to the extent of the interest of such Person 5 7 in such Subsidiary; (ix) the net income of any Subsidiary of such Person (or if such Person is the Company, of any Restricted Subsidiary of the Company) that is subject to any restriction or limitation on the payment of dividends and other distributions (including loans or advances) by operation of the terms of its charter or by agreement, instrument, judgment, decree, order or governmental regulation applicable to such Subsidiary (or such Restricted Subsidiary, if applicable) to the extent of such restriction or limitation in such period; (x) the net income of any Person acquired in a pooling transaction for any period prior to the date of such acquisition; and (xi) the excess of (a) the consolidated compensation expense recorded by the Company in the computation of net earnings of the Company in respect of shares of Capital Stock (other than Redeemable Stock) or other Equity Interests awarded, pursuant to a plan or other arrangement approved by the Board of Directors of the Company (or of a Reporting Subsidiary, if applicable), to or for the benefit of any employee, officer or director of the Company or any of its Subsidiaries or to or by any employee stock ownership plan or similar trust for the benefit of any such employee, officer or director, over (b) the amount of consolidated income tax benefit recorded by the Company in connection with such consolidated compensation expense of the Company. "Consolidated Net Worth" means, with respect to any Person at any date of determination, the sum of the Capital Stock, additional paid-in capital and cumulative translation, pension and other adjustment account plus retained earnings (or minus accumulated deficit), excluding amounts attributable to Redeemable Stock, any Capital Stock convertible into Indebtedness, or treasury stock, of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in currency values to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary on the date of this Indenture or becomes a party or a beneficiary thereafter. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Definitive Notes" means Notes that are in the form of Exhibit A attached hereto (but without including the text referred to in footnote 1 thereto and the additional schedule referred to therein). "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depositary" shall mean or include such successor. "Designated Senior Indebtedness" means (i) any Indebtedness (and all Obligations of the Company with respect thereto) outstanding under the Company Credit Facility, (ii) any Indebtedness (and all Obligations of the Company with respect thereto) 6 8 represented by the 8-7/8% Notes, the 9-1/8% Notes or the 9-1/4% Notes and (iii) any other Senior Indebtedness permitted to be incurred under this Indenture the original principal amount of which is $25,000,000 or more and that has been designated by the Company as "Designated Senior Indebtedness." "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors of the Company is required to deliver a Board Resolution under this Indenture, a member of such Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "8-7/8% Notes" means any of the Company's 8-7/8% Senior Notes due August 1, 2008 issued under the indenture dated as of July 31, 1998 between the Company and State Street Bank and Trust Company. "Eligible Inventory" means, with respect to any Person, the finished goods, raw materials and work-in-process of such Person less any applicable reserves, each of the foregoing determined on the FIFO method of accounting in accordance with GAAP. "Eligible Receivables" means, with respect to any Person, the trade receivables of such Person less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP. "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Note" means any Series B Note issued in exchange for an Original Note pursuant to the Exchange Offer or the Private Exchange. "Exchange Offer" means the offer by the Company to the Holders of all outstanding Transfer Restricted Securities to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series B Notes, in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. "Exchange Offer Registration Statement" means the registration statement under the Securities Act relating to the Exchange Offer, including the related prospectus. "Exempt Person" means (i) Richard L. Bready, (ii) any Person which is an Affiliate of Richard L. Bready and (iii) any other Affiliate of such Person so long as such Person is an Affiliate of Richard L. Bready. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries in existence on the date of this Indenture, including without limitation all Indebtedness outstanding under the Ply Gem Credit Facility on such date. 7 9 "Existing Investments" means (i) Investments of the Company and its Restricted Subsidiaries in existence on the date of this Indenture and (ii) Investments to be made pursuant to commitments authorized by the Board of Directors of the Company prior to the date of this Indenture in Ecological Engineering Associates, L.P. in an amount not to exceed $3,000,000 (including such Investments made prior to the date of this Indenture). "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets of the Company or any of its Subsidiaries shall be determined by the Board of Directors of the Company or, if such Subsidiary is a Reporting Subsidiary, of such Reporting Subsidiary, acting in good faith, and evidenced by a Board Resolution of the Company or such Reporting Subsidiary, as the case may be, delivered to the Trustee. "GAAP" means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that for purposes of Article IV and Article V hereof and the definitions used therein, GAAP shall be determined on the basis of such principles as in effect on the date of this Indenture. "Global Note" means a Note registered in the name of the Depositary or its nominee that contains the paragraph referred to in footnote 1 thereto and the additional schedule referred to in the form of Note attached hereto as Exhibit A. "guarantee" means, with respect to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, of all or any part of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure the payment or performance of (or payment of damages in the event of non-performance) of all or any part of such obligation. "Holder" means a Person in whose name a Note is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, any indebtedness, contingent or otherwise, (i) with respect to borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or consisting of reimbursement obligations with respect to letters of credit, or (ii) representing the deferred and unpaid balance of the purchase price of any property excluding any such balance that constitutes a trade payable or an accrued liability, in each case arising in the ordinary course of business, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP, and shall also include, to the extent not otherwise included, (a) any Capital Lease Obligations, (b) the maximum fixed repurchase price of any Redeemable Stock, (c) indebtedness secured by a Lien to which the 8 10 property or assets owned or held by such Person is subject, whether or not the obligations secured thereby shall have been assumed, (d) guaranties of items that would be included within this definition to the extent of such guaranties, and (e) net liabilities in respect of Commodity Agreements, Currency Agreements and Interest Rate Agreements. For purposes of the immediately preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; provided that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be without duplication (y) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (z) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the Fair Market Value at such date of any property or asset subject to a Lien securing the Indebtedness of others or the amount of the Indebtedness secured. The amount of any Indebtedness issued at a discount shall be equal to the gross proceeds of such issuance (and not the face amount of any bond, note, debenture or similar instrument representing such Indebtedness). "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary thereof. "Investment" means, with respect to any Person, (i) any direct or indirect loan or other extension of credit (other than extensions of trade credit by such Person on commercially reasonable terms and relating to the sale of property or services in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to any other Person, or (ii) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person. "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease intended as security, any option or other agreement to sell or give any security interest and any filing of or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a financing statement covering leased goods under a lease not intended as security). 9 11 "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means the aggregate Cash Proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reasonable reserve in accordance with GAAP for adjustments in respect of the sale price of such asset or assets. "9-1/8% Notes" means any of the Company's 9-1/8% Senior Notes due September 1, 2007 issued under the indenture dated as of August 26, 1997 between the Company and State Street Bank and Trust Company. "9-1/4% Notes" means any of the Company's 9-1/4% Senior Notes due March 15, 2007 issued under the indenture dated as of March 17, 1997 between the Company and State Street Bank and Trust Company. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Note Custodian" means the Trustee, as custodian for the Depositary with respect to the Notes in global form, or any successor entity thereto. "Notes" means the Original Notes and the Exchange Notes. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any corporation, the Chairman of the Board, any Vice Chairman, the Chief Executive Officer, the President, any Vice President, any Assistant Vice President, the Treasurer, the Chief Financial officer, the Chief Accounting Officer, the Secretary, any Assistant Treasurer or any Assistant Secretary of such corporation. 10 12 "Officers' Certificate" means, with respect to any Person, a certificate containing the information specified in Sections 11.04 and 11.05 hereof signed by the Chief Executive Officer or President and the Treasurer, Chief Financial Officer or Chief Accounting Officer of such Person. "Opinion of Counsel" means a written opinion containing the information specified in Sections 11.04 and 11.05 hereof, rendered by legal counsel (who may be counsel to the Company) acceptable to the Trustee. "Original Notes" means the Series A Notes initially issued under this Indenture prior to the issuance of Exchange Notes. "Permitted Investments" means any of the following: (i) Cash Equivalents; (ii) Existing Investments; (iii) Investments by the Company or a Restricted Subsidiary of the Company in any Subsidiary of the Company that is a Restricted Subsidiary or any other Person that concurrently with the making of such Investment becomes a Subsidiary of the Company that is a Restricted Subsidiary; (iv) guaranties by Restricted Subsidiaries permitted under Section 4.08 hereof; (v) Indebtedness of the Company to any Restricted Subsidiary of the Company; provided that such Indebtedness is contractually subordinated in right of payment to the Notes; (vi) Investments by the Company or any of its Restricted Subsidiaries in debt securities or debt instruments having maturities of 10 years or less and (A) issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (B) with a rating of BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent of such rating by a successor rating agency; (vii) any Investment by Broan-NuTone Canada, Inc. and or any Canadian Subsidiary in debt securities or debt instruments having maturities of 10 years or less and issued or fully guaranteed or insured by Canada or an instrumentality or agency thereof or rated, at the time of such Investment, BBB- or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency, so long as the aggregate amount of all such Investments by Broan-NuTone Canada, Inc. and any Canadian Subsidiaries that are Restricted Subsidiaries does not exceed $15,000,000 at any one time outstanding; (viii) loans and advances to officers and directors of the Company or any Restricted Subsidiary of the Company made in the ordinary course of business or pursuant to any employee benefit plan, up to $10,000,000 in the aggregate at any one time outstanding; (ix) loans and advances to vendors, suppliers and contractors of the Company or any Restricted Subsidiary of the Company and made in the ordinary course of business; (x) the receipt by the Company or any of its Restricted Subsidiaries of consideration other than Cash Proceeds in any Asset Sale made in compliance with the terms of this Indenture; (xi) so long as no Default or Event of Default shall have occurred and be continuing, other Investments made after the date of this Indenture not exceeding in the aggregate at any time outstanding (A) $40,000,000, if at the time of the making of such Investment the Notes are not rated BB+ or better by S&P or Bal or better by Moody's, or (B) $50,000,000, if at the time of the making of such Investment the Notes are rated BB+ or better by S&P or Bal or better by Moody's; (xii) any Lien permitted under Section 4.10 hereof; and (xiii) Investments by Restricted Subsidiaries of the Company not exceeding in the aggregate $10,000,000 at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term herein; provided that for purposes of this 11 13 clause (xiii) an instrument referred to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100,000,000. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries, taken as a whole; (vi) Liens securing Purchase Money Obligations permitted to be incurred by the provisions of this Indenture; (vii) leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of the Company or any of its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or any of its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capital Lease Obligation; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any Person existing at the time (A) such Person becomes a Restricted Subsidiary of the Company or (B) such Person or such property becomes a part of the Company or any Restricted Subsidiary of the Company; (xii) Liens in favor of the Company or any Restricted Subsidiary of the Company; (xiii) Liens securing any real property or other assets of the Company or any Restricted Subsidiary of the Company in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the Company or such Restricted Subsidiary of the Company; (xiv) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary of the Company that does not give rise to an Event of Default; (xv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvii) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Company Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and 12 14 Currency Agreements; and (xviii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the date of this Indenture. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Ply Gem Credit Facility" means one or more credit facilities between Ply Gem Industries, Inc. or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Ply Gem Credit Facility." All Ply Gem Credit Facilities are referred to collectively herein as the "Ply Gem Credit Facility." "Principal Property" means any manufacturing or processing plant, warehouse or other building used by the Company or any Restricted Subsidiary of the Company, other than a plant, warehouse or other building that, in the good faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by the Company and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of the Company. "Private Exchange" means a private exchange pursuant to Section 2(a) of the Registration Rights Agreement. "Purchase Money Obligations" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed by the Company or a Restricted Subsidiary of the Company in connection with the acquisition of assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased. "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable or is redeemable at the sole option of the holder thereof, in whole or in part, prior to the Stated Maturity of the Notes. "Redemption Date" or "redemption date" means the date specified for redemption of the Notes in accordance with the terms of the Notes and this Indenture. "Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 5 of the Notes. 13 15 "Registration Rights Agreement" means the registration rights agreement dated as of the date of this Indenture between the Company and the Initial Purchasers named therein. "Reporting Subsidiary" means, with respect to any Person, a Subsidiary of such Person required to file periodic reports under Section 13 or 15(d) of the Exchange Act. "Restricted Subsidiary" means (i) any Subsidiary of the Company in existence on the date of this Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary", (ii) any Subsidiary of the Company (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of this Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of the Company; provided that immediately after giving effect to the designation referred to in clause (iii), no Default or Event of Default shall have occurred and be continuing and the Company could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Ratio test set forth in the first paragraph of Section 4.08 hereof. The Company shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers' Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence. "S&P" means Standard and Poor's Corporation and its successors. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series A Notes" means the Company's 9-7/8% Series A Senior Subordinated Notes due June 15, 2011, to be issued pursuant to this Indenture. "Series B Notes" means the Company's 9-7/8% Series B Senior Subordinated Notes due June 15, 2011, to be issued pursuant to this Indenture in the Exchange Offer and the Private Exchange. "Senior Indebtedness" means all Indebtedness of the Company (including Specified Senior Indebtedness), whether outstanding on the date of this Indenture or thereafter incurred (unless, in the case of any particular Indebtedness, the instrument under which such Indebtedness is incurred expressly provides that such Indebtedness shall not be senior or superior in right of payment to the Notes), and all Obligations of the Company with respect thereto, but excluding: (i) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (ii) amounts owed for goods, materials or services purchased in the ordinary course of business or for compensation to employees; (iii) any Indebtedness in respect of any Capital Lease Obligation created, incurred, assumed or guaranteed prior to or, unless designated in the instrument evidencing such Capital Lease Obligation as "Senior Indebtedness", after the date of this Indenture; (iv) any Indebtedness represented by Redeemable Stock; and (v) any Indebtedness that is incurred in violation of this Indenture. 14 16 "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of the Registration Rights Agreement which covers all of the Registrable Notes (as defined in the Registration Rights Agreement), on an appropriate form under Rule 415 under the Securities Act or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the SEC, as such regulation is in effect on the date of this Indenture. "Special Common Stock" means the special common stock of the Company, $1.00 par value per share. "Specified Senior Indebtedness" means (i) any Indebtedness outstanding under the Company Credit Facility, and (ii) any Indebtedness represented by the 8-7/8% Notes, the 9-1/8% Notes or the 9-1/4% Notes. "Stated Maturity" means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency). "Subsidiary" of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 as amended and as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Transfer Restricted Securities" means each Original Note until (i) the date on which such Original Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Original Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which the Original Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Original Note is distributed to the public pursuant to Rule 144 under the Securities Act. "Trust Officer," when used with respect to the Trustee, means any officer assigned to and working in the corporate trust department of the Trustee or any other officer of 15 17 the Trustee customarily performing functions similar to those performed by any of the above officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. "Unrestricted Subsidiary" means, until such time as any of the following shall be designated as a Restricted Subsidiary of the Company by the Board of Directors of the Company as provided in and in compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary of the Company or of a Restricted Subsidiary organized or acquired after the date of this Indenture that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of the Company that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company; provided that (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in Section 4.06 hereof, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in accordance with Section 4.06 hereof; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. The Company shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers' Certificate certifying that such designation has been made and that such designation complies with the requirements of this Indenture and all conditions thereto have been satisfied. "U.S. Government Obligations" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged. "Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary (other than directors' qualifying shares) is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries). 16 18 SECTION 1.02 Other Definitions. "Act"........................................... 1.05 "Acceleration Notice"........................... 6.02 "Bankruptcy Law"................................ 6.01 "Blockage Notice"............................... 10.04 "Cash Proceeds"................................. 4.13 "Change of Control"............................. 4.12 "Change of Control Offer"....................... 4.12 "Change of Control Payment"..................... 4.12 "Change of Control Payment Date"................ 4.12 "Covenant Defeasance"........................... 8.03 "Custodian"..................................... 6.01 "DTC"........................................... 2.03 "Event of Default".............................. 6.01 "Excess Proceeds"............................... 4.13 "Excess Proceeds Offer"......................... 4.13 "Exchange Act".................................. 4.02 "IAIs".......................................... 2.01 "incurrence".................................... 4.08 "Legal Defeasance".............................. 8.02 "Legal Holiday"................................. 11.08 "Offshore Notes Exchange Date".................. 2.01 "Paying Agent".................................. 2.03 "Payment Blockage Period"....................... 10.04 "QIB Global Note"............................... 2.01 "QIBs".......................................... 2.01 "refinance"..................................... 4.08 "Refinancing Indebtedness"...................... 4.08 "Register"...................................... 2.03 "Registrar"..................................... 2.03 "Regulation S Purchasers"....................... 2.01 "Restricted Payment"............................ 4.06 "Rule 144A"..................................... 2.01 "surviving entity".............................. 5.01 "Temporary Regulation S Global Note"............ 2.01 SECTION 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "Indenture to be qualified" means this Indenture. 17 19 "Indenture trustee" or "institutional trustee" means the Trustee. "Obligor" on the Notes means the Company, and each other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural, and words in the plural include the singular. SECTION 1.05 Acts of Holders. (1) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (2) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient. (3) The ownership of Notes shall be proved by the Register. (4) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note as the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 18 20 (5) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Notes have authorized or agreed or consented to such request, demand, authorization, directions, notice, consent, waiver or other Act, and for that purpose the outstanding Notes shall be computed as of such record date, provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 1.06 Exchange Rates. Except as otherwise required under GAAP or in connection with the preparation of any financial statements, any computation of the U.S. dollar equivalent of any foreign currency required for any calculation or computation under this Indenture (including, without limitation, in connection with the limitations under the definition of "Consolidated Net Income" and Section 4.03 hereof) shall be made at the exchange rate published in The Wall Street Journal which is in effect as of the close of business on the first Business Day in the month in which such computation is required to be made hereunder. ARTICLE II THE NOTES SECTION 2.01 Form and Dating. The Original Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto, with such appropriate insertions, substitutions and other variations as are required or permitted by this Indenture. The Exchange Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto, with such appropriate insertions, substitutions and other variations as are required or permitted by this Indenture; provided, that Exchange Notes issued in the Exchange Offer shall not bear the legend set forth in Exhibit A hereto as indicated by footnote 2 thereto; provided, further, that Exchange Notes issued in either the Exchange Offer or the Private Exchange shall not contain any reference to Liquidated Damages and shall not include paragraph 19 of Exhibit A hereto. The Notes may have notations, legends or endorsements required by this Indenture, law, stock exchange rule, depository rule or usage. Any such notation, legend or endorsement shall be delivered in writing to the Company. Each Note shall be dated the date of its issuance and show the date of its authentication. The terms and provisions contained in the Notes, annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company, by its execution and delivery of this Indenture, expressly agrees to such terms and provisions and to be bound thereby. 19 21 Original Notes offered and sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") in accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued initially in the form of a permanent Global Note substantially in the form set forth in Exhibit A hereto (including the text set forth in footnote 1 thereto and the additional schedule referred to therein, but excluding the text set forth in footnote 3 thereto), deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee for the Depositary, as hereinafter provided. The Global Note (which may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate) will represent Original Notes sold to QIBs (the "QIB Global Note"). Original Notes offered and sold in reliance on Regulation S, if any, shall be issued initially in the form of one Global Note (the "Temporary Regulation S Global Note") having a different CUSIP number than that of the QIB Global Note substantially in the form set forth in Exhibit A hereto (including the text set forth in footnotes 1 and 3 thereto and the additional schedule referred to therein), deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Temporary Regulation S Global Note may not be issued in definitive form until the later of the completion of the distribution of the Original Notes and the termination of the "restricted period" (as defined in Regulation S) with respect to the offer and sale of the Original Notes (the "Offshore Notes Exchange Date"). The Company shall promptly notify the Trustee in writing of the occurrence of the Offshore Notes Exchange Date and, at any time following the Offshore Notes Exchange Date, upon receipt by the Trustee and the Company of a certificate substantially in the form set forth in Exhibit E hereto, the Company shall execute, and the Trustee shall authenticate and deliver, one or more permanent certificated Definitive Notes in registered form pursuant to Section 2.06(4) hereof. The aggregate principal amount of each Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Transfers of Original Notes from QIBs to institutional "Accredited Investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, ("IAIs"), or persons who acquire an interest in the Original Notes pursuant to Regulation S (the "Regulation S Purchasers"), or from Regulation S Purchasers to QIBs, will be represented by appropriate increases and decreases to the respective amounts of the appropriate Global Notes in accordance with the customary operating procedures of the Depositary and the Trustee; provided, however, that such increases or decreases in the amount of Global Notes shall be made by the Trustee, as Note Custodian, in accordance with the instructions given by the Holder thereof as required by Section 2.06 hereof. SECTION 2.02 Execution and Authentication. The Notes shall be executed on behalf of the Company by its Chairman of the Board, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any such officer on the Notes may be manual or facsimile. 20 22 If an Officer of the Company whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto, manually executed by the Trustee, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate of authentication executed by the Trustee upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and made available for delivery hereunder. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a request for the authentication and delivery of such Notes signed by an Officer of the Company accompanied by any certificate and opinions required by the TIA and the following paragraph, and the Trustee, in accordance with such request, shall authenticate and deliver such Notes as provided in this Indenture. The Notes may be issued in one or more series; provided, however, that any Notes issued with original issue discount ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Notes that are issued with a different amount of OID or that are not issued with OID. Subject to this Section 2.02, Trustee shall authenticate (i) Original Notes for original issue on the date hereof in an aggregate principal amount not to exceed $250,000,000, (ii) Original Notes issued after the date hereof, upon written order of the Company in the form of an Officers' Certificate and (iii) Exchange Notes issued, either (x) in the Exchange Offer for the Original Notes pursuant to the Exchange Offer Registration Statement filed with the Commission from time to time, for issue only in exchange for a like principal amount of Original Notes or (y) in the Private Exchange, for issue only in exchange for a like principal amount of Original Notes, in each case, upon written order of the Company in the form of an Officers' Certificate. Such Officers' Certificate shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Original Notes or Exchange Notes, whether the Notes shall be issued as part of a new or existing series of Notes and the title of such Notes and whether the Notes are to be Definitive Notes or Global Notes. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matter as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate 21 23 of the Company. The Trustee shall not be liable for any act or failure to act of the authenticating agent to perform any duty either required herein or authorized herein to be performed by such person in accordance with this Indenture. Each authenticating agent shall be acceptable to the Company and otherwise comply in all respects with the eligibility requirements of the Trustee contained in this Indenture. SECTION 2.03 Registrar and Paying Agent. The Company shall maintain or cause to be maintained an office or agency where (a) Notes may be presented for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for purchase or payment ("Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange (the "Register"). The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agents. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and agent for service of notices and demands in connection with the Notes. SECTION 2.04 Paying Agent to Hold Money in Trust. Except as otherwise provided herein, prior to each due date of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to any Note, the Company shall deposit with the Paying Agent a sum of money sufficient to pay such principal, premium, if any, interest and Liquidated Damages, if any, so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes) and shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the request of the Trustee, forthwith pay to the Trustee all money so held in trust and account for any money disbursed to it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company, a Subsidiary or an Affiliate of either 22 24 of them acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. SECTION 2.05 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing, within five Business Days of such request, a list in such form as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06 Transfer and Exchange. (1) Transfer and Exchange of Definitive Notes. When Definitive Notes are presented to the Registrar with the request to register the transfer of the Definitive Notes, or to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided, however, that the Definitive Notes presented or surrendered for registration of transfer or exchange: (a) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Holder thereof or by an attorney who is duly authorized in writing to act on behalf of the Holder; and (b) shall, in the case of a Transfer Restricted Security, be accompanied by the following additional information and documents, as applicable: (i) if such Transfer Restricted Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); or (ii) if such Transfer Restricted Securities are being transferred (1) to a "qualified institutional buyer" (as defined in Rule 144A) in a transaction meeting the requirements of Rule 144A or (2) pursuant to an exemption from registration in a transaction meeting the requirements of Rule 144 under the Securities Act (based upon an Opinion of Counsel if the Company so requests) or (3) pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (iii) if such Transfer Restricted Securities are being transferred to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act 23 25 pursuant to a private placement exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto); or (iv) if such Transfer Restricted Securities are being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based on an Opinion of Counsel if the Company so requests), certification to that effect from such Holder (in substantially the form of Exhibits B and D hereto); or (v) if such Transfer Restricted Securities are being transferred in reliance on another exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such Holder (in substantially the form of Exhibit B hereto). (2) Transfer of a Definitive Note for a Beneficial Interest in a Global Note. A Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Holder thereof or by an attorney who is duly authorized in writing to act on behalf of the Holder, together with: (a) if such Definitive Note is being delivered to the Trustee by a Holder, without transfer, to enable such Holder to obtain a beneficial interest in a Global Note, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); provided that such Holder provides a certification that such Holder is otherwise permitted to hold a beneficial interest in a Global Note; (b) if such Definitive Note is a Transfer Restricted Security and is being transferred, certification, substantially in the form of Exhibit B hereto, that either (i) such Definitive Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A) in a transaction meeting the requirements of Rule 144A, (ii) to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based upon an Opinion of 24 26 Counsel if the Company so requests), provided that the Trustee receives a certification from such transferee (in substantially the form of Exhibit C hereto), or (iii) to a foreign person outside the U.S. pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based upon an Opinion of Counsel if the Company so requests), provided, that the Trustee receives a certification from such transferor (in substantially the form of Exhibit D hereto); and (c) whether or not such Definitive Note is a Transfer Restricted Security, written instructions directing the Trustee to cause, or directing the Note Custodian to cause in accordance with the standing instructions and procedures existing between the Depositary and the Note Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased; then the Trustee shall cancel such Definitive Note in accordance with Section 2.01 hereof and cause, or direct the Note Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Note Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased accordingly. If no Global Notes are then outstanding, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, and an agreement with the Depositary in customary form and substance acceptable to the Trustee, the Trustee shall authenticate a new Global Note in the appropriate principal amount. (3) Transfer and Exchange of Global Notes. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture and the procedures of the Depositary therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act; provided, however, that neither the Trustee nor the Registrar shall have any obligation to monitor or restrict the transfer of any beneficial interest in the Notes transferable through the book-entry facilities of the Depositary. (4) Transfer of a Beneficial Interest in a Global Note for a Definitive Note. (a) Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Definitive Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depositary from the Depositary or its nominee on behalf of any Person having a beneficial interest in a Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (i) if such beneficial interest is being transferred to the Person designated by the Depositary as being the beneficial owner, 25 27 a certification from such Person to that effect (in substantially the form of Exhibit B hereto); or (ii) if such beneficial interest is being transferred (A) to a "qualified institutional buyer" (as defined in Rule 144A) in a transaction meeting the requirements of Rule 144A or (B) pursuant to an exemption from registration in a transaction meeting the requirements of Rule 144 under the Securities Act (based upon an Opinion of Counsel if the Company so requests) or (C) pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto); or (iii) if such beneficial interest is being transferred to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such transferor (in substantially the form of Exhibit B hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto); or (iv) if such beneficial interest is being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based upon an Opinion of Counsel if the Company so requests), certifications to that effect from such transferor (in substantially the form of Exhibits B and D hereto); and (v) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such transferor (in substantially the form of Exhibits B and D hereto); then the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depositary and the Note Custodian, cause the aggregate principal amount of Global Notes to be reduced accordingly and, following such reduction, the Company shall execute and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the transferee a Definitive Note in the appropriate principal amount. 26 28 (b) Definitive Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.06(4) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Notes to or as directed by the Persons in whose names such Notes are so registered. (5) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provisions of this Indenture (other than the provisions set forth in subsection (6) of this Section 2.06), a Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (6) Authentication of Definitive Notes. If at any time: (a) the Company notifies the Trustee in writing that the Depositary for the Notes is no longer willing or able to act as Depositary for the Global Notes and a successor Depositary for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (b) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture; then the Company will execute, and the Trustee, upon receipt of an Officers' Certificate requesting the authentication and delivery of Definitive Notes, will authenticate and deliver Definitive Notes, in an aggregate principal amount equal to the principal amount of the Global Notes, in exchange for such Global Notes and registered in such names as the Depositary shall instruct the Trustee or the Company in writing. (7) Legends. (a) Except as permitted by the following paragraphs (c) and (d), each Note certificate evidencing the Global Notes and the Definitive Notes (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form until after the second anniversary of the later of the date of original issuance of the Note and the last day on which the Company or any Affiliate of the Company was the owner of such Note (or any predecessor Note or any beneficial interest therein, and which such date shall be certified to the Trustee by the Company): "THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE 27 29 SECURITY EVIDENCED HEREBY OR ANY INTEREST OR PARTICIPATION HEREIN MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACQUISITION HEREOF, (A) REPRESENTS THAT IT IS (1) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (2) NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (B) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE INITIAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (1) TO THE ISSUER, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), (6) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT OR (7) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (5), (6) OR (7), BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (C) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE." (b) Each Global Note shall also bear the following legend: "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE 28 30 DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE CIRCUMSTANCES SET FORTH IN SECTION 2.06 OF THE INDENTURE, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.06 OF THE INDENTURE." (c) Each Temporary Regulation S Global Note shall also bear the following legend: "THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE OFFSHORE NOTES EXCHANGE DATE (AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY MAY BE MADE FOR AN INTEREST IN A CERTIFICATED SECURITY UNTIL AFTER THE LATER OF THE DATE OF EXPIRATION OF THE OFFSHORE NOTES EXCHANGE DATE AND THE DATE ON WHICH THE PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS." (d) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a 29 31 Global Note) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act: (i) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the legend set forth in clause (a) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (ii) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in clause (a) above if all other interests in such Global Note have been or are concurrently being sold or transferred pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, but such Transfer Restricted Securities shall continue to be subject to the provisions of Section 2.06(3) hereof; provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Definitive Note that does not bear a legend set forth in clause (a) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B hereto). (e) Notwithstanding the foregoing, upon consummation of the Exchange Offer, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate Series B Notes in exchange for Series A Notes accepted for exchange in the Exchange Offer, which Series B Notes shall not bear the legend set forth in clause (a) above, and the Registrar shall rescind any restriction on the transfer of such Notes, in each case unless the Holder of such Series A Notes is either (A) a broker-dealer, (B) a Person participating in the distribution (within the meaning of the Securities Act) of the Series A Notes or (C) a Person who is an affiliate (as defined in Rule 501 under the Securities Act) of the Company. The Company shall identify to the Trustee such Holders of the Notes in a written certification signed by an Officer of the Company and, absent certification from the Company to such effect, the Trustee shall assume that there are no such Holders. 30 32 (f) By its acceptance of any Note bearing the legend set forth in Section 2.06(7)(a) hereof, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in such legend and agrees that it will transfer such Note only as provided in this Indenture. (8) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be returned to or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an endorsement shall be made on such Global Note (or the principal amount of such Global Note shall otherwise be reduced in accordance with standard practices of the Note Custodian and the Depositary), by the Trustee or the Note Custodian, at the direction of the Trustee to reflect such reduction. (9) General Provisions with Respect to Transfer and Exchange. (a) To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, pursuant to the terms of this Indenture, Definitive Notes and Global Notes at the Registrar's request. (b) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchange or transfer pursuant to Section 2.09, 3.01, 4.12, 4.13, and 9.05 hereof). (c) Neither the Company nor the Registrar shall be required to register the transfer or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (d) All Definitive Notes and Global Notes issued upon any registration of transfer or exchange of Definitive Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefit under this Indenture as the Definitive Notes or Global Notes surrendered upon such registration of transfer or exchange. (e) The Company shall not be required to issue or register the transfer or exchange of Notes during a period beginning at the opening of 15 days before the day of any selection of Notes for redemption 31 33 under Section 3.02 hereof and ending at the close of business on the day of selection. (f) Prior to due presentment for registration of transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to such Note, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. (g) The Trustee shall authenticate Definitive Notes and Global Notes in accordance with the provisions of Section 2.02 hereof. (h) Neither the Company nor the Trustee shall be liable for any delay by the Depositary in identifying the beneficial owners of the Notes and each such Person may conclusively rely on, and shall be protected in relying on, instructions from the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of any Notes to be issued). (i) Members of, or participants in, the Depositary shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as the Note Custodian, or under the Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (x) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (y) impair, as between the Depositary and members of, or participants in, the Depositary, the operation of customary practices governing the exercise of the rights of a Holder of any Note. SECTION 2.07 Replacement Notes. If any mutilated Note is surrendered to the Company or the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request, the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. In any case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to 32 34 Article III hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Upon the issuance of new Notes under this Section 2.07, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Note issued pursuant to this Section 2.07 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefit of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.08 Outstanding Notes; Determinations of Holders' Action. Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those referred to in Section 2.07 hereof, or purchased by the Company pursuant to Article III hereof and those described in this Section 2.08 as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate thereof holds the Note; provided, however, that in determining whether the holders of the requisite principal amount of Notes have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company, any other Obligor upon the Notes or any Affiliate of the Company or such other Obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee knows based upon an examination of the Register to be so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time of such determination shall be considered in any such determination (including determinations pursuant to Articles VI and IX hereof). If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the Paying Agent (other than the Company) holds, in accordance with this Indenture, at maturity or on a Redemption Date, money sufficient to pay the Notes payable on that date, then immediately on the date of maturity or such Redemption Date, as the case may be, such Notes shall cease to be outstanding and interest, if any, on such Notes shall cease to accrue. SECTION 2.09 Temporary Notes. Pending the preparation of Definitive Notes, the Company may execute, and upon receipt of an Officers' Certificate from the Company, the Trustee shall authenticate and make available for delivery, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized 33 35 denomination, substantially of the tenor of the Definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers of the Company executing such Notes may determine, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Company will cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 2.03 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and the Trustee, upon receipt of an Officers' Certificate from the Company, shall authenticate and make available for delivery in exchange therefor a like principal amount of Definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes. SECTION 2.10 Cancellation. All Notes surrendered for payment, purchase by the Company, redemption by the Company pursuant to Article III hereof, or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and made available for delivery hereunder which the Company may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Trustee. The Company may not reissue, or issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.10, except as expressly permitted by this Indenture. All canceled Notes held by the Trustee shall be destroyed by the Trustee. SECTION 2.11 CUSIP Number. The Company, in issuing the Notes may use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification number printed on the Notes and any redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.12 Defaulted Interest. If the Company defaults on a payment of interest on the Notes, it shall pay the defaulted interest (as provided in the form of Note attached hereto as Exhibit A), plus (to the extent lawful) any interest payable on the defaulted interest (as provided in Section 4.01 hereof), to the Persons who are Holders on a subsequent special record date, and such special record date, as used in this Section 2.12 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. The Company may also pay defaulted interest in any other lawful manner. 34 36 SECTION 2.13 Liquidated Damages Under Registration Rights Agreement. Under certain circumstances, the Company shall be obligated to pay certain Liquidated Damages to the Holders, all as set forth in Section 2 of the Registration Rights Agreement. In any such case, and for all purposes hereunder, the Trustee shall rely conclusively upon the Company's certification as to the existence and amount of any obligation to pay any such Liquidated Damages, and as to any other matters pertaining thereto. ARTICLE III REDEMPTION SECTION 3.01 Right to Redeem; Notices to Trustee. At any time on and after June 15, 2006, the Company, at its option, may redeem the Notes for cash in accordance with this Article III and the provisions of paragraph 5 of the Notes. If the Company elects to redeem Notes pursuant to paragraph 5 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.01 at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). SECTION 3.02 Selection of Notes to be Redeemed. If less than all the outstanding Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed by lot or, if such method is prohibited by the rules of any stock exchange on which the Notes are then listed, any other method the Trustee considers reasonable. The Trustee shall make the selection at least 30 but not more than 60 days before the Redemption Date from outstanding Notes not previously called for redemption. Notes and portions of them the Trustee selects shall be in principal amount of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be redeemed. SECTION 3.03 Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first-class mail, postage prepaid, to each Holder of Notes to be redeemed at the Holder's last address as it shall appear on the registry book. A copy of such notice shall be mailed to the Trustee on the same day the notice is mailed to Holders of Notes. The notice shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the CUSIP number (subject to the provisions of Section 2.11 hereof); (4) the name and address of the Paying Agent; 35 37 (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (6) if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed; and (7) that, unless the Company defaults in making such redemption payment, together with accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date, interest will cease to accrue on Notes called for redemption on and after the Redemption Date. At the Company's written request, made at least 45 days prior to the Redemption Date, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; provided, however, that in all cases, the text of such notice of redemption shall be prepared or approved by the Company and the Trustee shall have no responsibility whatsoever with regard to such notice being accurate or correct. SECTION 3.04 Effect of Notice of Redemption. Once notice of redemption is given, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon the later of the Redemption Date and the date such Notes are surrendered to the Paying Agent, such Notes called for redemption shall be paid at the Redemption Price, if money sufficient for that purpose has been deposited as provided in Section 3.05 hereof. Notice of redemption shall be deemed to be given when mailed in the manner provided in Section 3.03 hereof, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the Notes. SECTION 3.05 Deposit of Redemption Price. Prior to the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption which prior thereto have been delivered by the Company to the Trustee for cancellation. SECTION 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall execute, and the Trustee shall authenticate at the expense of the Company and make available for delivery to the Holder, a new Note in an authorized denomination equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE IV COVENANTS SECTION 4.01 Payment of Notes. The Company shall pay the principal of, premium, if any, interest on (including interest accruing on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing 36 38 interest is allowed in such proceeding) and Liquidated Damages, if any, with respect to the Notes on (or prior to) the dates and in the manner provided in the Notes or pursuant to this Indenture. An installment of principal of, premium, if any, and interest on the Notes shall be considered paid on the applicable date due if on such date the Trustee or the Paying Agent shall have received before 12:00 noon on such date and shall then hold, in accordance with this Indenture, money sufficient to pay all of such installment then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. If any Liquidated Damages become payable, the Company shall not later than three (3) Business Days prior to the date that any payment of Liquidated Damages is due (i) deliver an Officers' Certificate to the Trustee setting forth the amount of Liquidated Damages payable to Holders and (ii) instruct the Paying Agent to pay such amount of Liquidated Damages to Holders entitled to receive such Liquidated Damages. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest and Liquidated Damages, if any (including interest accruing on or after the filing of a petition in bankruptcy or reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), to the extent lawful at 2% above the rate per annum borne by the Notes, which interest on overdue interest shall accrue from the date such amounts became overdue. SECTION 4.02 Reports. (1) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information with the SEC for public availability (unless the SEC will not accept such filing) and make such information available to investors or prospective investors who request it in writing. (2) If the Company is not subject to and in compliance with the informational requirements of Sections 13 or 15(d) of the Exchange Act at any time while the Notes constitute "restricted securities" within the meaning of the Securities Act, it will furnish to the Holders of the Notes and prospective purchasers of the Notes designated by Holders of the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company either exchanges all of the Notes for the Exchange Notes or has registered under the Securities Act and continues to maintain a registration statement with respect to the resale of all of the Notes pursuant to the Registration Rights Agreement. (3) Upon qualification of this Indenture under the TIA, the Company shall also comply with the provisions of TIA Section 314(a). 37 39 (4) For so long as any Transfer Restricted Securities remain outstanding, the Company shall, if it is not subject to and in compliance with the informational requirements of Section 13 or 15(d) of the Exchange Act, furnish to all Holders or beneficial owners of Notes and prospective purchasers of the Notes designated by the Holders of Transfer Restricted Securities, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (5) The Company shall deliver directly, or shall at its own expense provide the Trustee with a sufficient number of copies thereof for delivery at the Company's expense by the Trustee, all reports and other documents and information that the Company may be required to deliver to the Holders under this Section 4.02. SECTION 4.03 Compliance Certificates. (1) The Company shall deliver to the Trustee within 90 days after the end of each of the Company's fiscal years an Officers' Certificate executed by Officers of the Company, stating whether or not the signers know of any Default or Event of Default. Such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Company as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 4.03(1), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If they do know of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default, and its status. (2) So long as not contrary to the then current recommendation of the American Institute of Certified Public Accountants as certified by the Company to the Trustee in an Officers' Certificate, the Company shall deliver to the Trustee within 125 days after the end of each fiscal year a written statement by the Company's independent certified public accountants stating (a) that their audit examination has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, and (b) whether, in connection with their audit examination, any Default has come to their attention and, if such a Default has come to their attention, specifying the nature and period of the existence thereof; provided, however, that the independent certified public accountants delivering such statement shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with GAAP. (3) The Company shall deliver to the Trustee as soon as possible and in any event within 15 days after the Company becomes aware of the occurrence of each Default or Event of Default, which is continuing, an Officers' Certificate setting forth the details of such Default or Event of Default, and the action which the Company proposes to take with respect thereto. (4) Delivery of reports, and other documents and information to the Trustee pursuant to this Indenture is for informational purposes only and the Trustee's receipt of such documents and information shall not constitute constructive notice of any information contained therein, including the Company's compliance with any of its covenants under this Indenture (as to which the Trustee is entitled to rely conclusively on Officers' Certificates delivered to it). 38 40 SECTION 4.04 Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.05 Maintenance of Office or Agency. The Company will maintain or cause to be maintained an office or agency of the Trustee, Registrar and Paying Agent where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer, exchange or redemption and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The corporate trust office of the Trustee at the address specified in Section 11.02 hereof shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of any change of location of such office or agency. If at any time the Company shall fail to maintain or cause to be maintained any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02 hereof. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in location of any such other office or agency. SECTION 4.06 Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend on, or make any distribution in respect of the Company's or any of its Restricted Subsidiaries' Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by the Company or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of the Company or such Restricted Subsidiary, as the case may be; (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of the Company or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by the Company or any Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary); (iii) prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date any Indebtedness of the Company that is subordinate in right of payment to the Notes (other than in connection with any refinancing of such Indebtedness permitted by this Indenture); or (iv) make any Investment other than Permitted Investments (each such action described in any of clauses (i) through (iv) above being referred to as a "Restricted Payment"), if, at the time of such Restricted Payment: (1) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (2) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the date of this Indenture (including, without duplication, Restricted Payments described in the next succeeding paragraph), exceeds the sum 39 41 of (A) 50% of the cumulative Consolidated Net Income of the Company for the period commencing on July 5, 1998 through the last day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (provided that if the amount of such cumulative Consolidated Net Income divided by the number of full fiscal quarters of the Company in the applicable period exceeds $5,250,000, then such amount shall equal (i) 50% of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period plus (ii) 75% of the amount in excess of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period) (or, if the cumulative Consolidated Net Income of the Company shall be a deficit, minus 100% of such deficit); (B) the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by the Company (other than from a Restricted Subsidiary of the Company) from the issuance and sale at any time after May 1, 1998 of either Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock; (C) an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by the Company or any of its Restricted Subsidiaries after the date of this Indenture as a dividend or other distribution from any Unrestricted Subsidiary; and (D) the Fair Market Value of any Investment held by either the Company or any Restricted Subsidiary of the Company in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of this Indenture; or (3) the Company could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of Section 4.08 hereof. The foregoing provisions shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof, (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of this Indenture; (ii) the declaration and payment by a Reporting Subsidiary of the Company of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends; provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for the immediately preceding fiscal year; (iii) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of the Company or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $7,500,000 in the aggregate in any fiscal year of the Company; or (iv) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock). 40 42 The amount of any dividend or other distribution (other than cash) shall be equal to the Fair Market Value of the asset(s) proposed to be transferred by the Company or such Subsidiary of the Company, as the case may be, pursuant to such dividend or other distribution. SECTION 4.07 Limitation on Other Senior Subordinated Indebtedness. The Company shall not incur, issue, create, assume, guarantee or otherwise become directly or indirectly liable for any Indebtedness that is contractually subordinated in right of payment to any Senior Indebtedness and contractually senior in right of payment to the Notes. SECTION 4.08 Limitation on Additional Indebtedness. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an "incurrence") any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that the Company may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of the Company for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0. The foregoing limitations set forth in this Section 4.08 shall not apply, without duplication, to: (i) Existing Indebtedness; (ii) Indebtedness of the Company represented by the Notes (not to exceed $250,000,000 aggregate principal amount for purposes of this clause (ii)); (iii) Indebtedness of the Company and its Restricted Subsidiaries under the Company Credit Facility, provided that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iii) and outstanding on such date, shall not exceed the greater of (a) $75,000,000 and (b) the sum of 85% of Eligible Receivables of the Company and its Subsidiaries plus 65% of Eligible Inventory of the Company and its Subsidiaries; (iv) Indebtedness of (a) Broan-NuTone Canada, Inc. and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility, provided that (1) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iv) and outstanding on such date, shall not exceed the greater of (x) $50,000,000 (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (iii) above) and (2) such Indebtedness shall be secured only by Liens on assets of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are 41 43 Restricted Subsidiaries, and (b) the Company under its limited guarantee of not more than $30,000,000 (Canadian) of the Indebtedness of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility; (v) Indebtedness of NuTone and any NuTone Subsidiary not exceeding at any time $6,000,000 in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of NuTone and any NuTone Subsidiary; (vi) Indebtedness of the Company to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (provided that such Indebtedness is contractually subordinated in right of payment to the Notes) or Indebtedness of any Subsidiary of the Company that is a Restricted Subsidiary to the Company or to any other Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary; provided that if the Company or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary or ceases to be a Restricted Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of the Company or ceases to be a Restricted Subsidiary; (vii) Indebtedness of the Company and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements; provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements relate to Indebtedness permitted to be incurred under this Indenture and the notional principal amount of the obligations of the Company and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (viii) Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers; (ix) Indebtedness incurred by the Company and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30,000,000 in aggregate outstanding principal amount; (x) Acquired Indebtedness incurred by a Restricted Subsidiary of the Company to the extent such Indebtedness could have been incurred by the Company under the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of this Section 4.08, after giving pro forma effect to the acquisition of such Restricted Subsidiary by the Company; (xi) Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of this Indenture if immediately prior to such designation such Subsidiary was an Unrestricted 42 44 Subsidiary; provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Section 4.08; and provided, further, that none of the Company or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent the Company or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of this Section 4.08 (other than solely in accordance with clause (vi) above or this clause (xi)); (xii) Indebtedness of the Company and its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds provided in the ordinary course of business; (xiii) Indebtedness of (a) Nortek Holding B.V. and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek Holding B.V. Limited and its Subsidiaries and (b) the Company under its limited guarantee of not more than $20,000,000 of any such Indebtedness of Nortek (UK) Limited and its Subsidiaries; (xiv) other Indebtedness of the Company and its Restricted Subsidiaries not to exceed at any time $35,000,000 in aggregate outstanding principal amount; (xv) Liens permitted under Section 4.10 hereof; and (xvi) Indebtedness ("Refinancing Indebtedness") created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute or refund ("refinance"), Indebtedness described in the preceding paragraph or referred to in clauses (i) through (xiv) above; provided, however, that (a) the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced, (1) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (iii) through (v) and (xiv) above, shall not, when added to all other Indebtedness outstanding under such clause, exceed the aggregate amount of Indebtedness permitted to be incurred under such clause (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof), and (2) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (i), (ii) and (vi) through (xiii) above, shall not exceed the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof); (b) such Refinancing Indebtedness 43 45 shall be subordinated in right of payment to the Notes at least to the same extent as the Indebtedness to be refinanced; (c) such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence; (d) the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of the Company, shall not be used to refinance Indebtedness of the Company or another Subsidiary of the Company; and (e) the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced. For purposes of this Section 4.08, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness. SECTION 4.09 Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries. The Company shall not (i) permit any of its Restricted Subsidiaries to issue or sell to any Person except the Company or a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or (ii) sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued or sold to the Company or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (except to the issuer thereof, the Company or any of its other Wholly-Owned Subsidiaries that is a Restricted Subsidiary). SECTION 4.10 Limitation on Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on (i) any Principal Property, (ii) any shares of Capital Stock of any Restricted Subsidiary of the Company held by the Company or (iii) any Indebtedness owed by any Restricted Subsidiary of the Company to the Company if, in the case of clause (i), (ii) or (iii), such Lien secures Indebtedness or any other obligation or liability which is pari passu in right of payment with the Notes or subordinated in right of payment to the Notes without making effective provision for all of the Notes and all other amounts due under this Indenture to be directly secured equally and ratably with (or, if the Indebtedness or other obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the Indebtedness or other obligation or liability secured by such Lien. The foregoing limitation set forth in this Section 4.10 shall not apply to: (i) Liens existing on the date of this Indenture; (ii) Liens with respect to the assets of a Restricted Subsidiary of the Company granted by such Restricted Subsidiary to the Company to secure Indebtedness owing to the Company; (iii) Liens in respect of Indebtedness permitted by clause (xii) of Section 4.08 hereof; (iv) Liens securing Refinancing Indebtedness incurred to refinance Indebtedness that has been secured by a Lien permitted under this Indenture; provided that such Liens do not 44 46 extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (v) Permitted Liens. SECTION 4.11 Limitation on Certain Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by the Company or any of its Restricted Subsidiaries, (ii) pay or repay any Indebtedness owed to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iii) make loans or advances to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iv) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, or (v) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company except, in each case, for such encumbrances or restrictions existing under or by reason of (a) applicable law, (b) this Indenture, (c) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries, (d) any instrument governing Indebtedness of a Person acquired by the Company or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired, (e) agreements existing as of the date of this Indenture, (f) the Company Credit Facility, (g) the Ply Gem Credit Facility, (h) the Broan-NuTone Canada, Inc. Credit Facility, (i) any other agreement pursuant to which any Restricted Subsidiary of the Company incurs Indebtedness in accordance with Section 4.08 hereof and (j) any agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (d), (e), (f), (g), (h) or (i) above; provided that the terms and conditions of any such encumbrances and restrictions are not materially less favorable to the Holders than those under the agreement or instrument evidencing the Indebtedness being refinanced. The foregoing shall not restrict the ability of any Restricted Subsidiary of the Company to grant any Lien to the extent otherwise permitted in this Indenture. SECTION 4.12 Repurchase Upon Change of Control. Upon the occurrence of a Change of Control, each Holder shall have the right to require the repurchase of all or any part of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Immediately following any Change of Control, the Company shall mail a notice to the Trustee and to each Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.12 and that all Notes tendered will be accepted for payment; (2) the amount of the Change of Control Payment and the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Change of Control 45 47 Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment thereof, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on and after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice (but in no event later than the Business Day prior to the Change of Control Payment Date); and (7) that Holders whose Notes are being purchased only in part will be issued (or book-entry notation made with respect thereto) new Notes equal in principal amount to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new Note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 or an integral multiple thereof. On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn, (2) deposit with the Paying Agent an amount (no later than 12:00 noon Boston, Massachusetts time on such date) sufficient to pay the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn, and (3) deliver, or cause to be delivered to the Trustee (no later than 12:00 noon Boston, Massachusetts time on such date), all Notes so tendered and not withdrawn together with an Officers' Certificate specifying the Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Change of Control Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder (or cause to be transferred by book entry) a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. A "Change of Control" shall be deemed to have occurred at such time as any of the following events shall occur: (i) there is consummated any consolidation or merger of the Company with or into another corporation, or all or substantially all of the assets of the Company are sold, leased or otherwise transferred or conveyed to another Person (other than pursuant to a bona fide pledge of assets to secure Indebtedness made in accordance with this Indenture), and the holders of the Company's common stock outstanding immediately prior to such consolidation, merger, sale, lease or other transfer or conveyance or one or more Exempt Persons do not hold, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or at least a majority of the Equity Interests of such Person; (ii) there is filed a report on Schedule 13D or 14D-1 (or any successor schedule, form or report) pursuant to the Exchange Act disclosing that any person (defined, solely for the purposes of this Section 4.12, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any 46 48 successor rule or regulation promulgated under the Exchange Act) of 50% or more of the combined voting power of all the Company's then outstanding securities entitled to vote generally for the election of directors; provided, however, that a person shall not be deemed to be the beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. Notwithstanding anything to the contrary set forth in this Section 4.12, a Change of Control shall not be deemed to have occurred under clause (ii) of the immediately preceding paragraph solely by virtue of the Company, any Subsidiary of the Company, any employee stock ownership plan or any other employee benefit plan of the Company or any such Subsidiary, any other person holding securities of the Company for or pursuant to the terms of any such employee benefit plan, or any Exempt Person, filing or becoming obligated to file a report on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of securities of the Company, whether equal to or greater than 50% of the combined voting power of the Company's then outstanding securities entitled to vote generally for the election of directors or otherwise. SECTION 4.13 Limitation On Use of Proceeds from Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and (ii) at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, "Cash Proceeds") or indebtedness for borrowed money of the Company or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of the Company whose stock is purchased by the transferee. Any Net Cash Proceeds (a) in excess of the amount of cash applied by the Company or any Restricted Subsidiary of the Company during the period beginning 12 months prior to the date of the Asset Sale (but not prior to the date of this Indenture) and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by the Company and its Subsidiaries as of the date of this Indenture or at the date of such Asset Sale and (b) not applied within 12 months after the date of the Asset Sale to reduce Indebtedness of the Company (other than 47 49 Indebtedness which is by its terms subordinated in right of payment to the Notes) or any Restricted Subsidiary of the Company shall be deemed to be "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15,000,000, the Company shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to purchase the Notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the principal amount plus accrued and unpaid interest, if any, thereon and Liquidated Damages, if any, to the date fixed for the closing of such offer, substantially in accordance with the procedures for a Change of Control Offer described in Section 4.12 hereof. To the extent that the aggregate amount of Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company may use the remaining Excess Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate principal amount of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the Notes. SECTION 4.14 Limitation on Transactions With Affiliates. Except as otherwise permitted by this Indenture, neither the Company nor any of its Restricted Subsidiaries shall make any Investment, loan, advance, guarantee or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless (i) such transaction or series of transactions is in the best interests of the Company or such Restricted Subsidiary based on all relevant facts and circumstances; (ii) such transaction or series of transactions is fair to the Company or such Restricted Subsidiary and on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arms' length basis from a Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and (iii) (a) with respect to a transaction or series of related transactions involving aggregate payments in excess of $5,000,000, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions comply with clauses (i) and (ii) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $15,000,000, the Company receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to the Company from a financial point of view. The foregoing limitation shall not apply to: (i) any payment of money or issuance of securities by the Company or any Restricted Subsidiary of the Company pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors' and officers' liability insurance; (ii) reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of the Company or any of its Restricted Subsidiaries and reimbursement of expenses related thereto; or (iii) transactions between the Company and any Restricted Subsidiary of the Company, or between one Restricted Subsidiary of the Company and another Restricted Subsidiary of the Company; provided that not more than 48 50 20% of any such Restricted Subsidiary is owned by any Affiliate of the Company or any of its Restricted Subsidiaries (other than the Company or a Wholly-Owned Subsidiary of the Company which is a Restricted Subsidiary). SECTION 4.15 Intentionally Omitted. SECTION 4.16 Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before any penalty accrues thereon, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries upon the income, profits or property of the Company or any of its Subsidiaries and (ii) all material lawful claims for labor, materials and supplies which, if unpaid, would by law become a Lien upon the property of the Company or any of its Subsidiaries; provided that none of the Company or any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claims the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders. SECTION 4.17 Corporate Existence. Subject to Article V hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of any of its Subsidiaries in accordance with the respective organizational documents of such Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any such Subsidiary, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. SECTION 4.18 Maintenance of Properties and Insurance. The Company shall cause all material properties owned by or leased to it or any of its Subsidiaries and used or useful in the conduct of its business or the business of such Subsidiary to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.18 shall prevent the Company or any of its Subsidiaries from discontinuing the maintenance of any such properties, if such discontinuance is desirable in the conduct of its business or the business of such Subsidiary. The Company shall provide or cause to be provided, for itself and any of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, public liability insurance, with reputable insurers in such amounts with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. 49 51 SECTION 4.19 Stay, Extension and Usury Laws. The Company covenants (to the extent it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not resort to any such law that would hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.20 Investment Company Act. The Company shall not become an investment company subject to registration under the Investment Company Act of 1940, as amended. SECTION 4.21 Payments for Consents. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. SECTION 4.22 Covenant to Comply with Securities Laws Upon Purchase of Notes. In connection with any offer to purchase or purchase of Notes under Section 4.12 or 4.13 hereof, the Company shall (i) comply with the requirements of Rule 14e-1 under the Exchange Act, and (ii) otherwise comply with all applicable Federal and state securities laws and regulations so as to permit the rights and obligations under Sections 4.12 and 4.13 hereof to be exercised in the time and in the manner specified in Sections 4.12 and 4.13 hereof. ARTICLE V SUCCESSOR CORPORATION SECTION 5.01 When the Company May Merge or Transfer Assets. The Company shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, unless: (1) the Company shall be the continuing Person, or the Person, if other than the Company, formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company or of the Company and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental to this Indenture, executed and 50 52 delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture, and this Indenture remains in full force and effect; (2) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (3) the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the "surviving entity"), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of Section 4.08 hereof; and (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of the Company immediately before such transaction. In connection with any such consolidation, merger or transfer, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with this Section 5.01 and that all conditions precedent provided for in this Indenture relating to such transactions have been complied with. SECTION 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such transfer made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company in this Indenture, and when a successor Person assumes all the obligations of its predecessor under this Indenture or the Notes, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01 Events of Default. An "Event of Default" occurs if one of the following shall have occurred and be continuing: (1) the Company defaults in the payment, when due and payable, whether or not prohibited by Article X hereof, of (i) interest on or Liquidated Damages, if any, with respect to any Note and the default continues for a period of 30 days, or (ii) principal of or premium, if any, on any Notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise; 51 53 (2) the Company fails to comply with any of its covenants or agreements under Article V hereof; (3) the Company fails to comply with any of its covenants or agreements in the Notes or this Indenture (other than those referred to in clause (1) or (2) above), and such failure continues for the period and after receipt by the Company of the notice specified below; (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such indebtedness or guarantee is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15,000,000 or more; (5) the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing its inability to pay its debts generally as they become due; (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; 52 54 (C) orders the liquidation of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary); and in each case, the order or decree remains unstayed and in effect for 60 days; or (7) final judgments for the payment of money which in the aggregate exceed $15,000,000 shall be rendered against the Company or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days. "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. A Default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." In the case of any Event of Default (other than as a result of the failure to comply with Section 4.12 hereof) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay if the Company then had elected to redeem the Notes pursuant to paragraph 5 of the Notes, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. In the case of an Event of Default as a result of a failure to comply with Section 4.12 hereof occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay pursuant to Section 4.12 hereof, such premium shall also become and be immediately due and payable at such time as the principal of and interest on the Notes become due and payable pursuant to Section 6.02 hereof to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. SECTION 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 6.01 hereof) occurs and is continuing, the Trustee may, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may, by notice to the Company and the Trustee (each, an "Acceleration Notice"), and the Trustee shall, upon the request of such Holders, declare all unpaid principal of, premium, if any, accrued interest on and Liquidated Damages, if any, with respect to the Notes to be due and payable immediately. If any Event of Default specified in clause (5) or (6) of Section 6.01 hereof occurs, all unpaid principal of, premium, if any, accrued interest on and Liquidated Damages, if any, with respect to the Notes then outstanding shall ipso facto become and be immediately due and payable without declaration or other act on the part of 53 55 the Trustee or any Holder. The Holders of at least a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee and to the Company may rescind an acceleration and its consequences (except an acceleration due to a default in payment of the principal of, premium, if any, accrued interest on and Liquidated Damages, if any, with respect to the Notes) if all existing Events of Default have been cured or waived except non-payment of principal of, premium, if any, accrued interest on and Liquidated Damages, if any, with respect to the Notes that has become due solely because of the acceleration. SECTION 6.03 Other Remedies. If any Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Notes or does not produce any of the Notes in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, by notice to the Trustee (and without notice to any other Holder), may waive an existing Default or Event of Default and its consequences except (i) an Event of Default described in Section 6.01(1) hereof, or (ii) a Default in respect of a provision that under Section 9.02 hereof cannot be amended without the consent of each Holder affected. When a Default or Event of Default is waived, it is deemed cured and shall cease to exist, but no such wavier shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.05 Control by Majority. The Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding may direct, by an instrument or concurrent instruments in writing delivered to the Trustee, the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability. Subject to the provisions of Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.06 Limitation on Suits. Except as provided in Section 6.07 hereof, a Holder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding make a written request to the Trustee to pursue the remedy; 54 56 (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense satisfactory to the Trustee; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and (5) the Holders of a majority in aggregate principal amount of the Notes at the time outstanding do not give the Trustee a direction inconsistent with the request during such 30-day period. A Holder may not use this Indenture to prejudice the rights of any other Holder or to obtain a preference or priority over any other Holder. SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes held by such Holder, on or after the respective due dates expressed in the Notes, any Redemption Date, any Change in Control Payment Date or any payment date respecting an Excess Proceeds Offer, or to bring suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.08 Collection Suit by Trustee. If an Event of Default described in Section 6.01(1) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount owing with respect to the Notes and the amounts provided for in Section 7.07 hereof. SECTION 6.09 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or to any other obligor on the Notes or the property of such obligor, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes and to file such other papers or documents and to take other actions, including participating as a member of any committee of creditors, as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian or other official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. 55 57 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article VI, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Holders for amounts due and unpaid on the Notes for the principal of, premium, if any, interest on and Liquidated Damages, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Notes; and THIRD: the balance, if any, to the Company or to the Person or Persons otherwise entitled thereto. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merit and good faith of the claims or defense made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holder of more than 10% in aggregate principal amount of the Notes at the time outstanding. SECTION 6.12 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE VII TRUSTEE SECTION 7.01 Duties of Trustee. (1) If an Event of Default has occurred and is continuing (and is not cured), the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same 56 58 degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (2) Except during the continuance of an Event of Default: (A) the Trustee need perform only those duties that are specifically set forth in this Indenture and not others and no implied covenants or obligations shall be read into this Indenture against the Trustee and the duties of the Trustee shall be determined solely by the express provisions of this Indenture; and (B) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificate or opinion which by any provision hereof is specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirement of this Indenture. The Trustee shall not be liable for any interest on any money received by it. (3) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its willful misconduct, except that: (A) this paragraph (3) does not limit the effect of paragraph (2) of this Section 7.01; (B) the Trustee shall not be liable for any error of judgment made in good faith by any Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (C) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.04 or 6.05 hereof. (4) Whether or not expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (1), (2), (3), (5) and (7) of this Section 7.01 and Section 7.02 hereof. (5) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives reasonable security or indemnity satisfactory to it against any loss, liability or expense. (6) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money held by it hereunder. 57 59 (7) The Trustee shall not be deemed to have knowledge of the existence of any fact or matter unless such fact or matter is actually known to one of its Trust Officers. (8) The Trustee shall not be required to examine any reports or financial information filed with it by the Company pursuant to Section 4.02 hereof to determine whether the limitations set forth in Sections 4.06 through 4.14 hereof have been exceeded. SECTION 7.02 Rights of Trustee. (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in any such document but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters stated in any such document as it sees fit. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate and Opinion of Counsel. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (5) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (6) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security and indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. SECTION 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Section 7.10 and 7.11 hereof. SECTION 7.04 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement in the registration statement for the Notes under the Securities Act (other than statements contained in the Form T-1 filed with the SEC under the TIA) or in this Indenture or the Notes (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. 58 60 SECTION 7.05 Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Holder as their names and addresses appear on the Register, notice of the Default within 90 days after it becomes known to the Trustee unless such Default shall have been cured or waived. Except in the case of Default described in Section 6.01(1) hereof, the Trustee may withhold such notice if and so long as a committee of Trust Officers in good faith determines that the withholding of such notice is in the interests of Holders. SECTION 7.06 Reports by Trustee to Holders. Within 60 days after each May 15 beginning with May 15, 2002, the Trustee shall mail to each Holder a brief report dated as of such May 15th in accordance with and to the extent required under Section 313 of the TIA. A copy of each report at the time of its mailing to Holders shall be filed with the Company, the SEC and each stock exchange on which the Notes are listed. The Company agrees to promptly notify the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof. SECTION 7.07 Compensation and Indemnity. The Company agrees: (1) To pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) To reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, disbursements and advances of its agents and counsel and other persons not regularly in its employ), including all reasonable expenses, disbursements and advances incurred or made by the Trustee in connection with any membership on any creditor's committee, except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) To indemnify the Trustee, its officers, directors and shareholders, for, and to hold it harmless against, any and all loss, liability or expense, incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall have a claim and lien prior to the Notes as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 7.07, except with respect to funds held in trust for the payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to particular Notes. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee renders services or incurs expenses after the occurrence of a Default specified in Section 6.01(5) or (6) hereof, the compensation for services and expenses are intended to constitute expenses of administration under any Bankruptcy Law; 59 61 provided that, if not paid as such expenses, such compensation and expenses shall remain payable as provided under Section 6.10 hereof. SECTION 7.08 Replacement of Trustee. The Trustee may resign by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee subject to the consent of the Company. The Trustee shall resign if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by a Board Resolution, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. Subject to payment of all amounts owing to the Trustee under Section 7.07 hereof and subject further to its lien under Section 7.07 hereof, the retiring Trustee shall promptly transfer all property held by it as Trustee to successor Trustee. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including this Trusteeship) to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and (5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recently published annual report of condition. The Trustee shall comply with TIA Section 310(b). In determining whether the 60 62 Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) shall be deemed incorporated herein. SECTION 7.11 Preferential Collection of Claims Against the Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Notes), the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against the Company (or any such other obligor). ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01 Discharge. When (1) the Company delivers to the Trustee all outstanding Notes (other than Notes replaced pursuant to Section 2.07 hereof or Notes which are purchased pursuant to Section 4.12 or 4.13 hereof or Notes for whose payment money has heretofore been held in trust and thereafter repaid to the Company as provided in this Article VIII) for cancellation or (2) all outstanding Notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III hereof, and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to all outstanding Notes, and in the case of either clause (1) or (2), the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Sections 2.06 and 2.07 hereof, cease to be of further effect. SECTION 8.02 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a Board Resolution, at any time, with respect to the Notes, elect to have either Section 8.03 or 8.04 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII. SECTION 8.03 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.03, the Company shall be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.06 hereof and the other Sections hereof referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to such Notes when such payments are due (from the trust referred to below), or on the Redemption Date, as the case may be, (b) the Company's obligations with respect to such Notes under Sections 2.05, 2.07, 2.08, 2.09, 2.10 and 4.05 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article VIII. Subject to compliance with this Article VIII, the Company may exercise its option 61 63 under this Section 8.03 notwithstanding the prior exercise of its option under Section 8.04 hereof with respect to the Notes. SECTION 8.04 Covenant Defeasance. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.04, the Company shall be released from its obligations under the covenants contained in Sections 4.02, 4.03, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.18 and 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding under GAAP). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(2) or Section 6.01(3) hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. SECTION 8.05 Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.03 or 8.04 hereof to the outstanding Notes: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 hereof who shall agree to comply with the provisions of this Article VIII applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (i) cash in U.S. Dollars, (ii) U.S. Government Obligations, or (iii) a combination thereof, in such amounts, as will be sufficient in each case, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the outstanding Notes on the stated maturity or on the applicable date fixed for redemption, as the case may be, of such principal or installment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to such Notes, and the Company shall have specified whether the Notes are being defeased to maturity or to a particular date fixed for redemption; (2) In the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or 62 64 (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) In the case of an election under Section 8.04 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) 91 days pass after the deposit specified in clause (1) of this Section 8.05 is made and during such 91-day period, no Default or Event of Default set forth in Section 6.01(5) or 6.01(6) hereof occurs with respect to the Company which is continuing at the end of such 91-day period; (5) no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto; (6) Such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (7) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 8.03 or 8.04 hereof was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States (on which the Trustee may conclusively rely), each stating that all conditions precedent to either the Legal Defeasance under Section 8.03 hereof or the Covenant Defeasance under Section 8.04 hereof (as the case may be) have been complied with as contemplated by this Section 8.05. SECTION 8.06 Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.07 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.06, the "Trustee") pursuant to Section 8.05 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as 63 65 the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to such Notes, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Notes deposited pursuant to Section 8.05 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or Government Notes held by it as provided in Section 8.05 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.05(1) hereof), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.07 Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to any Note and remaining unclaimed for two years after such principal thereof, premium, if any, interest thereon and Liquidated Damages, if any, with respect thereto has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustees thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.08 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States Dollars or U.S. Government Obligations in accordance with Section 8.06 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.05 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.06 hereof; provided, however, that, if the Company makes any payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 64 66 ARTICLE IX AMENDMENTS SECTION 9.01 Without Consent of Holders. From time to time, when authorized by Board Resolutions of each of them, the Company and the Trustee, without notice to or the consent of the Holders of the Notes issued hereunder, may amend or supplement this Indenture or the Notes as follows: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article V hereof; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes so long as such uncertificated Notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended; (4) to make any other change that does not adversely affect the rights of any Holder; or (5) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA. SECTION 9.02 With Consent of Holders. With the consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, the Company and the Trustee may amend this Indenture or the Notes or may waive future compliance by the Company with any provisions of this Indenture or the Notes. However, without the consent of each Holder affected, a waiver or an amendment to this Indenture or the Notes may not: (1) reduce the percentage of principal amount of the Notes whose Holders must consent to an amendment or waiver; or (2) make any change to the Stated Maturity of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any Note payable in money or securities other than that stated in the Note; or (3) make any change in Article X hereof that adversely affects the rights of any Holder of Notes or any change to any other Section hereof that adversely affects the rights of any Holder of Notes under Article X hereof; or (4) waive a default in the payment of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to any Note; or (5) make any change in the provisions of Sections 4.12, 4.13, 6.04 or 6.07 hereof; or (6) make any change to Section 9.01 or 9.02 hereof. 65 67 It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. In the event that certain Holders are willing to defer or waive certain obligations of the Company hereunder with respect to Notes held by them, such deferral or waiver shall be deemed to affect any other Holder who receives the subject payment or performance in a timely manner. After an amendment or waiver under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment or waiver. SECTION 9.03 Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article IX shall comply with the TIA. SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions. Until an amendment, waiver or other action by Holders becomes effective, a consent to it or any other action by a Holder of a Note hereunder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same obligation as the consenting Holder's Note, even if notation of the consent, waiver or action is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the consent of the requisite aggregate principal amount of the Notes then outstanding has been obtained and not revoked. After an amendment, waiver or action becomes effective, it shall bind every Holder, except as provided in Section 9.02 hereof. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver. If a record date is fixed, then, notwithstanding the first two sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. SECTION 9.05 Notation on or Exchange of Notes. Notes authenticated and made available for delivery after the execution of any supplemental indenture pursuant to this Article IX may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the reasonable opinion of the Trustee and the opinion of the Board of Directors of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and made available for delivery by the Trustee in exchange for outstanding Notes. 66 68 SECTION 9.06 Trustee to Sign Supplemental Indenture. The Trustee shall sign any supplemental indenture authorized pursuant to this Article IX if the supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing such amendment the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. SECTION 9.07 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and made available for delivery hereunder shall be bound thereby. ARTICLE X SUBORDINATION SECTION 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the indebtedness evidenced by the Notes (including the payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes) is subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment in full of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness. SECTION 10.02 Intentionally Omitted. SECTION 10.03 Liquidation; Dissolution; Bankruptcy. Upon any (i) bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, (ii) assignment for the benefit of creditors or any marshalling of the assets and liabilities of the Company or (iii) payment or distribution of the assets of the Company to creditors of the Company in a total or partial liquidation or dissolution of the Company: (1) holders of Senior Indebtedness shall be entitled to receive payment in full in cash or, at the option of the holders of such Senior Indebtedness, cash equivalents (including, in the case of Specified Senior Indebtedness, interest accruing after the commencement of any such proceeding at the rate specified in the instrument evidencing the applicable Specified Senior Indebtedness, whether or not a claim therefor is allowed, to the date of payment of such Specified Senior Indebtedness) before the Holders of the Notes shall be entitled to receive any payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes; and (2) until the Senior Indebtedness (as provided in subsection (1) above) is paid in full in cash or, at the option of the holders of the Senior Indebtedness, cash equivalents, any distribution to which the Holders of the Notes would be entitled but for this Article X shall be made to holders of Senior Indebtedness, as their interests may appear, except that the Holders of the Notes may receive Equity Interests and any debt securities that are subordinated to Senior 67 69 Indebtedness and to any securities issued in exchange for Senior Indebtedness to at least the same extent as the Notes are subordinated to Senior Indebtedness. For purposes of this Article X, a distribution may consist of cash, securities or other property, by set-off or otherwise. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and condition set forth in Article V hereof shall not be deemed a dissolution, winding up, liquidation or reorganization, for the purposes of this Section 10.03, if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer comply with the conditions set forth in Article V hereof. SECTION 10.04 Default on Senior Indebtedness. The Company may not pay the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes and may not make any deposit for the purpose of the discharge of its liabilities pursuant to this Indenture and may not repurchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if: (1) a default in the payment of principal or interest on any Senior Indebtedness occurs and is continuing beyond any applicable grace period; or (2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless in either case, (A) the default has been cured or waived and any such acceleration has been rescinded, or (B) such Senior Indebtedness has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Blockage Notice") and ending 179 days thereafter, or earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice; (2) by repayment in full of such Designated Senior Indebtedness; or 68 70 (3) because the default giving rise to such Blockage Notice is no longer continuing (as stated in writing to the Trustee by and officer of the Company). Notwithstanding the provisions described in the immediately preceding paragraph of this Section 10.04 (but subject to the provisions contained in the next preceding paragraph of this Section 10.04), unless the holders of such Designated Senior Indebtedness or the representative of such holders will have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the expiration of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. SECTION 10.05 No Suspension of Remedies. Nothing contained in this Article X shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes or to pursue any other rights or remedies thereunder or under applicable law; provided, however, that all Senior Indebtedness of the Company then or thereafter due and payable shall first be paid in full in cash or, at the option of the holders of the Senior Indebtedness, cash equivalents before the Holders shall be entitled to receive any payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes. Notwithstanding the foregoing, any acceleration of the maturity of the Notes or other remedies pursued hereunder or under applicable law due to the occurrence of an Event of Default under Section 6.01(1) hereof resulting from the operation of Section 10.04 hereof shall be automatically rescinded or discontinued to the extent permitted by applicable law and all Events of Default which permitted the acceleration of the Notes or the pursuit of other remedies hereunder or under applicable law shall be deemed to be automatically and permanently cured to the extent permitted by applicable law if (i) the payment or payments the omission of which gave rise to the Event of Default is or are made within 179 days after the date on which the Trustee or the Paying Agent received notice of the default or defaults on the Senior Indebtedness and (ii) at the time of such automatic rescission no other Event of Default or Default shall have occurred and be continuing. Such automatic rescission shall be effective as of the date the conditions specified in clauses (i) and (ii) above are satisfied. SECTION 10.06 When Distribution Must Be Paid Over. In the event that the Company shall make any payment to the Trustee on account of the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes at a time when such payment is prohibited by Section 10.03, 10.04 or 10.05 hereof, such payment shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their representative, as their respective interests may appear, for application to the payment of all Senior Indebtedness in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. If a distribution is made to Holders that because of this Article X should not have been made to them, the Holders who receive the distribution shall hold it in trust for holders of Senior Indebtedness (pro rata as to each of such holder on the basis of the respective amounts of Senior Indebtedness held by them) or their representative, as their respective interests may 69 71 appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article X, no implied covenants or obligations with respect to the Holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. SECTION 10.07 Notice by the Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes to violate this Article X, but failure to give such notice shall not affect the subordination of the Notes to Senior Indebtedness provided in this Article X. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. SECTION 10.08 Subrogation. After all Senior Indebtedness is paid in full in cash or, at the option of the holders of Senior Indebtedness, cash equivalents, and until the Notes are paid in full, the Holders of the Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article X to holders of Senior Indebtedness that otherwise would have been made to the Holders of the Notes is not, as between the Company and the Holders of the Notes, a payment by the Company on the Notes. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article X shall have been applied pursuant to the provisions of this Article X to the payment of all amounts payable in respect of the Senior Indebtedness of the Company, then and in such case, the Holders shall be entitled to receive from the holders of such Senior Indebtedness at the time outstanding any payment or distributions received by such holders of Senior Indebtedness in excess of the amount sufficient to pay all amounts payable in respect of the Senior Indebtedness of the Company in full in cash or, at the option of the holders of Senior Indebtedness, cash equivalents. SECTION 10.09 Relative Rights. This Article X defines the relative rights of the Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes in accordance with their terms; (2) affect the relative rights of the Holders of the Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or 70 72 (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to the Holders of the Notes. If the Company fails because of this Article X to pay principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to a Note on the due date, the failure is still a Default or Event of Default. The provisions of this Article X shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Senior Indebtedness is rescinded or must otherwise be returned by any holder of Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the Company or otherwise all as though such payment had not been made. SECTION 10.10 No Waiver of Subordination Provisions. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. The holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes and without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article X or the obligations hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do any one or more of the following: (i) except as otherwise provided in Section 4.08 hereof, change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or an instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any person liable in any manner for the collection or payment of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company or any other person. SECTION 10.11 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their representative. Upon any payment or distribution of assets of the Company referred to in this Article X, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. SECTION 10.12 Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article X or any other provision hereof, the Trustee or Paying Agent shall not at any time be charged with knowledge of the existence of any facts which would prohibit the 71 73 making of any payment to or by the Trustee unless and until the Trustee or Paying Agent shall have received written notice thereof from the holders (or the agent or representative) of Senior Indebtedness; and, prior to the receipt of any such written notice, the Trustee and Paying Agent shall be entitled to assume conclusively that no such facts exist. Unless at least two Business Days prior to the date on which by the terms of this Indenture any monies are to be deposited by the Company with the Trustee or any Paying Agent (whether or not in trust) for any purpose (including, without limitation, the payment of either the principal of or the interest on any Note), the Trustee or Paying Agent shall have received with respect to such monies the notice provided for in the preceding sentence, the Trustee or Paying Agent shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such date. The foregoing shall not apply to the Paying Agent if the Company is acting as Paying Agent. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.13 Authorization to Effect Subordination. Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article X, and appoints the Trustee as attorney-in-fact for any and all purposes. SECTION 10.14 Miscellaneous. (a) All rights and interests under this Article X of the holders of Senior Indebtedness, and all agreements and obligations of the Holders, the Trustee and the Company under this Article X, shall remain in full force and effect irrespective of: (i) any exchange, release or non-perfection of any Lien securing Senior Indebtedness, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Senior Indebtedness, or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of the Company in respect of, Senior Indebtedness or the Trustee in respect of this Indenture. (b) The provisions of this Article X constitute a continuing agreement and shall (i) remain in full force and effect until the Senior Indebtedness shall have been paid in full, (ii) be binding upon the Holders and the Trustee, the Company and their successors and assigns, and (iii) inure to benefit of and enforceable by each other holder of Senior Indebtedness and their successors, transferees and assigns. ARTICLE XI MISCELLANEOUS SECTION 11.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of subsection (c) of 72 74 Section 318 of the TIA, the imposed duties shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that impose duties on any Person (including provisions automatically deemed included in an indenture unless the indenture provides that such provisions are excluded) are a part of and govern this Indenture, except as, and to the extent, expressly excluded from this Indenture, as permitted by the TIA. SECTION 11.02 Notices. Any notice or communication shall be in writing and delivered in Person or mailed by first-class mail, postage prepaid, addressed as follows: if to the Company: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903-2360 Attention: Mr. Richard L. Bready if to the Trustee: State Street Bank and Trust Company Two Avenue des Lafayette Boston, MA 02111 Attention: Corporate Trust Division - Nortek Senior Subordinated Notes The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Holder shall be mailed to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Holders it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-registrar. SECTION 11.03 Communication by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 73 75 (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05 Statements Required in Certificate or Opinion. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each Person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, he has made such examination or investigation as is necessary to enable such Person to express an informed opinion as whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 11.06 Separability Clause. In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.07 Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and Paying Agent may make reasonable rules for their functions. SECTION 11.08 Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Notes, no principal of, premium, if any, interest on and Liquidated Damages, if any, shall accrue for the intervening period. SECTION 11.09 GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH OF THE PARTIES AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. 74 76 SECTION 11.10 No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes. SECTION 11.11 Successors. All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 11.12 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 75 77 SIGNATURES IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. NORTEK, INC. /s/ Kevin W. Donnelly By: ________________________________ Kevin W. Donnelly Name: ____________________________ Vice President, General Counsel and Secretary Title: ___________________________ STATE STREET BANK AND TRUST COMPANY /s/ Andrew M. Sinasky By: _________________________________ Andrew M. Sinasky Name: ____________________________ Assistant Vice President Title:____________________________ 76 78 EXHIBIT A [FORM OF FACE OF NOTE] NORTEK, INC. 9-7/8% Series [A/B] Senior Subordinated Note due June 15, 2011 No. CUSIP No. 656559BA8 [$__________ ] Nortek, Inc., a Delaware corporation ("the Company", which term includes any successor corporation under the Indenture hereinafter referred to), promises to pay to ______________________ or its registered assigns, the principal amount of ________________ Dollars on June 15, 2011. Interest Payment Dates: June 15 and December 15, commencing December 15, 2001. Record Dates: May 15 and November 15. Reference is hereby made to the further provisions of this Note set forth on the following pages which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. NORTEK, INC. By: _______________________________ Name: Title: ATTESTED: By: _______________________________ Name: Title: A-1 79 [SEAL] Dated:________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. STATE STREET BANK AND TRUST COMPANY, as Trustee By:__________________________ Authorized Officer A-2 80 [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE CIRCUMSTANCES SET FORTH IN SECTION 2.06 OF THE INDENTURE, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.06 OF THE INDENTURE.](1) - ----------------------- 1 This paragraph should be included only if the Note is issued in global form. A-3 81 ["THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY OR ANY INTEREST OR PARTICIPATION HEREIN MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACQUISITION HEREOF, (A) REPRESENTS THAT IT IS (1) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (2) NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (B) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE INITIAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (1) TO THE ISSUER, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), (6) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT OR (7) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (5), (6) OR (7), BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (C) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE."](2) - --------------------- 2 This paragraph should not be included on Exchange Notes received in an Exchange Offer. A-4 82 ["THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE OFFSHORE NOTES EXCHANGE DATE (AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY MAY BE MADE FOR AN INTEREST IN A CERTIFICATED SECURITY UNTIL AFTER THE LATER OF THE DATE OF EXPIRATION OF THE OFFSHORE NOTES EXCHANGE DATE AND THE DATE ON WHICH THE PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS."](3) - ------------------------ 3 This paragraph should only be included on the Temporary Regulation S Global Note. A-5 83 [FORM OF REVERSE SIDE OF NOTE] 9-7/8% Series [A/B] Senior Subordinated Note due June 15, 2011 1. Interest Nortek, Inc., a Delaware corporation ("the Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above and to pay Liquidated Damages, if any, payable pursuant to Section 2 of the Registration Rights Agreement referred to below. Interest and Liquidated Damages, if any, will be payable semi-annually on each interest payment date, commencing December 15, 2001. Interest on the Notes will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from June 12, 2001; provided that, if there is no existing Event of Default in the payment of interest and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and interest on overdue installments of interest and Liquidated Damages, if any, to the extent lawful, at 2% above the rate per annum borne by the Notes. 2. Method of Payment The Company will pay interest on the Notes (except defaulted interest) to the persons who are registered Holders at the close of business on May 15 and November 15, as the case may be, immediately preceding the interest payment date even if the Note is canceled on registration of transfer or registration of exchange (other than with respect to the purchase of Notes pursuant to an offer to purchase Notes made in connection with Section 4.12 or 4.13 of the Indenture after such record date). Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, interest and Liquidated Damages, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, interest and Liquidated Damages, if any, by its check payable in such money; provided that payment by wire transfer of immediately available/same day funds will be required with respect to principal, premium, if any, interest and Liquidated Damages, if any, on all Global Notes. It may mail an interest payment to a Holder's address as it appears on the Register. 3. Paying Agent and Registrar Initially, the Trustee will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent or Registrar without notice, other than notice to the Trustee. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Notes under an Indenture, dated as of June 12, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Notes include those stated A-6 84 in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended and as in effect on the date of the Indenture (the "TIA") and as provided in the Indenture. Capitalized terms used herein and not defined herein have the meaning ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms. The Notes are senior subordinated, unsecured obligations of the Company. This Note is one of the Series A Notes referred to in the Indenture issued in an aggregate principal amount of $250,000,000. The Notes include the Series A Notes issued on the date of the Indenture up to an aggregate principal amount of $250,000,000, additional Series A Notes issued in accordance with the Indenture, and any Series B Notes issued in exchange for the Series A Notes. The Series A Notes, the additional Series A Notes and the Series B Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of preferred stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company. 5. Optional Redemption The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2006 at the following redemption prices (expressed as a percentage of the principal amount) together with accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date (the "Redemption Price") if redeemed during the twelve-month period beginning June 15 of the years indicated below:
Year Percentage ---- ---------- 2006 104.938% 2007 103.292% 2008 101.646% 2009 and 100.000% thereafter
6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date by first-class mail, postage prepaid, to each Holder of Notes to be redeemed at the Holder's registered address. Notes in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount. A-7 85 7. Requirement that the Company Offer to Purchase Notes under Certain Circumstances Subject to the terms and conditions of the Indenture, the Company shall become immediately obligated to offer to purchase the Notes pursuant to Section 4.12 of the Indenture after the occurrence of a Change in Control of the Company at a price equal to 101% of aggregate principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. In addition, to the extent that there are Excess Proceeds from Asset Sales, the Company will be obliged to offer to purchase Notes at 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, in accordance with Section 4.13 of the Indenture. 8. Subordination The Notes are subordinated to Senior Indebtedness (as defined in the Indenture). To the extent provided in the Indenture, Senior Indebtedness must be paid before the Notes may be paid. The Company agrees, and each Holder by accepting a Note or any interest therein agrees, to such subordination and authorizes the Trustee to give it effect. 9. Denominations; Transfer; Exchange The Notes are in registered form, without coupons, in denominations of $1,000 of principal amount and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before selection of Notes to be redeemed. 10. Persons Deemed Owners The registered Holder of this Note may be treated as the owner of this Note for all purposes. 11. Amendment; Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding and (ii) certain defaults or noncompliance with certain provisions may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Notes in addition to certificated Notes, or to comply with any requirements of the Securities and Exchange Commission in A-8 86 connection with the qualification of the Indenture under the TIA, or to make any change that does not adversely affect the rights of any Holder. 12. Defaults and Remedies Under the Indenture, Events of Default include (i) default in payment of the principal of, premium, if any, interest on or Liquidated Damages, if any, with respect to the Notes when the same becomes due and payable subject, in the case of interest and Liquidated Damages, if any, to the grace period contained in the Indenture; (ii) failure by the Company to comply with other agreements in the Indenture or the Notes, subject to notice and lapse of time; (iii) certain events of acceleration prior to maturity of certain indebtedness; (iv) certain final judgments which remain undischarged; or (v) certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding, may declare all the Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes becoming due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) above) if it determines that withholding notice is in their interests. 13. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 14. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 15. Authentication This Note shall not be valid until an authorized officer of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Note. A-9 87 16. Abbreviations Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 17. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company upon request. After that, Holders entitled to money must look to the Company for payment. 18. Discharge Prior to Maturity If the Company deposits with the Trustee or Paying Agent money or U.S. Government Obligations sufficient to pay the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes to maturity, the Company will be discharged from the Indenture except for certain Sections thereof. 19. Registration Rights Agreement In addition to the rights provided to and the obligations of Holders of Notes under the Indenture, Holders of Transfer Restricted Securities shall have all the rights and shall be subject to all the obligations set forth in the Registration Rights Agreement, dated as of the date of the Indenture. 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company will cause CUSIP numbers to be printed on the Notes as a convenience to Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. 21. Successor. When a successor Person to the Company assumes all the obligations of its predecessor under the Notes and the Indenture such predecessor shall be released from those obligations. 22. Governing Law THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. A-10 88 23. Indenture Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture or the Registration Rights Agreement. A-11 89 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: - ------------------------------------------------------------------------------ (INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX I.D. NUMBER) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE) and irrevocably appoint ------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: Signature: --------------------- ----------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------------- (PARTICIPANT IN RECOGNIZED SIGNATURE GUARANTEE MEDALLION PROGRAM) (PARTICIPANT IN RECOGNIZED SIGNATURE GUARANTEE MEDALLION PROGRAM) NOTICE: Your Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Guarantee Programs: (i) the Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any other guarantee program acceptable to the Trustee. In connection with any transfer of this Note the Holder hereof may be required by the Indenture to deliver to the Trustee and the Registrar a certification substantially in the form of Exhibit B to the Indenture. A-12 90 OPTION OF HOLDER TO ELECT PURCHASE If you wish to elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.12 ("Change of Control Offer") or Section 4.13 ("Excess Proceeds Offer") of the Indenture, check the applicable boxes: [ ] Change of Control Offer: [ ] Excess Proceeds Offer: in whole in whole in part in part Amount to be Amount to be Purchased: $-------- purchased: $-------- Dated: Signature: ----------------- -------------------------------- (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE) Signature Guarantee: -------------------------------------------------------------------- (PARTICIPANT IN RECOGNIZED SIGNATURE GUARANTEE MEDALLION PROGRAM) Social Security Number or Taxpayer Identification Number: -------------------------------------------- A-13 91 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTES The following increases or decreases in this Global Note have been made:
PRINCIPAL AMOUNT OF AMOUNT OF SIGNATURE OF DECREASE IN INCREASE IN THIS GLOBAL AUTHORIZED PRINCIPAL PRINCIPAL AMOUNT NOTE FOLLOWING OFFICER OF DATE OF AMOUNT OF THIS OF THIS GLOBAL SUCH DECREASE TRUSTEE OR EXCHANGE GLOBAL NOTE NOTE (OR INCREASE) NOTE CUSTODIAN - ---------------------------------------------------------------------------------
A-14 92 EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES Re: 9-7/8% Series [A/B] Senior Subordinated Notes due 2011 of Nortek, Inc. This Certificate relates to $______ principal amount of Notes held in ** ________ book-entry or */ _______ definitive form by ________________ (the "Transferor"). The Transferor: */ [ ] has requested the Registrar by written order to exchange or the transfer of a Note or Notes; or [ ] has requested the Trustee by written order to exchange its Note or Notes in definitive, registered form for a beneficial interest in a Global Note held by the Depositary equal to the principal amount of Notes it holds (or the portion thereof indicated above); or [ ] has requested the Trustee by written order to deliver in exchange for its beneficial interest in a Global Note held by the Depositary a Note or Notes in definitive, registered form equal to its beneficial interest in such Global Note (or the portion thereof indicated above). In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relative to the above captioned Notes and that the transfer of this Note does not require registration under the Securities Act (as defined below) because: */ [ ] Such Note is being acquired for the Transferor's own account without transfer (in satisfaction of Section 2.06(1)(b)(i), Section 2.06(2)(a) or Section 2.06(4)(a)(i) of the Indenture). [ ] Such Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")), in a transaction meeting the requirements of Rule 144A under the Securities Act. - -------------------- ** Check applicable box. B-1 93 [ ] Such Note is being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based on an opinion of counsel if the Company so requests and together with a certification in substantially the form of Exhibit D to the Indenture). [ ] Such Note is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act (based on an opinion of counsel if the Company so requests). [ ] Such Note is being transferred pursuant to an effective registration statement under the Securities Act. [ ] Such Note is being transferred to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based on an opinion of counsel if the Company so requests together with a certification in substantially the form of Exhibit C to the Indenture). [ ] Such Note is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act (based on an opinion of counsel if the Company so requests). ____________________________________ [INSERT NAME OF TRANSFEROR] By: _____________________________ Name: Title: Address: Date:__________________ B-2 94 TO BE COMPLETED BY TRANSFEREE IF SECOND BOX ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: ____________________ Signed: _____________________________ NOTICE: To be executed by an executive officer B-3 95 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED BY ACCREDITED INSTITUTIONS __________________ _____, ______ State Street Bank and Trust Company, as Registrar Attn: Corporate Trust Department Dear Sirs: In connection with our proposed purchases of $________ aggregate principal amount of 9-7/8% Series [A/B] Senior Subordinated Notes due 2011 (the "Notes") of Nortek, Inc. (the "Issuer"), a Delaware corporation, we confirm that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor," and we are acquiring the Notes for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or the laws of any state or other jurisdiction, and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions of the Securities Act. 3. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as described below. We agree, on our own behalf and on behalf of any account for which we are purchasing the Notes, and each subsequent holder of the Notes by its acceptance thereof will agree, not to offer, sell or otherwise transfer such Notes prior to the date which is two years after the later of the date of original issue of such Notes and the last date on which the Issuer or any affiliate of the Issuer was the owner of such Notes (the "Resale Restriction Termination Date"), except (A) to the Issuer, (B) in accordance with Rule 144A under the Securities Act to a "qualified institution buyer" (as defined therein) in a transaction meeting the requirements of Rule 144A, (C) to an institutional "accredited investor" (as defined above) that is purchasing for his own account or for the account of such an "accredited investor" and that, prior to such C-1 96 transfer, furnishes to the Trustee (as defined in the Indenture) a signed letter, substantially identical to this letter, containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, if available, (E) pursuant to an effective registration statement under the Securities Act, (F) outside the U.S. to a foreign person in a transaction meeting the requirements of Regulation S under the Securities Act, or (G) pursuant to any other available exemption from the registration requirements of the Securities Act (based, in the cases of clauses (C), (D), (F) and (G), upon an opinion of counsel reasonably acceptable to the Issuer if the Issuer so requests), subject in each of the foregoing cases, to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with applicable securities laws of any state of other jurisdiction. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 4. We understand that, on any proposed offer, sale or other transfer of any Notes prior to the Resale Restriction Termination Date, we will be required to furnish to the Trustee and the Issuer such certifications, legal opinions, and other information as either of them may reasonably require to confirm that the proposed transaction complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend reflecting the substance of this and the preceding paragraph. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. We acknowledge that you, the Trustee and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy thereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. We agree to notify you promptly in writing if any of our representations or warranties ceases to be accurate and complete. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. __________________________________ (Name of Purchaser) By: ____________________________ Name: Title: Address: C-2 97 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S __________________ _____, ______ State Street Bank and Trust Company, as Registrar Attn: Corporate Trust Department Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of 9-7/8% Series [A/B] Senior Subordinated Notes due 2011 (the "Notes") of Nortek, Inc. (the "Issuer"), a Delaware corporation, we represent that: (i) the offer of the Notes was not made to a person in the United States; (ii) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (iii) no directed selling efforts have been made by us, any of our affiliates or any person acting on our or their behalf in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (iv) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933, as amended. You and the Company are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, __________________________________ [Name of Transferor] By: ____________________________ Name: Date: Title: D-1 98 EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF THE RESTRICTED PERIOD __________________ _____, ______ State Street Bank and Trust Company, as Registrar Attn: Corporate Trust Department Ladies and Gentlemen: This letter relates to Notes represented by the Temporary Regulation S Global Note Certificate (the "Temporary Certificate"). Pursuant to Section 2.01 of the Indenture dated as of June 12, 2001 relating to the Notes (the "Indenture"), we hereby certify that (1) we are the beneficial owner of $[__________] principal amount of Original Notes represented by the Temporary Certificate and (2) we are a person outside the United States to whom the Original Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Definitive Note representing the undersigned's interest in the principal amount of Original Notes represented by the Temporary Certificate, all in the manner provided by the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, ____________________________________ [Name of Holder] By: ______________________________ Name: Date: Title: E-1 99 CROSS REFERENCE TABLE(4)
TIA Indenture Section Section 310(a)(1)...................................................... 7.10 (a)(2) ..................................................... 7.10 (a)(3) ..................................................... N.A.(5) (a)(4) ..................................................... N.A. (a)(5) ..................................................... 7.10 (b) ........................................................ 7.08; 7.10 (c) ........................................................ N.A. 311(a) ........................................................ 7.11 (b) ........................................................ 7.11 (c) ........................................................ N.A. 312(a) ........................................................ 2.05 (b) ........................................................ 11.03 (c) ........................................................ 11.03 313(a) ........................................................ 7.06 (b)(1) ..................................................... N.A. (b)(2) ..................................................... 7.06 (c) ........................................................ 11.02 (d) ........................................................ 7.06 314(a) ........................................................ 4.02; 11.02 (b) ........................................................ N.A. (c)(1) ..................................................... 11.04 (c)(2) ..................................................... 11.04 (c)(3) ..................................................... N.A. (d) ........................................................ N.A. (e) ........................................................ 11.05 (f) ........................................................ 4.03 315(a) ........................................................ 7.01 (b) ........................................................ 7.05; 11.02 (c) ........................................................ 7.01 (d) ........................................................ 7.07 (e) ........................................................ 6.11 316(a) (last sentence) ........................................ 2.08 (a)(1)(A) .................................................. 6.05 (a)(1)(B) .................................................. 6.04 (a)(2) ..................................................... N.A. (b) ........................................................ 6.07 (c) ........................................................ N.A.
- ------------------- (4) Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of this Indenture. (5) N.A. means Not Applicable. F-1 100 317(a)(1) ..................................................... 6.08 (a)(2) ..................................................... 6.09 (b) ........................................................ 2.04 318(a) ........................................................ 11.01
F-2 101 ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE................ 1 SECTION 1.01 Definitions......................................... 1 SECTION 1.02 Other Definitions................................... 17 SECTION 1.03 Incorporation by Reference of Trust Indenture Act................................................. 17 SECTION 1.04 Rules of Construction............................... 18 SECTION 1.05 Acts of Holders..................................... 18 SECTION 1.06 Exchange Rates...................................... 19 ARTICLE II THE NOTES................................................. 19 SECTION 2.01 Form and Dating..................................... 19 SECTION 2.02 Execution and Authentication........................ 20 SECTION 2.03 Registrar and Paying Agent.......................... 22 SECTION 2.04 Paying Agent to Hold Money in Trust................. 22 SECTION 2.05 Holder Lists........................................ 23 SECTION 2.06 Transfer and Exchange............................... 23 SECTION 2.07 Replacement Notes................................... 32 SECTION 2.08 Outstanding Notes; Determinations of Holders' Action.............................................. 33 SECTION 2.09 Temporary Notes..................................... 33 SECTION 2.10 Cancellation........................................ 34 SECTION 2.11 CUSIP Number........................................ 34 SECTION 2.12 Defaulted Interest.................................. 34 SECTION 2.13 Liquidated Damages Under Registration Rights Agreement........................................... 35 ARTICLE III REDEMPTION................................................ 35 SECTION 3.01 Right to Redeem; Notices to Trustee................. 35 SECTION 3.02 Selection of Notes to be Redeemed................... 35 SECTION 3.03 Notice of Redemption................................ 35 SECTION 3.04 Effect of Notice of Redemption...................... 36 SECTION 3.05 Deposit of Redemption Price......................... 36 SECTION 3.06 Notes Redeemed in Part.............................. 36 ARTICLE IV COVENANTS................................................. 36 SECTION 4.01 Payment of Notes.................................... 36 SECTION 4.02 Reports............................................. 37 SECTION 4.03 Compliance Certificates............................. 38 SECTION 4.04 Further Instruments and Acts........................ 39
102 SECTION 4.05 Maintenance of Office or Agency..................... 39 SECTION 4.06 Limitation on Restricted Payments................... 39 SECTION 4.07 Limitation on Other Senior Subordinated Indebtedness........................................ 41 SECTION 4.08 Limitation on Additional Indebtedness............... 41 SECTION 4.09 Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries.................... 44 SECTION 4.10 Limitation on Liens................................. 44 SECTION 4.11 Limitation on Certain Restrictions Affecting Subsidiaries........................................ 45 SECTION 4.12 Repurchase Upon Change of Control................... 45 SECTION 4.13 Limitation On Use of Proceeds from Asset Sales...... 47 SECTION 4.14 Limitation on Transactions With Affiliates.......... 48 SECTION 4.15 Intentionally Omitted............................... 49 SECTION 4.16 Payment of Taxes and Other Claims................... 49 SECTION 4.17 Corporate Existence................................. 49 SECTION 4.18 Maintenance of Properties and Insurance............. 49 SECTION 4.19 Stay, Extension and Usury Laws...................... 50 SECTION 4.20 Investment Company Act.............................. 50 SECTION 4.21 Payments for Consents............................... 50 SECTION 4.22 Covenant to Comply with Securities Laws Upon Purchase of Notes................................... 50 ARTICLE V SUCCESSOR CORPORATION..................................... 50 SECTION 5.01 When the Company May Merge or Transfer Assets....... 50 SECTION 5.02 Successor Corporation Substituted................... 51 ARTICLE VI DEFAULTS AND REMEDIES..................................... 51 SECTION 6.01 Events of Default................................... 51 SECTION 6.02 Acceleration........................................ 53 SECTION 6.03 Other Remedies...................................... 54 SECTION 6.04 Waiver of Past Defaults............................. 54 SECTION 6.05 Control by Majority................................. 54 SECTION 6.06 Limitation on Suits................................. 54 SECTION 6.07 Rights of Holders to Receive Payment................ 55 SECTION 6.08 Collection Suit by Trustee.......................... 55 SECTION 6.09 Trustee May File Proofs of Claim.................... 55
103 SECTION 6.10 Priorities.......................................... 56 SECTION 6.11 Undertaking for Costs............................... 56 SECTION 6.12 Restoration of Rights and Remedies.................. 56 ARTICLE VII TRUSTEE................................................... 56 SECTION 7.01 Duties of Trustee................................... 56 SECTION 7.02 Rights of Trustee................................... 58 SECTION 7.03 Individual Rights of Trustee........................ 58 SECTION 7.04 Trustee's Disclaimer................................ 58 SECTION 7.05 Notice of Defaults.................................. 59 SECTION 7.06 Reports by Trustee to Holders....................... 59 SECTION 7.07 Compensation and Indemnity.......................... 59 SECTION 7.08 Replacement of Trustee.............................. 60 SECTION 7.09 Successor Trustee by Merger......................... 60 SECTION 7.10 Eligibility; Disqualification....................... 60 SECTION 7.11 Preferential Collection of Claims Against the Company............................................. 61 ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE........................ 61 SECTION 8.01 Discharge........................................... 61 SECTION 8.02 Option to Effect Legal Defeasance or Covenant Defeasance.......................................... 61 SECTION 8.03 Legal Defeasance and Discharge...................... 61 SECTION 8.04 Covenant Defeasance................................. 62 SECTION 8.05 Conditions to Legal or Covenant Defeasance.......... 62 SECTION 8.06 Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.......................................... 63 SECTION 8.07 Repayment to the Company............................ 64 SECTION 8.08 Reinstatement....................................... 64 ARTICLE IX AMENDMENTS................................................ 65 SECTION 9.01 Without Consent of Holders.......................... 65 SECTION 9.02 With Consent of Holders............................. 65 SECTION 9.03 Compliance with Trust Indenture Act................. 66 SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions............................................. 66 SECTION 9.05 Notation on or Exchange of Notes.................... 66 SECTION 9.06 Trustee to Sign Supplemental Indenture.............. 67 SECTION 9.07 Effect of Supplemental Indentures................... 67
104 ARTICLE X SUBORDINATION............................................. 67 SECTION 10.01 Agreement to Subordinate............................ 67 SECTION 10.02 Intentionally Omitted............................... 67 SECTION 10.03 Liquidation; Dissolution; Bankruptcy................ 67 SECTION 10.04 Default on Senior Indebtedness...................... 68 SECTION 10.05 No Suspension of Remedies........................... 69 SECTION 10.06 When Distribution Must Be Paid Over................. 69 SECTION 10.07 Notice by the Company............................... 70 SECTION 10.08 Subrogation......................................... 70 SECTION 10.09 Relative Rights..................................... 70 SECTION 10.10 No Waiver of Subordination Provisions............... 71 SECTION 10.11 Distribution or Notice to Representative............ 71 SECTION 10.12 Rights of Trustee and Paying Agent.................. 71 SECTION 10.13 Authorization to Effect Subordination............... 72 SECTION 10.14 Miscellaneous....................................... 72 ARTICLE XI MISCELLANEOUS............................................. 72 SECTION 11.01 Trust Indenture Act Controls........................ 72 SECTION 11.02 Notices............................................. 73 SECTION 11.03 Communication by Holders with Other Holders......... 73 SECTION 11.04 Certificate and Opinion as to Conditions Precedent........................................... 73 SECTION 11.05 Statements Required in Certificate or Opinion....... 74 SECTION 11.06 Separability Clause................................. 74 SECTION 11.07 Rules by Trustee, Paying Agent and Registrar........ 74 SECTION 11.08 Legal Holidays...................................... 74 SECTION 11.09 GOVERNING LAW....................................... 74 SECTION 11.10 No Recourse Against Others.......................... 75 SECTION 11.11 Successors.......................................... 75 SECTION 11.12 Multiple Originals.................................. 75 SIGNATURES.................................................................. 76
105 EXHIBIT A Form of Note EXHIBIT B Form of Certificate to be Delivered Upon Exchange or Registration of Transfer of Notes EXHIBIT C Form of Certificate to be Delivered by Accredited Institutions EXHIBIT D Form of Certificate to Delivered in Connection with Transfers Pursuant to Regulation S EXHIBIT E Form of Certificate to be Delivered Upon Termination of the Restricted Period EXHIBIT F Cross Reference Table EX-4.2 3 b39754niex4-2.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of June 12, 2001 by and among Nortek, Inc., a Delaware corporation (the "COMPANY"), Bear, Stearns & Co. Inc. and Dresdner Kleinwort Wasserstein - Grantchester, Inc. (collectively, the "INITIAL PURCHASERS"). This Agreement is made pursuant to the Purchase Agreement dated as of June 7, 2001 (the "PURCHASE AGREEMENT"), between the Company and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of $250,000,000 aggregate principal amount of the Company's 9-7/8% Series A Senior Subordinated Notes due 2011 (the "NOTES"). In order to induce the Initial Purchasers to enter into the Purchase Agreement and to purchase the Notes, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights for the Notes set forth in this Agreement. The execution and delivery of this Agreement is a condition precedent to the obligations of the Initial Purchasers under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized defined terms shall have the following meanings (and, unless otherwise indicated, capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement): "ACT" shall mean the Securities Act of 1933, as amended. "AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "APPLICABLE PERIOD" shall have the meaning set forth in Section 3(t) hereof. "CLOSING DATE" shall mean the Closing Date as defined in the Purchase Agreement. "COMMISSION" shall mean the Securities and Exchange Commission, or such other federal agency administering the Act or the Exchange Act. "COMPANY" shall have the meaning set forth in the preamble to this Agreement, and shall also include the Company's successors. "DEPOSITARY" shall mean The Depository Trust Company, or any successor depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary must have an address in the Borough of Manhattan, The City of New York. 1 2 "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(b) hereof. "EVENT DATE" shall have the meaning set forth in Section 2(e) hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" shall mean the 9-7/8% Series B Senior Subordinated Notes due 2011, to be issued by the Company under the Indenture and containing terms identical to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from June 12, 2001, and (ii) the transfer restrictions thereon shall be eliminated) to be offered to Holders of Notes in exchange for Notes pursuant to the Exchange Offer. "EXCHANGE OFFER" shall mean the exchange offer by the Company of Exchange Notes for Notes pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION" shall mean a registration under the Act effected pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean the registration statement (on Form S-4 or, if applicable, on any other appropriate form) relating to the Exchange Offer, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a) hereof. "HOLDER" shall mean each Initial Purchaser, for so long as such Initial Purchaser owns any Registrable Securities, and each of such Initial Purchaser's respective successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "INDENTURE" shall mean the Indenture dated as of June 12, 2001 by and between the Company and State Street Bank and Trust Company, as trustee, as the same may be amended or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS" shall have the meaning set forth in the preamble to this Agreement. "INSPECTORS" shall have the meaning set forth in Section 3(n) hereof. 2 3 "LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(e) hereof. "MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate principal amount of outstanding (as determined under the Indenture) Registrable Securities. "NASD" shall mean the National Association of Securities Dealers, Inc. "NOTES" shall have the meaning set forth in the preamble to this Agreement. "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 3(t) hereof. "PERSON" shall mean any individual, corporation, limited liability company, general or limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, charitable foundation, unincorporated organization, government or agency or political subdivision thereof or any other entity. "PRIVATE EXCHANGE" shall have the meaning set forth in Section 2(a) hereof. "PRIVATE EXCHANGE NOTES" shall have the meaning set forth in Section 2(a) hereof. "PROSPECTUS" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, including post-effective amendments, and in each case including all material incorporated by reference therein. "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "RECORDS" shall have the meaning set forth in Section 3(n) hereof. "REGISTRABLE SECURITIES" shall mean the Notes and, if issued, the Private Exchange Notes; PROVIDED, HOWEVER, that Notes or Private Exchange Notes, as the case may be, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Notes or Private Exchange Notes or the resale thereof shall have been declared effective under the Act and such Notes or Private Exchange Notes, as the case may be, shall have been disposed of pursuant to such Registration Statement, (ii) such Notes or Private Exchange Notes, as the case may be, shall have become eligible to be 3 4 sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Act, (iii) such Notes or Private Exchange Notes, as the case may be, shall have ceased to be outstanding or (iv) with respect to the Notes, such Notes have been exchanged for Exchange Notes upon consummation of the Exchange Offer. "REGISTRATION EXPENSES" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including, without limitation: (i) Commission, stock exchange and NASD registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with the blue sky qualification of any of the Exchange Notes or Registrable Securities) and compliance with the rules of the NASD, (iii) expenses of any Persons in preparing or assisting in preparing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with the obligations under this Agreement, (iv) rating agency fees, (v) fees and disbursements of counsel for and independent certified public accountants of the Company, including the expenses of any "cold comfort" letters required by or incident to such performance and compliance, (vi) fees and expenses of the Trustee, and any exchange agent or custodian, (vii) fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement. "REGISTRATION STATEMENT" shall mean any registration statement of the Company relating to the Exchange Notes or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SHELF REGISTRATION" shall mean a registration effected pursuant to Section 2(b) hereof. "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each 4 5 case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "TIA" shall mean the Trust Indenture Act of 1939, as amended. "TRANSFER RESTRICTED SECURITIES" shall mean each Note until (i) the date on which such Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. "TRUSTEE" shall mean the trustee under the Indenture. 2. REGISTRATION UNDER THE ACT. (a) EXCHANGE OFFER. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, the Company shall, for the benefit of the Holders, at the Company's cost, use its best efforts to cause to be filed with the Commission an Exchange Offer Registration Statement on or prior to 90 days after the Closing Date on an appropriate form under the Act covering the offer by the Company to the Holders to exchange all of the Registrable Securities (other than Private Exchange Notes) for a like aggregate principal amount of Exchange Notes, to cause such Exchange Offer Registration Statement to be declared effective under the Act by the Commission on or prior to 165 days after the Closing Date, to cause such Registration Statement to remain effective until the closing of the Exchange Offer and to cause the Exchange Offer to be consummated on or prior to 45 days after the date on which the Exchange Offer Registration Statement was declared effective under the Act by the Commission. The Exchange Notes will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder (other than Participating Broker-Dealers (as defined in Section 3(t) hereof)) eligible and electing to exchange Registrable Securities for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Notes) to transfer such Exchange Notes from and after their receipt without any limitations or restrictions under the Act or under state securities or blue sky laws. 5 6 In connection with the Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement together with an appropriate letter of transmittal and related documents; (ii) keep the Exchange Offer open for acceptance for a period of not less than 30 days after the date notice thereof is mailed to the Holders, or longer if required by applicable law (such period being referred to herein as the "EXCHANGE PERIOD"); (iii) utilize the services of the Depositary for the Exchange Offer; (iv) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York City time, on the last business day of the Exchange Period, by sending to the institution specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for exchange, and a statement that such Holder is withdrawing its election to have such Notes exchanged; (v) notify each Holder that any Note not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (vi) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company upon the request of such Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "PRIVATE EXCHANGE") for Notes held by such Initial Purchaser a like principal amount of debt securities of the Company that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") and which are issued pursuant to the Indenture (which will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes will vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter). The Private Exchange Notes shall be of the same series as and shall bear the same CUSIP number as the Exchange Notes. 6 7 As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all Notes or portions thereof duly tendered and not validly withdrawn pursuant to the Exchange Offer; (ii) accept for exchange all Notes or portions thereof duly tendered pursuant to the Private Exchange; and (iii) deliver, or cause to be delivered, to the Trustee for cancellation all Notes or portions thereof so accepted for exchange by the Company, and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, a new Exchange Note or Private Exchange Note, as the case may be, equal in principal amount to the principal amount of the Notes surrendered by such Holder. To the extent not prohibited by applicable law or any applicable interpretation of the staff of the Commission, the Company shall use its best efforts to complete the Exchange Offer as provided above, and shall comply with all applicable requirements of the Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Exchange Offer shall not be subject to any condition, other than that (i) the Exchange Offer does not violate any applicable law or interpretation of the staff of the Commission, (ii) no action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might impair the ability of the Company to proceed with the Exchange Offer, (iii) there has not been any material change, or development involving a prospective material change, in the business or financial affairs of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, would materially impair the Company's ability to consummate the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated, (iv) there has not been proposed, adopted, or enacted any law, statute, rule or regulation which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated or (v) all governmental approvals which the Company shall reasonably deem necessary for the consummation of the Exchange Offer as contemplated shall have been obtained. Each Holder of Registrable Securities who wishes to exchange such Registrable Securities for Exchange Notes in the Exchange Offer will be required to make certain customary representations in connection therewith, including representations that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, that any Exchange Notes to be received by it will be acquired in the ordinary course of business and that at the time of the commencement of the Exchange Offer it had no arrangement with any Person to participate in the distribution (within the meaning of the Act) of the Exchange Notes and will be required to make such other representations as 7 8 may be necessary under applicable Commission rules, regulations or interpretations to render available the use of Form S-4 or any other appropriate form under the Act. The Company shall inform the Initial Purchasers, after consultation with the Trustee and the Initial Purchasers, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. In the event that the Company is unable to consummate the Exchange Offer due to any event listed in clauses (i) through (v) in the paragraph immediately above, the Company shall not be deemed to have breached any covenant under this Section 2(a). Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Securities that are Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the Company shall have no further obligation to register Registrable Securities (other than Private Exchange Notes) pursuant to Section 2(b) of this Agreement. (b) SHELF REGISTRATION. In the event that (i) the Company is not permitted to commence or accept tenders pursuant to the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) any Holder of Transfer Restricted Securities notifies the Company within 20 business days after the consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, or (iii) the Exchange Offer is not for any other reason consummated within 210 days of the Closing Date, the Company shall, at its cost, cause to be filed with the Commission as promptly as practicable after such determination or date, as the case may be, and, in any event, on or prior to 45 days thereafter, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities, and shall use its best efforts to cause such Shelf Registration Statement declared effective by the Commission on or prior to 90 days after such determination or date. No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the Commission to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in the 8 9 applicable Shelf Registration Statement or Prospectus included therein by the rules and regulations of the Commission applicable to the Shelf Registration Statement in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company agrees, subject to applicable law or applicable interpretation of the staff of the Commission, to use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended under the Act for a period ending on the earlier of the date which is two years from the Closing Date (subject to extension pursuant to the last paragraph of Section 3) or the date on which all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding (the "EFFECTIVENESS PERIOD"). The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration. The Company will, in the event a Shelf Registration Statement is declared effective, provide to each Holder copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective and take certain other actions as are customary to permit unrestricted resales of the Registrable Securities covered by the Shelf Registration Statement. The Company further agrees, if necessary, to use its reasonable best efforts to supplement or amend the Shelf Registration Statement, if required by the Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by any other rules and regulations thereunder for shelf registrations, or if reasonably requested by the holders of a majority of the Registrable Securities covered by such Shelf Registration Statement, and the Company agrees to furnish to the Holders copies of any such supplement or amendment promptly after its being used or filed with the Commission. (c) EXPENSES. The Company shall pay all Registration Expenses in connection with registrations pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all expenses of its counsel (other than the fees described in clauses (i) and (ii) of the definition of "Registration Expenses"), underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Exchange Offer Registration Statement and the Shelf Registration Statement. (d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the Commission; PROVIDED, HOWEVER, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the 9 10 offering of Registrable Securities pursuant to such Registration Statement may legally resume. (e) LIQUIDATED DAMAGES. In the event that an Exchange Offer Registration Statement has not been filed with the Commission on or prior to 90 days after the Closing Date, additional interest payable by the Company as liquidated damages ("LIQUIDATED DAMAGES") will accrue on the Notes from and including the 91st day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is filed. In addition, if on or prior to 165 days after the Closing Date, such Exchange Offer Registration Statement is not declared effective under the Act by the Commission, Liquidated Damages will accrue on the Notes from and including the 166th day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is declared effective. Further, if on or prior to 45 days after the date specified for effectiveness of the Exchange Offer Registration Statement the Exchange Offer is not consummated, Liquidated Damages will accrue on the Notes from and including the 46th day after the date specified for effectiveness of the Exchange Offer Registration Statement until but excluding the date of the Exchange Offer is consummated. If a Shelf Registration Statement is required to be filed pursuant to Section 2(b) and such Shelf Registration Statement is not filed or declared effective within the time periods provided by Section 2(b) hereof for such filing or declaration, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the effective date of the Shelf Registration Statement. Further, if the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable during the time periods specified in this Agreement, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the date such Registration Statement becomes effective or usable. In each case, such Liquidated Damages will be payable in cash semiannually in arrears, with the first semiannual payment due on the first interest payment date in respect of the Notes (or the Private Exchange Notes) following the date from which Liquidated Damages begin to accrue, and will accrue, under each circumstance set forth above in an amount equal to $0.05 per week per $1,000 principal amount of Notes (or Private Exchange Notes) held by such Holder to each Holder affected by such circumstance, which amount will increase by $0.05 per week per $1,000 principal amount of Notes (or Private Exchange Notes) for each 90-day period that such Liquidated Damages continue to accrue under any circumstance, up to a maximum amount of Liquidated Damages of $0.25 per week per $1,000 principal amount of Notes (or Private Exchange Notes). For any portion of a week that Liquidated Damages are payable hereunder, such Liquidated Damages shall be calculated on a pro rata basis. Upon the filing of the Exchange Offer Registration Statement, the effectiveness of the Exchange Offer Registration Statement, or the consummation of the 10 11 Exchange Offer, as the case may be, the Liquidated Damages assessed in respect of the Notes shall cease to accrue to the extent that such Liquidated Damages related to the failure of any such event to have occurred. Upon the effectiveness of a Shelf Registration Statement, the Liquidated Damages assessed in respect of the Notes (and the Private Exchange Notes) shall cease to accrue, from and as of the date of such effectiveness, unless and until reassessed as described above. Notwithstanding anything to the contrary contained herein, the Company (i) shall not be required to amend or supplement the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference and (ii) may suspend the effectiveness of any such Shelf Registration Statement in the event that, and for a period not to exceed, for so long as this Agreement is in effect, an aggregate of 90 days in any one calendar year if (A) an event occurs and is continuing as a result of which the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading, and (B) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company; provided that any such suspension shall not relieve the Company from its obligation to pay Liquidated Damages. The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Liquidated Damages is required to be paid (an "EVENT DATE"). Liquidated Damages shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Notes, Exchange Notes or Private Exchange Notes, as the case may be, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Liquidated Damages then due. The Liquidated Damages due shall be payable on each interest payment date to the record Holder of Notes entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to accrue from and including the day following the applicable Event Date. (f) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof would result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall: 11 12 (a) prepare and file with the Commission a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) within the relevant time periods specified in Section 2 hereof on the appropriate form under the Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith, and the Company shall use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2; PROVIDED, HOWEVER, that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating Broker-Dealer who seeks to sell Exchange Notes, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company, if requested, shall furnish to and afford the Holders and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed at least five (5) business days prior to such filing. The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders, pursuant to this Agreement, must be afforded an opportunity to review prior to the filing of such document, if the holders of a majority of the Registrable Securities covered by such Registration Statement or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object; (b) subject to Section 3(a) hereof, prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the Effectiveness Period or the Applicable Period, as the case may be, and cause each Prospectus to be supplemented by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Act, and comply with the provisions of the Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all securities covered by each Registration Statement during the Effectiveness Period or the Applicable Period, as the case may be, in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder, at least five (5) business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders, (ii) furnish to each Holder and to each underwriter of an underwritten 12 13 offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities, and (iii) subject to the last paragraph of this Section 3, consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto, provided that such use complies with all applicable laws and regulations; (d) use its best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the Commission, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify as a foreign partnership or foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (iii) subject itself to taxation in any such jurisdiction if it is not then so subject; (e) in the case of (A) a Shelf Registration or (B) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver Prospectuses, notify each Holder, or such Participating Broker-Dealers, as the case may be, their counsel and the managing underwriters, if any, promptly and, if requested by such Holder or Participating Broker-Dealer, confirm such notice in writing (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) if the Company receives any notification with respect to the suspension of the qualification 13 14 of the Registrable Securities or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, (vi) of the happening of any event or the failure of any event to occur or the discovery of any facts or otherwise, during the period a Shelf Registration Statement is effective or the Applicable Period, as the case may be, which makes any statement made in the Shelf Registration Statement, the Exchange Offer Registration Statement or any related Prospectus untrue in any material respect or which causes such Registration Statement or Prospectus, as the case may be, to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vii) of the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; (f) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (g) in the case of a Shelf Registration, furnish to each Holder, upon request and without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates, if any, representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with the Depositary; and cause such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the managing underwriters may reasonably request at least two business days prior to the closing of any sale of Registrable Securities; (i) subject to Section 3(a) hereof and the second paragraph of Section 2(e) hereof, in the case of a Shelf Registration or an Exchange Offer Registration, upon the occurrence of any circumstance contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement and the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of any such circumstance, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; 14 15 (j) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, upon request and without charge, a reasonable number of copies of any document which is incorporated by reference into or is an exhibit to a Registration Statement or a Prospectus after the initial filing of a Registration Statement; (k) obtain a CUSIP number for all Exchange Notes or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Notes or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary; (l) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Notes or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, enter into such agreements (including underwriting agreements) as are customary in underwritten public offerings and take all such other appropriate actions as are reasonably requested in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Company and its subsidiaries and the Registration Statement, the Prospectus and all documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when reasonably requested; (ii) obtain customary opinions of counsel to the Company and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority in principal amount of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten public offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired or to be acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to the selling Holders of Registrable Securities and to each of the underwriters, such letters to be in customary 15 16 form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten public offerings; and (iv) if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder; (n) if (A) a Shelf Registration is filed pursuant to Section 2(b) or (B) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and as to which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless, after prior consultation with the Company, (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to an effective subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction or is otherwise required upon the written advice of counsel to such Participating Broker-Dealer, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the Records deemed confidential; 16 17 (o) comply with all applicable rules and regulations of the Commission and, as soon as reasonably practicable, make generally available to the Holders earnings statements of the Company covering at least twelve (12) months satisfying the provisions of Section 11(a) of the Act and Rule 158 thereunder (or any similar rule promulgated under the Act); (p) upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Notes and Private Exchange Notes and the Indenture, as the case may be, and (ii) each of the Exchange Notes or the Private Exchange Notes and the Indenture, as the case may be, constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (in each case, with customary exceptions); (q) if an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Securities delivered by such Holders that such Registrable Securities are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (r) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (s) use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (t) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "PLAN OF DISTRIBUTION," which section shall be reasonably acceptable to the Initial Purchasers or another representative of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer (a "PARTICIPATING BROKER-DEALER") that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the Commission or such 17 18 positions or policies, in the reasonable judgment of the Initial Purchasers or such other representative, represent the prevailing views of the staff of the Commission, including a statement that any such broker-dealer who receives Exchange Notes for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Act in connection with any resale of such Exchange Notes, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) subject to the last paragraph of this Section 3, hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the Commission, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Notes covered by the Prospectus or any amendment or supplement thereto, (iv) use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Act for such period of time as such Persons must comply with such requirements in order to resell the Exchange Notes (PROVIDED, HOWEVER, that such period shall not be required to exceed 180 days, or such longer period if extended pursuant to the last sentence of this Section 3 (the "APPLICABLE PERIOD")), and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree all necessary information for such offeree to participate in the Exchange Offer; (B) in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers or to another representative of the Participating Broker-Dealers on behalf of the Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel substantially in the form attached hereto as EXHIBIT A, (ii) an Officer's Certificate containing certifications substantially similar to those set forth in Section 8(d) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities, and (iii) a comfort letter in customary form permitted by Statement of Auditing Standards No. 72 of the American Institute of Certified Public Accountants. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the proposed distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. The Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. 18 19 In the case of (i) a Shelf Registration Statement or (ii) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver copies of such Prospectus, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities or Exchange Notes, as the case may be, current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Securities or Exchange Notes, as the case may be, pursuant to a Registration Statement, the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Registration Statement and shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Company shall have made available to the Holders copies of the supplemented or amended Prospectus necessary to resume such dispositions or shall have advised the Holders in writing that the use of the applicable Prospectus may be resumed. 4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each underwriter who participates in an offering of Registrable Securities, each of their respective affiliates, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each of their respective directors, officers, partners, employees, representatives and agents, to the fullest extent lawful as follows: (i) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereto pursuant to which the offer and sale of the Registrable Securities or Exchange Notes were registered under the Act including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto, or the omission or alleged 19 20 omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any court or governmental agency or body, whether commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if and only if such settlement is effected with the prior written consent of the Company; and (iii) from and against any and all expenses whatsoever (including reasonable fees and disbursements of counsel chosen by the Initial Purchasers, Holder, Participating Broker-Dealer or underwriter (except to the extent otherwise expressly provided in Section 4(c) hereof)), as incurred, reasonably incurred in investigating, preparing for or defending against any litigation, or any investigation or proceeding by any court or governmental agency or body, whether commenced or threatened, or any other claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission (i) made solely in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers, such Holder, such Participating Broker-Dealer or any underwriter in writing expressly for use in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) contained in any preliminary prospectus or any Prospectus if the Initial Purchasers, such Holder, such Participating Broker-Dealer or such underwriter failed to send or deliver a copy of the Prospectus (as then amended or supplemented if the Company shall have timely furnished any amendments or supplements thereto) to the Person asserting such losses, liabilities, claims or damages on or prior to the delivery of written confirmation of any sale of securities covered thereby to such Person in any case where such delivery is required by the Act and such Prospectus (as so amended or supplemented) would have corrected such untrue statement or omission and the delivery thereof would have eliminated such losses, claims, damages or liabilities. Any amounts advanced by the Company to an indemnified party pursuant to this Section 4 as a result of such losses shall be returned to the Company if it shall be finally, judicially determined by a court of competent jurisdiction that such indemnified party was not entitled to indemnification by the Company pursuant to this Section 4. 20 21 (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Initial Purchasers, each underwriter who participates in an offering of Registrable Securities and the other selling Holders and each of their respective directors, officers (including each officer of the Company who signed the Registration Statement), employees, representatives and agents, and each Person, if any, who controls the Company, the Initial Purchasers, any underwriter or any other selling Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as reasonably incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) solely in reliance upon and in conformity with written information furnished to the Company by such selling Holder expressly for use in the Registration Statement (or any amendment thereto) or any such Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that, in the case of a Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give prompt notice to each indemnifying party of any action in respect of which indemnity may be sought hereunder, enclosing a copy of all papers properly served on such indemnified party (but failure to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have other than on account of this indemnity agreement). An indemnifying party may participate, at its own expense, in the defense of any such action. If an indemnifying party so elects within a reasonable time after receipt of such notice, such indemnifying party, jointly with any other indemnifying party, may assume the defense of such action with counsel chosen by it and reasonably satisfactory to the indemnified parties defendant in such action; PROVIDED, HOWEVER, that if any such indemnified party reasonably determines, upon written advice of counsel, that there may be legal defenses available to such indemnified party which are different from or in addition to those available to such indemnifying party or that representation of such indemnifying party and any indemnified party by the same counsel would present a conflict of interest, then one additional counsel in each jurisdiction for all indemnified parties having consistent interests and such different or additional defenses or subject to such conflict shall be entitled to conduct the defense of such indemnified parties with the fees and expenses of such counsel to be borne by the indemnifying party or parties. If an indemnifying party assumes the defense of an action in accordance with and as permitted by the provisions of this Section 4(c), such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action (except to the extent set forth in the proviso contained in the immediately preceding sentence). In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel for all indemnified parties in 21 22 connection with any one action, or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4, unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Notwithstanding any payment or payments made by the Company hereunder, the Company hereby expressly waives subrogation to, and agrees that it shall not be entitled to be subrogated to, any of the rights of any indemnified party against the Company or any other right of offset held by any indemnified party for the payment of any amounts owed to any indemnified party pursuant to this Section 4; PROVIDED, HOWEVER, that if any of the foregoing provisions of this paragraph are held to be contrary to applicable law or unenforceable by a court of competent jurisdiction, the Company hereby expressly agrees that any right of subrogation or contribution that the Company may have as a result of such applicable law or unenforceability, as the case may be, shall be subordinate in right of payment to the payment in full in cash of all amounts owed to any indemnified party pursuant to this Section 4. (e) If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to herein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Notes pursuant to the Purchase Agreement, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Notes pursuant to the Purchase Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Notes pursuant to the Purchase Agreement 22 23 (before deducting expenses) received by the Company and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Notes. The relative fault of the Company on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders, and the respective parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(e). The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing for or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any untrue or alleged untrue statement or omission or alleged omission referred to in Section 4(a)(i). Notwithstanding the provisions of this Section 4(e), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discount received by such Initial Purchaser in respect of the purchase price of the Notes purchased by it from the Company exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(c), each person, if any, who controls an Initial Purchaser, a Holder, a Participating Broker-Dealer, an underwriter who participates in an offering of Registrable Securities, or the affiliates of any of them, within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director, officer (including each officer of the Company who signed the Registration Statement), partner, employee, representative and agent of the Company, the Initial Purchasers, each Holder, each Participating Broker-Dealer, and each underwriter who participates in an offering of Registrable Securities and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. 23 24 5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any customary underwriting arrangements approved by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents reasonably required in connection with such underwriting arrangements. 6. SELECTION OF UNDERWRITERS. In any underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering; PROVIDED, HOWEVER, that such underwriters and managers must be reasonably satisfactory to the Company. 7. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor will the Company on or after the date of this Agreement enter into any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if sent by registered or certified mail, postage prepaid, sent by any national courier service guaranteeing overnight delivery or transmitted by any standard form of telecommunication, as follows: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 7(c), which address, with respect to an Initial Purchaser, shall initially be the address provided for such Initial Purchaser in the Purchase Agreement; and (ii) if to the Company, at its address as set forth in the Purchase Agreement, or at such other address provided in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given at the earlier of: (i) the time of actual receipt by the addressee; or (ii) the time delivered, if personally delivered, or five (5) business days after being sent by registered 24 25 or certified mail, postage prepaid, if mailed, or when answered back, if telexed, or when transmission is confirmed, if telecopied, or on the next business day, if timely delivered to a national courier service guaranteeing overnight delivery. Copies of all notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee at its address specified in the Indenture. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (e) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries of the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and the Holders shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of any of the other Holders. (f) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. (h) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any affiliate of the Company (as such term is defined in Rule 405 under the Act) shall not be counted in 25 26 determining whether such consent or approval was given by the Holders of such required percentage. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts and, when so executed, all such counterparts taken together shall constitute one and the same agreement. 26 27 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NORTEK, INC. By: /s/ Kevin W. Donnelly ------------------------------ Name: Kevin W. Donnelly Title: Vice President, General Counsel and Secretary BEAR, STEARNS & CO. INC. By: /s/ James Diao -------------------------------- Name: James Diao Title: Senior Managing Director DRESDNER KLEINWORT WASSERSTEIN -- GRANTCHESTER, INC. By: /s/ Christopher H. Sullivan -------------------------------- Name: Christopher H. Sullivan Title: Vice President and Controller 1 28 EXHIBIT A FORM OF OPINION OF COUNSEL 1. Each of the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial and statistical data and supplemental schedules included or referred to therein or omitted therefrom and the Form T-1, as to which such counsel need express no opinion), complies as to form in all material respects with the applicable requirements of the Act and the applicable rules and regulations promulgated under the Act. 2. In the course of such counsel's review and discussion of the contents of the Exchange Offer Registration Statement and the Prospectus with certain officers and other representatives of the Company and representatives of the independent certified public accountants of the Company, but without independent check or verification or responsibility for the accuracy, completeness or fairness of the statements contained therein, on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Company), no facts have come to such counsel's attention which cause such counsel to believe that the Exchange Offer Registration Statement (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein and the Form T-1, as to which such counsel need express no belief), at the time the Exchange Offer Registration Statement became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 2 EX-12.1 4 b39754niex12-1.txt COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES 1 NORTEK, INC. EXHIBIT 12.1 CALCULATION OF EARNINGS TO FIXED CHARGES (AMOUNTS IN MILLIONS)
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED 1996 1997 1998 1999 2000 APRIL 1, 2000 MARCH 31, 2001 ---- ---- ---- ---- ---- ------------- -------------- EARNINGS(LOSS): Earnings(Loss) from Continuing Operations $ 23.7 $ 26.4 $ 34.0 $ 49.3 $ 41.6 $ 4.0 $ (2.4) Income Tax Provision (Benefit) 14.9 16.3 27.3 40.7 34.0 3.4 (2.1) ---- ---- ----- ----- ----- ---- ---- "Earnings(Loss)" $ 38.6 $ 42.7 $ 61.3 $ 90.0 $ 75.6 $ 7.4 $ (4.5) ==== ==== ===== ===== ===== ==== ==== FIXED CHARGES: Interest Expense including Amortization of Debt Expense and Discount $ 28.4 $ 50.2 $ 86.3 $ 96.5 $ 97.4 $ 24.3 $ 25.3 Interest Portion of Rental Expense 2.0 2.6 4.5 4.4 5.3 1.4 1.2 ---- ---- ----- ----- ----- ---- ---- "Fixed Charges" $ 30.4 $ 52.8 $ 90.8 $100.9 $102.7 $ 25.7 $ 26.5 ==== ==== ===== ===== ===== ==== ==== Earnings Available for Fixed Charges $ 69.0 $ 95.5 $152.1 $190.9 $178.3 $ 33.1 $ 22.0 Ratio of Earnings to Fixed Charges 2.3 1.8 1.7 1.9 1.7 1.3 N/A*
* Not applicable, since ratio is less than 1.0:1. Such earnings were insufficient to cover fixed charges by approximately $4.5 million. EX-23.1 5 b39754niex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 7, 2001 included in Nortek, Inc. and subsidiaries' Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Boston, Massachusetts June 27, 2001 -----END PRIVACY-ENHANCED MESSAGE-----