-----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, Lrm9nwdjSgpiLzNaeAYGMEj84qAZExAUEqQfBGAUVwlY2gdOl67whD/T9JYCheyv vfwCXX+QDXWyPBYXMhOWZw== 0000950135-02-003083.txt : 20020624 0000950135-02-003083.hdr.sgml : 20020624 20020621203656 ACCESSION NUMBER: 0000950135-02-003083 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20020624 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BREADY RICHARD L CENTRAL INDEX KEY: 0001013138 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O NORTEK INC STREET 2: 50 KENNEDY PLAZA CITY: PROVIDENCE MAIL ADDRESS: STREET 1: C/O NORTEK INC STREET 2: 50 KENNEDY PLAZA CITY: PROVIDENCE STATE: RI ZIP: 02903 SUBJECT COMPANY: 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: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-30364 FILM NUMBER: 02684814 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 SC 13D/A 1 b43459scsc13dza.txt NORTEK, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934* (AMENDMENT NO. 15) NORTEK, INC. (Name of Issuer) Common Stock, par value $1.00 per share Special Common Stock, par value $1.00 per share (Title of Class of Securities) 65655910 (CUSIP NUMBER) COPY TO: Richard L. Bready Douglass N. Ellis, Jr., Esq. c/o Nortek, Inc. Ropes & Gray 50 Kennedy Plaza One International Place Providence, RI 02903 Boston, MA 02110 (401) 751-1600 (617) 951-7000 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) June 20, 2002 (Dates of Events which Require Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of this schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 7 Pages CUSPIP NO. 65655910 SCHEDULE 13D Page 2 of 7 Pages 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Richard L. Bready 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3. SEC USE ONLY 4. SOURCE OF FUNDS Not Applicable 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) / / 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY 408,150 - Common Stock OWNED BY 1,588,697- Special Common Stock EACH REPORTING 8. SHARED VOTING POWER PERSON WITH 236,800 - Common Stock 46,263 - Special Common Stock 9. SOLE DISPOSITIVE POWER 408,150 - Common Stock 1,588,697- Special Common Stock 10. SHARED DISPOSITIVE POWER 236,800 - Common Stock 46,263 - Special Common Stock Page 2 of 7 Pages CUSPIP NO. 65655910 SCHEDULE 13D Page 3 of 7 Pages 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 408,150 - Common Stock 1,588,697- Special Common Stock 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /X/ The amount set forth in Row (11) excludes 236,800 shares of Common Stock and 46,263 shares of Special Common Stock held in various benefit plans of the Issuer for which the Reporting Person disclaims beneficial ownership. 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 16.1% of Common Stock, including Special Common Stock. 91.9% of Special Common Stock 14. TYPE OF REPORTING PERSON IN Page 3 of 7 Pages ITEM 1. SECURITY ISSUER. The class of equity securities to which this Statement on Schedule 13D (the "Statement") relates is the Common Stock, par value $1.00 per share (the "Common Stock"), and the Special Common Stock, par value $1.00 per share (the "Special Common Stock"), each of Nortek, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 50 Kennedy Plaza, Providence, Rhode Island 02903. ITEM 2. IDENTITY AND BACKGROUND. (a) The person filing this statement is Richard L. Bready (hereinafter referred to as "Bready" or the "Reporting Person"). (b) The business address of the Reporting Person is Nortek, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903. (c) The present principal employment of the Reporting Person is as Chairman and Chief Executive Officer of the Issuer. (d) The Reporting Person has not been convicted in any criminal proceeding, excluding traffic violations or similar misdemeanors, in the last five years. (e) The Reporting Person has not been a party, in the last five years, to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in his being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The Reporting Person is a citizen of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Not Applicable. ITEM 4. PURPOSE OF TRANSACTION. On June 20, 2002, the Issuer, Nortek Holdings, Inc. ("Nortek Holdings"), a wholly-owned subsidiary of the Issuer, and K Holdings, Inc. ("K Holdings"), an affiliate of Kelso & Company, L.P. ("Kelso"), entered into an Agreement and Plan of Recapitalization (the "Recapitalization Agreement") pursuant to which all publicly owned outstanding shares of capital stock of the Issuer, with the exception of some shares owned by certain members of management, will be acquired for $46.00 per share in cash (the "Transaction"). The foregoing description of the Transaction is qualified in its entirety by reference to the Recapitalization Agreement, the Senior Secured Credit Facility Commitment Letter dated May 31, 2002 by and between Nortek, Fleet Capital Corporation and Fleet Securities, Inc., and the Bridge Facility Commitment Letter dated June 20, 2002 by and between Kelso, Page 4 of 7 Pages UBS AG, Stamford Branch, and UBS Warburg LLC, copies of which are attached hereto as Exhibits 1, 2, and 3, respectively, and are incorporated herein by reference. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a-b) As of June 20, 2002, the Reporting Person directly owned (x) 1,588,697 shares of Special Common Stock, including 1,215,515 such shares that the Reporting Person has a right to acquire pursuant to certain vested employee stock options, and (y) 408,150 shares of Common Stock, including 150,000 such shares that the Reporting Person has a right to acquire pursuant to certain vested employee stock options. These shares represent 16.1% of all outstanding shares, if the shares of Common Stock and Special Common Stock are taken as a group, and 91.9% of the shares of Special Common Stock. The Reporting Person has both sole voting and dispositive power with respect to these shares. Various defined benefit pension plans of the Issuer and certain of its subsidiaries held 236,800 shares of Common Stock and 46,263 shares of Special Common Stock as of June 20, 2002. Under the provisions of the trust agreement governing these benefit pension plans, authorized representatives of the Issuer may instruct the trustee of such plans regarding the acquisition and disposition of plan assets and the voting of securities held by the trust relating to such pension plans. While the Reporting Person is one of these authorized representatives, the Reporting Person disclaims beneficial ownership of the shares held by these benefit pension plans. (c) Not Applicable (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The Reporting Person has entered into a Voting Agreement dated June 20, 2002 with the Issuer and K Holdings pursuant to which the Reporting Person has agreed, subject to the terms of such agreement, to vote all of his Common Stock and Special Common Stock in favor of the Transaction and in favor of any actions required in furtherance thereof. The foregoing description of the Voting Agreement is qualified in its entirety by reference to the Voting Agreement, a copy of which is attached hereto as Exhibit 4 and is incorporated herein by reference. The Reporting Person has also entered into an Exchange Agreement dated June 20, 2002 with the Issuer, Nortek Holdings and K Holdings pursuant to which the Reporting Person has agreed to sell his interest in 373,182 shares of Special Common Stock and exchange the remainder of his shares and stock options for shares and stock options of Nortek Holdings in connection with the Transaction. The foregoing description of the Exchange Agreement is qualified in its Page 5 of 7 Pages entirety by reference to the Exchange Agreement, a copy of which is attached hereto as Exhibit 5 and is incorporated herein by reference. Except for such agreements, the Reporting Person presently has no contracts, arrangements, understandings or relationships with any other person with respect to any securities of the Issuer, including but not limited to the transfer or voting of any shares of Common Stock or Special Common Stock, finder's fees, joint ventures, loans or option arrangements, puts or calls, guarantees of profits, division of profits or loss or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 1. Agreement and Plan of Recapitalization dated June 20, 2002 by and between Nortek, Inc., Nortek Holdings, Inc., a wholly-owned subsidiary of Nortek, Inc., and K Holdings, Inc., an affiliate of Kelso & Company, L.P. 2. Senior Secured Credit Facility Commitment Letter dated May 31, 2002 by and between Nortek, Inc., Fleet Capital Corporation and Fleet Securities, Inc. 3. Bridge Facility Commitment Letter dated June 20, 2002 by and between Kelso & Company, L.P., UBS AG, Stamford Branch and UBS Warburg LLC. 4. Voting Agreement dated June 20, 2002 by and between Nortek, Inc., K Holdings, Inc., an affiliate of Kelso & Company, L.P., and Richard L. Bready. 5. Exchange Agreement dated June 20, 2002 by and between Nortek, Inc., Nortek Holdings, Inc., a wholly-owned subsidiary of Nortek, Inc., K Holdings, Inc., an affiliate of Kelso & Company, L.P., and Richard L. Bready. 6 Press Release, dated June 20, 2002. Page 6 of 7 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 21, 2002 /s/ Richard L. Bready ------------------------------ Richard L. Bready Page 7 of 7 Pages EX-2 3 b43459scexv1.txt AGREEMENT AND PLAN OF RECAPITALIZATION EXHIBIT 1 ================================================================================ AGREEMENT AND PLAN OF RECAPITALIZATION by and among NORTEK, INC., NORTEK HOLDINGS, INC. and K HOLDINGS, INC. Dated as of June 20, 2002 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I THE RECLASSIFICATION 4 SECTION 1.1 The Reclassification 4 SECTION 1.2 Effective Time 4 SECTION 1.3 No Certificates; Ownership of Reclassified Stock 4 SECTION 1.4 Nortek Holdings COD 5 SECTION 1.5 Certificate of Incorporation 5 SECTION 1.6 By-laws 5 SECTION 1.7 Officers and Directors 5 SECTION 1.8 Closing 6 ARTICLE II THE K STOCK PURCHASE; THE REDEMPTION; CERTAIN TRANSACTION MATTERS 6 SECTION 2.1 The K Stock Purchase 6 SECTION 2.2 Payment and Delivery 7 SECTION 2.3 The Distribution 7 SECTION 2.4 The Redemption 7 SECTION 2.5 The Preferred Exchange 7 SECTION 2.6 Exchange of Certificates 7 SECTION 2.7 Transfer Taxes; Withholding 10 SECTION 2.8 Stock Options; Other Equity Awards 10 SECTION 2.9 Lost Certificates 10 SECTION 2.10 Dissenting Shares 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11 SECTION 3.1 Corporate Existence and Power 11 SECTION 3.2 Corporate Authorization 12 SECTION 3.3 Consents and Approvals; No Violations 13 SECTION 3.4 Capitalization 14 SECTION 3.5 Subsidiaries 15 SECTION 3.6 SEC Documents 16 SECTION 3.7 Financial Statements; No Undisclosed Liabilities 17 SECTION 3.8 Proxy Statement; Other Filings 17 SECTION 3.9 Absence of Material Adverse Changes, etc. 18 SECTION 3.10 Taxes 18 SECTION 3.11 Employee Benefit Plans 19 SECTION 3.12 Environmental Matters 21 SECTION 3.13 Litigation; Compliance with Laws 23 SECTION 3.14 Intellectual Property 24 SECTION 3.15 Material Contracts 25 SECTION 3.16 Indebtedness; Company Cash 27 SECTION 3.17 Real Estate 28 SECTION 3.18 Labor Relations and Employment 29 SECTION 3.19 Opinion of Financial Advisors 30 SECTION 3.20 Finders' and Other Fees 30
i SECTION 3.21 Rights Amendment 30 SECTION 3.22 Nortek Holdings Operations 31 SECTION 3.23 Debt Financing 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDINGS 31 SECTION 4.1 Corporate Existence and Power 31 SECTION 4.2 Authorization 32 SECTION 4.3 Consents and Approvals; No Violations 32 SECTION 4.4 Capitalization 33 SECTION 4.5 Proxy Statement 34 SECTION 4.6 K Holdings' Operations 34 SECTION 4.7 Equity Financing 34 SECTION 4.8 Debt Financing 34 ARTICLE V COVENANTS OF THE PARTIES 35 SECTION 5.1 Conduct of the Business of the Company 35 SECTION 5.2 Stockholders' Meeting; Proxy Material 39 SECTION 5.3 Access to Information 41 SECTION 5.4 No Solicitation 42 SECTION 5.5 Director and Officer Liability 44 SECTION 5.6 Reasonable Best Efforts 46 SECTION 5.7 Certain Filings 46 SECTION 5.8 Public Announcements 48 SECTION 5.9 Employee Matters 48 SECTION 5.10 State Takeover Laws 49 SECTION 5.11 Certain Notifications 49 SECTION 5.12 Financing 49 SECTION 5.13 Consent Solicitation 49 SECTION 5.14 Post Closing Change of Control Offer 51 SECTION 5.15 Holding Company Merger 51 SECTION 5.16 Solvency Letter 51 SECTION 5.17 Advisory Fees, etc. 52 SECTION 5.18 FIRPTA Compliance 52 ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CONSUMMATE THE TRANSACTIONS 52 SECTION 6.1 Conditions to Each Party's Obligations 52 SECTION 6.2 Conditions to the Company's Obligation to Consummate the Transactions 53 SECTION 6.3 Conditions to K Holdings' Obligations to Consummate the Transactions 55 ARTICLE VII TERMINATION 57 SECTION 7.1 Termination 57 SECTION 7.2 Effect of Termination 58 SECTION 7.3 Fees and Expenses 59 ARTICLE VIII MISCELLANEOUS 60 SECTION 8.1 Notices 60 SECTION 8.2 Survival of Representations and Warranties 61 SECTION 8.3 Interpretation 62
ii SECTION 8.4 Amendments, Modification and Waiver 62 SECTION 8.5 Successors and Assigns 63 SECTION 8.6 Specific Performance 63 SECTION 8.7 Governing Law 63 SECTION 8.8 Severability 63 SECTION 8.9 Third Party Beneficiaries 64 SECTION 8.10 Entire Agreement 64 SECTION 8.11 Counterparts; Effectiveness 64
Exhibits Exhibit A - Holding Company Merger Agreement Exhibit B - Charter Amendment Exhibit C - Nortek Holdings COD Exhibit D - Voting Agreement Exhibit E - By-Laws Exhibit F - Form of Stockholders Agreement iii INDEX OF DEFINED TERMS Acceptable Confidentiality Agreement................................................................ 44 Acquisition Proposal................................................................................ 43 Action.............................................................................................. 23 Active Company Subsidiary........................................................................... 15 Affiliate........................................................................................... 62 Agreement........................................................................................... 1 Bridge Facility..................................................................................... 31, 34 Bridge Facility Commitment Letter................................................................... 31, 34 Certificate of Incorporation........................................................................ 11 Certificates........................................................................................ 8 Change in Recommendation............................................................................ 40 Change of Control Offer............................................................................. 50 Change of Control Waiver............................................................................ 50 Charter Amendment................................................................................... 2 Class A Common Stock................................................................................ 3 Class B Common Stock................................................................................ 2 Closing............................................................................................. 6 Closing Date........................................................................................ 6 Code................................................................................................ 19 Company............................................................................................. 1 Company 10-K........................................................................................ 17 Company Contracts................................................................................... 13 Company Disclosure Schedule......................................................................... 11 Company Material Adverse Effect..................................................................... 11 Company Recommendation.............................................................................. 40 Company SEC Documents............................................................................... 16 Company Securities.................................................................................. 15 Company Voting Debt................................................................................. 36 Confidentiality Agreement........................................................................... 44 Consent Solicitation................................................................................ 50 Debt Financing...................................................................................... 49 Delivered........................................................................................... 62 DGCL................................................................................................ 2 Distribution........................................................................................ 3 EC Merger Regulations............................................................................... 48 Effective Time...................................................................................... 4 Environmental Laws.................................................................................. 23 Environmental Permits............................................................................... 21 Equity Financing.................................................................................... 34
iv Exchange Act........................................................................................ 14 Exchange Agent...................................................................................... 7 Exchange Agreements................................................................................. 2 Exchange Fund....................................................................................... 9 Exchange Options.................................................................................... 2 Expenses............................................................................................ 59 Foreign Monopoly Laws............................................................................... 14 GAAP................................................................................................ 17 Governmental Entity................................................................................. 14 Hazardous Substance................................................................................. 23 Holder.............................................................................................. 8 Holding Company Merger.............................................................................. 1 Holding Company Merger Agreement.................................................................... 1 HSR Act............................................................................................. 14 indebtedness........................................................................................ 27 Indebtedness........................................................................................ 27 Indemnifiable Claim................................................................................. 45 Indemnitees......................................................................................... 45 Intellectual Property............................................................................... 25 K Holdings.......................................................................................... 1 K Holdings Common Stock............................................................................. 33 K Holdings Disclosure Schedule...................................................................... 31 K Holdings Material Adverse Effect.................................................................. 32 K Holdings' Representatives......................................................................... 41 K Stock Purchase.................................................................................... 3 knowledge of the Company............................................................................ 62 Licenses............................................................................................ 24 Lien................................................................................................ 16 made available...................................................................................... 62 Management Stock Purchase........................................................................... 3 Material Adverse Consequence........................................................................ 55 Material Contracts.................................................................................. 26 Material Subsidiary................................................................................. 44 Maximum Amount...................................................................................... 46 New Options......................................................................................... 2 Nortek.............................................................................................. 1 Nortek Common Stock................................................................................. 1 Nortek Holdings..................................................................................... 1 Nortek Holdings COD................................................................................. 2 Nortek Holdings Common Stock........................................................................ 2 Nortek Holdings Preference Stock.................................................................... 2 Nortek Holdings Special Common Stock................................................................ 2 Nortek Notes........................................................................................ 51 Nortek Notes Indentures............................................................................. 51 Nortek Preference Stock............................................................................. 14 Nortek Special Common Stock......................................................................... 2
v Open Indenture Amendments........................................................................... 50 Option.............................................................................................. 10 Option Exchanges.................................................................................... 2 person.............................................................................................. 62 Person.............................................................................................. 62 Preferred Exchange.................................................................................. 3 Property Restrictions............................................................................... 40 Proxy Statement..................................................................................... 6 Purchase Price...................................................................................... 3 Reclassification.................................................................................... 2 Redemption.......................................................................................... 3 Redemption Consideration............................................................................ 7 Redemption Time..................................................................................... 7 Regulatory Law...................................................................................... 47 Related Party Agreement............................................................................. 26 Release............................................................................................. 23 Required Company Vote............................................................................... 53 Restraints.......................................................................................... 53 Restrictive Agreement............................................................................... 26 Rights.............................................................................................. 31 Rights Agreement.................................................................................... 31 Schedule 13E-3...................................................................................... 40 SEC................................................................................................. 16 Secretary of State.................................................................................. 4 Securities Act...................................................................................... 14 Senior Nortek Notes................................................................................. 51 Senior Nortek Notes Indentures...................................................................... 51 Share Exchanges..................................................................................... 2 Shares.............................................................................................. 2 S-K Contracts....................................................................................... 26 Special Committee................................................................................... 1 Special Meeting..................................................................................... 40 Subsidiary.......................................................................................... 15 Superior Proposal................................................................................... 43 Tax Return.......................................................................................... 19 Taxes............................................................................................... 19 Termination Date.................................................................................... 57 Termination Fee..................................................................................... 59 the date hereof..................................................................................... 62 Transactions........................................................................................ 3 Trust Indenture Act................................................................................. 14 Voting Agreement.................................................................................... 3
vi AGREEMENT AND PLAN OF RECAPITALIZATION, dated as of June 20, 2002 (this "Agreement"), by and among Nortek, Inc., a Delaware corporation ("Nortek"), Nortek Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Nortek ("Nortek Holdings"), and K Holdings, Inc., a Delaware corporation ("K Holdings"). References herein to the "Company" shall be deemed to be references to Nortek, prior to the Holding Company Merger (as defined below), and to Nortek Holdings, from and after the Holding Company Merger. W I T N E S S E T H WHEREAS, the Board of Directors of Nortek (upon the recommendation of a special committee thereof consisting solely of disinterested directors (the "Special Committee")), subject to the terms and conditions set forth herein, (i) has determined that the Transactions (as defined herein) are fair and advisable to, and in the best interests of, Nortek and its stockholders and has approved this Agreement and the Transactions and (ii) has recommended approval by the stockholders of Nortek of the Charter Amendment and the Reclassification (each, as defined herein); WHEREAS, the Board of Directors of Nortek Holdings, subject to the terms and conditions set forth herein, (i) has determined that the Transactions are fair and advisable to, and in the best interests of, Nortek Holdings and its stockholder and has approved this Agreement and the Transactions and (ii) has recommended approval by the stockholder of Nortek Holdings of the Charter Amendment and the Reclassification; WHEREAS, concurrently with the execution and delivery of this Agreement, Nortek, Nortek Holdings and Nortek Holdings Merger Sub (as defined therein) are entering into an Agreement and Plan of Merger, attached as Exhibit A hereto (the "Holding Company Merger Agreement"), pursuant to which a wholly owned subsidiary of Nortek Holdings will merge with and into Nortek (the "Holding Company Merger"), whereby, among other things, each share of common stock, par value $1.00 per share, of Nortek (the "Nortek Common Stock") including the associated Rights (as defined in Section 3.21 hereof) and each share of special common stock, par value $1.00 per share, of Nortek (the "Nortek Special Common Stock"), issued and outstanding immediately prior to the Holding Company Merger Effective Time (as defined in the Holding Company Merger Agreement), will be converted into, respectively, one share of common stock, par value $1.00 per share, of Nortek Holdings (the "Nortek Holdings Common Stock"), including the associated Rights, and one share of special common stock, par value $1.00 per share, 1 of Nortek Holdings (the "Nortek Holdings Special Common Stock" and, together with the Nortek Holdings Common Stock and the associated Rights, the "Shares"), and each share of Nortek Holdings Common Stock held by Nortek shall be cancelled, upon the terms and subject to the conditions and limitations set forth therein and in accordance with the Delaware General Corporation Law (the "DGCL"); WHEREAS, certain members of the Company's management designated or to be designated by K Holdings have each entered into, or prior to the Effective Time will enter into, an agreement with Nortek, Nortek Holdings and K Holdings (collectively, the "Exchange Agreements"), pursuant to which each such Person immediately prior to the Effective Time, shall exchange (collectively, the "Share Exchanges") each Share held by him or her and specified therein for shares of Series B convertible preference stock, par value $1.00 per share, of Nortek Holdings (the "Nortek Holdings Preference Stock"), having the rights and preferences set forth on the certificate of designation with respect thereto, substantially in the form attached as Exhibit C hereto (the "Nortek Holdings COD"); WHEREAS, upon the terms and subject to the conditions of this Agreement, Nortek Holdings will file an amendment (the "Charter Amendment") to its Certificate of Incorporation (as defined herein) with the Secretary of State of the State of Delaware, substantially in the form of Exhibit B attached hereto, whereby each Share issued and outstanding immediately prior to the Effective Time, will be reclassified (the "Reclassification") into one fully paid and nonassessable share of Class B redeemable common stock, par value $1.00 per share, of Nortek Holdings (the "Class B Common Stock"), in accordance with Section 242 of the DGCL; WHEREAS, pursuant to the Exchange Agreements, each member of the Company's management designated or to be designated by K Holdings shall, immediately following the Reclassification, exchange (collectively, the "Option Exchanges") each Option (as defined herein) held by him or her and specified therein (the "Exchange Options") for options (the "New Options") to acquire shares of Class A Common Stock (as defined herein), upon the terms and subject to the conditions thereof; WHEREAS, (i) immediately following the Option Exchanges, K Holdings (or its permitted designees) shall (A) purchase for cash shares of class A common stock, par value $1.00 per share, of Nortek Holdings, to be created pursuant to the Charter Amendment ("Class A Common Stock"), upon the terms and subject to the conditions of this Agreement (the "K Stock Purchase") and (B) purchase for 2 cash in an amount equal to $46.00 per share shares of Nortek Holdings Preference Stock from certain members of the Company's management pursuant to the Exchange Agreements, upon the terms and subject to the conditions thereof (the "Management Stock Purchase" and, together with the K Stock Purchase, the Charter Amendment and the Reclassification, the "Purchase Transactions") and (ii) immediately prior to the Redemption (as defined herein), Nortek shall make a distribution in accordance with Section 2.3 hereof (the "Distribution") of funds from Nortek to Nortek Holdings; WHEREAS, immediately following the Purchase Transactions and the Distribution, the Company shall irrevocably call for redemption and redeem each share of Class B Common Stock issued and outstanding for an amount in cash equal to $46.00 (the "Redemption"); WHEREAS, immediately following the Redemption, the Company shall exchange each outstanding share of Nortek Holdings Preference Stock for one fully paid and nonassessable share of Class A Common Stock (the "Preferred Exchange" and, together with the Redemption, the Purchase Transactions and the other transactions contemplated hereby, the "Transactions"); WHEREAS, Richard L. Bready ("RLB") and K Holdings have negotiated an amendment to the Employment Agreement, dated as of February 26, 1997, between RLB and the Company, to be entered into by RLB, Nortek and Nortek Holdings and to be effective at the Closing; WHEREAS, concurrently with the execution and delivery of this Agreement, RLB, K Holdings and Nortek are entering into a voting agreement, attached as Exhibit D hereto (the "Voting Agreement"), pursuant to which RLB has agreed to vote the Shares owned by him for approval of the Charter Amendment and the Reclassification; and WHEREAS, it is intended that the Transactions shall be completed in the following order: first, the Holding Company Merger; second, the Share Exchanges; third, the Charter Amendment and Reclassification; fourth, the Option Exchange; fifth, the K Stock Purchase, the Management Stock Purchase and the Distribution; sixth, the Redemption; and seventh, the Preferred Exchange, with all such Transactions intended to occur in the sequence described above but, other than the Holding Company Merger, substantially concurrently with each other; 3 NOW, THEREFORE, in consideration of the representations, warranties, covenants, agreements and conditions set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE RECLASSIFICATION SECTION 1.1 The Reclassification. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time (as defined in Section 1.2) each Share issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the Company or the holders thereof, be reclassified as, and be converted into, one fully paid and nonassessable share of Class B Common Stock, the terms of which are set forth in the form of Certificate of Incorporation of the Company, as amended pursuant to the Charter Amendment. SECTION 1.2 Effective Time. Concurrently with the Closing (as defined in Section 1.8 hereof), the Company shall cause the Charter Amendment to be executed and filed with the Secretary of State of the State of Delaware (the "Secretary of State") as provided in the DGCL. The Reclassification shall become effective on the date and at the time at which the Charter Amendment has been duly filed with the Secretary of State or at such other date and time as is agreed between the parties and specified in the Charter Amendment. The date and time of such effectiveness is hereinafter referred to as the "Effective Time." Upon the filing of the Charter Amendment with the Secretary of State of the State of Delaware, Nortek Holdings shall be irrevocably obligated to complete the Redemption. SECTION 1.3 No Certificates; Ownership of Reclassified Stock. From and after the Effective Time, (x) for all purposes of determining the record holders of the Class B Common Stock, the holders of Shares as of immediately prior to the Effective Time (but after giving effect to the Share Exchanges) shall be deemed to be holders of the Class B Common Stock and (y) each such holder shall be entitled to receive all dividends and other distributions declared or payable on, and exercise voting rights and all other powers, preferences or other relative, participating, optional or other special rights and privileges with respect to, the Class B Common Stock, in each case until such time, if any, as such persons cease to be such record holders or such shares cease to be outstanding. Certificates which previously represented Shares, as of and following the Effective Time and until such time as shares of Class B Common Stock are no longer outstanding, shall be deemed 4 for all purposes to represent shares of Class B Common Stock, and no new Certificates in respect of such Class B Common Stock shall be delivered to the holders thereof. In accordance with the terms of the Redemption set forth in Article II below and in the Charter Amendment, each such holder shall be entitled to, and upon proper surrender (in accordance with the requirements specified in the letter of transmittal and other instructions provided to such holder following the Effective Time) of the certificate or certificates previously representing the Shares held by such holder shall promptly thereafter receive, the Redemption Consideration. SECTION 1.4 Nortek Holdings COD. Immediately prior to the Share Exchange and prior to the Effective Time, Nortek Holdings shall cause the Nortek Holdings COD to be executed and filed with the Secretary of State as provided in the DGCL, with such filing to become effective on the date and at the time at which the Nortek Holdings COD has been duly filed with the Secretary of State or at such other date and time as is agreed between the parties (but, in any event prior to the Share Exchange and prior to the Effective Time). SECTION 1.5 Certificate of Incorporation. At the Effective Time, the Certificate of Incorporation of Nortek Holdings, as in effect immediately prior to the Effective Time, shall be amended pursuant to the Charter Amendment, until thereafter amended as provided by applicable law and such Certificate of Incorporation (but not to be amended or otherwise modified prior to the Redemption). SECTION 1.6 By-laws. At the Effective Time, the Board of Directors of the Company shall take all steps necessary so that the by-laws of Nortek Holdings, as in effect immediately prior to the Effective Time, shall be amended and restated so as to read in their entirety as set forth in Exhibit E hereto, and, as so amended and restated, shall be the by-laws of Nortek Holdings until thereafter amended as provided by applicable law, the Certificate of Incorporation of Nortek Holdings and such by-laws (but not to be amended or otherwise modified prior to the Redemption). SECTION 1.7 Officers and Directors. From and after the Effective Time, the officers of the Company immediately prior to the Effective Time shall be the officers of the Company, until they are removed, resign or are replaced. The Company shall use its reasonable best efforts to obtain and deliver to K Holdings the valid resignation, effective as of immediately following the Redemption, of each director of the Company (other than RLB). 5 SECTION 1.8 Closing. Subject to the satisfaction or waiver of the conditions set forth in Article VI hereof, the closing of the Transactions (the "Closing") will take place at 10:00 a.m., New York City time, on a date to be specified by the parties hereto, and no later than the second business day (subject to extension to the extent necessary for the satisfaction or waiver of the conditions set forth in Article VI) after the satisfaction or waiver, to the extent permitted by applicable law, of the conditions set forth in Sections 6.1(a), (b) and (d) hereof (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver, to the extent permitted by applicable law, of those conditions), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York, unless another time, date or place is agreed to in writing by the parties hereto (such date, the "Closing Date"). ARTICLE II THE K STOCK PURCHASE; THE REDEMPTION; CERTAIN TRANSACTION MATTERS SECTION 2.1 The K Stock Purchase. Upon the terms and subject to the conditions contained herein, the Company and K Holdings agree to effect the K Stock Purchase, pursuant to which the Company shall issue and sell to K Holdings (or its permitted designees) and K Holdings (or its permitted designees) shall purchase at the Closing, free and clear of all Liens (as defined herein), 8,085,328 shares of Class A Common Stock, for a per share purchase price of $46.00 per share, for an aggregate purchase price equal to $371,925,094 (the "Purchase Price"), it being understood that K Holdings (or its permitted designees) will purchase, upon the terms and subject to the conditions set forth in the Exchange Agreements, 373,182 shares of Nortek Holdings Preference Stock pursuant to the Management Stock Purchase for a per share purchase price equal to the Redemption Price (for an aggregate purchase price of $17,166,372); provided that the Purchase Price shall be reduced to the extent the number of shares acquired pursuant to the Management Stock Purchase is increased; provided, further, that the Purchase Price may be further reduced, at the option of K Holdings, (i) by an amount equal to the aggregate value of all Share Exchanges and Option Exchanges (based on, in the case of Share Exchanges, a per share price of $46 and, in the case of Option Exchanges, the difference between such $46 per share price and the exercise price of any Option subject to any such Option Exchange) pursuant to Exchange Agreements entered into after the date hereof and also (ii) to the extent that, after giving effect to the Distribution, the aggregate Redemption Consideration and the Option Cash Out may still be funded in their entirety. 6 SECTION 2.2 Payment and Delivery. At the Closing, the Company shall deliver to K Holdings (or such other Person or Persons designated by K Holdings who are purchasing the Class A Common Stock) certificates representing the number of shares of Class A Common Stock which K Holdings (or such other Persons) is purchasing from the Company and K Holdings shall deliver to the Company the Purchase Price, such Purchase Price to be paid by wire transfer of immediately available funds to a bank account designated in writing by the Company two business days prior to the Closing Date. SECTION 2.3 The Distribution. At the Closing, immediately prior to the Redemption, Nortek shall distribute to Nortek Holdings such funds as it is directed to distribute by K Holdings, but in no event more than the maximum amount permitted under the Nortek Notes Indentures (as defined below) and applicable law, and, notwithstanding the foregoing, in no event less than the amount which, when added to the Purchase Price, will be sufficient to fund the Option Cash Out and the aggregate Redemption Consideration (as defined below), in cash in immediately available funds. SECTION 2.4 The Redemption. Immediately following the Purchase Transactions and the Distribution and in accordance with the terms of the Charter Amendment, the Company shall irrevocably call for redemption and redeem all outstanding shares of Class B Common Stock for $46.00 per share in cash in accordance with their terms (the "Redemption Consideration"). The date and time of such Redemption is hereinafter referred to as the "Redemption Time." SECTION 2.5 The Preferred Exchange. Immediately following the Redemption and in accordance with the terms of the Exchange Agreements and the Nortek Holdings COD, the Company shall cause each issued and outstanding share of Nortek Holdings Preference Stock to be exchanged for and converted into one fully paid and nonassessable share of Class A Common Stock. SECTION 2.6 Exchange of Certificates. (a) Prior to the Redemption Time, EquiServe Trust Company, N.A., or such other bank or trust company reasonably acceptable to the Company and having a capital and surplus of at least $1,000,000,000, shall be designated by K Holdings to act as the exchange agent (the "Exchange Agent") for payment of the Redemption Consideration. As of the Redemption Time, K Holdings shall cause the Company to, and the Company shall, deposit, or cause to be deposited with the Exchange Agent separate and apart from its other funds, as a trust fund for the 7 benefit of holders of Class B Common Stock, cash in an amount equal to the aggregate Redemption Consideration, with irrevocable instructions and authority to such Exchange Agent to pay to each respective holder of Class B Common Stock (a "Holder"), as evidenced by a list of such Holders certified by an officer of the Company or the Company's transfer agent, for each share of Class B Common Stock, the Redemption Consideration upon surrender of their respective Certificates. From and after the Redemption Time, shares of Class B Common Stock shall no longer be deemed to be outstanding and shall not have the status of shares of Class B Common Stock, and all rights of the Holders thereof as stockholders of Nortek Holdings (except the right to receive from Nortek Holdings the Redemption Consideration) shall cease, except if Nortek Holdings shall default in payment of the Redemption Consideration to any Holder, in which case the rights of such Holder to receive the Redemption Consideration shall continue unless and until such shares are redeemed and such consideration is paid in accordance with the terms hereof. Except as provided in Section 2.6(c) hereof, any such deposit of funds shall be irrevocable. (b) As of or promptly following the Redemption Time, the Company shall cause the Exchange Agent to mail (and to make available for collection by hand) to each holder of record of a certificate or certificates, which immediately prior to the Effective Time represented outstanding Shares which were reclassified and converted into Class B Common Stock pursuant to the Reclassification (the "Certificates") and which were redeemed, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and which shall be in the form and have such other customary provisions as K Holdings and the Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the amount of cash into which the Shares previously represented by such Certificate shall have been converted into the right to receive pursuant to the Redemption (which instructions shall provide that at the election of the surrendering Holder and subject to compliance with the requirements specified therein, Certificates may be surrendered, and the Redemption Consideration in exchange therefor collected, by hand delivery). Upon surrender of a Certificate for cancellation to the Exchange Agent, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required pursuant to such instructions, the Holder of such Certificate shall be entitled to receive in exchange therefor the Redemption Consideration for each Share formerly represented by such Certificate, to be mailed (or made available for collection by hand if so elected by the surrendering Holder) within three business days of receipt thereof (but in no case prior to the Redemption Time), and the 8 Certificate so surrendered shall be forthwith cancelled. The Exchange Agent shall accept such Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until so surrendered, outstanding Certificates will be deemed from and after the Redemption Time, for all corporate purposes, to evidence only the right to receive the Redemption Consideration. No interest shall be paid or accrued for the benefit of Holders of the Certificates on the Redemption Consideration payable upon the surrender of the Certificates. (c) Any portion of the Redemption Consideration deposited with the Exchange Agent pursuant to this Section 2.6 (the "Exchange Fund") which remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to the Company, upon, and in accordance with, any demand by the Company therefor, and any Holders prior to the Redemption who have not theretofore complied with this Article II shall thereafter look for payment of their claim, as general creditors thereof, only to the Company for their claim for cash. (d) None of K Holdings, the Company or the Exchange Agent shall be liable to any Person in respect of any cash held in the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to one year after the Effective Time (or immediately prior to such earlier date on which any cash in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 3.3(b) hereof)), any such cash in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Company, free and clear of all claims or interest of any Person previously entitled thereto. (e) The Exchange Agent shall invest the cash included in the Exchange Fund, as directed by the Company on a daily basis; provided that such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investor Services, Inc. or Standard & Poor's Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $1,000,000,000. If for any reason (including losses) the Exchange Fund is inadequate to pay the amount which Holders shall be entitled to receive hereunder, the Company shall in any event be liable for payment therefor. Any interest and other income resulting from such investments shall be paid to the Company. 9 SECTION 2.7 Transfer Taxes; Withholding. If any cash is to be remitted to a Person (other than the Person in whose name the Certificate surrendered in exchange therefor is registered), it shall be a condition of such exchange that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall pay to the Exchange Agent any transfer or other Taxes (as defined in Section 3.10(e) hereof) required by reason of the payment of the Redemption Consideration to a Person other than the registered holder of the Certificate so surrendered, or shall establish to the satisfaction of the Exchange Agent that such Tax either has been paid or is not applicable. To the extent that amounts are so withheld by the Company or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of whom such deduction and withholding was made by the Company or the Exchange Agent. SECTION 2.8 Stock Options; Other Equity Awards. (a) Except for Exchange Options, each option granted to an employee, consultant or director of the Company or any Subsidiary (as defined in Section 3.5(a) hereof) of the Company to acquire Shares, which is outstanding immediately prior to the Effective Time (each, an "Option"), shall be cancelled, effective as of the Effective Time, in exchange for (the "Option Cash Out") a single lump sum cash payment (less any applicable income or employment tax withholding) equal to the product of (1) the number of Shares subject to such Option immediately prior to the Effective Time and (2) the excess, if any, of the Redemption Consideration over the exercise price per share of such Company Option; provided, however, that in the event that the exercise price per share of any such Option is equal to or greater than the Redemption Consideration, such Option shall be cancelled without any cash payment being made in respect thereof. (b) Prior to the Closing, the Company shall take or cause to be taken any and all actions necessary, including the amendment of stock option plans and other equity related plans, programs or policies, to give effect to the treatment of Options pursuant to this Section 2.8. SECTION 2.9 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Company, the posting by such Person of a bond, in such reasonable amount as the Company may direct (but consistent with past practice of the Company), as indemnity against any claim that may be made against it with respect to such 10 Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Redemption Consideration to which the Holder thereof is entitled pursuant to this Article II. SECTION 2.10 Dissenting Shares. Holders of Shares shall not have appraisal rights under Section 262 of the DGCL in connection with the Transactions. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as disclosed in the Company SEC Documents filed and publicly available prior to the date hereof or as set forth on the Company's disclosure schedule delivered concurrently with the delivery of this Agreement (the "Company Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty or covenant to the extent specified therein and such other representations and warranties or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to the information called for by such other representation and warranty or covenant reasonably apparent) and except as expressly contemplated by this Agreement, the Company hereby represents and warrants to K Holdings as follows: SECTION 3.1 Corporate Existence and Power. Each of Nortek and Nortek Holdings is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all necessary corporate or other power, as the case may be, required to carry on its business as now conducted. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction (to the extent such concept is recognized) where the character of the property owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except in such jurisdictions where failures to be so qualified or licensed or in good standing would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has heretofore made available to K Holdings true and complete copies of the certificate of incorporation of the Company (the "Certificate of Incorporation") and the by-laws of the Company as currently in effect. As used herein, the term "Company Material Adverse Effect" shall mean, with respect to any one or more changes, events or effects, a material adverse effect on (i) the condition (financial or otherwise), business, assets, liabilities, prospects or result of operations of the Company and its Subsidiaries, taken as a whole, other than, any event, change 11 or effect resulting from, or relating to (x) the economy or financial markets in general, or (y) in general the industries in which the Company and its Subsidiaries operate and not specifically relating to, or having a materially disproportionate effect (relative to the effect on other similar companies) on, the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company and its Subsidiaries to consummate the Transactions. All references to Company Material Adverse Effect contained in this Agreement shall be deemed to include any effect on the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of the Company and its Subsidiaries, taken as a whole, after the Effective Time. SECTION 3.2 Corporate Authorization. (a) Each of Nortek and Nortek Holdings has the requisite corporate power and authority to execute and deliver this Agreement and, subject to approval of the holders of Shares, as set forth in Section 3.2(b) hereof and as contemplated by Section 5.2 hereof, to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized, and this Agreement has been approved by the Special Committee and the Boards of Directors of Nortek and Nortek Holdings, and approved by Nortek as the sole stockholder of Nortek Holdings, and no other corporate proceedings, other than the approval of the Charter Amendment and the Reclassification by the holders of Shares, on the part of Nortek or Nortek Holdings is necessary to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by each of Nortek and Nortek Holdings, and constitutes, assuming due authorization, execution and delivery of this Agreement by K Holdings, a valid and binding obligation of Nortek and Nortek Holdings enforceable against each of Nortek and Nortek Holdings in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law). (b) Under applicable law and the Certificate of Incorporation, including as such Certificate of Incorporation is to be amended by the Charter Amendment, the affirmative vote of a majority of the votes represented by the shares of Nortek Holdings Common Stock and Nortek Holdings Special Common Stock outstanding on the record date, established by the Board of Directors of the Company in accordance with the by-laws of the Company, applicable law and this Agreement, at the Special Meeting (as defined herein), voting together as a single 12 class, and voting separately as separate classes, is the only vote required to approve this Agreement and the Transactions, including the Charter Amendment and the Reclassification. (c) The execution and delivery of the Holding Company Merger Agreement and the performance of the respective obligations of each of Nortek, Nortek Holdings and Nortek Holdings Merger Sub thereunder have been duly and validly authorized, and the Holding Company Merger Agreement has been approved by the Special Committee and the Boards of Directors of Nortek, Nortek Holdings and Nortek Holdings Merger Sub, and approved and adopted by Nortek as the sole stockholder of Nortek Holdings and approved and adopted by Nortek Holdings as the sole stockholder of Nortek Holdings Merger Sub, and no other corporate action on the part of Nortek, Nortek Holdings or Nortek Holdings Merger Sub is necessary to authorize the execution, delivery and performance of this Agreement. Pursuant to Section 251(g) of the DGCL, no vote of the holders of capital stock of Nortek, Nortek Holdings or Nortek Holdings Merger Sub is required to effect the Holding Company Merger. SECTION 3.3 Consents and Approvals; No Violations. (a) Neither the execution and delivery of this Agreement nor the performance by Nortek and Nortek Holdings of their respective obligations hereunder nor the consummation by Nortek and Nortek Holdings of the Transactions will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or the by-laws of the Company or any Subsidiary thereof; (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or obligation to repurchase, repay, redeem or acquire or any similar right or obligation) under any of the terms, conditions or provisions of any Material Contract (as defined herein) or any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease, contract or agreement or similar instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their assets may be bound (collectively, the "Company Contracts") or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any Governmental Entity (as hereinafter defined) to which the Company or any of its Subsidiaries is subject, excluding from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights or violations that would 13 not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (b) No filing or registration with, notification to, or authorization, consent or approval of, any government or any agency, court, tribunal, commission, board, bureau, department, political subdivision or other instrumentality of any government (including any regulatory or administrative agency), whether federal, state, multinational (including, but not limited to, the European Community), provincial, municipal, domestic or foreign (each, a "Governmental Entity") is required in connection with the execution and delivery of this Agreement by Nortek and Nortek Holdings or the performance by Nortek and Nortek Holdings of their respective obligations hereunder, except (i) the filing of the Charter Amendment in accordance with the DGCL and filings to maintain the good standing of the Company, (ii) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"), the applicable EC Merger Regulations (as defined in Section 5.7(d) hereof) or any other applicable foreign laws regulating competition, antitrust, investment or exchange controls ("Foreign Monopoly Laws"); (iii) compliance with any applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"), the Trust Indenture Act of 1939, as amended, and the rules and regulations promulgated thereunder (the "Trust Indenture Act"), and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"); (iv) compliance with any applicable requirements of state blue sky, securities or takeover laws or stock exchange requirements; and (v) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings the failure of which to be obtained or made would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. SECTION 3.4 Capitalization. The authorized capital stock of the Company consists of 40,000,000 shares of Nortek Common Stock (or, after the Holding Company Merger, Nortek Holdings Common Stock), 5,000,000 shares of Nortek Special Common Stock (or, after the Holding Company Merger, Nortek Holdings Special Common Stock), and 7,000,000 shares of preference stock, $1.00 par value per share, of the Company (the "Nortek Preference Stock"), of which 200,000 shares are designated as Series A Participating Preference Stock. As of June 18, 2002, there were (A) 10,489,978 shares of Nortek Common Stock issued and outstanding (and there are an additional 8,377,935 shares of Nortek Common Stock held in the treasury of the Company), (B) 513,113 shares of Nortek Special Common Stock issued and outstanding, and (C) no shares of Preference Stock issued and 14 outstanding and, since June 18, 2002, no shares of capital stock of the Company have been issued, except pursuant to the exercise of Options and conversion of Nortek Special Common Stock, in each case, outstanding on such date. All shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and were not issued in violation of any preemptive rights. As of June 18, 2002, 2,685,163 shares of Nortek Common Stock and 2,644,116 shares of Nortek Special Common Stock were reserved for issuance (of which 837,897 shares of Nortek Common Stock and 1,248,849 shares of Nortek Special Common Stock were issuable upon the exercise of outstanding Options) under the Company Option plans listed on Section 3.4 of the Company Disclosure Schedule (such schedule to specify the shares reserved for issuance and issuable upon the exercise of outstanding Options for each such plan). As of the date hereof, 803,282 shares of Nortek Common Stock were reserved for issuance upon the conversion of shares of Nortek Special Common Stock and all of such shares of Nortek Common Stock were issuable upon the conversion of Nortek Special Common Stock. Except as set forth in the four preceding sentences or as contemplated by this Agreement, there are outstanding (I) no shares of capital stock or other voting securities of the Company, (II) no securities of the Company or any Subsidiary of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company and (III) no options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (I), (II) and (III) being referred to collectively as the "Company Securities"). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities, except for the Redemption. No Subsidiary of the Company owns any capital stock or other voting securities of the Company. SECTION 3.5 Subsidiaries. (a) Each Subsidiary of the Company that is actively engaged in any business or owns any assets or has any non de minimis liabilities (contingent or otherwise) (each, an "Active Company Subsidiary") (i) is a entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (to the extent such concept is recognized), (ii) has all necessary powers required to carry on its business as now conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification or licensing necessary, except for failures of this representation and warranty to be true which would not, in the aggregate, have a Company Material 15 Adverse Effect. For purposes of this Agreement, "Subsidiary" means with respect to any Person, any corporation or other legal entity of which such Person owns, directly or indirectly, 50% or more of the outstanding stock or other equity interests, the holders of which are entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. All Active Company Subsidiaries and their respective jurisdictions of organization are identified on Section 3.5(a) of the Company Disclosure Schedule. (b) All of the outstanding shares of capital stock of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable, and such shares are owned by the Company or by a Subsidiary of the Company free and clear of any Liens (as defined hereafter) or limitation on voting rights. There are no subscriptions, options, warrants, calls, rights, convertible securities or other agreements or commitments of any character relating to the issuance, transfer, sale, delivery, voting or redemption (including any rights of conversion or exchange under any outstanding security or other instrument) for any of the capital stock or other equity interests of any such Subsidiaries. For purposes of this Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, except, in the case of securities, for limitations on transfer imposed by federal or state securities laws. (c) Section 3.5(c) of the Company Disclosure Schedule sets forth all Persons in which the Company or a Subsidiary of the Company owns 10% or more of the outstanding voting or equity interest, the owner thereof and the amount thereof so owned. SECTION 3.6 SEC Documents. The Company has filed all reports, proxy statements, registration statements, forms and other documents required to be filed by it with the Securities and Exchange Commission ("SEC") since January 1, 2001 (collectively, including all exhibits and schedules thereto and documents incorporated by reference therein, the "Company SEC Documents"). No Subsidiary of the Company is required to file any report, proxy statement, registration statement, form or other document with the SEC. None of the Company SEC Documents (other than the financial statements contained therein, as to which representations are made in Section 3.7 hereof) (as amended prior to the date of this Agreement, if amended prior to the date of this Agreement), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All of such Company SEC Documents 16 (as amended prior to the date of this Agreement, if amended prior to the date of this Agreement), complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, each as in effect on the date so filed. SECTION 3.7 Financial Statements; No Undisclosed Liabilities. (a) The consolidated financial statements of Nortek and Nortek Holdings (including any notes and schedules thereto) included in the Company SEC Documents (i) were prepared from the books and records of the Company and its Subsidiaries, (ii) comply as to form in all material respects with all applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (iii) are in conformity with United States generally accepted accounting principles as in effect as of the dates of such financial statements ("GAAP"), applied on a consistent basis (except as may be indicated therein or in the notes thereto and, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) during the periods involved and (iv) fairly present, in all material respects, the consolidated financial position of Nortek and Nortek Holdings, as the case may be, and its respective consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that are not expected to be material in amount). (b) Except for (i) those liabilities or obligations that are fully reflected or reserved for in the consolidated balance sheet (including the notes thereto) of Nortek included in its Annual Report on Form 10-K for the year ended December 31, 2001 (the "Company 10-K"), and (ii) liabilities and obligations incurred since December 31, 2001 in the ordinary course of business consistent with past practice or in connection with the Transactions, the Company and its Subsidiaries did not have at December 31, 2001, and since such date the Company and its Subsidiaries have not incurred, any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in the Company's financial statements in accordance with GAAP), except for such liabilities and obligations which would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. SECTION 3.8 Proxy Statement; Other Filings. None of the information contained in the Proxy Statement (as defined in Section 5.2(b)) (and any amendments thereof or supplements thereto) will at the time of the mailing of the Proxy Statement to the holders of Shares, at the time of the Special Meeting (as 17 defined in Section 5.2(a) hereof), and at the time of any amendments thereof or supplements thereto, and none of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Schedule 13E-3 (as defined in Section 5.2(b) hereof) to be filed with the SEC concurrently with the filing of the Proxy Statement, will, at the time of its filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made or omitted in the Proxy Statement or Schedule 13E-3 relating to Kelso & Company, L.P. ("Kelso") and its affiliates or K Holdings based on information supplied by Kelso and its affiliates or K Holdings for inclusion or incorporation by reference in the Proxy Statement or Schedule 13E-3. The Proxy Statement and the Schedule 13E-3 will comply as to form in all material respects with the provisions of the Exchange Act, except that no representation is made by the Company with respect to the statements made or omitted in the Proxy Statement or Schedule 13E-3 relating to Kelso and its affiliates or K Holdings based on information supplied by Kelso and its affiliates or K Holdings for inclusion or incorporation by reference in the Proxy Statement or Schedule 13E-3. SECTION 3.9 Absence of Material Adverse Changes, etc. Except as set forth in the Company SEC Documents filed prior to the date hereof and except as expressly contemplated by this Agreement, since December, 2001, the Company and its Subsidiaries have conducted their business only in the ordinary course consistent with past practice, and there has not been (i) any change, event or effect that, individually or in the aggregate, has had, or is reasonably likely to have, a Company Material Adverse Effect or (ii) any action taken by the Company or any of its Subsidiaries that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1 of this Agreement. SECTION 3.10 Taxes. (1) All material Tax Returns required to be filed by or on behalf of the Company or any of its Subsidiaries have been timely filed in the manner prescribed by law, and all such Tax returns are true, complete and accurate in all material respects; (2) all Taxes due and owing (whether or not reflected on any Tax Return) by the Company or any Subsidiary of the Company have been timely paid, or adequately reserved or properly accounted for in accordance with GAAP; (3) there is no presently pending, scheduled or commenced audit, examination, deficiency, refund litigation, proposed adjustment, proceeding (whether judicial or administrative) or matter in controversy relating to Taxes of the 18 Company or any Subsidiary of the Company; (4) there are no material liens for Taxes on any asset of the Company or any Subsidiary of the Company, except for liens for Taxes not yet due and payable; and (5) the Company and each of its Subsidiaries has complied in all material respects with all rules and regulations relating to the withholding of Taxes (including, without limitation, employee-related Taxes) or has adequately reserved or properly accounted for such taxes in accordance with GAAP. (a) The statutes of limitations for the federal income Tax Returns of the Company and the Subsidiaries of the Company have expired or otherwise have been closed for all taxable periods ending on or before December 31, 1996. (b) The Company is not and has not been a United States real property holding corporation (as defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) during the 5-year period ending on the Closing Date. (c) Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any person other than the Company or any of its Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor or (iii) by contract. (d) For purposes of this Agreement, (i) "Taxes" means all taxes, levies or other like assessments, charges or fees (including estimated taxes, charges and fees), including, without limitation, income, corporation, advance corporation, gross receipts, transfer, excise, property, sales, use, value-added, license, payroll, withholding, social security and franchise or other governmental taxes or charges, imposed by the United States or any state, county, local or foreign government or subdivision or agency thereof, any liability for taxes, levies or other like assessments, charges, fees of another Person pursuant to Treasury Regulation Section 1.1502-6 or any similar or analogous provision of applicable law or otherwise (including, without limitation, by agreement) and such term shall include any interest, penalties or additions to tax attributable to such taxes and (ii) "Tax Return" means any report, return, statement, declaration or other written information required to be supplied to a taxing or other governmental authority in connection with Taxes. (e) Neither the Company nor any of its Subsidiaries is required to include in income any material adjustment pursuant to Section 481(a) of the Code (or 19 any similar provisions of state, local or foreign law) in its current or in any future taxable period by reason of a change in accounting method. SECTION 3.11 Employee Benefit Plans. (a) The Company has heretofore delivered or made available to K Holdings true and complete copies of (i) each bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance or termination pay, hospitalization or other medical, life or other employee benefit-related insurance, supplemental unemployment benefits, profit-sharing, pension, or retirement plan, program, agreement or arrangement, whether written or oral, sponsored, maintained or contributed to or required to be contributed to by the Company or any member of its "controlled group," within the meaning of Section 414(b), (c) or (m) of the Code, (together, the "Company Group") for the benefit of any employee or former employee of the Company Group (collectively, the "Plans") and (ii) if any Plan is funded through a trust or any third party funding vehicle, copies of such trust or other vehicle. (b) Schedule 3.11(b) of the Company Disclosure Schedule contains a true and complete list of all Plans that are material to the Company and its Subsidiaries taken as a whole. (c) Schedule 3.11(c) of the Company Disclosure Schedule contains a true and complete list of all Plans pursuant to which any amounts may become vested or payable as a result of the consummation of the Transactions (either alone or in combination with other events). (d) No member of the Company Group has any legally binding plan or commitment to create any additional Plan or modify or change any existing Plan that would be reasonably expected to result in material liabilities to the Company Group, except as may be required by law. (e) Other than as set forth in Schedule 3.11(e) of the Company Disclosure Schedule, no member of the Company Group has incurred, or reasonably expects to incur, (i) any material liability under Title IV of ERISA that has not been satisfied in full, including, without limitation, any such material unsatisfied liability arising out of proceedings instituted by the PBGC or (ii) any liability that has not been satisfied in full in connection with any Plan that is a Multiemployer Plan on account of a "complete withdrawal" or "partial withdrawal" as such terms are respectively defined in sections 4203 and 4205 of ERISA, except as would not, in 20 the aggregate, reasonably be expected to have a Company Material Adverse Effect. The aggregate withdrawal liability of the Company Group, computed as if a complete withdrawal by each member of the Company Group from each Plan that is a Multiemployer Plan occurred on the date hereof, would not reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, (i) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder, (ii) "PBGC" means the Pension Benefit Guaranty Corporation and (iii) "Multiemployer Plan" means a multiemployer plan within the meaning of section 4001(a)(3) of ERISA. (f) Except to the extent that it would not result in material liability to the Company, each of the Plans has been operated and administered in all material respects in accordance with the terms of such Plan and all applicable laws, including but not limited to ERISA and the Code, and no governmental audits, actions, suits or claims (other than routine claims in the ordinary course) are pending or, to the knowledge of the Company, threatened. (g) Each of the Plans which is intended to be "qualified" within the meaning of section 401(a) of the Code is so qualified, provided that any corrections required to be made to maintain such qualification are set forth in Section 3.11(g) of the Company Disclosure Schedule and can be cured under Revenue Procedure 2001-17 without material liability to the Company. Each of the Plans that is intended to satisfy the requirements of section 501(c)(9) of the Code has so satisfied such requirements other than any failure that would not give rise to material liability. (h) Full payment has been made, or will be made in accordance with Section 404(a)(6) of the Code, of all amounts which any member of the Company Group is required to pay on or before the Closing Date under the terms of each of the Plans and Section 412 of the Code, and all amounts not payable prior to Closing will be properly accrued and recorded on the balance sheet of the Company, except as would not reasonably be expected to result in a Company Material Adverse Effect, and, other than as set forth in Section 3.11(h) of the Company Disclosure Schedule, none of the Plans or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Plans ended prior to the date of this Agreement. 21 SECTION 3.12 Environmental Matters. (a) The Company and each of its Subsidiaries is in compliance with all applicable Environmental Laws, including possessing all permits, authorizations, licenses, exemptions and other governmental authorizations required for its operations under applicable Environmental Laws (all of the foregoing, the "Environmental Permits"), except for such violations, if any, that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. All such Environmental Permits are in effect, no appeal nor any other action is pending to revoke any such Environmental Permit, and the Company and each of its Subsidiaries are in compliance with all terms and conditions of such Environmental Permits, except for such violations, if any, that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. To the extent required by applicable Environmental Laws, the Company and each of its Subsidiaries have filed (or will have filed by the Closing Date) all applications necessary to renew or obtain any Environmental Permits in a timely fashion so as to allow the Company and each of its Subsidiaries to continue to operate their businesses in compliance with applicable Environmental Laws, except for such failure, if any, that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, and the Company does not expect such new or renewed Environmental Permits to include any new terms or conditions that will have a material impact on the Company or any of its Subsidiaries. (b) There is no pending or, to the knowledge of the Company, threatened claim, lawsuit, or administrative proceeding against the Company or any of its Subsidiaries, under or pursuant to any Environmental Law, and neither the Company nor any of its Subsidiaries has received written notice from any Person, including any Governmental Entity, alleging that the Company or any of its Subsidiaries has been or is in violation or potentially in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law, which violation or liability is unresolved, except for such violations and liabilities which would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any written request for information from any Person, including but not limited to any Governmental Entity, related to any potential liability under or compliance with any applicable Environmental Law, except for such liability that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. 22 (c) With respect to the real property that is currently owned, leased or operated by the Company or any of its Subsidiaries, there have been no Releases of Hazardous Substances on or underneath any of such real property except for those that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (d) With respect to real property that was formerly owned, leased or operated by the Company or any of its Subsidiaries or any of their predecessors in interest, there were no Releases of Hazardous Substances on or underneath any of such real property during the Company's or any of its Subsidiaries' ownership or operation of such real property except for those that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (e) Neither the Company nor any of its Subsidiaries has entered into any agreement that may require them to pay to, reimburse, guarantee, pledge, defend, indemnify or hold harmless any Person from or against any liabilities or costs arising out of or related to the generation, manufacture, use, transportation or disposal of Hazardous Substances, or otherwise arising in connection with or under Environmental Laws, except for such liabilities or costs, if any, that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (f) To the knowledge of the Company, neither the Company nor any of its Subsidiaries, within the next five years, will be required to expend monies for capital improvements in order to (1) comply or maintain compliance with applicable Environmental Laws or (2) comply with regulatory requirements that are not now effective, but to the knowledge of the Company, will be or are reasonably expected to become effective after the Closing Date, except for such expenditures that, if made as of the date of this Agreement, would not reasonably be expected to have a Company Material Adverse Effect. (g) For purposes of this Agreement (i) "Environmental Laws" shall mean all foreign, federal, state and local laws, regulations, rules and ordinances relating to pollution or protection of the environment or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances and all laws and regulations with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and all laws relating to endangered 23 or threatened species of fish, wildlife and plants and the management or use of natural resources, (ii) "Hazardous Substance" shall mean any substance, whether solid, liquid or gaseous, which is listed, defined or regulated as a "hazardous substance", "hazardous waste", "oil", "pollutant", "toxic substance", "hazardous material waste", or "contaminant" or is otherwise classified as hazardous or toxic, in or pursuant to any Environmental Laws; or which is or contains any asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, explosive, nuclear, or radioactive material, or motor fuel or other petroleum hydrocarbons, or pesticides, insecticides, fungicides, or rodenticides, or biohazardous materials or waste, and (iii) "Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment or into or out of any property, including the movement of Hazardous Substances through or in the air, soil, surface water or groundwater. SECTION 3.13 Litigation; Compliance with Laws. (a) Except as set forth in the Company SEC Documents filed prior to the date of this Agreement or arising out of the Transactions, there is no action, suit, charge, complaint, grievance or proceeding pending (each, an "Action") against, or to the knowledge of the Company threatened against, the Company or any Subsidiary of the Company or any of their respective properties, or any of their officers, employees or directors in their capacity as such, or any other Person with respect to which, in whole or in part, the Company or any Subsidiary of the Company is liable or has agreed to indemnify such other Person, before any court or arbitrator or any Governmental Entity except for those that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. After the date of this Agreement, there shall not have been commenced or threatened in writing any "Designated Actions" which, when considered collectively, are such that it would not be unreasonable to conclude that there is a material risk that the Company and its Subsidiaries will in the future incur liabilities in connection with such Designated Actions and/or other potential Actions involving allegations of a similar nature that would be material to the Company and its Subsidiaries taken as a whole. The term "Designated Actions" shall have the meaning set forth in Section 3.13(a) of the Company Disclosure Schedule. (b) The Company and its Subsidiaries are (and since January 1, 2001 have been) in compliance with all applicable laws, ordinances, rules and regulations of any federal, state, local or foreign Governmental Entity applicable to their respective businesses and operations, except for such violations, if any, which, individually or in the aggregate, would not reasonably be expected to have a 24 Company Material Adverse Effect. The Company and its Subsidiaries have all governmental licenses, permits, authorizations, consents and approvals (collectively, "Licenses") required to carry on its business as now conducted and all such Licenses are in full force and effect, other than any such Licenses the failure of which to have or to be in full force and effect would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Subsidiary thereof has received notification from any Governmental Entity of any intent to revoke or terminate, or of any proceedings regarding, any of their material Licenses. SECTION 3.14 Intellectual Property. (a) The Company and its Subsidiaries own or have the right to use all Intellectual Property (as defined hereafter) used in or necessary for the conduct, in all material respects, of the business of the Company and its Subsidiaries as such business is currently conducted, except where the failure to so own or have such right would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (b) To the knowledge of the Company: (i) all of the registrations relating to material Intellectual Property owned by the Company and its Subsidiaries are subsisting and unexpired, and, except with respect to Liens granted under the Bank Facility, all the material Intellectual Property is free of all Liens, and has not been abandoned; (ii) the Company and its Subsidiaries do not infringe or otherwise violate, and neither the Company nor any of its Subsidiaries has received any notice of potential infringement or other violation of, the Intellectual Property rights of any third party in any respect that would (either by reason of any damage claims against the Company or any of its Subsidiaries or by reason of the Company or any of its Subsidiaries ceasing to so infringe such rights) reasonably be expected to have, in the aggregate, a Company Material Adverse Effect; (iii) no third party is challenging, infringing on or otherwise violating any right of the Company or any of its Subsidiaries in or to any Intellectual Property owned or licensed by the Company or any of its Subsidiaries; (iv) no judgment, decree, injunction, rule or order has been rendered by any Governmental Entity which would limit, cancel or question the validity of, or the Company's or its Subsidiaries' rights in and to, any Intellectual Property owned or used by the Company in any respect except for those that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect; (v) neither the Company nor any of its Subsidiaries has received notice of any pending or threatened suit, action or proceeding that seeks to limit, cancel or question the validity of, or the Company's or any of its Subsidiaries' rights in and to, 25 any Intellectual Property, except for those that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (c) For purposes of this Agreement, "Intellectual Property" shall mean all rights provided under U.S. state and foreign law relating to intellectual property, including without limitation all (x) (1) patents, patent applications, patent disclosures, and all rights related thereto including all reissues, divisions, and continuations; (2) proprietary inventions, discoveries, processes, formulae, designs, methods, techniques, procedures, concepts, developments, technology, new and useful improvements thereof and proprietary know-how relating thereto, whether or not patented or eligible for patent protection; (3) copyrights and copyrightable works, including computer applications, programs, software, databases, Internet websites, and related items; (4) trademarks, service marks, trade names, trade dress, and domain names, and the goodwill of the business symbolized thereby, and all common-law rights relating thereto; (5) trade secrets and other confidential information and (y) all registrations, applications and recordings for any of the foregoing. (d) The consummation of the Transactions will not result in the loss or impairment of the Company's or any of its Subsidiaries' ownership or use of any Intellectual Property, except as would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. SECTION 3.15 Material Contracts. (a) All contracts described in Item 601(b)(10) of Regulation S-K to which the Company or its Subsidiaries is a party or may be bound ("S-K Contracts") have been filed as exhibits to, or incorporated by reference in, the Company's Form 10-K for the year ended December 31, 2001. As used herein, "Material Contracts" shall mean all S-K Contracts and the following contracts: (i) all management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other amounts calculated based upon (x) the revenues or income of the Company or any of its Subsidiaries or (y) the revenues or income of any product of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party, in each case involving aggregate annual payments by the Company or any of its Subsidiaries of more than $500,000; 26 (ii) all contracts and agreements that (A) limit or purport to limit the ability of the Company or any of its Subsidiaries or, to the Company's knowledge, any key executives of the Company or any of its Subsidiaries, to compete in any line of business or with any Person or in any geographic area or location or during any period of time, (B) require the Company or any of its Subsidiaries to use any supplier or third party for all or substantially all of the Company's or any of its Subsidiaries' requirements or needs, (C) limit or purport to limit in any material respect the ability of the Company or any of its Subsidiaries to solicit any customers or clients of the other parties thereto, or (D) require the Company or any of its Subsidiaries to provide to the other parties thereto "most favored nations" pricing (each of (A) through (D), a "Restrictive Agreement"); (iii) all (or, in the case of the Company and persons other than officers or principals, all written) contracts, understandings, transactions, agreements and arrangements between the Company (and all material contracts, understandings, transactions, agreements and arrangements between any of its Subsidiaries), on the one hand, and any of their respective officers, directors or principals (or any of such Person's affiliates) on the other hand (each such contract, a "Related Party Agreement"); and (iv) all joint venture contracts, partnership arrangements or other agreements outside the ordinary course of business involving a sharing of profits, losses, costs or liabilities by the Company or any of its Subsidiaries of more than $1,000,000 per year with any third party. (b) Set forth on Section 3.15 of the Company Disclosure Schedule is a true and complete list of all Material Contracts described in clauses (i) through (iv) above. (c) All Material Contracts are valid and in full force and effect on the date hereof, except to the extent they have previously expired in accordance with their terms. None of the Company, its Subsidiaries, or, to the knowledge of the Company, the other parties thereto, has violated in any material respect any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any Material Contract. 27 SECTION 3.16 Indebtedness; Company Cash. (a) Except for (v) Indebtedness (as defined herein) specifically described in the notes to the Company's unaudited consolidated financial statements for the three months ended March 31, 2002 included in the Company 10-Q, (w) Indebtedness included in the amount set forth under total liabilities on the balance sheet included therein, (x) Indebtedness of the Company to any of its wholly owned Subsidiaries or of any Subsidiary of the Company to the Company, (y) Indebtedness incurred under working capital facilities of foreign Subsidiaries of the Company not exceeding the amount of such Indebtedness outstanding on March 31, 2002 and (z) other Indebtedness not in excess of $500,000 in the aggregate, the Company and its Subsidiaries have no outstanding Indebtedness and no Contracts, agreements, understandings or other obligations relating to Indebtedness, other than Indebtedness incurred after the date hereof in compliance with Section 5.1(j) hereof. (b) For the purposes of this Agreement, "Indebtedness" or "indebtedness" means, without duplication, (i) all indebtedness, notes payable (including, without limitation, notes payable in connection with acquisitions), accrued interest payable or other obligations of the Company and its Subsidiaries for borrowed money, whether current, short-term, or long-term, secured or unsecured, (ii) all indebtedness of the Company and its Subsidiaries for the deferred purchase price for purchases of property or assets, (iii) all lease obligations of the Company and its Subsidiaries under leases which are capital leases in accordance with GAAP, (iv) all off-balance sheet financing of the Company and Subsidiaries including, without limitation, synthetic leases and project financing, (v) any obligations of the Company or its Subsidiaries in respect of banker's acceptances or letters of credit (other than stand-by letters of credit in support of ordinary course trade payables), (vi) any liability of the Company or its Subsidiaries with respect to interest rate swaps, collars, caps and similar hedging obligations, (vii) the obligations pursuant to any class of preferred stock (other than Nortek Preference Stock or Nortek Holdings Preference Stock) and any dividends accrued thereon, (viii) any indebtedness referred to in clauses (i) through (vii) above of any Person or entity other than the Company which is either guaranteed by, or secured by any Lien upon any property or assets owned by, the Company or any of its Subsidiaries and (ix) any prepayment penalties resulting from the discharge of any of the foregoing obligations which are or will be actually prepaid pursuant to a pre-existing contractual arrangement as a result of the Transactions; provided, however, that the foregoing definition of Indebtedness shall not include ordinary course trade payables and accrued expenses (other than interest). In addition to the foregoing, "Indebtedness" or "indebtedness" 28 also includes any Indebtedness that will become due or owing as a result of the execution and delivery of this Agreement or the consummation of the Transactions. (c) As of the date of this Agreement, the Company and its Subsidiaries had cash and cash equivalents on hand of not less than $175 million. SECTION 3.17 Real Estate. (a) The Company or one of its Subsidiaries has (i) good, valid and marketable title to each parcel of real property owned in fee by the Company or any of its Subsidiaries (the "Company Fee Property") and (ii) good, valid and subsisting leasehold title to each parcel of real property leased by the Company or any of its Subsidiaries (the "Company Leased Property" and together with the Company Fee Property, the "Company Real Property") pursuant to a lease set forth on Section 3.17(a) of the Company Disclosure Schedule (the "Company Leases"), in each case where any such real property is necessary to the conduct of the business of the Company and its Subsidiaries as it is presently conducted, except for any such failure in title which does not have a Company Material Adverse Effect. Section 3.17(a) of the Company Disclosure Schedule sets forth a true and complete list of all Company Real Property which is necessary to the conduct of the business of the Company and its Subsidiaries as it is presently conducted. To the Company's knowledge, (1) the Company or one of its Subsidiaries has the right to quiet enjoyment of the Company Leased Property for the full term of the Company Lease relating thereto, except for any failure which would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (2) each Company Lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the parties thereto and there is no, nor has the Company or any of its Subsidiaries received notice of any, default (or any condition or event, which, after notice or a lapse of time or both would constitute a default thereunder), except for any failure which would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (3) neither the Company nor any of its Subsidiaries has assigned its interest under any Company Lease or sublet any part of the premises covered thereby or exercised any option or right thereunder except as would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, and (4) no penalties are accrued and unpaid under any Company Lease, except for penalties that would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (b) The Company Real Property is not subject to any liens, restrictions, rights-of-way or other encumbrances (collectively, "Property 29 Restrictions"), except for: (i) any such Property Restrictions for taxes, assessments and other governmental charges not yet due and payable, or, if due, not delinquent or being contested in good faith by appropriate proceedings during which collection or enforcement against the Company Real Property is stayed, (ii) Property Restrictions imposed or promulgated by law or any Governmental Entity with respect to real property, including zoning, building or similar restrictions where such Property Restrictions would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (iii) easements, licenses, covenants, conditions, mechanic's liens, rights-of-way and other similar restrictions and encumbrances, including any other agreements, restrictions or encumbrances which would be shown on a current title report or survey or similar report or listing and any other matters of record, provided the same would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or (iv) where the existence of any such Property Restrictions, in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. (c) To the Company's knowledge and except as would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) there is no Company Real Property whose building systems are not in working order, (ii) there is no physical damage to any Company Real Property, (iii) there is no currently pending and incomplete renovation or restoration to any Company Real Property and (iv) there are no material structural defects relating to the Company Real Property. To the Company's knowledge, neither the Company nor any of its Subsidiaries has received any written notice to the effect that (A) any condemnation or rezoning proceedings are pending or threatened with respect to any of the Company Real Property or (B) any zoning, building or similar law, code, ordinance, order or regulation is or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the Company Real Property or by the continued maintenance, operation or use of the parking areas. SECTION 3.18 Labor Relations and Employment. (a) (i) Except as would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no labor strike, dispute, slowdown, stoppage, or lockout actually pending, or to the knowledge of the Company, threatened or being carried out against the Company or its Subsidiaries which may interfere with the respective business activities of the Company or any of its Subsidiaries; (ii) to the knowledge of the Company, no unions claim to represent any employees of the Company or any of its Subsidiaries; (iii) except as set forth on Schedule 3.18(a), neither the Company nor any of its Subsidiaries is a party to or 30 bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association; (iv) except as set forth on Schedule 3.18(a), none of the employees of the Company or any of its Subsidiaries is represented by any labor organization and neither the Company nor any of its Subsidiaries have any knowledge of any union organizing activities among such employees, nor does any question concerning representation exist concerning such employees; and (v) there has not occurred a substantial union organizing event at one or more facilities of the Company or its domestic Subsidiaries in respect of which there is a reasonable risk that such event would have a material adverse impact on the labor costs of the Company and its Subsidiaries taken as a whole. (b) The Company and its Subsidiaries are, to the knowledge of the Company, in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, and are not engaged in any unfair labor practices, except for such violations, if any, which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries have received notice of the intent of any Governmental Entity responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to employees and, to the knowledge of the Company, no such investigation is in progress which would, in the aggregate, reasonably be expected to have a Company Material Adverse Effect. SECTION 3.19 Opinion of Financial Advisors. Nortek has received the opinion of Morgan Stanley & Co. Incorporated to the effect that the Redemption Consideration is fair to the stockholders of the Company from a financial point of view. SECTION 3.20 Finders' and Other Fees. Except for Morgan Stanley & Co. Incorporated, whose fees will be paid by the Special Committee, there is no investment banker, broker, finder or other intermediary which has been retained by, or is authorized to act on behalf of, the Special Committee, the Company or any Subsidiary of the Company, or any employee or consultant of the Company or any Subsidiary of the Company, that would be entitled to any fee, commission, sale bonus or similar payment from the Special Committee, the Company, any Subsidiary of the Company, K Holdings or any of K Holdings's affiliates upon consummation of the Transactions. 31 SECTION 3.21 Rights Amendment. The Company and its Board of Directors have taken all necessary action to render the Rights Agreement inapplicable to the Transactions, and neither the execution and delivery of this Agreement nor the consummation of any of the Transactions will result in the occurrence of a Distribution Date (as defined in the Rights Agreement) or otherwise cause the Rights to become exercisable by the holders thereof. From and after the Holding Company Merger, the Rights Agreement shall apply in respect of Nortek Holdings and shall be void and of no further force or effect with respect to Nortek. For purposes of this Agreement, "Rights Agreement" means the Second Amended and Restated Rights Agreement, dated April 1, 1996, as amended, between the Company and EquiServe Trust Company, N.A., as Rights Agent, and "Rights" shall have the meaning specified therein. SECTION 3.22 Nortek Holdings Operations. Nortek Holdings was formed solely for the purpose of engaging in the Transactions and has not, as of the date of this Agreement, (i) engaged in any business activities, (ii) conducted any operations other than in connection with the Transactions, (iii) incurred any liabilities other than in connection with the Transactions or (iv) owned any assets or property other than Nortek Holdings Merger Sub. As of the date of this Agreement, all of the issued and outstanding shares of capital stock of Nortek Holdings are owned by Nortek and have been validly issued, fully paid and nonassessable and not issued in violation of statutory or contractual preemptive or similar rights. SECTION 3.23 Debt Financing. The Company has received and delivered to K Holdings a copy of the bank facility (the "Bank Facility") commitment letter, dated as of May 31, 2002, by and among Nortek, Fleet Capital Corporation and Fleet Securities, Inc. (the "Bank Facility Commitment Letter"). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDINGS Except as disclosed in K Holdings' disclosure schedule delivered concurrently with the delivery of this Agreement (the "K Holdings Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to the information called for by such other representation and warranty or covenant reasonably apparent), K Holdings hereby represents and warrants to the Company as follows: 32 SECTION 4.1 Corporate Existence and Power. K Holdings is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has all necessary corporate or other power, as the case may be, required to carry on its business as now conducted. K Holdings is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of the property owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for those jurisdictions where failures to be so qualified or licensed or in good standing would not, in the aggregate, reasonably be expected to have a K Holdings Material Adverse Effect. K Holdings has heretofore delivered or made available to the Company true and complete copies of the governing documents or other similar organizational documents, as currently in effect, of K Holdings. As used herein, the term "K Holdings Material Adverse Effect" shall mean, with respect to one or more changes, events and effects, a material adverse effect on (i) the condition (financial or otherwise), business, assets, liabilities, prospects, or result of operations of K Holdings and its Subsidiaries, taken as a whole, other than, any event, change, circumstance or effect resulting from, or relating to (x) the economy or financial markets in general, or (y) in general the industries in which K Holdings and its Subsidiaries operate and not specifically relating to, or having a materially disproportionate effect (relative to the effect on other similar companies) on, K Holdings and its Subsidiaries, taken as a whole or (ii) the ability of K Holdings and its Subsidiaries to consummate the Transactions. All references to K Holdings Material Adverse Effect contained in this Agreement shall be deemed to refer solely to the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of K Holdings and its Subsidiaries, taken as a whole, without including its ownership of the Company and its Subsidiaries after the Transactions. SECTION 4.2 Authorization. K Holdings has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized and this Agreement has been approved by the Board of Directors of K Holdings, and no other proceedings on the part of K Holdings is necessary to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by K Holdings and constitutes, assuming due authorization, execution and delivery of this Agreement by the Company, a valid and binding obligation of K Holdings, enforceable against K Holdings in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law). 33 SECTION 4.3 Consents and Approvals; No Violations. (a) Neither the execution and delivery of this Agreement nor the performance by K Holdings of its obligations hereunder nor the consummation by K Holdings of the Transactions will (i) conflict with or result in any breach of any provision of the certificate of incorporation or by-laws (or other governing or similar organizational documents) of K Holdings; (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or obligation to repurchase, repay, redeem or acquire or any similar right or obligation) under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease, contract or agreement or similar instrument or obligation to which K Holdings is a party or by which it or its assets may be bound or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any Governmental Entity to which K Holdings is subject, excluding from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights or violations that would not, in the aggregate, reasonably be expected to have a K Holdings Material Adverse Effect. K Holdings has all Licenses required to carry on its business as now conducted and all such Licenses are in full force and effect, other than any Licenses to failure of which to have or to be in full force and effect would not, in the aggregate, reasonably be expected to have a K Holdings Material Adverse Effect. (b) No filing or registration with, notification to, or authorization, consent or approval of, any Governmental Entity is required in connection with the execution and delivery of this Agreement by K Holdings or the performance by K Holdings of its obligations hereunder, except (i) the filing of the Charter Amendment in accordance with the DGCL and filings to maintain the good standing of the Company; (ii) compliance with any applicable requirements of the HSR Act, or the applicable EC Merger Regulations or applicable Foreign Monopoly Laws; (iii) compliance with any applicable requirements of the Securities Act, the Trust Indenture Act and the Exchange Act; (iv) compliance with any applicable requirements of state blue sky or takeover laws or stock exchange requirements; and (v) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings the failure of which to be obtained or made would not, in the aggregate, reasonably be expected to have a K Holdings Material Adverse Effect. 34 SECTION 4.4 Capitalization. As of the date hereof, the authorized capital stock of K Holdings consists of 1,000,000 shares of common stock, par value $.01 per share (the "K Holdings Common Stock"), of which 100 shares were issued and outstanding. As of the date of this Agreement, 85 shares of K Holdings Common Stock have been issued to Kelso Investment Associates VI, L.P., a Delaware limited partnership, and 15 shares of K Holdings Common Stock have been issued to KEP VI, LLC, a Delaware limited liability company. All of the issued and outstanding shares of K Holdings Common Stock have been duly authorized and validly issued and are fully paid and nonassessable and were not issued in violation of statutory or contractual preemptive or similar rights. SECTION 4.5 Proxy Statement. None of the information supplied or to be supplied by K Holdings for inclusion in the Proxy Statement (and any amendments thereof or supplements thereto) will, at the time of the mailing of the Proxy Statement to the stockholders of the Company, at the time of the Special Meeting, and at the time of any amendments thereof or supplements thereto, and none of the information supplied or to be supplied by K Holdings for inclusion in the Schedule 13E-3, will, at the time of its filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 4.6 K Holdings' Operations. K Holdings was formed solely for the purpose of engaging in the Transactions and has not, as of the date of this Agreement, (i) engaged in any business activities, (ii) conducted any operations other than in connection with the Transactions, (iii) incurred any liabilities other than in connection with the Transactions or (iv) owned any assets or property (other than the stock of North Sub II, Inc., a Delaware corporation). SECTION 4.7 Equity Financing. K Holdings (and its designees) has available to it, subject to the satisfaction or waiver of the conditions contained in Sections 6.1 and 6.3 of this Agreement, sufficient funds to deliver $389,091,466 necessary to consummate the Management Stock Purchase and the K Stock Purchase (the "Equity Financing"). SECTION 4.8 Debt Financing. K Holdings has received and delivered to the Company the bridge facility (the "Bridge Facility") commitment letter with respect to the Debt Financing (as defined herein), dated as of the date of this Agreement, by and among Kelso, UBS AG, Stamford Branch and UBS Warburg LLC (the "Bridge Facility Commitment Letter"). The Bridge Facility Commitment 35 Letter is in full force and effect on the date hereof and has not been amended or modified, and there is no breach or default existing (or which with notice or lapse of time or both may exist) thereunder. Assuming Nortek has cash on hand to make the Distribution as contemplated by Section 2.3 hereof, and makes such Distribution, and has available to it the Bank Facility, then the aggregate proceeds of the Equity Financing and the Bridge Facility are sufficient to pay the aggregate Redemption Consideration, to fund the K Stock Purchase, the Management Stock Purchase, the Option Cash Out and the Change of Control Offer, to provide for the working capital needs of the Company following the Redemption Time and to pay all fees and expenses to be paid by K Holdings related to the Transactions. Neither the Equity Financing nor the Bridge Facility Commitment Letter conditions or will condition the availability of the proceeds of such financing upon the receipt of any consent under the Consent Solicitations. ARTICLE V COVENANTS OF THE PARTIES SECTION 5.1 Conduct of the Business of the Company. During the period from the date of this Agreement and continuing until the Effective Time, the Company agrees as to itself and its Subsidiaries that (except as expressly contemplated or permitted by this Agreement, the Transactions or the Bank Facility, as set forth in the Company Disclosure Schedule or as required by a Governmental Entity of competent jurisdiction or to the extent that K Holdings shall otherwise consent in writing); provided that nothing in this Agreement shall be deemed in any way to prohibit or restrict the right of the Board of Directors of the Company to convert the Nortek Special Common Stock into Nortek Common Stock (or, after the Holding Company Merger, convert the Nortek Holdings Special Common Stock into Nortek Holdings Common Stock) pursuant to Article Fifth of the Certificate of Incorporation (or, after the Holding Company Merger, the Certificate of Incorporation of Nortek Holdings): (a) Ordinary Course. (i) The Company and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course and consistent with past practice. Without limiting the foregoing, the Company and its Subsidiaries shall use their reasonable best efforts to preserve substantially intact their present lines of business, maintain their rights and franchises and preserve substantially intact their relationships with customers, suppliers and 36 others having business dealings with them and keep available the services of their present officers and employees, in each case to the end that their ongoing businesses shall not be impaired in a manner that would reasonably be expected to have a Company Material Adverse Effect at the Effective Time. (ii) The Company shall not, and shall not permit any of its Subsidiaries to, (A) enter into any new material line of business or (B) except for (1) capital expenditures set forth on, and made at the times indicated in, a capital expenditure budget plan delivered to K Holdings prior to the date of this Agreement and (2) capital expenditures not in excess of the aggregate amount not yet expended in the capital expenditure budget for the current year delivered to K Holdings, plus an additional $5,000,000, incur or commit to any capital expenditures. (b) Dividends; Changes in Share Capital. The Company shall not, and shall not permit any of its Subsidiaries to (i) other than pursuant to the Rights Agreement, declare, set aside or pay any dividend or other distribution with respect to any of its capital stock (except for dividends by wholly owned Subsidiaries of the Company), (ii) other than the Reclassification, split, combine or reclassify any of its capital stock or issue any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, except for any such transaction by a wholly owned Subsidiary of the Company which remains a wholly owned Subsidiary after consummation of such transaction, or (iii) other than the Redemption, repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock. (c) Issuance of Securities. The Company shall not, and shall not permit any of its Subsidiaries to, issue, deliver or sell any shares of its capital stock of any class, any bonds, debentures, notes or other indebtedness of the Company having the right to vote on any matters on which stockholders may vote ("Company Voting Debt") or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares of capital stock or Company Voting Debt, other than (i) (A) the issuance of Shares upon the exercise of Options outstanding on the date of this Agreement or issued in accordance with clause (B) below, in each case in accordance with the terms of the Plans in effect as of the date of this Agreement, and (B) the issuance of Options pursuant to Plans in effect as of the date of this Agreement in the ordinary course of business consistent with past practice, but in no event more than 10,000 such Options, (ii) issuances by a wholly owned Subsidiary of the Company of capital stock to such Subsidiary's parent or 37 another wholly owned Subsidiary of the Company, or (iii) issuances in accordance with the Rights Agreement. (d) Governing Documents; Securities. The Company shall not, and shall not permit any of its Subsidiaries to, amend (i) their respective certificates of incorporation, by-laws or other governing documents or (ii) any material term of any outstanding security issued by the Company or any of its Subsidiaries. (e) No Acquisitions. The Company shall not, and shall not permit any of its Subsidiaries to, acquire (or agree to acquire or take any steps to facilitate the acquisition of) by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, stock or operations of another company, other than in the ordinary course of business consistent with past practice or any acquisition by the Company for cash (i) in an aggregate amount not to exceed $1,000,000 and (ii) which do not make it materially more difficult to obtain, or is likely to cause any material delay in obtaining, any approval or authorization required in connection with the Transactions under any Regulatory Law (as defined in Section 5.7(d) hereof). (f) No Dispositions. The Company shall not, and shall not permit any of its Subsidiaries to, sell, dispose of, transfer or divest any assets (including capital stock of its Subsidiaries but excluding excess or obsolete assets and sales of inventory in the ordinary course of business), businesses or divisions other than (i) internal reorganizations or consolidations involving existing Subsidiaries of the Company and (ii) dispositions for which the fair market value of the assets disposed of and of the total consideration, including liabilities assumed, received by the Company or its Subsidiaries in the aggregate does not exceed $1,000,000. (g) No Liens. The Company shall not, and shall not permit any of its Subsidiaries to, create, assume or otherwise incur any Lien or restriction on transfer of any nature whatsoever on any asset other than Liens which, in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. (h) No Relinquishment of Rights. The Company shall not, and shall not permit any of its Subsidiaries to, (i) relinquish, waive or release any material contractual or other right or claim, (ii) settle any material action, suit, claim, investigation or other proceeding or (iii) knowingly dispose of or permit to lapse any 38 rights in any material Intellectual Property or knowingly disclose to any Person not an employee of the Company or any of its Subsidiaries or otherwise knowingly dispose of any material trade secret, process or know-how not a matter of public knowledge prior to the date of this Agreement, except pursuant to judicial order or process or as required by law or regulation. (i) Investments. The Company shall not, and shall not permit any of its Subsidiaries to make any loans, advances or capital contributions to, or investments in, any other Person other than (w) in connection with actions permitted by Section 5.1(e) hereof, (x) by the Company or a Subsidiary of the Company to or in the Company or any wholly-owned Subsidiary of the Company, (y) pursuant to any contract or other legal obligation of the Company or any of its Subsidiaries existing at the date of this Agreement and set forth on Section 5.1(i) of the Company Disclosure Schedule or (z) in the ordinary course of business consistent with past practice in an aggregate amount not in excess of $1,000,000. (j) Indebtedness. The Company shall not, and shall not permit any of its Subsidiaries to, have outstanding, create, incur or assume any Indebtedness other than (x) Indebtedness in existence on the date of this Agreement and additional Indebtedness in an aggregate amount not to exceed, at any one time outstanding, $1,000,000, (y) Indebtedness incurred under the Bank Facility or under the Bridge Facility and (z) Indebtedness incurred under working capital facilities of foreign Subsidiaries of the Company not to exceed at any one time outstanding an amount of such Indebtedness equal to the amount of such Indebtedness outstanding on March 31, 2002, plus $5 million. (k) Compensation; Severance. Except (i) as required by law, (ii) to satisfy contractual obligations existing on the date hereof or (iii) for grants of stock options up to 10,000 such options for new employees and retention of current employees in accordance with Section 5.1(c) hereof, the Company shall not, and shall not permit any of its Subsidiaries to, (A) pay or commit to pay any severance or termination pay other than severance or termination pay that is required to be paid pursuant to the terms of an existing Plan, (B) enter into any employment, deferred compensation, consulting, severance or other similar agreement (or any amendment to any such existing agreement) with any director or officer or key employee of the Company or any of its Subsidiaries, (C) increase or commit to increase any employee benefits payable to any director, officer or employee of the Company or any of its Subsidiaries, including wages, salaries, compensation, pension, severance, termination pay or other benefits or payments (except in the case of employees other than officers and directors in the ordinary course of business consistent with past 39 practice or as required by an existing Plan or any collective bargaining agreement), (D) adopt or make any commitment to adopt any additional employee benefit plan, except as may be required pursuant to any collective bargaining agreement, (E) make any contribution, other than (i) regularly scheduled contributions and (ii) contributions required pursuant to the terms thereof, to any Plan and (F) amend or extend or make any commitments to amend or extend any Plan. (l) Accounting Methods; Income Tax Elections. The Company shall not, and shall not permit any of its Subsidiaries to, (i) change in any material respect its methods of accounting or accounting practice as in effect at December 31, 2001, except for any such change as required by reason of a change in SEC guidelines or GAAP, (ii) change its fiscal year, (iii) make or rescind any material Tax election or settle or compromise any audit, examination, litigation, proceeding (whether judicial or administrative) or matter in controversy relating to Taxes of the Company or any of its Subsidiaries, or (iv) make any change to its method of reporting income, deductions or other Tax items for Tax purposes; provided that in the case of matters described in (iii) and (iv) above, K Holdings shall not unreasonably withhold its consent. (m) Certain Agreements. The Company shall not, and shall not permit any of its Subsidiaries to, enter into any contracts, agreements or arrangements that limit or restrain the Company or any of its Subsidiaries or any of their respective affiliates or successors, or that could, after the Effective Time, limit or restrict K Holdings, the Company or any of their respective affiliates or successors, from engaging or competing in any business or in any geographic area or location. (n) Rights Agreement. Except in connection with the termination of this Agreement by the Company pursuant to Section 7.1(i), the Company shall not (a) redeem the Rights, or amend or modify or terminate the Rights Agreement other than to delay the Distribution Date (as defined therein) or to render the Rights inapplicable to the execution, delivery and performance of this Agreement and the Transactions, (b) permit the Rights to become non-redeemable at the redemption price currently in effect, except by reason of clause (c) below, or (c) take any action which would allow any Person (as defined in the Rights Agreement) other than K Holdings to acquire beneficial ownership (as defined in the Rights Agreement) of 17% or more of the Shares without causing a "Distribution Date" or a "Stock Acquisition Date" (as each such term is defined in the Rights Agreement) to occur or to otherwise render the Rights Agreement inapplicable to any transaction contemplated by such Person. 40 (o) Corporate Structure. The Company shall not, and shall not permit any of its Subsidiaries to, alter (through merger, liquidation, reorganization, restructuring or any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries, except for changes in the corporate structure or ownership of the Company's Subsidiaries which (1) do not increase the Tax liability of the Company or its Subsidiaries and (2) do not adversely affect (x) the ability to obtain, or the terms of, the Debt Financing and (y) the ability of the Company and its Subsidiaries to transfer assets and liabilities among the Company's Subsidiaries or to the Company. (p) The Company shall not, and shall not permit any of its Subsidiaries to, agree, propose, authorize or enter into any commitment to take any action described in the foregoing subsections (a)-(o) of this Section 5.1, except as otherwise permitted by this Agreement. SECTION 5.2 Stockholders' Meeting; Proxy Material. (a) Subject to the next two sentences of this Section 5.2(a), the Company shall, acting through its Board of Directors and in accordance with applicable law and the Certificate of Incorporation and the by-laws of the Company, duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as promptly as practicable after the date hereof for the purpose of considering and taking action upon this Agreement and the Transactions and shall take all lawful action to solicit proxies in favor of the approval of this Agreement and the Transactions, including the Charter Amendment. The Board of Directors of the Company shall recommend approval of the Charter Amendment and the Reclassification by the Company's stockholders (the "Company Recommendation"); provided that, notwithstanding anything in this Agreement to the contrary, the Board of Directors of the Company may determine (1) not to make or may withdraw, modify or change such recommendation (a "Change in Recommendation"), and (2) not to use such efforts to solicit proxies in favor of this Agreement and the Transactions if, in the case of both clauses (1) and (2), it has determined in good faith, based on such matters as it deems relevant, including the advice of the Company's outside legal counsel, that (x) it has received a Superior Proposal and (y) such action is necessary in order for the Board of Directors to act in a manner consistent with its fiduciary duties under applicable law. The Company may, if it receives a bona fide unsolicited Acquisition Proposal (as defined in Section 5.4(b) hereof) delay the mailing of the Proxy Statement or the holding of the Special Meeting, in each case for such reasonable period as would provide a reasonable opportunity for the Company's Board of Directors to consider such Acquisition 41 Proposal and to determine the effect, if any, on its recommendation in favor of the Transactions. (b) Promptly following the date of this Agreement, the Company shall prepare a proxy statement relating to the approval of the Charter Amendment and the Reclassification, by the Company's stockholders (as amended or supplemented, the "Proxy Statement"), and the parties hereto shall prepare a Schedule 13E-3 filing (as amended or supplemented, the "Schedule 13E-3"). K Holdings and the Company shall cooperate with each other in connection with the preparation of the foregoing documents. The Company will use its reasonable best efforts to have the Proxy Statement, and the parties hereto will use their reasonable best efforts to have the Schedule 13E-3, cleared by the SEC as promptly as practicable after such filing. Immediately following the Holding Company Merger, the Company shall prepare and file with the SEC a Form 8-K announcing such merger. (c) The Company shall as promptly as practicable notify K Holdings of the receipt of any oral or written comments from the SEC relating to the Proxy Statement. The Company will use its reasonable best efforts to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after the Proxy Statement is cleared by the SEC. The Company shall cooperate and provide K Holdings with a reasonable opportunity to review and comment on the draft of the Proxy Statement (including each amendment or supplement thereto), and the parties hereto shall cooperate and provide each other with a reasonable opportunity to review and comment on the draft Schedule 13E-3 (including each amendment or supplement thereto) and all responses to requests for additional information by and replies to comments of the SEC, prior to filing such with or sending such to the SEC, and the parties hereto will provide each other with a copy of all such filings made and correspondence with the SEC. If at any time prior to the Effective Time, any information should be discovered by any party which should be set forth in an amendment or supplement to the Proxy Statement or the Schedule 13E-3 so that the Proxy Statement or the Schedule 13E-3 would not include any misstatement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by Law, rules or regulations, an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and disseminated to the stockholders of the Company. 42 SECTION 5.3 Access to Information. Upon reasonable advance notice, between the date of this Agreement and the Closing Date, the Company shall (i) give K Holdings, its potential financing sources and, as applicable, its and their respective counsel, financial advisors, auditors and other authorized representatives (collectively, "K Holdings' Representatives") reasonable access during normal business hours to the offices, properties, books and records (including, without limitation, all Tax Returns and other Tax-related information) of the Company and its Subsidiaries, (ii) furnish to K Holdings' Representatives such financial and operating data and other information (including, without limitation, all Tax Returns and other Tax-related information) relating to the Company, its Subsidiaries and their respective operations as such Persons may reasonably request and (iii) instruct the employees, counsel and financial advisors of the Company and its Subsidiaries to cooperate with K Holdings in its investigation of the business of the Company and its Subsidiaries; provided; however, that such access shall only be provided to the extent that such access would not violate applicable laws or the terms of any Company Contract. Without limiting the foregoing, K Holdings and its representatives shall be allowed to conduct an environmental investigation of the Company, its Subsidiaries and their properties, including, at K Holdings' discretion, the performance of environmental sampling. The Company and its Subsidiaries shall fully cooperate with K Holdings and its representatives in connection with such investigation, including, but not limited to, making available personnel, outside contractors and outside consultants with knowledge of environmental matters pertaining to the Company, its Subsidiaries and their properties, making available relevant documents related to such matters, and providing necessary assistance with respect to any proposed environmental sampling, including providing accurate information regarding subsurface utilities or structures that could interfere with or prevent such proposed sampling. Any information relating to the Company or its Subsidiaries made available pursuant to this Section 5.3, shall be subject to the provisions of the Confidentiality Agreement (as defined herein). SECTION 5.4 No Solicitation. (a) From the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with its terms, the Company shall not (whether directly or indirectly through advisors, agents or other intermediaries), and the Company shall cause its and its Subsidiaries' respective officers, directors, advisors, representatives or other agents of the Company not to, directly or indirectly, (x) solicit, initiate, knowingly encourage or knowingly facilitate (including by way of furnishing information) any inquiries or the making or submission of any proposal that constitutes, or may reasonably be expected to lead 43 to, an Acquisition Proposal, (y) participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to the Company or its Subsidiaries or afford access to the properties, books or records of the Company or its Subsidiaries to, any Person that has made an Acquisition Proposal or to any Person in contemplation of an Acquisition Proposal, or (z) accept an Acquisition Proposal or enter into any agreement or agreement in principle (other than an Acceptable Confidentiality Agreement) providing for or relating to an Acquisition Proposal or enter into any agreement or agreement in principle requiring the Company to abandon, terminate or fail to consummate the Transactions or any other transaction contemplated by this Agreement. Notwithstanding the previous sentence, if at any time prior to the holding of the vote of the Company's stockholders to approve the Charter Amendment and the Reclassification, (i) the Company has received an unsolicited bona fide written proposal from a third party, (ii) the Company's Board of Directors concludes in good faith, based on such matters as it deems relevant, including the advice of the Company's financial advisor, that such Acquisition Proposal is reasonably likely to result in a Superior Proposal by the Person making such Acquisition Proposal and (iii) the Company's Board of Directors determines in good faith, based on such matters as it deems relevant, including the advice of the Company's outside legal counsel, that the failure to engage in such negotiations or discussions or provide such information would result in a breach of the fiduciary duties of the Board of Directors of the Company under applicable law, then the Company may, subject to its giving K Holdings at least two business days' prior written notice of the identity of the Person making such Acquisition Proposal and the terms and conditions of the Acquisition Proposal and the Company's intention to furnish information to, and enter into negotiations with, such Person, take any of the actions described in clause (y) of this Section 5.4(a); provided that the Company will not disclose any information to such Person without entering into an Acceptable Confidentiality Agreement (as defined hereafter). The Company shall keep K Holdings reasonably informed of the status of any Acquisition Proposals (including the identity of the parties and price involved). Nothing contained in this Section 5.4 shall prohibit the Company or the Company's Board of Directors from taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any disclosure required by applicable law. (b) For purposes of this Agreement, "Acquisition Proposal" means any offer or proposal regarding a merger, consolidation, share exchange, recapitalization, reclassification, liquidation or other business combination involving the Company or any of its Material Subsidiaries (as defined hereafter) or the 44 acquisition or purchase of 30% or more of any class of equity securities of the Company or any of its Material Subsidiaries, or any tender offer (including self-tenders) or exchange offer or stock purchase (including any repurchase by the Company) that if consummated would result in any Person beneficially owning 30% or more of any class of equity securities of the Company or any of its Material Subsidiaries, or a substantial portion of the assets of, the Company or any of its Subsidiaries taken as a whole, other than the Transactions. For purposes of this Agreement, "Superior Proposal" means a proposal made by a third party to enter into (I) (i) a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company as a result of which either (A) the Company's stockholders prior to such transaction (by virtue of their ownership of Shares) in the aggregate cease to own at least 50% of the voting securities (determined on the basis of one vote (as opposed to ten votes) for each share of Special Common Stock) of the entity surviving or resulting from such transaction (or the ultimate parent entity thereof) or (B) the individuals comprising the Board of Directors of the Company prior to such transaction do not constitute a majority of the board of the Company or such ultimate parent entity following the transaction, (ii) a sale, lease, exchange, transfer or other disposition of at least 50% of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or a series of related transactions, or (iii) the acquisition, directly or indirectly, by a Person of beneficial ownership of 50% or more of the Company Common Stock or Special Common Stock whether by merger, consolidation, share exchange, business combination, tender or exchange offer or otherwise, and which is (II) otherwise on terms which the Board of Directors of the Company in good faith concludes (based on such matters as it deems relevant, including the advice of its financial advisors and outside counsel), (i) would, if consummated, result in a transaction that is more favorable to its stockholders (in their capacities as stockholders), from a financial point of view, than the Transactions, (ii) is with a Person that has the necessary funds to consummate the proposed transaction or has the necessary financing reasonably available to it with respect thereto and (iii) is reasonably capable of being completed. As used herein, "Material Subsidiary" means any Subsidiary whose consolidated revenues, net income or assets constitutes 10% or more of the revenues, net income or assets of the Company and its Subsidiaries, taken as a whole. As used in this Agreement, an "Acceptable Confidentiality Agreement" shall mean a confidentiality agreement in customary form with terms no less restrictive than the terms of the Confidentiality Agreement, dated March 12, 2002, entered into between Company and Kelso, as the same may be amended, supplemented or modified (the "Confidentiality Agreement"). 45 SECTION 5.5 Director and Officer Liability. (a) K Holdings and the Company agree that all rights to indemnification and all limitations on liability existing in favor of any Indemnitee (as defined hereafter) as provided in the Certificate of Incorporation or by-laws of the Company and of each of its Subsidiaries as in effect as of the date hereof, in respect of acts or omissions occurring prior to the Effective Time, shall continue in full force and effect in accordance with their terms from and after the Effective Time. K Holdings and the Company agree that the Certificate of Incorporation and by-laws of Nortek and Nortek Holdings following the Effective Time shall contain the provisions with respect to indemnification and limitations on liability set forth in the Certificate of Incorporation and by-laws of the Company on the date of this Agreement, which provisions, in respect of acts or omissions occurring on or prior to the Effective Time, shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of the Indemnitees, unless, and only to the extent, such modification is required by law or the Indemnitee affected thereby otherwise consents in writing thereto. With respect to acts or omissions occurring after to the Effective Time, K Holdings and the Company agree that the Certificate of Incorporation and by-laws of Nortek and Nortek Holdings following the Effective Time shall contain the provisions with respect to indemnification and limitations on liability set forth in the Certificate of Incorporation and by-laws of the Company on the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for six years after the Effective Time in any manner that would adversely affect the rights thereunder of the Indemnitees, unless, and only to the extent, such modification is required by law or the Indemnitee affected thereby otherwise consents in writing thereto; provided, however, that no such amendment, repeal or modification after six years following the Effective Time shall be made (unless required by law or the Indemnitee affected thereby otherwise consents in writing thereto) to the extent it adversely affects the rights of such Indemnitees in respect of acts or omissions occurring prior to the effectiveness of such amendment, repeal or modification. K Holdings and the Company agree that all rights to indemnification and all limitations on liability existing in favor of any Indemnitee as provided in an agreement between an Indemnitee and the Company or a Subsidiary of the Company as in effect as of the date hereof shall continue in full force and effect in accordance with their terms from and after the Effective Time. (b) In addition to the other rights provided for in this Section 5.5 and not in limitation thereof (but without in any way limiting or modifying the obligations of any insurance carrier contemplated by Section 5.5(c)), for six years 46 from and after the Effective Time, the Company shall, to the fullest extent permitted by applicable Law, indemnify and hold harmless (and release from any liability to the Company or any of its Subsidiaries), the individuals who, on or prior to the Effective Time, were officers or directors of the Company or served on behalf of the Company as an officer or director of any of the Company's current or former Subsidiaries (the "Indemnitees") against all expenses (including fees and expenses of counsel), losses, claims, fines, liabilities, damages, judgments or amounts paid in settlement in respect of any threatened, pending or completed claim, action, suit or proceeding, whether criminal, civil, administrative or investigative, based on, or arising out of or relating to the fact that such Person is or was a director or officer of the Company or any of its current or former Subsidiaries or arising out of acts or omissions occurring on or prior to the Effective Time (including, without limitation, in respect of acts or omissions in connection with this Agreement and the Transactions) except for, in any case, acts or omissions which involve conduct known to such Person at the time to constitute a material violation of Law (collectively, an "Indemnifiable Claim"); provided that the Company shall not be responsible for any amounts paid in settlement of any Indemnifiable Claim without the consent of K Holdings and the Company, which consent shall not be unreasonably withheld. The Company shall advance all expenses (including fees and expenses of counsel) incurred by or on behalf of an Indemnitee in connection with an Indemnifiable Claim within 10 days after receipt by the Company of a statement or statements from such Indemnitee requesting such advance or advances from time to time, provided that prior thereto the Indemnitee provides to the Company an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification from the Company. In the event any Indemnifiable Claim is asserted or made within such six-year period, all rights to indemnification shall continue until such claim is finally disposed of or all judgments, orders, decrees or other rulings in connection with such claim are fully satisfied. (c) For six years after the Effective Time, the Company shall provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided, however, that in no event shall the Company be required to expend more than an amount per year equal to 300% of current annual premiums paid by the Company for such insurance (the "Maximum Amount") to maintain or procure insurance coverage pursuant hereto; provided, further, that if the amount of the annual premiums necessary to maintain or procure such insurance 47 coverage exceeds the Maximum Amount, the Company shall maintain or procure, for such six-year period, the most advantageous policies of directors' and officers' insurance obtainable for an annual premium equal to the Maximum Amount. (d) The obligations of the Company under this Section 5.5 shall not be terminated or modified in such a manner as to adversely affect any Indemnitee to whom this Section 5.5 applies without the consent of such affected Indemnitee (it being expressly agreed that Section 5.5 shall survive the termination of this Agreement and the Indemnitees to whom this Section 5.5 applies shall be third party beneficiaries of this Section 5.5). SECTION 5.6 Reasonable Best Efforts. Upon the terms and subject to the conditions of this Agreement, each party hereto shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions. SECTION 5.7 Certain Filings. (a) The Company and K Holdings shall cooperate with one another (i) in connection with the preparation of the Proxy Statement and the Schedule 13E-3, (ii) in determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the Transactions and (iii) in seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith or with the Proxy Statement or the Schedule 13E-3 and seeking timely to obtain any such actions, consents, approvals or waivers. Without limiting the provisions of this Section 5.7, the Company shall, and K Holdings shall, cause its "ultimate parent entity" to file with the Department of Justice and the Federal Trade Commission a Pre-Merger Notification and Report Form pursuant to the HSR Act in respect of the Transactions within ten (10) days of the date of this Agreement, and, subject to Section 5.7(c) hereof, each party will use its reasonable best efforts to take or cause to be taken all actions necessary, including to comply promptly and fully with any requests for information from regulatory Governmental Entities, to obtain any clearance, waiver, approval or authorization relating to the HSR Act that is necessary to enable the parties to consummate the Transactions. Without limiting the provisions of this Section 5.7, each party hereto shall use its reasonable best efforts to promptly make the filings required to be made by it with all foreign Governmental Entities in any jurisdiction in which the parties 48 reasonably believe it is necessary or advisable. If a Registration Statement on Form S-4 is required to be filed with the SEC in connection with the Transactions, the parties agree to take all necessary steps to prepare, file and have declared effective, in compliance with all applicable securities laws, such Form S-4. (b) Subject to Section 5.7(c) hereof, (i) the Company and K Holdings shall each use its reasonable best efforts to resolve such objections, if any, as may be asserted with respect to the Transactions under any Regulatory Law and (ii) if any administrative, judicial or legislative action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging the Transactions as violative of any Regulatory Law, the Company and K Holdings shall each cooperate in all respects and use its respective reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation of the Transactions, including, without limitation, by pursuing all reasonable avenues of administrative and judicial appeal. (c) If any objections are asserted with respect to the Transactions under any Regulatory Law or if any suit is instituted by any Governmental Entity or any private party challenging any of the Transactions as violative of any Regulatory Law, each of K Holdings and the Company shall use its reasonable best efforts as may be required in order to resolve any such objections or challenge as such Governmental Entity or private party may have to such transactions under such Regulatory Law so as to permit consummation of the Transactions. Each of the Company and K Holdings shall promptly inform the other party of any material communication received by such party from the Federal Trade Commission, the Antitrust Division of the Department of Justice, the Commission of the European Community or any other governmental or regulatory authority regarding any of the Transactions. (d) "Regulatory Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, Counsel Regulation (EEC) No. 4064/89 of December 21, 1989 on the Control of Concentrations Between Undertakings, OJ (1989) L 395/1 and the regulations and decisions of the Councilor Commission of the European Community or other organs of the European Union or the European Community implementing such regulations (the "EC Merger Regulations") and all other federal, state and foreign, if any, statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or 49 regulate (i) foreign investment, (ii) foreign exchange or currency controls or (iii) actions having the purpose or effect of monopolization or restraint of trade or lessening of competition. SECTION 5.8 Public Announcements. None of the Company, K Holdings, or any of their respective affiliates shall issue or cause the publication of any press release or other public announcement with respect to this Agreement or the Transactions without the prior approval of the other party, except as may be required by law or by any listing agreement with, or the policies of, a national securities exchange. SECTION 5.9 Employee Matters. (a) Nortek shall, and shall cause its Subsidiaries to, honor in accordance with their terms, all agreements, contracts and arrangements listed on Section 5.9(a) of the Company Disclosure Schedule and Nortek Holdings shall assume all New Options. (b) The parties hereto currently intend that for a period of one year following the Effective Time, except (i) with respect to Plans terminated or benefits and compensation paid in connection with the consummation of the Transactions and (ii) as agreed to following the Effective Time by Nortek Holdings and the Chief Executive Officer of Nortek, Nortek will provide employee benefits (excluding any benefits attributable to equity based plans or grants) to employees of Nortek that are substantially similar in the aggregate to those provided to such persons immediately prior to the Effective Time. (c) Each employee of the Company and the Subsidiaries will receive service credit for all years of service with the Company or any Subsidiary for purposes of eligibility to participate and vesting (but not benefit accrual) under those employee benefit plans maintained by a member of the controlled group (within the meaning of sections 414(b) and (c) of the Code) which includes Nortek Holdings in which such employee participates after the Effective Time to the extent that such service was recognized by the Company and its Subsidiaries under the corresponding Plan in which such employee participated immediately prior to the Effective Time. SECTION 5.10 State Takeover Laws. If any "fair price," "business combination" or "control share acquisition" statute or other similar statute or regulation is or may become applicable to the Transactions, the Company and K Holdings shall each take such actions as are necessary so that the Transactions may 50 be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any such statute or regulation on the Transactions. SECTION 5.11 Certain Notifications. Between the date hereof and the Effective Time, each party shall promptly notify the other party hereto in writing after becoming aware of the occurrence of any event which will, or is reasonably likely to, result in the failure to satisfy any of the conditions specified in Article VI hereof. SECTION 5.12 Financing. (a) K Holdings shall use its reasonable best efforts to obtain the Debt Financing on terms and subject to conditions reasonably acceptable to it, it being understood and agreed that the terms and conditions contained in the Bridge Financing Commitment Letter are reasonably acceptable to it. For purposes of this Agreement, the term "Debt Financing" shall mean debt financing available to the Company to fund the Change of Control Offer. In addition, it is understood and agreed that nothing contained in this Agreement shall prohibit the Equity Financing from being provided by designees of K Holdings (whether or not affiliates thereof). (b) The Company agrees to provide, and will use its reasonable best efforts to cause its officers and employees to provide, all necessary cooperation reasonably requested by K Holdings in connection with the arrangement of, and the negotiation of agreements with respect to, the Debt Financing (and any replacements or refinancing thereof), including, without limitation, by making available to K Holdings and such lenders and their representatives, personnel (including for participation in road shows), documents and information of the Company and its Subsidiaries as may reasonably be requested by K Holdings or such lenders and by cooperating with lenders under the Bridge Facility Commitment Letter in achieving a timely syndication of the Bridge Facility reasonably satisfactory to K Holdings and such lenders. SECTION 5.13 Consent Solicitation. (a) If, and at such time as, K Holdings reasonably requests, but not later than promptly following the mailing of the Proxy Statement, Nortek or, at K Holdings' election, Nortek Holdings or K Holdings, shall commence a solicitation (the "Consent Solicitation") from holders of the Nortek Notes (i) to agree not to tender into a change of control offer (a "Change of Control Offer"), as described in 51 the Nortek Notes Indentures, in connection with the Transactions (each affirmative agreement, a "Change of Control Consent "), (ii) to amend the Senior Nortek Notes Indentures (as defined below) to permit the issuance of additional notes under the Senior Nortek Notes Indentures and (iii) to permit the Nortek Notes purchased in the Change of Control Offer to be reoffered and reissued under the Nortek Notes Indentures (clauses (ii) and (iii) together, the "Open Indenture Amendments"). The Consent Solicitation (including the applicable amendments) shall be conducted in accordance with the terms of the Nortek Notes Indentures and all applicable rules and regulations of the SEC and other applicable laws and regulations and shall be on terms (including the terms of the proposed amendments) reasonably determined by K Holdings in consultation with Nortek (including the appointment of a solicitation agent selected by K Holdings). (b) Each of Nortek and Nortek Holdings hereby agrees that K Holdings has sole discretion over the terms, conditions and structure of the Consent Solicitation, except that (i) the Company shall have the right to approve, which approval shall not be unreasonably withheld, any terms thereof that would be reasonably expected to impair the Company's relations with the holders of Nortek Notes and (ii) the Change of Control Consent and the Open Indenture Amendments shall not become operative nor shall any amounts be payable to the holders of Nortek Notes in respect of a consent fee or otherwise (unless K Holdings provides an undertaking to reimburse the Company for any amounts so expended) in the event that this Agreement is terminated pursuant to Article VII hereof or the Closing does not occur pursuant hereto. Each of Nortek and Nortek Holdings agrees to cooperate, and to cause its officers, employees, counsel and accountants to cooperate, and to use its reasonable best efforts to consummate the Consent Solicitation, including, preparing and executing all documents required in connection therewith in form and substance reasonably satisfactory to K Holdings, and taking any other reasonable actions K Holdings (in consultation with Nortek) reasonably determines may be necessary in connection therewith; provided, however, that, prior to the Effective Time, neither Nortek nor Nortek Holdings shall be required to (i) make any cash expenditures or (ii) in Nortek's sole judgment be subjected to any unreasonable risk of liability, in each case, as a result of the Consent Solicitation and provisions of this Section. Each of K Holdings, Nortek and Nortek Holdings agrees to comply in all material respects with all laws and regulations applicable to the Consent Solicitation. In no event shall more than the amounts set forth on Section 5.14 of the Company Disclosure Schedule be paid in the Consent Solicitation in respect of the Nortek Notes, unless K Holdings otherwise determines and provides the funds therefor. 52 (c) If at any time prior to the Effective Time any information relating to Nortek, Nortek Holdings, or any of its affiliates, officers or directors, should be discovered by K Holdings, Nortek or Nortek Holdings which should be set forth in an amendment or supplement to the documents mailed to holders in respect of the Consent Solicitation so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by law, rules or regulations, an appropriate amendment or supplement describing such information shall promptly be prepared and, if required, filed with the SEC and/or disseminated to the holders of Nortek Notes. (d) K Holdings and the Company shall use their reasonable best efforts to maintain the current rating of the Nortek Notes, provided that the foregoing shall not require K Holdings to increase its equity commitment specified in Section 4.7 hereof. For purposes of this agreement, "Nortek Notes" shall mean Nortek's (1) 8 7/8% senior notes due August 1, 2008; (2) 9 7/8% senior notes due September 1, 2007; (3) 9 1/4% senior notes due March 15, 2007 (collectively, the "Senior Nortek Notes"); and (4) 9 7/8% senior subordinated notes due June 15, 2011. "Nortek Notes Indentures" shall mean the indentures related to the Nortek Notes (as they may be amended from time to time). "Senior Nortek Notes Indentures" shall mean the indentures related to the Senior Nortek Notes (as they may be amended from time to time). SECTION 5.14 Post Closing Change of Control Offer. Immediately following the Effective Time, Nortek agrees to commence the Change of Control Offer in respect of each series of Nortek Notes to the extent required by the terms of the Nortek Notes Indentures. SECTION 5.15 Holding Company Merger. The Company shall consummate the Holding Company Merger as soon as reasonably practicable following the date of this Agreement, including taking all actions that are necessary in connection therewith. SECTION 5.16 Solvency Letter. The parties shall engage, at the expense of the Company (except that, if the Closing does not occur, the Company and K Holding shall share such expense equally), the appraisal firm of Murray, 53 Devine & Company to deliver a letter addressed to the Special Committee, K Holdings and, if requested by them, the lenders under the Bridge Facility (and on which the Special Committee shall be entitled to rely) indicating that immediately after the Effective Time, and after giving effect to the Transactions, including the Redemption, the Equity Financing and the Debt Financing, each of Nortek and Nortek Holdings (i) will not be insolvent and will have assets sufficient to pay its debts and (ii) will not have unreasonably small capital with which to engage in its business. SECTION 5.17 Advisory Fees, etc. Nortek and Nortek Holdings acknowledge that, at the Closing, K Holdings shall cause Nortek or Nortek Holdings (as designated by K Holdings) to (i) pay to Kelso and its designees a fee of $10.5 million and pay or reimburse Kelso and its designees for their expenses and (ii) enter into a financial advisory agreement with Kelso with respect to services to be provided by Kelso or certain of its related parties to Nortek or Nortek Holdings in return for certain financial advisory fees (the amount of which shall be determined by Kelso not to exceed $1.5 million per annum), to be paid annually to Kelso by Nortek or Nortek Holdings, which agreement shall also include indemnification by Nortek or Nortek Holdings of Kelso and certain related parties with respect to the Transactions, including the financing of the Transactions and any services to be provided by Kelso or any related party to Nortek and Nortek Holdings on a going forward basis. SECTION 5.18 FIRPTA Compliance. At Closing, the Company shall deliver to K Holdings a statement conforming with the requirements of Treasury Regulation section 1.1445-2(c)(3) certifying that shares of capital stock of the Company do not constitute "United States real property interests" under section 897(c) of the Code. Such statement shall be complete, accurate and valid on the Closing Date. ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CONSUMMATE THE TRANSACTIONS SECTION 6.1 Conditions to Each Party's Obligations. The respective obligations of the Company and K Holdings to consummate the Transactions are subject to the satisfaction or, to the extent permitted by applicable law, the waiver on or prior to the Closing of each of the following conditions: 54 (a) (i) The affirmative vote of a majority of the votes represented by the shares of Company Common Stock and Special Common Stock outstanding on the record date, voting together as a single class and voting separately as separate classes, approving the Charter Amendment and the Reclassification shall have been obtained at the Special Meeting in accordance with the DGCL; and (ii) the affirmative vote of a majority of the votes represented by the shares of Company Common Stock outstanding on the record date, excluding, for such purpose, any shares of Company Common Stock held by members of management of the Company who have entered into Exchange Agreements, approving the Charter Amendment and the Reclassification shall have been obtained at the Special Meeting (the vote required by clauses (i) and (ii) being referred to herein as the "Required Company Vote"); (b) Any applicable waiting periods (including any extensions thereof) under the HSR Act shall have expired or been terminated. Approval of the Transactions by the European Commission, if required, shall have been obtained pursuant to the EC Merger Regulations and the Form S-4, if required, shall have become effective under the Securities Act and shall not be the subject of any stop order. All Foreign Monopoly Laws shall have been complied with and all consents, approvals and actions of, filings with, and notices to, all Governmental Entities required of K Holdings, the Company or any of their respective Subsidiaries in connection with the Transactions shall have been made, obtained or effected, as the case may be, except for those, the failure of which to be made, obtained or effected would not, in the aggregate, reasonably be expected to have a Company Material Adverse Effect or a K Holdings Material Adverse Effect; (c) No judgment, injunction, order, decree, statute, law, rule or regulation (collectively, "Restraints") shall prohibit the consummation of any of the Transactions; and (d) The Company, the Special Committee, K Holdings and, if requested by them, the lenders under the Bridge Facility shall have received the letter referred to in Section 5.16 or K Holdings shall have provided to the Company, the Special Committee and such lenders, if requested, from another appraisal firm a comparable letter in form and substance reasonably satisfactory to the Company, the Special Committee and K Holdings. SECTION 6.2 Conditions to the Company's Obligation to Consummate the Transactions. The obligation of the Company to consummate the Transactions shall be further subject to the satisfaction or, to the extent permitted by 55 applicable law, the waiver on or prior to the Closing of each of the following conditions: (a) The representations and warranties of K Holdings contained in Article IV hereof (other than in Section 4.8 hereof) shall be true and correct in all respects when made and as of the Closing as if made at such time (or, to the extent such representations and warranties speak as of a specified date, they need only be true and correct in all respects as of such specified date) interpreted without giving effect to the words "materially" or "material" or to any qualifications based on such terms or based on the defined term "K Holdings Material Adverse Effect," except where the failure of all such representations and warranties to be true and correct, in the aggregate, would not reasonably be expected to have a K Holdings Material Adverse Effect. Without limiting the foregoing, the representations of K Holdings contained in the first sentence of Section 4.1 and in Sections 4.2, 4.4 and 4.7 shall be true and correct in all respects as of the Closing (or, to the extent such representations and warranties speak as of an earlier date, they shall be true and correct in all respects as of such earlier date); (b) K Holdings shall have performed in all material respects its agreements and covenants contained in or contemplated by this Agreement that are required to be performed by it at or prior to the Closing pursuant to the terms hereof; (c) The Company shall have received certificates signed by the Chief Executive Officer of K Holdings, dated the Closing Date, to the effect that the conditions set forth in Sections 6.2(a) and 6.2(b) hereof have been satisfied or waived; (d) No suit, action, proceeding or investigation by any Governmental Entity shall have been commenced (and be pending) against the Company or any of its affiliates, associates, officers or directors seeking to impose liability on any of the foregoing Persons in connection with the Transactions; and no suit, action, proceeding or investigation by any Governmental Entity shall have been commenced (and be pending) against any officer or director of the Company seeking damages in connection with Transactions; (e) K Holdings shall be prepared to effect the K Stock Purchase and the Management Stock Purchase immediately following the Effective Time and the Company shall have received a certificate signed by the Chief Executive Officer of K Holdings, dated as of the Closing Date, to the effect that, assuming the occurrence of the Distribution, K Holdings has sufficient funds to effect the K Stock 56 Purchase and the Management Stock Purchase and to provide the Company with sufficient funds to fund the Option Cash Out and to pay the aggregate Redemption Consideration to the Company's stockholders; and (f) Nortek shall have sufficient funds to effect the Distribution in accordance with Section 2.3 hereof and there shall be no legal or other impediments thereto. SECTION 6.3 Conditions to K Holdings' Obligations to Consummate the Transactions. The obligations of K Holdings to consummate the Transactions shall be further subject to the satisfaction, or to the extent permitted by applicable law, the waiver on or prior to the Closing of each of the following conditions: (a) The representations and warranties of the Company contained in Article III hereof shall be true and correct in all respects when made and as of the Closing as if made at such time (or, to the extent such representations and warranties speak as of a specified date, they need only be true and correct in all respects as of such specified date) interpreted without giving effect to the words "materially" or "material" or to any qualifications based on such terms or based on the defined term "Company Material Adverse Effect," except where the failure of all such representations and warranties to be true and correct, in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Without limiting the foregoing, the representations of the Company contained in the first sentence of Section 3.1, in Sections 3.2 and Section 3.4, in the second sentence of Section 3.13(a) and in Sections 3.16 and 3.18(a)(v) shall be true and correct in all respects as of the Closing (or, to the extent such representations and warranties speak as of an earlier date, they shall be true and correct in all respects as of such earlier date); (b) The Company shall have performed in all material respects each of its agreements and covenants contained in or contemplated by this Agreement that are required to be performed by it at or prior to the Closing pursuant to the terms hereof; (c) The Company shall have received certificates signed by the Chief Executive Officer of the Company, dated the Closing Date, to the effect that the conditions set forth in Sections 6.3(a) and 6.3(b) hereof have been satisfied or waived; 57 (d) No suit, action, proceeding or investigation by any Governmental Entity shall have been commenced (and be pending) against K Holdings (or its permitted designees), the Company or any of their respective affiliates, partners, associates, officers or directors, or any officers or directors of such partners, seeking (i) to prevent or delay the Transactions, (ii) material damages in connection with the Transactions, (iii) any other remedy which would have a Company Material Adverse Effect or a K Holdings Material Adverse Effect; or (iv) to impose liability on any of the foregoing Persons in connection with the Transactions (each of clauses (i)-(iv), a "Material Adverse Consequence") and additionally in each case, other than (iv), which K Holdings reasonably believes is reasonably likely to result in a Material Adverse Consequence; (e) The following shall have occurred: (i) RLB shall have exchanged 258,150 shares of Nortek Common Stock and 373,182 shares of Nortek Special Common Stock for 631,332 shares of Nortek Holdings Preference Stock pursuant to the Exchange Agreement to which he is a party, and be prepared to, immediately following the Reclassification, exchange 1,398,849 Options for 1,398,849 New Options to acquire Class A Common Stock pursuant to the Exchange Agreement to which he is a party; and (ii) K Holdings, the Company and certain members of the Company's management, specified by K Holdings shall have entered into a stockholders agreement in the form attached hereto as Exhibit F, and with such changes thereto as the parties thereto shall agree; (f) The Company shall have available to it on an unconditional basis (except as specified in the Bridge Facility Commitment Letter) the proceeds of the Debt Financing on terms no less favorable to the Company than the terms specified and described in the Bridge Facility Commitment Letter; (g) Nortek shall have sufficient funds to effect the Distribution in accordance with Section 2.3 hereof and there shall be no legal or other impediments thereto. (h) The Company shall have received, and delivered copies to K Holdings of, valid resignations, effective as of immediately following the Redemption, of each Director (other than RLB); (i) The Company shall be prepared to effect the K Stock Purchase, the Distribution, the Redemption and the Preferred Exchange immediately following the Effective Time; and 58 (j) The Holding Company Merger shall have been consummated in accordance with the terms of the Holding Company Merger Agreement. (k) The Company shall have in place the Bank Facility, having terms and conditions no less favorable to the Company than those contained in the Bank Facility Commitment Letter. ARTICLE VII TERMINATION SECTION 7.1 Termination. This Agreement may be terminated at any time prior to the Closing, by action taken or authorized by (i) the board of directors in the case of K Holdings and (ii) the Special Committee in the case of the Company, and except as provided below, whether before or after approval of the matters presented in connection with the Transactions by the stockholders of the Company: (a) By mutual written consent of K Holdings and the Company; (b) By either the Company or K Holdings if the Closing shall not have occurred on or before January 31, 2003 as the same may be extended by the second proviso below (the "Termination Date"); provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before the Termination Date; (c) By either the Company or K Holdings if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Transactions, and such order, decree, ruling or other action shall have become final and nonappealable; (d) By either the Company or K Holdings if the approval by the stockholders of the Company required for the consummation of the Transactions shall not have been obtained by reason of the failure to obtain the Required Company Vote upon the taking of such vote at a duly held meeting of stockholders of the Company or at any adjournment thereof; (e) By K Holdings, if the Board of Directors of the Company, prior to obtaining the Required Company Vote, shall have (i) approved or recommended an Acquisition Proposal or resolved to take, or announced an intention 59 to take, any such action, or (ii) within twenty business days of any public disclosure thereof, failed to recommend against or reject an Acquisition Proposal (other than a tender or exchange offer covered under clause (iii) below) or (iii) recommended acceptance of (or indicated or announced that it is unable to take a position, will remain neutral or express no opinion with respect to), or, within eighteen business days after the commencement thereof, failed to recommend against or reject, a tender or exchange offer for 25% or more of the outstanding shares of the Company or resolved to take, or announced an intention to take, any such action; (f) By K Holdings, if the Board of Directors of the Company shall have effected a Change in Recommendation or shall have taken any action or made any statement in connection with the Special Meeting materially inconsistent with the Company Recommendation (including any action described in clause (2) of Section 5.2(a)) (or resolved to take such action), whether or not any such action is in violation of this Agreement; (g) By the Company, if there is an intentional breach by K Holdings of any representation, warranty, covenant or agreement contained in this Agreement that would give rise to a failure of a condition set forth in Section 6.2(a) or 6.2(b) and which has not been cured (or is not capable of being cured) within fifteen business days following receipt by K Holdings of written notice of such breach; (h) By K Holdings, if there is an intentional breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement that would give rise to a failure of a condition set forth in Section 6.3(a) or 6.3(b) and which has not been cured (or is not capable of being cured) within fifteen business days following receipt by the Company of written notice of such breach; or (i) By the Company, in order to recommend, approve or accept a Superior Proposal; provided, however, that prior to such termination, (A) the Company must notify K Holdings in writing that it intends to terminate pursuant to this subsection, with such notice specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal and (B) if K Holdings, within the 72 hour period immediately following delivery of such written notice, proposes in writing to the Company changes or supplements to the terms and conditions of this Agreement with a view to causing such terms to be at least as favorable to the Company's stockholders as the terms of the Superior 60 Proposal, the Special Committee shall in good faith consider such proposal from K Holdings, taking into account such factors as they in good faith deem relevant. The party desiring to terminate this Agreement shall give written notice of such termination to the other party. SECTION 7.2 Effect of Termination. In the event of termination of this Agreement by either the Company or K Holdings as provided in Section 7.1 hereof, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of K Holdings or the Company or their respective officers or directors except with respect to Article VII hereof, which provisions shall survive such termination, and except that, notwithstanding anything to the contrary contained in this Agreement, neither K Holdings nor the Company shall be relieved or released from any liabilities or damages arising out of its willful breach of this Agreement. SECTION 7.3 Fees and Expenses. (a) The Company agrees to pay Kelso (or its designees) the sum of $16.5 million (the "Termination Fee") and to reimburse Kelso (or its designees) for all out-of-pocket expenses of Kelso and K Holdings (the "Expenses"), not in any event to exceed $7.5 million, including expenses of financial advisors, outside legal counsel and accountants, incurred in connection with the Transactions if this Agreement is terminated under the following circumstances: (i) by the Company pursuant to Section 7.1(i) hereof; or (ii) by K Holdings pursuant to Section 7.1(e) or 7.1(f) hereof; or (iii) by either the Company or K Holdings pursuant to either Section 7.1(d) or Section 7.1(b) or Section 7.1(h) hereof and both of the following conditions are satisfied: (A) at any time after the date of this Agreement and on or before the date of such termination an Acquisition Proposal with respect to the Company shall have been publicly announced, disclosed or otherwise communicated to the Company's Board of Directors and (B) within twelve months of such termination the Company either (x) enters into a definitive agreement with a third party with respect to an Acquisition Proposal or (y) consummates a transaction of a type described in the definition of Acquisition Proposal. 61 (b) Any payment required to be made pursuant to Section 7.3(a) hereof shall be made not later than two business days after a termination giving rise to such fee (in the case of clause (ii) thereof) or after the satisfaction of the conditions provided for therein (in the case of clause (iii) thereof) or concurrently with a termination (in the case of clause (i)); provided, however, that (in the case of clause (iii) thereof only), if prior to termination of this Agreement the Required Company Vote had not been obtained after a vote duly taken at the Special Meeting and the condition in subclause (A) has been satisfied, the Company shall pay to Kelso (or its designees) not later than two business days after a termination the Expenses (but in this case up to a maximum amount of $10 million) and shall pay to Kelso (or its designees) the Termination Fee and Expenses not later than two business days following the satisfaction of the condition in subclause (B); provided that the aggregate amount paid pursuant to this Section 7.3 shall not exceed $24 million. In no event shall more than one Termination Fee be payable. All payments under this Section 7.3 shall be made by wire transfer of immediately available funds to an account designated by the party entitled to receive payment. (c) Except as otherwise provided in this Section 7.3, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement to any party hereunder shall be in writing and deemed given upon (a) personal delivery, (b) transmitter's confirmation of a receipt of a facsimile transmission, (c) confirmed delivery by a standard overnight carrier or when delivered by hand or (d) when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by notice given hereunder): 62 If to Nortek or Nortek Holdings, to: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: Kevin W. Donnelly and Richard L. Bready Telephone: 401-751-1600 Facsimile: 401-751-4610 with a copy to: Ropes & Gray One International Place Boston, Mass 02110 Attention: John Ayer Telephone: 617-951-7000 Facsimile: 617-951-7050 If to the Special Committee, to: Richard J. Harris 50 Kennedy Plaza Providence, RI 02903 Telephone: 401-751-1600 Facsimile: 401-751-4610 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: Daniel S. Sternberg, Esq. Telephone: 212-225-2000 Facsimile: 212-225-3999 63 If to K Holdings, to: c/o Kelso & Company, L.P. 320 Park Avenue New York, NY 10022 Attention: James J. Connors II Telephone: 212-751-3939 Facsimile: 212-223-2379 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Lou R. Kling, Esq. Telephone: 212-735-3000 Facsimile: 212-735-2000 SECTION 8.2 Survival of Representations and Warranties. The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time. All other covenants and agreements contained herein which by their terms are to be performed in whole or in part, including for the avoidance of doubt Section 5.5, or which prohibit actions, subsequent to the Effective Time, shall survive the Transactions in accordance with their terms. SECTION 8.3 Interpretation. References in this Agreement to "reasonable best efforts" shall not require a Person so obligated to use its reasonable best efforts to obtain any consent of a third party to incur a material amount of out-of-pocket expenses or indebtedness or, except as expressly provided herein, to institute litigation. References herein to the "knowledge of the Company" shall mean the actual knowledge of the officers (as such term is defined in Rule 3b-2 promulgated under the Exchange Act) of the Company and what such persons should have known after reasonable investigation. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The phrases "delivered" or "made available" when used in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be delivered or made available. As used in this Agreement, the term "affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act. 64 References to "the date hereof" shall mean as of the date of this Agreement. "Person" or "person" means an individual, corporation, partnership, limited liability company, joint venture, trust, estate, association, organization, Governmental Entity or other entity of any kind or nature. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect the meaning or interpretation of this Agreement. Any matter disclosed pursuant to any Schedule of the Company Disclosure Schedule or the K Holdings Disclosure Schedule shall not be deemed to be an admission or representation as to the materiality of the item so disclosed. SECTION 8.4 Amendments, Modification and Waiver. (a) Except as may otherwise be provided herein, any provision of this Agreement may be amended, modified or waived by the parties hereto, by action taken by or authorized by their respective Board of Directors, prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company and K Holdings or, in the case of a waiver, by the party against whom the waiver is to be effective; provided that no such amendment, modification or waiver by the Company shall be effective unless it is authorized by the Special Committee; and provided further that after the approval of the Charter Amendment and the Reclassification by the stockholders of the Company, no such amendment shall be made except as allowed under applicable law. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 8.5 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that neither the Company nor K Holdings may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and, in the case of the Company, the Special Committee. Notwithstanding anything to the contrary herein, K Holdings may assign any of its 65 rights hereunder to any of its financing sources or to any direct or indirect wholly owned Subsidiary or limited liability company of K Holdings. (b) Notwithstanding the foregoing or anything else contained in this Agreement, at the election of K Holdings, K Holdings, or another entity affiliated with Kelso as K Holdings may determine, may become a one hundred percent parent of Nortek Holdings, with designees of K Holdings and management owning equity in such parent and this Agreement shall be appropriately modified to effect the foregoing. SECTION 8.6 Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. SECTION 8.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). SECTION 8.8 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. SECTION 8.9 Third Party Beneficiaries. This Agreement is solely for the benefit of the Company and its successors and permitted assigns, with respect to the obligations of K Holdings under this Agreement, and for the benefit of K Holdings, and its successors and permitted assigns, with respect to the obligations of the Company under this Agreement, and this Agreement shall not be deemed to confer upon or give to any other third party any remedy, claim, liability, reimbursement, cause of action or other right; provided, however, that the 66 Indemnitees referred to in Section 5.5 hereof shall be third party beneficiaries entitled to enforce the provisions of Section 5.5 of this Agreement and Kelso shall be a third party beneficiary entitled to enforce the provisions of Section 7.3 of this Agreement. SECTION 8.10 Entire Agreement. This Agreement, including any exhibits or schedules hereto constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements or understandings, both written and oral, between the parties or any of them with respect to the subject matter hereof. SECTION 8.11 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. 67 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. NORTEK, INC. By: /s/ Richard L. Bready ------------------------------------ Name: Richard L. Bready Title: Chairman and Chief Executive Officer NORTEK HOLDINGS, INC. By: /s/ Richard L. Bready --------------------------------- Name: Richard L. Bready Title: Chairman and Chief Executive Officer K HOLDINGS, INC. By: /s/ James J. Connors, II ------------------------------- Name: James J. Connors, II Title: Vice President 68 EX-99.1 4 b43459scexv2.txt SENIOR SECURED CREDIT FACILITY COMMITMENT EXHIBIT 2 FLEET CAPITAL CORPORATION 1633 BROADWAY NEW YORK, NEW YORK 10019 FLEET SECURITIES, INC. 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 May 31, 2002 Nortek Inc. 50 Kennedy Plaza Providence, RI 02903-2360 Attn: Ed Cooney, Treasurer Ladies and Gentlemen: You have advised Fleet Capital Corporation ("FCC" or "Agent") and Fleet Securities, Inc. ("FSI" or the "Arranger") that Nortek, Inc. ("Nortek"), Broan-NuTone LLC, NuTone Inc., Linear Corporation, Nordyne Inc., Governair Corporation, Mammoth, Inc., Temtrol, Inc., Webco, Inc., Great Lakes Window, Inc., Kroy Building Products, Inc., Napco, Inc., Napco Window Systems, Inc., Variform, Inc., Rangaire LP, Jensen Industries, Inc., Multiplex Technology, Inc., Xantech Corporation, Richwood Building Products, Inc., Thermal-Gard, Inc., Broan-NuTone Canada, Inc., Venmar Ventilation Inc., Venmar Aston Inc., Venmar CES, Inc., Venmar Ventilation (H.D.H.) Inc. and Ventrol Air Handling Systems Inc. (each a "Borrower" and collectively, the "Borrowers") propose to obtain a senior secured credit facility to refinance certain existing indebtedness of the Borrowers and for ongoing working capital needs and general corporate purposes. FCC is pleased to advise you of its commitment to provide up to the full amount of a $200,000,000 senior secured credit facility (the "Senior Credit Facility") on the terms and conditions summarized in this letter and in the Summary of Terms 1 and Conditions attached as Annex A to this letter (the "Term Sheet"). All initially capitalized terms used in this Commitment Letter and not otherwise defined herein shall have the meanings assigned to those terms in the Term Sheet. The commitment of FCC and FSI hereunder is subject to the satisfaction of each of the following conditions precedent in a manner reasonably acceptable to FCC and FSI: (a) each of the terms and conditions set forth herein and in the Term Sheet; (b) the absence of a material breach of any representation or warranty of the Borrowers set forth herein; (c) the negotiation, execution and delivery of definitive documentation with respect to the Senior Credit Facility that is satisfactory to the Agent and the Lenders (the "Credit Documents"); (d) execution of the fee letter dated the date hereof among Nortek, the Agent and the Arranger; and (e) there not having occurred and being continuing since the date hereof a material adverse change in the market for syndicated bank credit facilities or a material adverse change in (i) government policy or regulation affecting the Agent, FSI, or the Senior Credit Facility or (ii) financial, banking or capital market conditions, in each case as determined by the Agent in its reasonable discretion. The terms and conditions of the commitment of FCC and FSI hereunder and of the Senior Credit Facility are not limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of FCC and FSI and you. Furthermore, the commitment of FCC and FSI hereunder is based upon the financial and other information regarding the Borrowers and their respective subsidiaries previously provided to FCC and FSI (the "Evaluation Materials"), and is subject to the condition, among others, that (i) there are no material misstatements in or omissions from the Evaluation Materials and (ii) there shall not have occurred after the date of such Evaluation Materials, in the opinion of FCC and FSI, any material adverse change in the business, assets, operations, prospects or financial condition of Nortek and its subsidiaries taken as a whole or in the ability of Nortek 2 and its subsidiaries taken as a whole to perform their obligations under the Credit Documents. If the continuing review by the Agent of Nortek and its subsidiaries prior to the execution of the Credit Documents discloses information relating to conditions or events not previously disclosed to the Agent, or relating to new information or additional developments concerning conditions or events previously disclosed to the Agent, which the Agent, in its sole discretion, believes may have a material adverse effect on the business, assets, operations, prospects or financial condition of Nortek or any of its subsidiaries taken as a whole, the Agent may, in its sole discretion, suggest alternative financing amounts or structures that ensure adequate protection for the Lenders or may decline to participate in the proposed financing altogether. Although FCC is committing to provide all of the Senior Credit Facility on a fully underwritten basis, FCC expects that a portion of the Senior Credit Facility will be made available by other financial institutions (such lenders including FCC, the "Lenders") identified by us and reasonably acceptable to you. It is agreed that FCC will act as the sole administrative agent (in such capacity, the "Administrative Agent") for the Senior Credit Facilities and FSI will act as sole arranger for the Senior Credit Facility. FCC will be responsible for preparing and negotiating the Credit Documents, and FCC and FSI will manage the syndication effort of forming the syndicate of Lenders that will make the Senior Credit Facility available. Additional agents, co-agents or arrangers may be appointed at the discretion of FCC and FSI. FSI intends to commence syndication efforts promptly, and you agree actively to assist FSI and the Agent in completing a syndication reasonably satisfactory to them. The Agent and FSI agree to inform you from time to time about the progress of the syndication. The Agent and FSI shall be entitled, after consulting with the Borrower, to change the pricing, terms and structure of the Senior Credit Facility (provided that the total amount of the Senior Credit Facility shall not be reduced) if the Agent and FSI determine that such changes are advisable to insure a successful syndication of the Senior Credit Facility, provided that (i) the revolving nature of the Senior Credit Facility shall not be changed, (ii) the Final Maturity of the Senior Credit Facility shall not be less than three years and (iii) the Applicable Margins shall not be increased by more than fifty (50) basis points from the highest Applicable Margin set forth in the Term Sheet. Additionally, all compensation paid to any of such financial institutions shall be solely payable by the Agent. Syndication of the Senior Credit Facility will be accomplished by a variety of means, including direct contact during the syndication between senior management 3 and advisors of the Borrowers and the proposed Lenders. To assist FSI in the syndication efforts, you agree to (a) provide and cause your advisors to provide the Agent and FSI and the other Lenders upon request with all information reasonably deemed necessary by the Agent and FSI to complete a syndication of the Senior Credit Facility, including but not limited to information and evaluations prepared by the Borrowers, and their advisors, or on their behalf, relating to the Senior Credit Facility, and the transactions contemplated by the Borrowers in connection therewith, (b) assist the Agent and FSI upon their reasonable request in the preparation of an Information Memorandum to be used in connection with the syndication of the Senior Credit Facility, (c) otherwise assist the Agent and FSI in their syndication efforts, including by making available officers and advisors of the Borrowers from time to time to attend and make presentations regarding the business and prospects of the Borrowers at a meeting or meetings of prospective Lenders, at reasonable times and on reasonable notice and (d) use commercially reasonable efforts to ensure that the syndication efforts benefit materially from the existing lending relationships of the Borrowers. The Borrowers further agree to refrain from engaging in any additional financings during such syndication process unless otherwise agreed to by the Agent (other than: (a) any unsecured bridge loan facility in connection with the Kelso Transaction or Alternate Transaction; (b) any note reoffering; (c) any consent solicitation; (d) any exchange note offering for indebtedness of equal rank; and (e) any unsecured high yield market offering). By executing this Commitment Letter, you agree to reimburse the Agent and FSI from time to time on demand for all reasonable out-of-pocket fees and expenses (including due diligence expenses, syndication expenses, consultant's fees, expenses relating to any collateral audits or appraisals, and expenses, travel expenses, and reasonable fees, charges and disbursements of counsel (including the reasonable fees, disbursements and other charges of Winston & Strawn, as counsel to the Agent and FSI) incurred in connection with the Senior Credit Facility and any related documentation or the administration, amendment, modification or waiver thereof or any of the other transactions contemplated hereby, whether or not the Senior Credit Facility closes, it being understood and agreed that the Borrowers shall directly retain the firms performing any collateral examination, asset appraisal and/or environmental reviews requested by either FCC or FSI, each such firm to be acceptable to FCC and FSI. The Borrowers hereby agree to indemnify and hold harmless Agent, FSI, and each director, officer, employee and affiliate or control person thereof (each an "Indemnified Person") from and against any and all actions, suits, proceeds (including any investigations or inquiries), claims, losses, damages, liabilities or 4 expenses of any kind or nature whatsoever which may be incurred by or asserted against or involve any such Indemnified Person as a result of or arising out of or in any way related to or resulting from this agreement or any eventual extension or syndication of any of the Credit Documents, and, upon demand, to pay and reimburse each Indemnified Person for any reasonable legal or other out-of-pocket expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including any inquiry or investigation) or claim (whether or not any such Indemnified Person is a party to any action or proceeding out of which any such expenses arise); provided, however, that you shall not have to indemnify any Indemnified Person against any loss, claim, damage, expense or liability which is found by a final, non-appealable judgment of a court to arise solely from the gross negligence or willful misconduct of any Indemnified Person. No Indemnified Person shall be liable for any damages arising from the use by others of Evaluation Materials or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages in connection with this agreement; provided, however, that you shall not have to indemnify any Indemnified Person against any loss, claim, damage, expense or liability which is found by a final, non-appealable judgment of a court with proper jurisdiction to arise solely from the gross negligence or willful misconduct of any Indemnified Person. The compensation, reimbursement, indemnification, and confidentiality provisions contained herein shall remain in full force and effect regardless of whether the Credit Documents shall be executed and delivered and notwithstanding the termination of this Commitment Letter. The contents of this Commitment Letter are confidential. You agree not to show, circulate or otherwise disclose it or its contents to any other person or entity without our prior written consent (other than (i) your directors, officers, employees, attorneys and advisors and (ii) potential equity investors in you, as well as their accountants, attorneys and other advisors, in each case on a confidential basis, as necessary, in connection with your evaluation of the terms and conditions set forth in such proposed equity investment and to the extent they have agreed to maintain their confidentiality); and, you will not file any of it or disclose its contents in any filing with any governmental agency, unless prior to the filing you have formally obtained our consent (such consent not to be unreasonably withheld), as provided herein. Subject to the confidentiality provisions set forth herein, you acknowledge and agree that the Agents may share with any of its respective affiliates any 5 information relating to the Senior Credit Facility, the Borrowers and their respective subsidiaries and affiliates. If you are in agreement with the foregoing, please execute and return the enclosed copy of this Commitment Letter (at or before 5:00 p.m.) (New York time) on June 3, 2002. This Commitment Letter will become effective upon your delivery to us of executed counterparts of this Commitment Letter and the Fee Letter and, without limiting the more specific terms hereof and of the Term Sheet, you agree upon acceptance of this commitment to pay the fees set forth in the Term Sheet and in the Fee Letter. This commitment shall terminate if not so accepted by you prior to that time. Following acceptance by you, this commitment will terminate on August 30, 2002 unless the Closing Date has occurred prior to such date. This Commitment Letter supersedes all other prior commitment letters executed by any parties hereto relating to the Senior Credit Facility, including, without limitation, the Engagement Letter, dated May 3, 2002. Except as required by applicable law, this Commitment Letter and the Fee Letter and the contents hereof and thereof shall not be disclosed by you to any third party without the prior consent of FCC and FSI, other than to your officers and employees, attorneys, advisors, and accountants, in each case to the extent necessary in your reasonable judgment. Without limiting the foregoing, in the event that you disclose the contents of this Commitment Letter in contravention of the preceding sentence, you shall be deemed to have accepted the terms of this Commitment Letter and the Fee Letter. This Commitment Letter may not be assigned by any Borrower without the prior written consent of FCC and FSI. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, FCC and FSI. This Commitment Letter may be executed in counterparts, which, taken together, shall constitute an original. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter, together with the Term Sheet and the Fee Letter, embodies the entire agreement and understanding between FCC, FSI and the Borrowers with respect to the specific matters set forth herein and supersedes all prior agreements and understandings relating to the subject matter hereof. No party has been authorized by FCC or FSI to make any oral or written statements inconsistent with this Commitment Letter. THIS COMMITMENT LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF 6 NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN GENERAL OBJECTIONS LAW SECTION 5-1401). NORTEK, FCC AND FSI EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE TERM SHEET OR THE FEE LETTER, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND NORTEK, FCC AND FSI EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. We are pleased to have this opportunity and look forward to working with you. Very truly yours, FLEET CAPITAL CORPORATION By: /s/ John F. Donlon ----------------------------------- Name: John F. Donlon Title: Vice President FLEET SECURITIES, INC. By: /s/ Robert D. Valbona ------------------------------------ Name: Robert D. Valbona Title: Director 7 Accepted and Agreed to as of this 3 day of June 2002: NORTEK, INC. By /s/ Edward J. Cooney ------------------------ Name: Edward J. Cooney Title: Vice President and Treasurer 8 EX-99.2 5 b43459scexv3.txt BRIDGE FACILITY COMMITMENT LETTER EXHIBIT 3 UBS AG UBS WARBURG LLC Stamford Branch 299 Park Avenue 677 Washington Boulevard New York, New York 10171 Stamford, Connecticut 06901 June 20, 2002 Kelso & Company, L.P. 320 Park Avenue, 24th Floor New York, NY 10022 Attention: Mr. Michael Goldberg Mr. Philip Berney Bridge Facility Commitment Letter Ladies and Gentlemen: Kelso & Company, L.P. ("you" or "Sponsor") has advised UBS AG, Stamford Branch ("UBS") and UBS Warburg LLC ("UBSW" and, together with UBS, "we" or "us") that a group of investors led by you intend to acquire (the "Acquisition") Nortek, Inc., a Delaware corporation ("Target"). In order to effect the Acquisition, a corporation newly formed by you ("Acquisition Co.") will enter into an agreement and plan of recapitalization (together with the exhibits thereto and related schedules, the "Recapitalization Agreement") with Target and a newly formed, wholly owned subsidiary of Target ("Holdings"). Pursuant to the Recapitalization Agreement: - a newly formed, wholly owned subsidiary of Holdings would merge with and into Target under Section 251(g) of the Delaware General Corporation Law, as a result of which the stockholders of Target would become direct stockholders of Holdings and Target would survive such merger as a wholly owned subsidiary of Holdings (the "Merger"); and - following receipt of stockholders' approval, Holdings would amend its certificate of incorporation to reclassify its capital stock and effect a series of transactions in which, among other things, Acquisition Co. (or the Equity Investors) would purchase common stock of Holdings and Holdings would use the proceeds of such purchase, together with a distribution of cash from Target, to redeem all of the outstanding capital stock of Holdings not held by Acquisition Co. or members of management of Target (such amendment of Holdings' certificate of incorporation, including the -2- solicitation of proxies in connection therewith, and such other transactions, the "Recapitalization"). Following the execution of the Recapitalization Agreement, Target or Acquisition Co. will commence the solicitations (the "Solicitations") from the holders of Target's outstanding publicly traded senior notes (the "Existing Senior Notes") and senior subordinated notes (the "Existing Senior Subordinated Notes" and, together with the Existing Senior Notes, the "Existing Notes"), on terms and conditions reasonably satisfactory to us, of agreements not to tender into change of control offers to purchase the Existing Notes by reason of the consummation of the Recapitalization under the related indentures (the "Existing Indentures") and of consents to the waivers or amendments of any other provisions in the Existing Indentures that you and we agree are necessary to facilitate the Transactions (as defined below), including to permit the issuance of additional notes under the Existing Indentures for the Existing Senior Notes and to permit Existing Notes purchased in the Change of Control Offers (as defined below) to be reoffered (the "Open Indenture Amendment"). The Solicitations will require that such confirmations and consents be delivered not later than, and not be revocable after, the fifth business day prior to the consummation of the Recapitalization, and any supplemental indenture contemplated by the Solicitations will be executed on or prior to, and become operative on, the date of the Recapitalization. Immediately following the consummation of the Recapitalization, Target will, in accordance with the Existing Indentures, offer to purchase Existing Notes from the holders thereof that have not given their confirmations in the Solicitations (the "Change of Control Offers"). We understand that the sources of funds required to effect the Transactions will be as follows: - a senior secured revolving credit facility to Target of up to $200.0 million (the "Bank Facility") on terms and conditions reasonably satisfactory to us, which will be used to repay the loans and replace the letters of credit under the credit agreement (the "Ply Gem Facility") for Target's subsidiary Ply Gem Industries, Inc. (the "Refinancing"), to purchase up to $75.0 million of Existing Notes tendered in the Change of Control Offers and for the ongoing working capital requirements and general corporate purposes of Target and its subsidiaries; - a senior unsecured term loan facility to Target (the "Bridge Facility") in the amount (not to exceed $955.0 million) required to, and which is used solely to, pay the purchase price of Existing Notes tendered in the Change of Control Offers (excluding accrued interest), as described in the Summary of Terms and Conditions attached hereto as Annex I (the "Term Sheet"); provided that, if (and only to the extent) required by the Existing Indentures, the portion of the Bridge Facility that is used to fund the purchase of Existing Senior Subordinated Notes shall rank pari passu with the Existing Senior Subordinated Notes; - cash investments in the equity of Holdings (the "Equity Financing") by Sponsor and one or more other investors identified to us and as to whom we have not reasonably objected (the "Equity Investors") on terms and conditions reasonably satisfactory to -3- us of not less than $389.1 million less (i) the value in excess of $43.6 million of shares (and options to purchase shares) of Target (based on the redemption price for Holdings' shares in the Recapitalization) held by members of Target's management retained in the form of common equity in Holdings and (ii) to the extent utilized, increases in the amount available to be used for restricted payments under the Existing Indentures above the $120.0 million level; and - cash on hand of Target in the amount sufficient to pay the remaining amount of the consideration in the Recapitalization, accrued interest for Existing Notes tendered in the Change of Control Offers, consent payments to holders of Existing Notes in the Solicitations and fees and expenses in connection with the Transactions. In addition, shares (and options to purchase shares) of Target held by members of Target's management, valued at not less than $43.6 million in the aggregate (based on the redemption price for Holdings' shares in the Recapitalization), will be retained in the form of common equity in Holdings on terms and conditions reasonably satisfactory to us. To the extent that any Existing Notes are tendered in the Change of Control Offers, Target will pay the purchase price thereof with a borrowing under the Bridge Facility or proceeds from a New Note Offering (as defined below) and/or a Reoffering (as defined below); provided, however, that Sponsor may, in lieu thereof and to the extent permitted by the terms of the Existing Indentures, elect for such purchase price to be paid using proceeds under the Bank Facility or cash of Target not otherwise used to finance the other Transactions. If any funds are to be provided under the Bridge Facility, Target will consummate either (1) an offering of new unsecured senior notes (the "New Notes") for gross proceeds of at least $100.0 million (the "New Note Offering"), the net proceeds of which will be used to purchase Existing Notes tendered in the Change of Control Offers or to repay the Bridge Facility; provided that any portion of the Bridge Facility that ranks pari passu with the Existing Senior Subordinated Notes and is required under the Existing Indentures to be refinanced with indebtedness that ranks pari passu with the Existing Senior Subordinated Notes, as well as any other portion of the Bridge Facility determined by us (subject to your consent, such consent not to be unreasonably withheld), shall be refinanced with New Notes that rank pari passu with the Existing Senior Subordinated Notes, or (2) a reoffering of the Existing Notes tendered in the Change of Control Offers, the proceeds of which will be used to repay the Bridge Facility (the "Reoffering"); provided that the Reoffering shall not be effected in respect of any series of Existing Senior Notes unless the Open Indenture Amendment in respect of such series has been approved by the requisite holders of Existing Senior Notes of such series and is in effect. In the event that the Reoffering is to be effected, such Reoffering shall be effected, at the election of Sponsor, pursuant to Rule 144A under the Securities Act or pursuant to a shelf registration statement of Target that is effective prior to the Recapitalization. No other financing will be required for the uses described above. After giving effect to the Transactions, neither Holdings nor any of its subsidiaries will have any indebtedness or preferred equity other than the Bank Facility, the Bridge Facility, the Existing Notes, the New Notes, other indebtedness of Target and its subsidiaries of up to $65.0 million reasonably satisfactory to us (of which the Bank Facility and up to $65.0 million of other indebtedness and, prior to the initial -4- borrowing under the Bank Facility, the Ply Gem Facility may be secured) and preferred equity of Holdings reasonably satisfactory to us. As used herein, the term "Transactions" means (1) the Merger and the Recapitalization, (2) the Refinancing, (3) the Solicitations, (4) the Change of Control Offers, (5) the effectiveness of and initial borrowing under the Bank Facility, (6) the effectiveness of and borrowing under the Bridge Facility, (7) the Equity Financing, (8) the Rollover Equity, (9) the New Note Offering or the Reoffering and (10) the payments of premiums, fees, commissions and expenses in connection with each of the foregoing. All references to "dollars" or "$" in this agreement and the attachments hereto (collectively, this "Commitment Letter") are references to United States dollars. Commitments. You have requested that UBS commit to provide the Bridge Facility and that UBSW agree to structure, arrange and syndicate the Bridge Facility. UBS is pleased to advise you of its commitment to provide the entire amount of the Bridge Facility to Target upon the terms and subject to the conditions set forth or referred to in this Commitment Letter. The commitment of UBS and each other Lender (as defined below) hereunder is subject to the negotiation, execution and delivery of definitive documentation (the "Financing Documentation") with respect to the Bridge Facility satisfactory to UBS and the other Lenders reflecting, among other things, the terms and conditions set forth in the Term Sheet and in the letter of even date herewith addressed to you providing, among other things, for certain fees relating to the Bridge Facility (the "Fee Letter"). You agree that (i) the Recapitalization, (ii) payment for consents received in the Solicitations, (iii) the commencement of the Change of Control Offers and (iv) the effectiveness of the Bridge Facility shall occur concurrently on a date (the "Closing Date") mutually agreed between you and us, but in any event shall not occur until the terms and conditions hereof and in the Term Sheet have been satisfied; provided that the payment referred to in clause (ii) may be made prior to the Closing Date. Syndication. It is agreed that UBSW will act as the sole and exclusive advisor, arranger and bookmanager for the Bridge Facility, and will exclusively manage the syndication of the Bridge Facility, and will, in such capacities, exclusively perform the duties and exercise the authority customarily associated with such roles. It is further agreed that no additional advisors, agents, co-agents, arrangers or bookmanagers will be appointed and no Lender will receive compensation with respect to the Bridge Facility outside the terms contained herein and in the Fee Letter in order to obtain its commitment to participate in the Bridge Facility, in each case unless you and we so agree. UBS also reserves the right, prior to or after the execution of the Financing Documentation, to syndicate all or a portion of its commitment to one or more institutions approved by you (such approval not to be unreasonably withheld) that will become parties to the Financing -5- Documentation (UBS and the institutions that will become parties to the Financing Documentation, the "Lenders"). Upon any such additional Lender issuing its commitment to provide a portion of the Bridge Facility, UBS shall be released from a portion of its commitment in respect of the Bridge Facility in an aggregate amount equal to the commitment of such Lender; provided that, prior to the funding of the Bridge Facility, (i) UBS shall not be released with respect to up to 49% of its commitment hereunder without your consent (such consent not to be unreasonably withheld) and (ii) UBS shall not be released with respect to more than 49% of its commitment hereunder without your consent. UBSW will exclusively manage all aspects of the syndication of the Bridge Facility in consultation with you, including selection of additional Lenders, determination of when UBSW will approach potential additional Lenders, any naming rights and the final allocations of the commitments in respect of the Bridge Facility among the additional Lenders. You agree actively to, and to use commercially reasonable efforts to cause Target to (including with a covenant to such effect in the Recapitalization Agreement), assist UBSW in achieving a timely syndication of the Bridge Facility that is satisfactory to UBSW and the Lenders participating in the Bridge Facility. To assist UBSW in its syndication efforts, you agree that you will, and will cause your representatives and advisors to, and will use commercially reasonable efforts to cause Target and its representatives and advisors to, (a) prepare and provide all financial and other information as we may reasonably request with respect to you, Acquisition Co., Holdings, Target, its subsidiaries and the transactions contemplated hereby, including but not limited to financial projections (the "Projections") relating to the foregoing, (b) use commercially reasonable efforts to ensure that the syndication efforts benefit materially from existing lending relationships of Sponsor and Target and its subsidiaries, (c) make available to prospective Lenders senior management and advisors of Sponsor and Target and its subsidiaries, (d) host, with UBSW, one or more meetings with prospective Lenders under the Bridge Facility, (e) assist UBSW in the preparation of one or more confidential information memoranda satisfactory to UBSW and other marketing materials to be used in connection with the syndication of the Bridge Facility, and (f) obtain, at your expense, ratings of the New Notes and confirmation of the ratings of the Existing Notes from Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") and participate actively in the process of securing such ratings, including having senior management of Sponsor and Target meet with such rating agencies. Information. You hereby represent and covenant that (a) all written information (other than the Projections) that has been or will be made available to any of the Lenders or UBSW by or on behalf of you, Acquisition Co., Holdings, Target or any of your or their respective representatives or advisors in connection with the transactions contemplated hereby (the "Information"), when taken as a whole, is or will be complete and correct in all material respects and does not or will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which such statements are made, not misleading, and (b) the Projections that have been or will be made available to any of the Lenders or UBSW by or on behalf you, Acquisition Co., Holdings, Target or any of your or their respective representatives or advisors in connection with the transactions contemplated hereby have been and will be prepared in good faith based upon assumptions believed by you at the time of preparation to be reasonable. You -6- agree to supplement the Information and the Projections from time to time and agree to advise UBSW of all developments materially affecting Sponsor, Acquisition Co., Holdings or Target or any of their respective subsidiaries or affiliates or the transactions contemplated hereby or the accuracy of Information and Projections previously furnished to UBSW or any of the Lenders. You acknowledge that UBS and UBSW may share with any of their affiliates, and such affiliates may share with UBS and UBSW, any information related to Sponsor, Acquisition Co., Holdings, Target, or any of their respective subsidiaries or affiliates (including in each case information relating to creditworthiness) and the transactions contemplated hereby. Compensation. As consideration for the commitments of the Lenders hereunder with respect to the Bridge Facility and the agreement of UBSW to structure, arrange and syndicate the Bridge Facility and to provide advisory services in connection therewith, you agree to pay, or cause to be paid, to UBS the fees set forth in the Fee Letter. Once paid, such fees shall not be refundable under any circumstances, except as specified in the Engagement Letter of even date herewith between UBSW and you. Conditions. The commitment of the Lenders hereunder with respect to the Bridge Facility and UBSW's agreement to perform the services described herein may be terminated by UBS if (i) the structure, terms or conditions of the Bank Facility are not reasonably satisfactory to UBS, or the structure, terms or conditions of the Transactions are changed from those described herein and in the Term Sheet in any respect determined by UBS to be material (provided that following the Closing Date, the "Transactions" in this condition shall refer only to those that are capable of being changed after the Closing Date); (ii) any information submitted to UBS by or on behalf of Sponsor, Acquisition Co., Holdings, Target or any of their respective subsidiaries or affiliates is inaccurate, incomplete or misleading in any respect determined by UBS to be material; (iii) the transactions contemplated hereby and the financing therefor (including borrowings under the Bridge Facility) are not in full compliance with all applicable legal requirements, including without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System, or any necessary governmental or third party approval in connection with the Transactions shall not have been obtained or shall have ceased to remain in effect; (iv) except those outstanding on the date hereof and described on Schedule I hereto (provided that this exception shall not apply to any material adverse development with respect thereto), there shall be pending or threatened litigation by any entity (private or governmental) which UBS shall reasonably determine could have a material adverse effect on the Transactions or on the condition (financial and other), business, operations, assets, liabilities or prospects of Holdings, Target or any of their respective subsidiaries; (v) any change occurs, or any additional information is disclosed to or discovered by UBS (including, without limitation, information contained in any review or report required to be provided to it in connection herewith), which UBS deems to be materially adverse in respect of the business, results of operations, condition (financial or otherwise), assets, liabilities or prospects of Holdings, Target or any of their respective subsidiaries; (vi) any of the fees provided for by the Fee Letter are not paid when due; (vii) in the sole judgment of UBS, a material adverse change or material disruption has occurred in the financial, -7- banking or capital markets generally after the date of this Commitment Letter (including, without limitation, the markets for loans to or debt securities issued by companies similar to Holdings or Target), which has had or could reasonably be expected to have a material adverse effect on the syndication of the Bridge Facility or the marketing of the New Note Offering or the Reoffering; (viii) Moody's shall not have a rating of the Existing Senior Notes (and the New Notes that rank pari passu therewith) of B1 or higher and S&P shall not have a rating of the Existing Senior Notes (and the New Notes that rank pari passu therewith) of B+ or higher; (ix) Moody's shall not have a rating of the Existing Senior Subordinated Notes (and the New Notes that rank pari passu therewith) of B3 or higher or S&P shall not have a rating of the Existing Senior Subordinated Notes (and the New Notes that rank pari passu therewith) of B- or higher; or (x) any condition set forth in the Term Sheet is not satisfied or any covenant or agreement in this Commitment Letter or the Fee Letter is not complied with; provided that following the effectiveness of the Bridge Facility, the conditions in clauses (iv), (v), (vii), (viii) and (ix) shall not constitute conditions to funding of the Bridge Facility. Notwithstanding the foregoing, if you give us written notice prior to the Closing Date of your election (which notice shall be irrevocable) and, on the Closing Date, pay the fees required to be paid on the Closing Date under the Fee Letter (the "Election"), none of the conditions in clauses (i) through (ix) shall constitute conditions to funding of the Bridge Facility following the effectiveness of the Bridge Facility. Clear Market. From the date of acceptance of the offer set forth in this Commitment Letter until our completion of syndication of the Bridge Facility and the New Note Offering (as determined by us and notified in writing to you) and the termination of your obligations under this Commitment Letter, you will ensure that, other than as contemplated by the Engagement Letter, no financing (other than the Bank Facility and the financing by Target described in Schedule II hereto) for Acquisition Co., Holdings, Target or any of their respective subsidiaries, and no debt financing for you or any of your affiliates in connection with the Transactions (other than financings related to your affiliates and limited partners in connection with the Equity Financing), shall be syndicated or placed without the prior written consent of UBS if such financing, syndication or placement would have, in the judgment of UBS, a detrimental effect upon the transactions contemplated hereby. Indemnity. You agree that the Indemnity Letter dated April 5, 2002 between you and us covers matters that arise out of, result from or in any way relate to this Commitment Letter, the Term Sheet, the Fee Letter, the Bridge Facility or any of the other transactions contemplated hereby or the providing or syndication of the Bridge Facility. In addition, you hereby agree to reimburse UBS and UBSW from time to time upon demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable legal fees and expenses of UBS's and UBSW's counsel, appraisal, consulting and audit fees, and printing, reproduction, document delivery, travel, communication and publicity costs) incurred in connection with the syndication and execution of the Bridge Facility and the preparation, review, negotiation, execution and delivery of this Commitment Letter, the Term Sheet, the Fee Letter, the -8- Financing Documentation and the administration, amendment, modification or waiver thereof (or any proposed amendment, modification or waiver), whether or not the Closing Date occurs or any Financing Documentation is executed and delivered or any extensions of credit are made under the Bridge Facility or the commitments under this Commitment Letter are terminated or expire. Notwithstanding the foregoing, you will not have a reimbursement obligation under this paragraph if an Acquisition is not consummated unless you or any of your affiliates receives any Break-up Fee (as defined in the Fee Letter). Confidentiality. This Commitment Letter is furnished for your benefit, and may not be relied on by any other person or entity. This Commitment Letter is delivered to you upon the condition that neither the existence of this Commitment Letter, the Term Sheet or the Fee Letter nor any of their contents shall be disclosed by you or any of your affiliates, directly or indirectly, to any other person, except that such existence and contents may be disclosed (i) as may be compelled in a judicial or administrative proceeding or as otherwise required by law and (ii) to your directors, officers, employees, advisors and agents, in each case on a confidential and "need-to-know" basis and only in connection with the transactions contemplated hereby. In addition, this Commitment Letter and the Term Sheet (but not the Fee Letter) may be (x) disclosed to Target and its directors, officers, employees, advisors and agents, in each case on a confidential and "need-to-know" basis and only in connection with the transactions contemplated hereby, (y) disclosed to rating agencies and (z) filed as an exhibit to a Schedule 13D filed by you or Richard Bready. Other Services. You acknowledge and agree that UBS, UBSW and/or their affiliates may be requested to provide additional services with respect to Sponsor, Acquisition Co., Holdings, Target and/or their respective affiliates or other matters contemplated hereby. Any such services will be set out in and governed by a separate agreement(s) (containing terms relating, without limitation, to services, fees and indemnification) in form and substance satisfactory to the parties thereto. Nothing in this Commitment Letter is intended to obligate or commit UBS or UBSW or any of their affiliates to provide any services other than as set out herein. Governing Law, Etc. This Commitment Letter and the commitment of the Lenders shall not be assignable by you without the prior written consent of the Lenders and UBSW, and any purported assignment without such consent shall be void. From and after the Closing Date and Target's assumption of Sponsor's obligations hereunder, Sponsor's obligations hereunder (except those under "Syndication," "Clear Market" and "Confidentiality") shall terminate. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by UBS, UBSW and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Commitment -9- Letter. Headings are for convenience only. This Commitment Letter is intended to be for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto, the Lenders and, with respect to the indemnification provided under the heading "Indemnification", each Indemnified Person. THIS COMMITMENT LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Any right to trial by jury with respect to any claim or action arising out of this Commitment Letter is hereby waived. You hereby submit to the non-exclusive jurisdiction of the federal and New York State courts located in The City of New York (and appellate courts thereof) in connection with any dispute related to this Commitment Letter or any of the matters contemplated hereby, and agree that service of any process, summons, notice or document by registered mail addressed to you shall be effective service of process against you for any suit, action or proceeding relating to any such dispute. You irrevocably and unconditionally waive any objection to the laying of such venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. A final judgment in any such suit, action or proceeding brought in any such court may be enforced in any other courts to whose jurisdiction you are or may be subject by suit upon judgment. Please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts of this Commitment Letter and the Fee Letter not later than midnight, New York City time, on the date hereof. This Commitment Letter and the commitments of the Lenders hereunder and the agreement of UBSW to provide the services described herein are also conditioned upon your acceptance hereof and of the Fee Letter, and our receipt of executed counterparts hereof and thereof. Upon the earlier to occur of (A) the execution and delivery of the Financing Documentation by all of the parties thereto, or (B) January 31, 2003, if the Financing Documentation shall not have been executed and delivered by all such parties prior to that date, or (C) if earlier than (B), the date of termination of the Recapitalization Agreement, this Commitment Letter and the commitments of the Lenders hereunder and the agreement of UBSW to provide the services described herein shall automatically terminate unless the Lenders and UBSW shall, in their discretion, agree to an extension. The compensation, expense reimbursement, confidentiality, indemnification and governing law and forum provisions hereof and in the Term Sheet and the Fee Letter shall survive termination of this Commitment Letter (or any portion hereof) or the commitments of the Lenders hereunder. The provisions under the headings "Syndication" and "Clear Market" above shall survive the execution and delivery of the Financing Documentation. [Signature Page Follows] -10- UBS and UBSW are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions. Very truly yours, UBS AG, STAMFORD BRANCH By: /s/ David A. Juge -------------------------------------- Name: David A. Juge Title: Managing Director By: /s/ David Kelly -------------------------------------- Name: David Kelly Title: Executive Director Legal & External Affairs UBS WARBURG LLC By: /s/ David Dickson Jr. -------------------------------------- Name: David Dickson Jr. Title: Managing Director By: /s/ Adam L. Reeder -------------------------------------- Name: Adam L. Reeder Title: Managing Director Accepted and agreed to as of the date first written above: KELSO & COMPANY, L.P. By: /s/ Jim Connors ----------------------------- Name: Jim Connors Title: General Counsel EX-9 6 b43459scexv4.txt VOTING AGREEMENT EXHIBIT 4 VOTING AGREEMENT This VOTING AGREEMENT (the "Agreement"), dated as of June 20, 2002 is entered into by and between Nortek, Inc., a Delaware corporation ("Nortek" and, for the period prior to the Holding Company Merger Effective Time (as defined in the Holding Company Merger Agreement (as defined in the Recapitalization Agreement (as defined below)), the "Company"), K Holdings, Inc., a Delaware corporation ("K Holdings"), and Richard L. Bready (the "Stockholder"). WHEREAS, Nortek, Inc., Nortek Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Nortek ("Nortek Holdings" and, from and after the Holding Company Merger Effective Time, the "Company"), and K Holdings have entered into an Agreement and Plan of Recapitalization, dated as of the date of this Agreement (the "Recapitalization Agreement"), pursuant to which the parties thereto have agreed, upon the terms and subject to the conditions set forth therein, to consummate the Transactions (as defined therein); WHEREAS, as of the date hereof (or, after the Holding Company Merger, as of such date), the Stockholder is (or will be, in the case of the period after the Holding Company Merger) (i) the record and beneficial owner of, and has the sole right to vote and dispose of, 258,150 shares of common stock, par value $1.00 per share, of the Company (the "Common Stock") and 373,182 shares of special common stock, par value $1.00 per share, of the Company (the "Special Common Stock," and together with the Common Stock, the "Shares"), and (ii) is the owner of options to acquire 150,000 shares of Common Stock and options to acquire 1,248,849 shares of Special Common Stock (each, an "Option"); it being understood that the term "Shares" shall not under any circumstances or for any purpose under this Agreement, including with respect to the agreement to vote any Shares of the Company or grant any proxy with respect thereto, be deemed to refer to or include shares of Common Stock or Special Common Stock beneficial ownership of which may be attributed to the Stockholder, or which the Stockholder has the right to vote, solely as a result of his serving as a trustee with respect to an employee benefit plan of the Company (collectively, "Benefit Plan Shares"); and WHEREAS, as a condition to its willingness to enter into the Recapitalization Agreement, K Holdings, Nortek and Nortek Holdings have required that the 1 Stockholder agree, and the Stockholder is willing to agree, to the matters set forth herein. NOW, THEREFORE, in consideration of the foregoing and the agreements set forth below, the parties hereto agree as follows: 1. Voting of Shares. 1.1 Voting Agreement. For so long as the Recapitalization Agreement is in effect, the Stockholder hereby agrees to vote (or cause to be voted) all of the Shares, at any annual, special or other meeting of the stockholders of the Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise, which the Stockholder has the right to so vote: (i) in favor of the approval of the Recapitalization Agreement, the Transactions, including the Charter Amendment, and any actions required in furtherance thereof; (ii) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation of the Company under this Agreement, the Recapitalization Agreement, the Exchange Agreement (as defined in the Recapitalization Agreement) or any other agreement contemplated hereby or thereby; (iii) against (A) any extraordinary corporate transaction, such as a merger, consolidation, share exchange, rights offering, reorganization, recapitalization, reclassification or liquidation involving the Company or any of its subsidiaries other than the Transactions, (B) a sale, lease, exchange, transfer or other disposition of at least 20% of the assets of the Company and its Subsidiaries, taken as a whole in a single or a series of related transactions, (C) the acquisition, directly or indirectly, by any person of beneficial ownership of 20% or more of the Common Stock or Special Common Stock, whether by merger, consolidation, share exchange, business combination, tender offer, exchange offer, or otherwise, taken as a whole in a single or a series of related transactions, or (D) any action that is intended, or could reasonably be expected, to materially impede, interfere with, delay, postpone or adversely affect the consummation of the Transactions; 2 (iv) against any change in the composition of the Board of Directors of the Company, other than as contemplated by the Recapitalization Agreement; and (v) against any amendment to the Certificate of Incorporation or by-laws of the Company, other than as contemplated by the Recapitalization Agreement. 1.2 Irrevocable Proxy. Stockholder constitutes and appoints K Holdings and each of its executive officers and, for the purpose of the vote set forth in Section 1.1(i) hereof (if, but only if, K Holdings and Stockholder fail to vote in favor of the matters set forth in Section 1.1(i) hereof), such designees as the Special Committee (as defined in the Recapitalization Agreement) may appoint, from and after the date hereof until the earlier to occur of the Effective Time and the termination of this Agreement pursuant to Section 9 (at which point such constitution and appointment shall automatically be revoked) as Stockholder's attorney, agent and proxy (such constitution and appointment, the "Irrevocable Proxy"), with full power of substitution, to vote and otherwise act with respect to all Stockholder's Shares at any meeting of the stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting), and in any action by written consent of the stockholders of the Company, on the matters and in the manner specified in Section 1.1. THIS PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN INTEREST AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM STOCKHOLDER MAY TRANSFER ANY OF ITS SHARES IN BREACH OF THIS AGREEMENT. Stockholder hereby revokes all other proxies and powers of attorney with respect to all of Stockholder's Shares that may have heretofore been appointed or granted, and no subsequent proxy or power of attorney shall be given (and if given, shall not be effective) by Stockholder with respect thereto. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of Stockholder and any obligation of Stockholder under this Agreement shall be binding upon the heirs, personal representatives, successors and assigns of Stockholder. It is understood and agreed that K Holdings and, for purposes of the vote set forth in Section 1.1(i), the Special Committee, does not intend to use such Irrevocable Proxy unless the Stockholder fails to comply with Section 1.1 hereof and that, to the extent K Holdings or the Special Committee uses such Irrevocable Proxy, it only intends to vote such Shares with respect to the matters specified in, and in accordance with the provisions of, Section 1.1 or, in the case of the Special Committee, Section 1.1(i) hereof. 3 1.3 Fiduciary Responsibilities. Subject to Section 6 hereof, notwithstanding any other provision of this Agreement to the contrary, nothing contained in this Agreement shall limit the rights and obligations of the Stockholder in his capacity as a director or officer of the Company from taking any action solely in his capacity as a director or officer of the Company, and no action taken by the Stockholder in any such capacity shall be deemed to constitute a breach of any provision of this Agreement. 2. Representations and Warranties of the Stockholder. The Stockholder represents and warrants to Nortek and K Holdings as follows: 2.1 Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 2.2 No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will, (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Shares or Options, (b) require any material consent, authorization or approval of any person other than a governmental entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Shares or Options. 2.3 Ownership of Shares. The Stockholder is the record and "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which meaning will apply for all purposes of this Agreement) of the number of Shares set forth in the recitals hereto and is the owner of the number of Options set forth in the recitals hereto, in each case free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction 4 on the right to vote, sell or otherwise dispose of the Shares or Options). Except as provided for in the Recapitalization Agreement and the Transactions, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Shares or Options. The Stockholder holds exclusive power to vote the number of Shares set forth in the recitals hereto, subject to the limitations set forth in Section 1 of this Agreement. As of the date of this Agreement, the number of Shares and Options set forth in the recitals hereto represents all of the shares of capital stock of the Company beneficially owned by the Stockholder, other than Benefit Plan Shares. 3. Representations and Warranties of K Holdings. K Holdings represents and warrants to Nortek and the Stockholder as follows: 3.1 Binding Agreement. K Holdings is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the Recapitalization Agreement by K Holdings and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of K Holdings, and no other corporate proceedings on the part of K Holdings are necessary to authorize the execution, delivery and performance of this Agreement and the Recapitalization Agreement by K Holdings and the consummation of the transactions contemplated hereby and thereby. K Holdings has duly and validly executed this Agreement and this Agreement constitutes a legal, valid and binding obligation of K Holdings, enforceable against K Holdings in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 3.2 No Conflict. Neither the execution and delivery of this Agreement, the consummation by K Holdings of the transactions contemplated hereby, nor the compliance by K Holdings with any of the provisions hereof will (a) conflict with or result in a breach of any provision of its certificate of incorporation or by-laws, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding, (c) require any material consent, authorization or approval of any person other than a governmental entity, or (d) violate or conflict with any writ, injunction or decree applicable to K Holdings. 5 4. Representations and Warranties of Nortek. Nortek represents and warrants to the Stockholder and K Holdings as follows: 4.1 Binding Agreement. Nortek is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the Recapitalization Agreement by Nortek and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Nortek (upon the recommendation of the Special Committee (as defined in the Recapitalization Agreement)), and no other corporate proceedings on the part of Nortek are necessary to authorize the execution, delivery and performance of this Agreement and the Recapitalization Agreement by Nortek and the consummation of the transactions contemplated hereby and thereby. Nortek has duly and validly executed this Agreement and this Agreement constitutes a legal, valid and binding obligation of Nortek, enforceable against Nortek in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). 4.2 No Conflict. Neither the execution and delivery of this Agreement, the consummation by Nortek of the transactions contemplated hereby, nor the compliance by Nortek with any of the provisions hereof will (a) conflict with or result in a breach of any provision of its certificate of incorporation or by-laws, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding, (c) require any material consent, authorization or approval of any person other than a governmental entity, or (d) violate or conflict with any writ, injunction or decree applicable to Nortek. 5. Transfer and Other Restrictions. For so long as the Recapitalization Agreement is in effect: 5.1 Certain Prohibited Transfers. The Stockholder agrees not to, except as provided for in the Recapitalization Agreement and the Transactions: 6 (a) sell, sell short, transfer (including gift), pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, encumbrance, assignment or other disposition of, any Shares or Options or any interest contained therein, other than pursuant to this Agreement; (b) grant any proxies or power of attorney or enter into a voting agreement or other arrangement with respect to any Shares or Options, other than this Agreement; or (c) deposit any Shares or Options into a voting trust; provided, however, that Stockholder may transfer up to 10,000 Shares for estate planning purposes or to a nationally or state recognized charitable organization if, in each case, (i) Stockholder obtains the prior written consent of K Holdings and the Company, which consent shall not be unreasonably withheld, and (ii) any such proposed transferee first agrees in writing to be bound by the terms of this Agreement with respect to such Shares to be transferred to it, including by executing any documentation requested by K Holdings or the Company in connection therewith. 5.2 Additional Shares. Without limiting the provisions of the Recapitalization Agreement, in the event (i) of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares of capital stock of the Company on, of or affecting the Stockholder's Shares or (ii) the Stockholder shall become the beneficial owner or record owner of any additional shares of capital stock of the Company, including pursuant to the exercise of options, or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 1 hereof, in each case, then the terms of this Agreement shall apply to the shares of capital stock or other securities of the Company held by the Stockholder immediately following the effectiveness of the events described in clause (i), or the Stockholder becoming the beneficial or record owner thereof, as described in clause (ii), as though they were Shares of the Stockholder hereunder. The Stockholder hereby agrees, while this Agreement is in effect, to notify Nortek and K Holdings of the number of any new Shares or Options acquired by the Stockholder, if any, after the date hereof. 6. No Solicitation. During the term of this Agreement, the Stockholder shall not (whether directly or indirectly through its advisors, agents or other intermediaries), engage in any conduct described in Section 5.4(a)(x)-(y) of the Recapitalization 7 Agreement, except to the extent Stockholder is specifically directed to engage in any such conduct by the Board of Directors of the Company. 7. Brokerage. Except as set forth on Section 3.20 to the Company Disclosure Schedule (as defined in the Recapitalization Agreement), the Stockholder represents and warrants that there are no claims for finder's fees or brokerage commissions or other like payments in connection with this Agreement or the transactions contemplated hereby. The Stockholder will indemnify and hold harmless both Nortek and K Holdings from and against any and all claims or liabilities for finder's fees or brokerage commissions or other like payments incurred by the Stockholder by reason of any action taken by the Stockholder. 8. Specific Enforcement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with the terms hereof or were otherwise breached and that each party shall be entitled to specific performance of the terms hereof in addition to any other remedy which may be available at law or in equity. 9. Termination. This Agreement shall terminate on the earliest of (i) the termination of the Recapitalization Agreement in accordance with its terms, (ii) the agreement of Nortek, K Holdings and the Stockholder to terminate this Agreement, and (iii) the consummation of the Transactions (as defined in the Recapitalization Agreement). Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. 10. Survival. The representations and warranties of the parties contained in this Agreement shall terminate upon the consummation of the Transactions. Section 7 hereof shall survive in accordance with its terms. 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon (a) transmitter's confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by a standard overnight carrier or when delivered by hand, or (c) the expiration of five business days after the day when mailed by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Company, to: Nortek, Inc. 50 Kennedy Plaza 8 Providence, RI 02903 Attention: Kevin W. Donnelly Telephone: 401-751-1600 Facsimile: 401-751-4610 with a copy to: Ropes & Gray One International Place Boston, Mass 02110 Attention: John Ayer Telephone: 617-951-7000 Facsimile: 617-951-7050 and a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: Daniel S. Sternberg, Esq. Telephone: 212-225-2000 Facsimile: 212-225-3999 If to K Holdings, to: c/o Kelso & Company, L.P. 320 Park Avenue New York, NY 10022 Attention: James J. Connors II Telephone: 212-751-3939 Facsimile: 212-223-2379 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Lou R. Kling, Esq. Telephone: 212-735-3000 Facsimile: 212-735-2000 9 If to the Stockholder, to: Richard L. Bready with a copy to: Ropes & Gray (as set forth above) 12. Certain Events. The Stockholder agrees that this Agreement and the obligations hereunder shall attach to the Stockholder's Shares and Options and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares or Options shall pass, whether by operation of law or otherwise. 13. No Waiver. K Holdings agrees not to waive the conditions set forth in Section 6.3(d) of the Recapitalization Agreement without the prior written consent of Stockholder. 14. Entire Agreement. This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. 15. Consideration. This Agreement is granted in consideration of the execution and delivery of the Recapitalization Agreement by Nortek, Nortek Holdings and K Holdings. 16. Amendment; Release. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. 17. Successors and Assigns. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other parties hereto, except that K Holdings may assign its rights under this Agreement to the same extent that it may assign its rights under the Recapitalization Agreement. This Agreement will be binding upon, inure to the benefit of and be enforceable by each party and such party's respective heirs, beneficiaries, executors, representatives and permitted assigns. 10 18. Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 20. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 21. Headings; Capitalized Terms. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Recapitalization Agreement. 22. Further Assurances. The Stockholder shall, upon request of K Holdings or the Company, execute and deliver any additional documents and take such actions as may reasonably be deemed by K Holdings or the Company to be necessary or desirable to carry out the provisions hereof. 11 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Stockholder, a duly authorized officer of Nortek, and a duly authorized officer of K Holdings on the day and year first written above. NORTEK, INC. By: /s/ Kevin W. Donnelly --------------------------- Name: Kevin W. Donnelly Title: Vice President and General Counsel K HOLDINGS, INC. By: /s/ James J. Connors, II --------------------------- Name: James J. Connors, II Title: Vice President RICHARD L. BREADY /s/ Richard L. Bready ----------------------------- 12 EX-99.3 7 b43459scexv5.txt EXCHANGE AGREEMENT EXHIBIT 5 EXCHANGE AGREEMENT This Exchange Agreement (the "Agreement") is made and entered into as of June 20, 2002, by and among Nortek, Inc., a Delaware corporation ("Nortek"), Nortek Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Nortek ("Nortek Holdings"), K Holdings, Inc., a Delaware corporation ("K Holdings"), and Richard L. Bready (the "Stockholder"). References herein to the "Company" shall be deemed to be references to Nortek, prior to the Holding Company Merger (as defined in the Recapitalization Agreement (as defined below)), and to Nortek Holdings, from and after the Holding Company Merger. WHEREAS, Nortek, Nortek Holdings and K Holdings, have entered into an Agreement and Plan of Recapitalization, dated as of June 20, 2002 (the "Recapitalization Agreement"), pursuant to which the parties thereto have agreed, upon the terms and subject to the conditions set forth therein, to consummate the Transactions (as defined therein); WHEREAS, as of the date hereof (or, after the Holding Company Merger, as of such date), the Stockholder is (or will be, in the case of the period after the Holding Company Merger) (i) the record and beneficial owner of, and has the sole right to vote and dispose of 258,150 shares of common stock, par value $1.00 per share, of the Company (the "Common Stock"), and 373,182 shares of special common stock, par value $1.00 per share, of the Company (the "Special Common Stock," and together with the Common Stock, the "Shares") and (ii) the owner of options to acquire 150,000 shares of Common Stock and options to acquire 1,248,849 shares of Special Common Stock (collectively, the "Exchange Options"); it being understood that the term "Shares" shall not under any circumstances or for any purpose under this Agreement be deemed to refer to or include shares of Common Stock or Special Common Stock the beneficial ownership of which may be attributed to the Stockholder, or which the Stockholder has the right to vote, solely as a result of his serving as a trustee with respect to an employee benefit plan of the Company (collectively, "Benefit Plan Shares"); WHEREAS, subject to the conditions set forth herein, (1) immediately prior to the Effective Time (as defined in the Recapitalization Agreement), the Stockholder desires to exchange each Share (the "Share Exchange") held by him, and Nortek Holdings desires to issue to the Stockholder in exchange therefor, one share of Series B convertible preference stock, par value $1.00 per share, of Nortek Holdings (the "Nortek Holdings Preference Stock"), and (2) immediately after the Reclassification (as defined in the Recapitalization Agreement), the Stockholder desires to have each Exchange Option cancelled and converted (the "Option Exchange") into an option (each, a "New Option") to acquire shares of class A common stock, par value $1.00 per share, of Nortek Holdings (the "Class A Common Stock") pursuant to the terms of the Nortek Holdings, Inc. 2002 Stock Option Plan (the "Option Plan"); WHEREAS, subject to the conditions set forth herein, immediately after the Option Exchange, the Stockholder desires to sell, and K Holdings desires to purchase from the Stockholder, 373,182 shares of Nortek Holdings Preference Stock (the "Management Stock Purchase") for a price per share (the "Management Purchase Price") equal to the Redemption Consideration (as defined in the Recapitalization Agreement); and WHEREAS, pursuant to the Nortek Holdings COD (as defined in the Recapitalization Agreement), the Nortek Holdings Preference Stock will automatically convert into Class A Common Stock immediately following the Redemption (as defined in the Recapitalization Agreement); NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein, the Stockholder, the Company and K Holdings hereby agree as follows: Share Exchange. (a) Immediately prior to the Effective Time, the Stockholder shall assign, transfer, convey and deliver 258,150 shares of Common Stock and 373,182 shares of Special Common Stock to the Company and, in exchange therefor, the Company shall issue and deliver to the Stockholder 631,332 shares of Nortek Holdings Preference Stock. If any Shares are held in "street name" by the Stockholder, such Stockholder agrees to arrange for appropriate transfer to the Company hereunder. Immediately prior to the Share Exchange, the Company shall cause the Nortek Holdings COD (as defined in the Recapitalization Agreement) to be executed and filed with the Secretary of State of the State of Delaware as provided in the Delaware General Corporation Law and to be effective at such time as is specified in the Recapitalization Agreement. (b) In the event that the Share Exchange is consummated and the Reclassification (as defined in the Recapitalization Agreement) is not consummated and the Recapitalization Agreement is terminated in accordance with its terms, then promptly following such termination, the Stockholder shall assign, transfer, convey and deliver to the Company the number of shares of Nortek Holdings Preference Stock received by the Stockholder pursuant to clause (a) above and, in exchange therefor, the Company shall issue and deliver to the Stockholder the number of shares of Common Stock and Special Common Stock exchanged by the Stockholder for such shares of Nortek Holdings Preference Stock pursuant to clause (a) above. Option Exchange. Stockholder agrees that, immediately after the Reclassification, each Exchange Option held by the Stockholder shall be cancelled, and in exchange therefore, shall be converted into a New Option to purchase the number of shares of Class A Common Stock equal to the number of shares of Common Stock and Special Common Stock subject to the related Exchange Option immediately prior to the Effective Time with an exercise price equal to the exercise price with respect to the related Exchange Option. Each New Option shall be subject to the terms and conditions of the Option Plan and the applicable stock option agreement. The Company and Stockholder agree to take all corporate and other action as shall be necessary to effectuate the foregoing. Management Stock Purchase. Immediately following the Option Exchange, the Stockholder shall assign, transfer, convey and deliver to K Holdings (or its permitted designees) 373,182 shares of Nortek Holdings Preference Stock by delivery of a certificate or certificates evidencing such Shares duly endorsed to K Holdings (or its permitted designees) or accompanied by such stock powers duly executed in favor of K Holdings (or its permitted designees), with all necessary stock transfer stamps affixed, and K Holdings (or its permitted designees) shall pay to the Stockholder an amount equal to the Management Purchase Price per share of Nortek Holdings Preference Stock being purchased by K Holdings (or its permitted designees), for an aggregate purchase price of $17,166,372. Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, concurrently with the closing of the Transactions (as defined in the Recapitalization Agreement), with such transactions intended to be consummated in the order specified in the recitals to the Recapitalization Agreement but substantially concurrently with each other. Representations and Warranties of the Stockholder. The Stockholder represents and warrants as follows: Binding Agreement. The Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Stockholder has duly and validly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). Ownership of Shares and Options. The Stockholder is the record and "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which meaning will apply for all purposes of this Agreement) of the number of Shares set forth in the recitals hereto and is the owner of the number of Exchange Options set forth in the recitals hereto, in each case free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Shares or Exchange Options), except, in each case, as may exist by reason of the Voting Agreement (as defined in the Recapitalization Agreement). Except as provided for in the Recapitalization Agreement and the Transactions, there are no outstanding options or other rights to acquire from the Stockholder, or obligations of the Stockholder to sell or to dispose of, any Shares or Exchange Options. As of the date of this Agreement, the number of Shares and Exchange Options set forth in the recitals hereto represent all of the shares of capital stock of the Company beneficially owned by the Stockholder, other than Benefit Plan Shares. No Conflict. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of the Stockholder's obligations hereunder will (a) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, agreement, instrument, commitment, arrangement or understanding, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to the Stockholder's Shares or Exchange Options, or (b) require any material consent, authorization or approval of any person other than a governmental entity, or (c) violate or conflict with any writ, injunction or decree applicable to the Stockholder or the Stockholder's Shares, Exchange Options, Nortek Holdings Preference Stock to be received by Stockholder or Class A Common Stock to be received by Stockholder upon conversion thereof. Federal Securities Laws Matters. The Stockholder acknowledges receipt of advice from the Company that (i) the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) have not been registered under the Securities Act of 1933 (the "Securities Act"), (ii) the shares of Nortek Holdings Preference Stock must be held indefinitely and the Stockholder must continue to bear the economic risk of the investment in the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof), unless such shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) are subsequently registered under the Securities Act, or an exemption from such registration is available, (iii) it is not anticipated that there will be any public market for the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) in the foreseeable future, (iv) Rule 144 promulgated under the Securities Act will not initially be available with respect to the sales of the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof), and neither Nortek nor Nortek Holdings has made any covenant to make such rule available and such rule is not anticipated to be available in the foreseeable future, (v) when and if the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such rule, (vi) if the exemption afforded by Rule 144 is not available, public sale of the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) without registration will require the availability of an exemption under the Securities Act, and (vii) a notation may be made in the appropriate records of the Company indicating that the Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) is subject to restrictions on transfer and, if the Company should in the future engage the services of a stock transfer agent, appropriate stop-transfer restrictions will be issued to such transfer agent with respect to the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof). Stockholder Status. Either (i) the Stockholder is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act or (ii) (A) the Stockholder's financial situation is such that the Stockholder can afford to bear the economic risk of holding the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof) for an indefinite period of time, (B) the Stockholder can afford to suffer complete loss of his investment in the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof), (C) the Stockholder's knowledge and experience in financial and business matters are such that the Stockholder is capable of evaluating the merits and risks of the Stockholder's investment in the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof), and (D) the Stockholder understands and has taken cognizance of all the risk factors related to the purchase of the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof). Representations and Warranties of the Company. Each of Nortek and Nortek Holdings represents and warrants as follows: Corporate Form. Each of Nortek and Nortek Holdings is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. Corporate Authority, etc. Each of Nortek and Nortek Holdings has all requisite corporate power and authority to enter into this Agreement and perform all of its obligations hereunder and to carry out the transactions contemplated hereby and Nortek Holdings has all requisite corporate power and authority to issue the shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof). The shares of Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon conversion thereof), when issued, delivered and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. As of the date hereof, there were no shares of Nortek Holdings Preference Stock issued and outstanding. Actions Authorized. Each of Nortek and Nortek Holdings has taken all corporate actions necessary to authorize it to enter into this Agreement and perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Nortek and Nortek Holdings and, assuming due authorization, execution and delivery of this Agreement by the Stockholder and K Holdings, constitutes a legal, valid and binding obligation of each of Nortek and Nortek Holdings enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). Required Filings and Approvals. Other than as provided for in the Recapitalization Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by each of Nortek and Nortek Holdings and the consummation of the transactions contemplated hereby by each of Nortek and Nortek Holdings do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Nortek or Nortek Holdings, other than the filings, registrations or qualifications (i) that may be required under Regulation D under the Securities Act, (ii) that may be required under the state securities laws or "blue sky" laws of any state of the United States of America that may be required to be made or obtained, all of which each of Nortek and Nortek Holdings will comply with prior to the date of the Closing (iii) the filing of the Nortek Holdings COD with the Secretary of State of the State of Delaware, or (iv) the failure of which to make or obtain, in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect (as defined in the Recapitalization Agreement). No Conflicts. Other than as provided for in the Recapitalization Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, by each of Nortek and Nortek Holdings will conflict with the respective certificate of incorporation or the by-laws of Nortek and Nortek Holdings or, except as would not be reasonably expected to have a Company Material Adverse Effect, result in any breach of, or constitute a default under any contract, agreement or instrument to which Nortek or Nortek Holdings is a party or by which it or any of its respective assets is bound. Representations and Warranties of K Holdings. K Holdings represents and warrants as follows: Corporate Form. K Holdings is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. Corporate Authority. K Holdings has all requisite corporate power and authority to enter into this Agreement and perform all of its obligations hereunder and to carry out the transactions contemplated hereby. Actions Authorized. K Holdings has taken all corporate actions necessary to authorize it to enter into this Agreement and perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by K Holdings and, assuming due authorization, execution and delivery of this Agreement by the Stockholder and the Company, constitutes a legal, valid and binding obligation of K Holdings enforceable in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). No Conflicts. Other than as provided for in the Recapitalization Agreement and the disclosure schedules thereto, none of the execution, delivery or performance of this Agreement by K Holdings or the consummation of the transactions contemplated hereby will conflict with the certificate of incorporation or the by-laws of K Holdings or, except as would not be reasonably expected to have a K Holdings Material Adverse Effect (as defined in the Recapitalization Agreement), result in any breach of, or constitute a default under any contract, agreement or instrument to which K Holdings is a party or by which it or any of its assets is bound. Required Filings and Approvals. Other than as provided for in the Recapitalization Agreement and the disclosure schedules thereto, the execution and delivery of this Agreement by K Holdings and the consummation of the transactions contemplated hereby by K Holdings do not require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of K Holdings, other than the filings, registrations or qualifications the failure of which to make or obtain, in the aggregate, will not have a K Holdings Material Adverse Effect (as defined in the Recapitalization Agreement). Equity Financing. K Holdings (and its permitted designees) has available to it, subject to the satisfaction of the conditions set forth in Sections 6.1 and 6.3 of the Recapitalization Agreement, sufficient funds to deliver $389,091,466 of the funds necessary to consummate the Transactions. Debt Financing. K Holdings has received and delivered to the Company the Bridge Facility Commitment Letter (as defined in the Recapitalization Agreement) with respect to the Debt Financing (as defined in the Recapitalization Agreement). The Bridge Facility Commitment Letter is in full force and effect on the date hereof and has not been amended or modified, and there is no breach or default existing (or which with notice or lapse of time or both may exist) thereunder. Assuming the Company has cash to fund the Distribution (as defined in the Recapitalization Agreement) in accordance with Section 2.3 of the Recapitalization Agreement, the aggregate proceeds of the financing contemplated by Section 7(f) of this Agreement are sufficient to pay the aggregate Redemption Consideration and to effect the Management Stock Purchase and the K Stock Purchase. Post-Closing Capitalization. Assuming the consummation of the Transactions, (i) immediately following the consummation of the Transactions, Stockholder will own (A) 258,150 shares of Class A Common Stock and (B) Rolled Over Options (as defined in the Nortek Holdings, Inc. 2002 Stock Option Plan) to purchase 1,398,849 shares of Class A Common Stock, (ii) it is anticipated that immediately following the consummation of the Transactions, K Holdings (or its permitted designees) will own 8,458,510 shares of Class A Common Stock and that, other than options held by employees, officers or directors of the Company, no other shares of, or options to acquire, capital stock of the Company will be outstanding and (iii) immediately following the consummation of the Transactions, (A) affiliates of Kelso & Company, L.P. will own at least a majority of the outstanding shares of capital stock of the Company (calculated on a fully diluted basis but, for this purpose only, ignoring all capital stock and options held by members of the Company's management) and (B) the amount of Stockholder's investment in Class A Common Stock and Rolled Over Options will represent at least approximately 10.1% of the investment of all holders of Class A Common Stock and Rolled Over Options, including Stockholder and K Holdings (and its permitted designees). For purposes of clause (iii)(B) of the immediately preceding sentence, all Class A Common Stock outstanding shall be valued at the Management Purchase Price and all Rolled Over Options shall be valued based upon the number of shares of Class A Common Stock subject thereto and the excess of the Management Purchase Price over the exercise price of such options. Capitalization of K Holdings. As of the date of this Agreement, the authorized capital stock of K Holdings consists of 1,000,000 shares of common stock, par value $.01 per share (the "K Holdings Common Stock"), of which 100 shares were issued and outstanding. As of the date of this Agreement, 85 shares of K Holdings Common Stock have been issued to Kelso Investment Associates VI, L.P., a Delaware limited partnership, and 15 shares of K Holdings Common Stock have been issued to KEP VI, LLC, a Delaware limited liability company. K Holdings Fees. The aggregate fees (but not including any expenses) payable to K Holdings or its affiliates in connection with the Transactions will not exceed the amounts set forth in Section 5.17 of the Recapitalization Agreement. Conditions Precedent. The obligations of the Stockholder and the Company to consummate the Share Exchange are subject to (1) the conditions set forth in Section 6.1 and Section 6.2 of the Recapitalization Agreement being satisfied or waived on or prior to the Closing (as defined in the Recapitalization Agreement) and (2) the conditions set forth in Section 6.3 of the Recapitalization Agreement being satisfied or waived on or prior to the Closing. The obligations of K Holdings to consummate the Management Stock Purchase are subject to the conditions set forth in Section 6.1, Section 6.2 and Section 6.3 of the Recapitalization Agreement being satisfied or waived on or prior to the Closing. The obligations of Stockholder to consummate the Management Stock Purchase are subject to the Share Exchange having been effected and K Holdings (or its permitted designees) having effected, or concurrently with the Management Stock Purchase effecting, the K Stock Purchase (as defined in the Recapitalization Agreement), provided that if Stockholder was required to effect the Share Exchange (and the conditions to Stockholder's obligations set forth in Section 8(a) have been satisfied (or would be satisfied concurrently therewith)) and failed to do so, this condition shall be deemed to be satisfied. The obligations of the parties to consummate the Option Exchange are subject to the Reclassification having been effected. Miscellaneous. Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement and their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. No party shall have liability for any breach of any representation or warranty contained herein, except for any knowing or intentional breach thereof. Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Stockholder and K Holdings, and such written modification, amendment, alteration or supplement shall not require the consent of the Company; provided, however, that any modification, amendment, alteration or supplement to the obligations of the Company with respect to the Share Exchange or Option Exchange, to the extent it imposes obligations on the Company that are applicable prior to the consummation of the Reclassification or in the event the Reclassification is not consummated or to the extent it would cause a condition to the closing of the transactions contemplated by the Recapitalization Agreement not to be satisfied or give rise to a right of termination thereunder, shall require the consent of the Company; it being further understood that this Agreement shall be appropriately modified consistent with Section 8.5(b) of the Recapitalization Agreement in the event such agreement is modified pursuant to such provision. Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by either the Company or the Stockholder without the prior written consent of K Holdings; it being understood that K Holdings may assign its rights hereunder to the same extent that it may assign its rights under the Recapitalization Agreement. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). Counterparts. This Agreement may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. Waiver. Any party to this Agreement may waive any condition to their obligations contained herein. Termination. This Agreement shall terminate on the earlier of (i) the termination of the Recapitalization Agreement in accordance with its terms and (ii) the agreement of K Holdings, the Company and the Stockholder to terminate this Agreement. Termination shall not relieve any party from liability for any intentional breach of its obligations hereunder committed prior to such termination. IN WITNESS WHEREOF, Nortek, Nortek Holdings, K Holdings, and the Stockholder have executed this Agreement as of the date first above written. Nortek, Inc. By: /s/ Kevin W. Donnelly ------------------------------------------ Name: Kevin W. Donnelly Title: Vice President and General Counsel Nortek Holdings, Inc. By: /s/ Kevin W. Donnelly ------------------------------------------ Name: Kevin W. Donnelly Title: Vice President K Holdings, Inc. By: /s/ James J. Connors, II ------------------------------------------ Name: James J. Connors, II Title: Vice President Richard L. Bready /s/ Richard L. Bready ---------------------------------------------- (Signature of Stockholder) EX-99.4 8 b43459scexv6.txt PRESS RELEASE EXHIBIT 6 Richard L. Bready, Chairman and CEO Edward J. Cooney, Vice President and Treasurer (401) 751-1600 IMMEDIATE NORTEK, INC. ANNOUNCES AGREEMENT TO BE ACQUIRED BY AN AFFILIATE OF KELSO & COMPANY AND MANAGEMENT ------------------------ PROVIDENCE, RI, June 21, 2002--NORTEK, INC. (NYSE:NTK), a leading international designer, manufacturer and marketer of building products, announced that it accepted a revised acquisition proposal from Kelso & Company, L.P., a private equity firm based in New York City, and signed a definitive agreement providing for the acquisition of NORTEK by an affiliate of Kelso in partnership with certain members of NORTEK management including Richard L. Bready, the Chairman and Chief Executive Officer of NORTEK. The transaction is valued at approximately $1.6 billion (including the assumption or refinancing of outstanding indebtedness). NORTEK will continue to operate under its current name and operating structure. Pursuant to the agreement, each publicly owned outstanding share, with the exception of some shares owned by certain members of management, will be acquired for $46 per share in cash. NORTEK currently has approximately 11 million shares of common and special common stock outstanding, excluding options. - M O R E - NORTEK'S Board of Directors, based upon the recommendation of a Special Committee of disinterested directors, has approved the transaction. Morgan Stanley & Co. Incorporated served as financial advisor to the Special Committee and has delivered its opinion that the $46 per share consideration to be received by NORTEK'S public stockholders in the transaction is fair, from a financial point of view. The acquisition is expected to be completed during the third quarter of 2002 and is subject to approval by the Company's stockholders, the availability of certain financing, the expiration of the applicable waiting period under the Hart-Scott Rodino Act and other customary conditions. A special meeting of NORTEK'S stockholders will be scheduled as soon as practical following approval of proxy materials by the Securities and Exchange Commission. Commitment letters have been obtained with respect to all necessary financing in connection with the transaction. In connection with the solicitation of proxies with respect to the special meeting of stockholders of NORTEK concerning the proposed transaction, NORTEK will file with the Securities and Exchange Commission (the "SEC"), and will furnish to security holders of NORTEK, a proxy statement, which security holders are advised to read as it will contain important information. Security holders will be able to obtain a free-of-charge copy of such proxy statement (when available) and other - P A G E 2 - relevant documents filed with the SEC from the SEC's website at www.sec.gov. Such proxy statement and other documents will also, when available, be provided to security holders by directing a request by mail or telephone to NORTEK, INC., 50 Kennedy Plaza, Providence, Rhode Island 02903 Attention: Investor Relations, 401-751-1600. NORTEK, and certain of its directors, executive officers and other members of management and employees may be soliciting proxies from NORTEK stockholders in favor of the transactions. Information regarding the persons who may, under the rules of the SEC, be considered "participants" in the solicitation of proxies in connection with the proposed transactions will be set forth in the proxy statement when it is filed with the SEC. Information regarding the participants is also available on the Schedule 14A filed by NORTEK on April 2, 2002 with the SEC. NORTEK* is a leading international manufacturer and distributor of high-quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets. The Company offers a broad array of products for improving the environments where people live and work. Its products include range hoods and other spot ventilation products; heating and air - P A G E 3 - conditioning systems; vinyl products, including windows and doors, siding, decking, fencing and accessories; indoor air quality systems; and specialty electronic products. *As used herein, the term "Nortek" refers to Nortek, Inc., together with its subsidiaries, unless the context indicates otherwise. This term is used for convenience only and is not intended as a precise description of any of the separate corporations, each of which manages its own affairs. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's current plans and expectations and involve risks and uncertainties 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 impacting such forward-looking statements include the availability and cost of raw materials and purchased components, the level of construction and remodeling activity, changes in general economic conditions, the rate of sales growth, and product liability claims. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information, please refer to the Company's reports and filings with the Securities and Exchange Commission. # # # -----END PRIVACY-ENHANCED MESSAGE-----