-----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, Ow2mONHVGEk/CePtCkH0hAVUxyoexZbhljJOiyAWpJDG+Lb6rf1IphlylJOnOt2s W/BOYb6Qyn2t4nAFFUwn6A== 0000950135-97-001938.txt : 19970423 0000950135-97-001938.hdr.sgml : 19970423 ACCESSION NUMBER: 0000950135-97-001938 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19970418 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTEK INC CENTRAL INDEX KEY: 0000072423 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 050314991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-25505 FILM NUMBER: 97583797 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4017511600 MAIL ADDRESS: STREET 1: 50 KENNEDY PLAZA CITY: PROVIDENCE STATE: RI ZIP: 02903 S-4 1 NORTEK, INC. FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- NORTEK, INC. (Exact name of registrant as specified in its charter) DELAWARE 3634 05-0314991 (State or other jurisdiction (Primary standard (I.R.S. Employer of incorporation or industrial classification code Identification Number) organization) number)
50 KENNEDY PLAZA PROVIDENCE, RHODE ISLAND 02903 (401) 751-1600 (Address, including zip code and telephone number including area code of registrant's principal executive offices) KEVIN W. DONNELLY VICE PRESIDENT AND GENERAL COUNSEL NORTEK, INC. 50 KENNEDY PLAZA PROVIDENCE, RHODE ISLAND 02903 (401) 751-1600 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- PLEASE SEND COPIES OF ALL COMMUNICATIONS TO: JOHN B. AYER, ESQ. ROPES & GRAY ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110 (617) 951-7000 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effectiveness of the Registration Statement. If the only securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] CALCULATION OF REGISTRATION FEE ================================================================================================== TITLE OF EACH CLASS AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO BE TO BE MAXIMUM OFFERING AGGREGATE REGISTRATION REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE - -------------------------------------------------------------------------------------------------- 9 1/4% Series B Senior Notes due 2007...... $175,000,000 99.422% $173,988,500 $52,723.79 ==================================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS SUBJECT TO COMPLETION DATED APRIL 18, 1997 NORTEK, INC. OFFER TO EXCHANGE 9 1/4% SERIES B SENIOR NOTES DUE MARCH 15, 2007 FOR AN EQUAL PRINCIPAL AMOUNT OF 9 1/4% SERIES A SENIOR NOTES DUE MARCH 15, 2007 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED --------------------- Nortek, Inc., a Delaware corporation ("Nortek" or the "Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal"), to exchange an aggregate principal amount of up to $175,000,000 of its 9 1/4% Series B Senior Notes due 2007 (the "Exchange Notes") of the Company for a like principal amount of the issued and outstanding 9 1/4% Series A Senior Notes due 2007 (the "Original Notes" and together with the Exchange Notes, the "Notes") from the holders (the "Holders") thereof. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Original Notes except that the Exchange Notes will not contain terms with respect to transfer restrictions (other than those that might be imposed by state securities laws) or, except in limited circumstances, provide for the payment of Liquidated Damages (as defined). The Original Notes are and the Exchange Notes will be senior unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Exchange Notes will be effectively subordinated to all existing and future secured indebtedness of the Company, to the extent of the value of the assets securing such indebtedness, and to all existing and future indebtedness and other obligations of the Company's subsidiaries. At December 31, 1996, after giving effect to the issuance and sale of the Original Notes (the "Offering") and the application of the net proceeds therefrom, the Exchange Notes would have been effectively subordinated to approximately $172.6 million of indebtedness for borrowed money, trade payables and accrued liabilities of the Company's subsidiaries. See "Description of Notes -- General." Subject to certain restrictions, the Indenture pursuant to which the Original Notes were issued and the Exchange Notes will be issued, permits the Company and its subsidiaries to incur additional indebtedness, including indebtedness which may be secured. Interest on the Exchange Notes will be payable semi-annually on March 15 and September 15 of each year, commencing September 15, 1997. The Exchange Notes will mature on March 15, 2007. The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time and from time to time on or after March 15, 2002 at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. Upon a Change of Control (as defined), holders of the Exchange Notes will have the right, subject to certain exceptions, restrictions and conditions, to require the Company to purchase all or any of their Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. See "Description of Notes." The Exchange Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement, dated March 17, 1997, among the Company and the other signataries thereto (the "Registration Rights Agreement"). The Company believes that based on interpretations by the staff of the Securities and Exchange Commission (the "Commission"), Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by each Holder thereof (other than (i) a broker-dealer who purchased Original Notes directly from the Company or any of its "affiliates" within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Securities Act") for resale pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is such an "affiliate" of the Company) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holder is not participating, and has no arrangement with any such person to participate, in the distribution of the Exchange Notes. Each broker-dealer participating in the Exchange Offer (a "Participating Broker-Dealer") that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined), it will make this Prospectus and any amendment or supplement to this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." The Company will not receive any proceeds from the Exchange Offer and will pay the expenses incident to the Exchange Offer. Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date. In the event the Company terminates the Exchange Offer and does not accept for exchange any Original Notes, the Company will promptly return the Original Notes to the Holders thereof. See "The Exchange Offer." --------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING THE EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- THE DATE OF THIS PROSPECTUS IS , 1997. 3 The Exchange Offer is not being made to, nor will the Company accept surrenders for Exchange Notes from, Holders of Original Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the Securities or Blue Sky Laws for such jurisdiction. The Exchange Notes will be available initially only in book-entry form. The Company expects that the Exchange Notes issued pursuant to this Exchange Offer will be issued in the form of one or more Global Notes (as defined), which will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Note representing the Exchange Notes will be shown on, and transfers thereof will be effected through, records maintained by the Depositary and its participants. After the initial issuance of the Global Note, Exchange Notes in certificated form will be issued in exchange for the Global Note only on the terms set forth in the Indenture (as defined). See "Description of Notes -- Book-Entry; Delivery and Form." Prior to the Exchange Offer, there has been no public market for the Original Notes or Exchange Notes. To the extent that Original Notes are tendered and accepted in the Exchange Offer, a Holder's ability to sell untendered Original Notes could be adversely affected. If a market for the Exchange Notes should develop, the Exchange Notes could trade at a premium or discount from their principal amount. The Company does not currently intend to list the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. The Company has been advised by Bear, Stearns & Co., Inc., Wasserstein Perrella Securities Inc. and BT Securities Corporation, the initial purchasers (the "Initial Purchasers") of the Original Notes, that, following completion of the Exchange Offer, they intend to make a market in the Exchange Notes; however, such entities are under no obligation to do so and any market activities with respect to the Exchange Notes may be discontinued at any time. Pursuant to the Indenture (as defined), so long as any of the Notes are outstanding, whether or not the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company will furnish to all holders of the Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operation" that describes the financial condition and results of operations of the Company and its subsidiaries and, with respect to annual information only, a report thereon by the Company's independent certified public accountants and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. The Company will also file a copy of all such information with the Commission for public availability (unless the Commission will not accept such filing) and make such information available to investors or prospective investors of the Notes who request it in writing. 2 4 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference into this Prospectus the following documents or information previously filed with the Commission: (a) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "Form 10-K"); (b) each of the Company's Current Report on Form 8-K dated March 5, 1997 and March 12, 1997 (collectively, the "Form 8-Ks"); and (c) all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange Act") after the date of this Prospectus and prior to the termination of the offering made hereby. Any statement contained herein or in any documents incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a subsequent statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM ALMON C. HALL, VICE PRESIDENT, CONTROLLER AND CHIEF ACCOUNTING OFFICER AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903 TELEPHONE NUMBER (401) 751-1600. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY . AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information with the Commission. All reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied at the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 400, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. In addition, such reports, proxy statements and other information concerning the Company can be inspected at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. A Registration Statement on Form S-4, including amendments thereto, relating to the Exchange Notes offered hereby has been filed by the Company with the Commission. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other documents filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. For further information with respect to the Company and the Exchange Notes offered hereby, reference is made to such Registration Statement, exhibits and schedules. A copy of the Registration Statement and the exhibits and schedules thereto may be inspected or obtained in the same manner set forth in the immediately preceding paragraph for the reports, proxy statements and other information referred therein. 3 5 - ------------------------------------------------------------------------------- PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the detailed information and financial data, including the Consolidated Financial Statements and Notes thereto, appearing elsewhere or incorporated by reference in this Prospectus. THE COMPANY The Company is a diversified manufacturer of residential and commercial building products, operating within three principal product groups: the Residential Building Products Group; the Air Conditioning and Heating Products Group; and the Plumbing Products Group. Through these product groups, the Company manufactures and sells, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and do-it-yourself and professional remodeling and renovation markets. The Company's net sales and EBITDA from operations for the fiscal year ended December 31, 1996 were $969.8 million and $82.6 million, respectively. RESIDENTIAL BUILDING PRODUCTS GROUP The Residential Building Products Group manufactures and distributes built-in products primarily for the residential new construction, do-it-yourself and professional remodeling and renovation markets. The principal products sold by the Group are kitchen range hoods, bath fans, combination units (fan, heater and light combinations) and bath cabinets. The Group is the largest supplier in the United States and Canada of range hoods, bath fans and combination units, indoor air quality products such as continuous-ventilation systems and energy-recovery ventilators and one of the leading suppliers in Western Europe, South America and the Middle East of luxury "Eurostyle" range hoods. Products are sold under the Broan(R), Nautilus(R), Venmar(R), Flair, vanEE(R), Rangaire(R) and Best(R) brand names, among others, to distributors and dealers of electrical and lighting products, kitchen and bath dealers, retail home centers and OEMs (original equipment manufacturers). Customers for the Group's products include residential and electrical contractors, professional remodelers and do-it-yourself homeowners. Other products sold by this Group include, among others, wireless security products, garage door openers, built-in home intercoms and entertainment systems, home automation systems, door chimes, paddle fans, central vacuum systems and fluorescent lighting fixtures. In the fourth quarter of 1995, the Company, through its subsidiaries, completed the acquisition of the assets, subject to certain liabilities, of Rangaire Company, all the capital stock of Best S.p.A. and related entities and all the capital stock of Venmar Ventilation Inc. See the Consolidated Financial Statements and Notes thereto included in the Form 10-K incorporated herein by reference. AIR CONDITIONING AND HEATING PRODUCTS GROUP The Air Conditioning and Heating Products Group manufactures and sells heating, ventilating and central air conditioning ("HVAC") systems for custom-designed commercial applications and for manufactured and site-built residential housing. The Group's commercial products consist of HVAC systems which are custom-designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. Such systems are primarily designed to operate on building rooftops (including large self-contained walk-in-units) or on individual floors within a building, and range from 40 to 600 tons of cooling capacity. The Group markets its commercial products under the Governair(R), Mammoth(R) and Temtrol(TM) brand names. For manufactured and site-built residential housing, the Group's products include central air conditioners, heat pumps, furnaces and a wide range of accessories marketed under the Intertherm(R), Softheat(R), Miller(R), Elect-Air(R) and Powermiser(R) brand names. Residential central air conditioning products range from 1.5 to 5 tons of cooling capacity and furnaces range from 45,000 BTU's to 144,000 BTU's of heating capacity. The Group's residential products also include portable and permanent electric baseboard heating products. - ------------------------------------------------------------------------------- 4 6 - ------------------------------------------------------------------------------- PLUMBING PRODUCTS GROUP The Plumbing Products Group manufactures and sells vitreous china bathroom fixtures (including lavatories, toilet bowls, flush tanks, bidets and urinals), gelcoat and acrylic bathtubs, shower stalls and whirlpools, brass and die cast faucets and shower doors, and also markets stainless steel and enameled steel tubs and sinks. In addition to its standard product offerings, the Group also sells designer bathroom fixtures, 1.6 gallon water-efficient toilets, pressure balance tub-shower fittings and a variety of products that are accessible to physically-challenged individuals. Products are sold under the URC(TM) and Universal-Rundle(R) brand names principally to wholesale plumbing distributors and retail home centers. End customers of the Group's products are generally home builders, do-it-yourself or buy-it-yourself homeowners, remodeling contractors and commercial builders. The Company is a Delaware corporation incorporated in 1986. Its executive offices are located at 50 Kennedy Plaza, Providence, Rhode Island 02903-2360, telephone number: (401) 751-1600. THE EXCHANGE OFFER The Exchange Offer relates to the exchange of up to $175 million aggregate principal amount of Exchange Notes for an equal aggregate principal amount of Original Notes. The Exchange Notes will be obligations of the Company entitled to the benefits of the Indenture relating to the Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes except that the Exchange Notes have been registered under the Securities Act, and hence are not entitled to the benefits of certain registration rights (the "Registration Rights") granted under the Registration Rights Agreement (as defined). Registration Rights Agreement.................. The Company and the Initial Purchasers entered into the Registration Rights Agreement which grants the holders of the Original Notes certain exchange and registration rights. The Exchange Offer made hereby is intended to satisfy such exchange rights. See "The Exchange Offer -- Registration Rights; Liquidated Damages." The Exchange Offer......... $1,000 principal amount of Exchange Notes will be issued in exchange for each $1,000 principal amount of Original Notes validly tendered pursuant to the Exchange Offer. As of the date hereof, $175 million in aggregate principal amount of Original Notes are outstanding. The Company will issue the Exchange Notes to tendering holders of Original Notes on or promptly after the Expiration Date. Resale of the Exchange Notes...................... Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Original Notes directly from the Company or any of its "affiliates" within the meaning of Rule 405 under the Securities Act for resale pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is such an "affiliate" of the Company) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the Exchange Notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Original Notes wishing to accept an Exchange Offer must represent to the Company that such conditions have been met. In the event that the Company's belief is inaccurate, holders of Exchange Notes who transfer Exchange Notes in violation of the prospectus delivery provisions of the - ------------------------------------------------------------------------------- 5 7 - ------------------------------------------------------------------------------- Securities Act and without an exemption from registration thereunder may incur liability under the Securities Act. The Company does not assume or indemnify holders against such liability. A Participating Broker-Dealer that receives Exchange Notes in exchange for Original Notes held for its own account, as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Although such Participating Broker-Dealer may be an "underwriter" within the meaning of the Securities Act, the Letter of Transmittal states that by so acknowledging and by delivering a prospectus, such Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Original Notes. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus and any amendment or supplement to this Prospectus available to any Participating Broker-Dealer for use in connection with any such resales. See "Plan of Distribution." The Exchange Offer is not being made to, nor will the Company accept surrenders for exchange from, holders of Original Notes in any jurisdiction in which this Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Expiration Date............ 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended by the Company in its sole discretion, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer -- Expiration Dates; Extensions; Amendments." Conditions to the Exchange Offer.................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Conditions of the Exchange Offer." Procedures for Tendering Original Notes........... Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Original Notes and any other required documentation to the Exchange Agent (as defined) at the address set forth herein. By executing a Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, (ii) neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that such holder is not engaged in, and does not intend to engage in, a distribution of Exchange Notes, and (iii) that neither the holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, - ------------------------------------------------------------------------------- 6 8 - ------------------------------------------------------------------------------- of the Company. See "The Exchange Offer -- Procedures for Tendering." Special Procedures for Beneficial Holders......... Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. A form of Instruction to Registered Holder from Beneficial Owner is included with the applicable Letter of Transmittal enclosed with this Prospectus for the convenience of such beneficial owners. See "The Exchange Offer -- Procedures for Tendering." Guaranteed Delivery Procedures................. Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes, the Letter of Transmittal, as the case may be, or any other documents required by such Letter of Transmittal to the Exchange Agent (as defined) (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures." Untendered Notes........... Following the consummation of the Exchange Offer, Holders of Original Notes eligible to participate but who do not tender their Original Notes will not have any further exchange rights, and such Original Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Original Notes could be adversely affected by the Exchange Offer. Consequences of Failure to Exchange................. The Original Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Original Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer -- Consequences of Failure to Exchange." Shelf Registration Statement.................. In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or upon the request of a Holder of Transfer Restricted Securities (as defined) under certain circumstances or if the Exchange Offer is not for any other reason consummated within 165 days of the date on which the Original Notes were issued, the Company has agreed pursuant to the Registration Rights Agreement to register the Original Notes issued by it on a shelf registration statement (the "Shelf Registration Statement") and use its best efforts to cause it to be declared effective by the Commission. The Company has agreed to use its reasonable best efforts to maintain the effectiveness of the Shelf Registration Statement for the earlier of (i) two years or (ii) the date on - ------------------------------------------------------------------------------- 7 9 - ------------------------------------------------------------------------------- which the securities covered by the Shelf Registration Statement have been sold or cease to be outstanding. Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." Acceptance of Original Notes and Delivery of Exchange Notes........... Subject to certain conditions, the Company will accept for exchange any and all Original Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Federal Tax Consideration.............. The exchange pursuant to the Exchange Offer will generally not be a taxable event for federal income tax purposes. See "Certain Federal Tax Considerations." Use of Proceeds............ There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent............. Street Bank and Trust Company. THE EXCHANGE NOTES General.................... The form and terms of the Exchange Notes are the same as the form and terms of the respective Original Notes except that (i) the Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will generally not bear legends restricting the transfer thereof (other than those that might be imposed by state securities laws) and (iii) the Exchange Notes will not provide for the payment of Liquidated Damages. The Exchange Notes will evidence the same debt as the Original Notes and will be entitled to the benefits of the Indenture. As used herein, the term "Notes" refers collectively to the Exchange Notes and the Original Notes. Securities Offered......... $175,000,000 aggregate principal amount of 9 1/4% Series B Senior Notes due 2007. Interest Rate and Payment Dates.................... Interest on the Exchange Notes will accrue at the rate of 9 1/4% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing September 15, 1997. Maturity................... March 15, 2007. Redemption................. The Exchange Notes may be redeemed at the Company's option, in whole or in part, at any time and from time to time, on and after March 15, 2002, initially at 104.625% of principal amount and thereafter at prices declining to 100% from and after March 15, 2005, plus accrued and unpaid interest, if any, to the date of redemption. See "Description of Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control (as defined), holders of the Exchange Notes will have the right, subject to certain restrictions and conditions, to require the Company to purchase all or any part of their Exchange Notes - ------------------------------------------------------------------------------- 8 10 - ------------------------------------------------------------------------------- at 101% of the principal amount thereof, plus accrued and unpaid interest, if any (the "Change of Control Payment"), to the date of purchase. If a Change of Control were to occur, there can be no assurance that the Company would have sufficient funds to make the Change of Control Payment with respect to all Notes tendered by holders thereof. In addition, the Company's ability to make such payment may be limited by the terms of borrowing and other agreements applicable to the Company or its subsidiaries. See "Description of Notes -- Change of Control" and "Description of Other Obligations." Ranking.................... The Exchange Notes will be senior unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Exchange Notes will be effectively subordinated to all existing and future secured indebtedness of the Company, to the extent of the value of the assets securing such indebtedness, and to all existing and future indebtedness and other obligations of the Company's subsidiaries. Subject to certain restrictions, the indenture pursuant to which the Exchange Notes will be issued (the "Indenture") permits the Company and its subsidiaries to incur additional indebtedness, including senior indebtedness which may be secured, and other liabilities. At December 31, 1996, after giving effect to the issuance and sale of the Original Notes and the application of the net proceeds therefrom, the Exchange Notes would have been effectively subordinated to approximately $172.6 million of indebtedness for borrowed money, trade payables and accrued liabilities of the Company's subsidiaries. See "Description of Notes -- General." Certain Covenants.......... The Indenture contains certain covenants that limit the ability of the Company and its Restricted Subsidiaries (as defined) to, among other things, pay dividends, repurchase capital stock or make certain other Restricted Payments (as defined), incur additional Indebtedness (as defined), issue preferred stock of Restricted Subsidiaries, make certain Investments (as defined) and consummate certain mergers, consolidations or sales of assets. Upon certain Asset Sales (as defined), the Company will be required in certain circumstances to offer to apply certain proceeds thereof to purchase the Notes. See "Description of Notes -- Certain Covenants." RISK FACTORS Prospective purchasers of the Exchange Notes should consider carefully all of the information included in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors." - ------------------------------------------------------------------------------- 9 11 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data for the five years ended December 31, 1996 has been derived from the Company's Consolidated Financial Statements and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K incorporated herein by reference. The Adjusted Consolidated Statement of Operations Data and adjusted Other Consolidated Data for the year ended December 31, 1996 give effect to the Offering, the refinancing of approximately $47.2 million of outstanding indebtedness of the Company's subsidiaries in connection therewith (the "Refinancing") and the purchase by the Company of the Company's Common and Special Common Stock for the period from January 1, 1996 to March 29, 1997 (the "Company Stock Purchases") as if such transactions had occurred on January 1, 1996. The Consolidated Balance Sheet Data as adjusted give effect to the Offering, the Refinancing and the Company Stock Purchases as if such transactions had occurred on December 31, 1996.
YEARS ENDED DECEMBER 31, -------------------------------------------------- 1992 1993 1994 1995 1996 ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) CONSOLIDATED STATEMENT OF OPERATIONS DATA(1): Net sales..................................... $800.0 $744.1 $737.2 $776.2 $969.8 Operating earnings............................ 20.4 30.3 50.0 41.1 60.1 Interest expense, net......................... (24.8) (23.3) (20.9) (18.8) (24.8) Earnings (loss) from continuing operations(2)............................... (21.0) (12.6) 17.2 15.0 22.0 Earnings (loss) per share from continuing operations.................................. (1.67) (1.00) 1.34 1.19 2.05 ADJUSTED CONSOLIDATED STATEMENT OF OPERATIONS DATA(6): Interest expense, net......................... (31.3) Earnings from continuing operations........... 17.5 Earnings per share from continuing operations.................................. 1.78 OTHER CONSOLIDATED DATA(6): Capital expenditures.......................... 8.8 10.8 19.4 17.3 22.2 Ratio of earnings to fixed charges(3)......... 2.0x 1.9x 2.1x Adjusted ratio of earnings to fixed charges(3).................................. 1.7x EBITDA from operations(4)..................... $ 42.5 $ 49.6 $ 66.7 $ 59.0 $ 82.6 Ratio of EBITDA from operations to interest expense, net................................ 1.7x 2.1x 3.2x 3.1x 3.3x Adjusted ratio of EBITDA from operations to interest expense, net(4).................... 2.6x
AS OF DECEMBER 31, 1996 ------------------------- ACTUAL AS ADJUSTED(6) ------ -------------- CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and marketable securities(5).................. $ 97.8 $213.1 Working capital...................................................... 143.5 291.7 Total assets......................................................... 609.1 729.4 Total debt........................................................... 280.5 407.3 Stockholders' investment............................................. 118.8 112.3
- --------------- (1) Acquisitions have been accounted for under the purchase accounting method and dispositions have been accounted for as described in Note 2 of Notes to Consolidated Financial Statements contained in the Form 10-K incorporated herein by reference and in note (2) below. (2) On January 2, 1992, the Company's subsidiary, Dixieline Products, Inc. ("Dixieline"), sold the assets of L.J. Smith, Inc. and recognized a pre-tax gain on the sale of approximately $8.0 million. On October 2, 1992, the Company sold its wholly-owned subsidiary Bend Millwork Systems, Inc. ("Bend") and recognized a pre-tax loss in 1992 of $22.5 million. In the third quarter of 1993, the Company provided a 10 12 pre-tax valuation reserve of approximately $20.3 million to reduce the Company's net investment in Dixieline to estimated net realizable value. On March 31, 1994, the Company sold all the capital stock of Dixieline for approximately $18.8 million in cash and $6.0 million in preferred stock of the purchaser. No additional loss in 1994 was incurred in connection with this sale. In January 1995, the Company paid approximately $1.8 million as a final purchase price adjustment related to the sale of Bend and recorded a charge to pre-tax earnings in the fourth quarter of 1994. (3) For purposes of calculating this ratio, "earnings" consist of earnings from continuing operations before provision for income taxes and fixed charges. "Fixed charges" consist of interest expense and the estimated interest portion of rental payments on operating leases. Such earnings were insufficient to cover fixed charges by $18.0 million and $11.6 million for the years ended December 31, 1992 and 1993, respectively. (4) "EBITDA from operations" is the earnings (loss) from continuing operations before income taxes plus depreciation, amortization and interest expense, and excludes interest and dividend income, net gain on investment and marketable securities and loss on business sold. EBITDA from operations differs from Consolidated Cash Flow as defined in the Indenture. See "Description of Notes -- Certain Definitions." EBITDA from operations should not be considered as an alternative to net earnings as a measure of the Company's operating results or to cash flows as a measure of liquidity. EBITDA from operations principally differs from net increase (decrease) in unrestricted cash and cash equivalents shown on the Consolidated Statement of Cash Flows of the Company, prepared in accordance with generally accepted accounting principles, in that EBITDA from operations does not reflect capital expenditures, borrowings, principal and interest payments under debt and capital lease obligations, income tax payments and cash flows from other operating, investing and financing activities. (5) Includes $5.7 million of restricted investments and marketable securities at December 31, 1996 (actual and as adjusted). See the Consolidated Financial Statements included in the Form 10-K incorporated herein by reference. (6) The Adjusted Consolidated Statement of Operations Data and adjusted Other Consolidated Data for the year ended December 31, 1996 give effect to the Offering, the Refinancing and the Company Stock Purchases as if such transactions had occurred on January 1, 1996. The Consolidated Balance Sheet Data as adjusted give effect to the Offering, the Refinancing and the Company Stock Purchases as if such transactions had occurred on December 31, 1996. A reconciliation from actual to as adjusted amounts is as follows (dollars in millions, except per share amounts):
COMPANY 1996 1996 OFFERING AND STOCK AS ACTUAL REFINANCING SUBTOTAL PURCHASE ADJUSTED ------ ------------ -------- -------- -------- ADJUSTED CONSOLIDATED STATEMENT OF OPERATIONS DATA: Interest Expenses, net................ $(24.8) $ (5.6) $(30.4) $ (0.9) $(31.3) Earnings from continuing operations... 22.0 (3.9) 18.1 (0.6) 17.5 Earnings per share from continuing operations.......................... 2.05 (0.36) 1.69 0.09 1.78 OTHER CONSOLIDATED DATA: Adjusted ratio of EBITDA from operations to interest expense, net................................. 3.3x (0.6)x 2.7x (0.1)x 2.6x
DECEMBER 31, COMPANY DECEMBER 31, 1995 OFFERING AND STOCK 1996 AS ACTUAL REFINANCING SUBTOTAL PURCHASE ADJUSTED ------------ ------------ -------- -------- ------------ CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and marketable securities.......................... $ 97.8 $121.8 $219.6 $ (6.5) $213.1 Working Capital....................... 143.5 154.7 298.2 (6.5) 291.7 Total Assets.......................... 609.1 126.8 735.9 (6.5) 729.4 Total Debt............................ 280.5 126.8 407.3 -- 407.3 Stockholders Investment............... 118.8 -- 118.8 (6.5) 112.3
11 13 RISK FACTORS Prospective purchasers of the Exchange Notes should carefully review and consider, among other things, the factors set forth below, as well as the other information included or incorporated by reference in this Prospectus, before making an investment in the Exchange Notes. SUBSTANTIAL LEVERAGE The Company has a substantial amount of debt. At December 31, 1996, the Company had approximately $280.5 million of consolidated debt. After giving effect to the Offering, the Refinancing and the Company Stock Purchases as of December 31, 1996, the Company would have had approximately $407.3 million of consolidated debt. At December 31, 1996, the Company's debt to equity ratio was 2.4 to 1 and after giving effect to the Offering, the Refinancing and the Company Stock Purchases as of December 31, 1996, the Company's debt to equity ratio would have been 3.6 to 1. See "Capitalization" and "Description of Other Obligations." The degree to which the Company is leveraged could have important consequences to holders of the Exchange Notes, including the following: (i) the Company's ability to obtain additional financing in the future for refinancing indebtedness, acquisitions, working capital, capital expenditures or other purposes may be impaired, (ii) funds available to the Company for its operations and general corporate purposes or for capital expenditures will be reduced as a result of the dedication of a substantial portion of the Company's consolidated cash flow from operations to the payment of the principal and interest on its indebtedness, (iii) the Company may be more highly leveraged than certain of its competitors, which may place it at a competitive disadvantage, (iv) the agreements governing the Company's and its subsidiaries' long-term indebtedness (including indebtedness under the Company's 9 7/8% Senior Subordinated Notes due 2004 (the "9 7/8% Notes") and the Exchange Notes) and bank loans contain certain restrictive financial and operating covenants, including, in the case of certain indebtedness of subsidiaries, certain covenants that restrict the ability of the Company's subsidiaries to pay dividends or make other distributions to the Company (see "Description of Other Obligations"), (v) an event of default (not cured or waived) under financial and operating covenants contained in the Company's or its subsidiaries' debt instruments, including the Indenture, could occur and have a material adverse effect on the Company, (vi) certain of the borrowings under debt agreements of the Company's subsidiaries have floating rates of interest, which causes the Company and its subsidiaries to be vulnerable to increases in interest rates and (vii) the Company's substantial degree of leverage could make it more vulnerable to a downturn in general economic conditions. The terms of the Indenture allow for the incurrence of additional Indebtedness (as defined). Except as set forth below, the incurrence of additional Indebtedness is limited by certain conditions, including compliance with a Consolidated Cash Flow Coverage Ratio (as defined) of 2 to 1, pro forma for the additional Indebtedness. As of December 31, 1996, after giving effect to the Offering and the Refinancing, the Company could have incurred approximately $360.7 million of additional Indebtedness based on compliance with the Consolidated Cash Flow Coverage Ratio. In addition, the Company and its Restricted Subsidiaries (as defined) may incur specified levels of additional Indebtedness without regard to compliance with the Consolidated Cash Flow Coverage Ratio or any other financial ratio or covenant in the Indenture. The Indenture places no restriction on the incurrence of Indebtedness by any of the Company's Unrestricted Subsidiaries (as defined). See "Description of Notes." In the event the Company or its subsidiaries were to incur additional Indebtedness, whether for acquisitions, investment in its business or other general corporate purposes, the Company's leverage could increase, which in turn could make it more susceptible to the factors described above. The ability of the Company and its subsidiaries to make principal and interest payments under long-term indebtedness (including the Notes) and bank loans will be dependent upon their future performance, which is subject to financial, economic and other factors affecting the Company and its subsidiaries, some of which are beyond their control. There can be no assurance that the current level of operating results of the Company and its subsidiaries will continue or improve. The Company believes that it will need to access the capital markets in the future in order to provide the funds necessary to repay a significant portion of its indebtedness. There can be no assurance that any such refinancing will be possible or that any additional financing can be obtained, 12 14 particularly in view of the Company's anticipated high levels of debt and the debt incurrence restrictions under its existing debt agreements, including the Indenture. If no such refinancing or additional financing were available, the Company and/or its subsidiaries could default on their respective debt obligations. In such case, virtually all other debt of the Company and its subsidiaries, including payments to be made under the Notes, could become immediately due and payable. SECURED INDEBTEDNESS The Indenture will permit the Company to incur certain indebtedness secured by a lien on assets of the Company (including indebtedness which may be incurred under the Company Credit Facility (as defined)). The Exchange Notes are unsecured and will be effectively subordinated to all existing and future secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness. Accordingly, if an event of default occurs under any agreement or instrument governing secured indebtedness of the Company, the lenders thereunder will have a prior right to the assets of the Company securing such indebtedness and may foreclose upon such collateral to the exclusion of the holders of the Exchange Notes. In such event, such assets would first be used to repay in full outstanding amounts under indebtedness secured thereby, resulting in all or a portion of the Company's assets being unavailable to satisfy the claims of the holders of Exchange Notes and holders of other unsecured indebtedness. See "Description of Notes -- Certain Covenants." STRUCTURAL SUBORDINATION The Exchange Notes will be obligations of the Company exclusively. Because the operations of the Company are conducted entirely through subsidiaries, the Company's cash flow and its ability to service debt, including the Exchange Notes, are dependent upon the cash flow of its subsidiaries and the payment of funds by those subsidiaries in the forms of loans, dividends or otherwise. The subsidiaries, however, are legally distinct from the Company and have no obligation, contingent or otherwise (except to the extent described below with respect to the requirement to provide guaranties in certain circumstances), to pay amounts due pursuant to the Exchange Notes or to make any funds available for such payments. Certain agreements governing the Company's subsidiaries restrict the ability of the subsidiaries to pay dividends or make other distributions to the Company. See "Description of Other Obligations." In addition, while substantially all of the Company's subsidiaries are currently wholly owned directly or indirectly by the Company, the ability of the Company to cause any less than wholly owned subsidiary to pay dividends or make other distributions to the Company may be limited by reason of contractual restrictions or the need to consider the interests of the other owners of such subsidiary. For example, a pro rata amount of any dividend distribution would in most cases be required to be paid to the other owners of such subsidiary (and thereby be subject to, and potentially prohibited by, the Limitations on Restricted Payments covenant of the Indenture and similar covenants in other agreements or instruments applicable to the Company, including without limitation the indenture governing the 9 7/8% Notes). In addition, the terms of any loan from any such less than wholly owned subsidiary to the Company may only be able to be made, if at all, on terms less favorable to the Company than in the case of a loan from a wholly owned subsidiary. Except to the extent that the Company may itself be a trade creditor with recognized claims against its subsidiaries, claims of creditors of such subsidiaries, including trade creditors, will have effective priority with respect to the assets and earnings of such subsidiaries over the claims of creditors of the Company, including holders of the Exchange Notes. At December 31, 1996, after giving effect to the Offering and the Refinancing, the Exchange Notes would have been effectively subordinated to approximately $172.6 million of indebtedness for borrowed money, trade payables and accrued liabilities of the Company's subsidiaries. See "Description of Notes -- General." The Indenture provides that in the event any of the Company's subsidiaries guarantees or otherwise becomes liable for the payment of any Indebtedness of the Company (other than Indebtedness under the Company Credit Facility) such subsidiary shall also guarantee the payment of the Exchange Notes. This provision of the Indenture ceases to have effect in certain circumstances. In the event any subsidiary provides 13 15 such a guaranty, the guaranty may, under certain circumstances, be subject to avoidance or subordination under fraudulent conveyance laws or the preference provisions of federal or state bankruptcy law. See "Description of Notes Certain Covenants -- Limitation on Guaranties by Subsidiaries." REPURCHASE OF NOTES UPON CHANGE OF CONTROL Upon the occurrence of a Change of Control, the Company will be required to make an offer to repurchase the Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. Certain events involving a Change of Control could result in acceleration of, or similar repurchase obligations with respect to, indebtedness outstanding under the Company Credit Facility, the 9 7/8% Notes or other indebtedness of the Company or its subsidiaries that may be incurred in the future. There can be no assurance that the Company will have sufficient resources to repurchase the Notes, including the Exchange Notes, in the event it becomes obligated to do so, particularly in the event of acceleration of, or the need to comply with repurchase obligations with respect to, other indebtedness. The failure to repurchase all of the tendered Notes in the event of a Change of Control constitutes an event of default under the Indenture which may result in the acceleration of the maturity of the Notes. The Change of Control repurchase provisions may be deemed to have anti-takeover effects and may delay, defer or prevent a merger, tender offer or other takeover attempt. See "Description of Notes -- Change of Control", "-- Certain Covenants" and "-- Events of Default and Remedies." SENSITIVITY TO ECONOMIC CYCLES; AVAILABILITY AND PRICING OF RAW MATERIALS A significant percentage of the Company's sales of residential and commercial building products is attributable to new residential and nonresidential construction, which are affected by such cyclical factors as interest rates, inflation, consumer spending habits and employment. This exposure to cyclicality in the new construction market is partially mitigated by the Company's increasing emphasis on the repair and replacement markets, which are typically less cyclical. In addition, the Company is dependent upon raw materials (including, among others, steel, copper, packaging material, plastics, resins and aluminum) and components purchased from third parties. Accordingly, the Company's results of operations and financial condition have in the past been, and may again in the future be, adversely affected by increases in raw material or component costs or their lack of availability. COMPETITION Substantially all of the markets in which the Company participates are highly competitive with respect to product quality, price, design innovations, distribution, service, warranties, reliability, efficiency and financing terms. Certain of the Company's competitors have greater financial and marketing resources and brand awareness than the Company. Competitive factors could require price reductions or increased spending on product development, marketing and sales that would adversely affect the Company's operating results. LACK OF PUBLIC MARKET There is no existing public market for the Original Notes or the Exchange Notes and the Company does not intend to list the Exchange Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchasers have advised the Company that they currently intend to make a market in the Notes but are not obligated to do so and may discontinue such market making at any time without notice. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of the Shelf Registration Statement. Accordingly, no assurance can be given that an active market will develop for any of the Exchange Notes or as to the liquidity of the trading market for any of the Exchange Notes. If a trading market does not develop or is not maintained, holders of the Exchange Notes may experience difficulty in reselling such Exchange Notes or may be unable to sell them at all. If a market for the Exchange Notes develops, any such market may be discontinued at any time. If a trading market develops for the Exchange Notes, future trading prices of such Exchange Notes will depend on many factors, including, among other things, prevailing interest rates, the 14 16 Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the Exchange Notes may trade at a discount from their principal amount. --------------------- This Prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts constitute forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, over which the Company has no control, which could cause actual results to differ materially from those projected. Cautionary statements describing these risks and uncertainties include those disclosed under the caption "Risk Factors" and elsewhere in this Prospectus and the documents incorporated herein by reference. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Readers are cautioned not to place undue reliance on forward-looking statements, including statements made in this Prospectus or the documents incorporated herein by reference, which speak only as of the date made (including the date of any incorporated document in the case of any forward-looking statement contained therein), and the Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date originally made or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company in the Company's periodic reports filed with the Commission. 15 17 CAPITALIZATION The following table sets forth the short-term debt and capitalization of the Company at December 31, 1996 and as adjusted to reflect the Offering, the Refinancing and the Company Stock Purchases:
ACTUAL AS ADJUSTED(3) ------ -------------- (DOLLARS IN MILLIONS) Short-term debt: Short-term borrowings........................................ $ 25.3 $ -- Current maturities of long-term debt......................... 11.2 3.6 ------ ------ Total short-term debt................................ $ 36.5 $ 3.6 ====== ====== Long-term debt: Notes, mortgage notes and other.............................. $ 26.9 $ 12.6 9 1/4% Series B Senior Notes due 2007........................ -- 174.0 9 7/8% Senior Subordinated Notes due 2004.................... 217.1 217.1 ------ ------ Total long-term debt(1).............................. 244.0 403.7 ------ ------ Stockholders' investment(2): Preference stock, $1.00 par value; 7,000,000 authorized...... -- -- Common stock, $1.00 par value; 40,000,000 shares authorized; 15,965,585 shares issued.................................. 15.9 15.9 Special common stock, $1.00 par value; 5,000,000 shares authorized; 784,169 shares issued......................... .8 .8 Additional paid-in capital................................... 135.0 135.0 Retained earnings............................................ 37.8 37.8 Cumulative translation, pension and other adjustments........ (3.2) (3.2) Less: Treasury stock, at cost, 6,599,645 actual and 6,872,470 as adjusted common shares and 276,910 actual and 284,985 as adjusted special common shares......................... (67.5) (74.0) ------ ------ Total stockholders' investment....................... 118.8 112.3 ------ ------ Total capitalization................................. $362.8 $516.0 ====== ======
- --------------- (1) Long-term debt is net of $2.3 million (actual) and $3.3 million (as adjusted) of unamortized debt discount. (2) Excludes (i) 1,428,869 shares of common stock, $1.00 par value (the "Common Stock") at December 31, 1996 which have been reserved for issuance pursuant to options and the conversion of the Company's special common stock, $1.00 par value (the "Special Common Stock"), (ii) 281,000 shares of Special Common Stock at December 31, 1996 which have been reserved for issuance pursuant to options and (iii) 98,732 shares of Series A Participating Preference Stock (the "Preference Stock") which may be issuable upon exercise of rights under the Rights Agreement, as amended and restated as of April 1, 1996, between the Company and State Street Bank and Trust Company. (3) See note (6) to the Summary Consolidated Financial Data on page 11 of this Prospectus for a reconciliation from actual to as adjusted amounts. 16 18 DESCRIPTION OF NOTES GENERAL The Original Notes were issued and the Exchange Notes will be issued pursuant to an indenture (the "Indenture") dated as of March 17, 1997 between the Company and State Street Bank and Trust Company, a Massachusetts banking corporation, as trustee (the "Trustee"). The terms of the Exchange Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of the Indenture. The Notes are subject to all such terms, and holders of the Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of certain provisions of the Indenture, the Notes and the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions included in the Indenture of certain terms used below. Copies of the Indenture and the Registration Rights Agreement are exhibits to the Registration Statement of which this Prospectus is a part and are publicly available as set forth above under "-- Available Information." The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes (which they replace) except that (i) the Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof (except as may be required under the state securities laws) and (iii) the holders of Exchange Notes will generally not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See "The Exchange Offer -- Registration Rights; Liquidated Damages." The Notes will be unsecured senior obligations of the Company limited to $175,000,000 aggregate principal amount. The Notes will rank senior in right of payment to all existing and future subordinated Indebtedness of the Company, including the 9 7/8% Notes, and pari passu in right of payment with all existing and future senior unsecured Indebtedness of the Company. The Notes will be effectively subordinated to all existing and future secured Indebtedness of the Company, including secured Indebtedness pursuant to the Company Credit Facility, to the extent of the value of the assets securing such Indebtedness, and the Notes will be structurally subordinated to all Indebtedness and other obligations (including trade payables) of the Company's Subsidiaries. At December 31, 1996, after giving effect to the Offering and the Refinancing, the Notes would have been effectively subordinated to approximately $172.6 million of indebtedness for borrowed money, trade payables and accrued liabilities of the Company's Subsidiaries. Although the Indenture contains certain covenants and provisions that afford certain protections to holders of the Notes (the "Holders"), such covenants and provisions would not necessarily afford the Holders of the Notes protection in the event of a highly leveraged transaction involving the Company, including a leveraged transaction initiated or supported by the Company, the management of the Company or any affiliate of either party. See "-- Certain Covenants" below. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $175,000,000 and will mature on March 15, 2007. Interest on the Notes will accrue at the rate of 9 1/4% per annum and will be payable semi-annually on each March 15 and September 15 commencing on September 15, 1997, to Holders on the immediately preceding March 1 or September 1, whether or not a business day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Original Notes and will continue to accrue after the occurrence of an event of default described in clause (5) or (6) of the first paragraph under "-- Events of Default and Remedies." Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of, premium, if any, interest on, and Liquidated Damages, if any, with respect to the Notes will be payable by wire transfer of immediately available funds to the holder of the Global Notes; provided, that 17 19 payments of interest and Liquidated Damages, if any, may be made at the office or agency of the Company maintained for such purpose or, at the option of the Company, by check mailed to the Holders at their respective addresses set forth in the register of Holders. Unless otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Trustee is Paying Agent and Registrar under the Indenture. The Company may act as Paying Agent or Registrar under the Indenture, and the Company may change the Paying Agent or Registrar without notice to the Holders. OPTIONAL REDEMPTION The Notes will be redeemable by the Company, in whole or in part, on or after March 15, 2002 at the following redemption prices (expressed as a percentage of the principal amount) if redeemed during the 12-month period beginning March 15 of the years indicated below, in each case, together with accrued and unpaid interest and Liquidated Damages, if any, to the redemption date:
YEAR PERCENTAGE --------------------------------------------------------------- ---------- 2002........................................................... 104.625% 2003........................................................... 103.083% 2004........................................................... 101.542% 2005 and thereafter............................................ 100.000%
Notice of the redemption must be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, the notice of redemption relating to that Note will state the principal amount thereof to be redeemed and a new Note in principal amount equal to the unredeemed portion will be issued in the name of the Holder upon cancellation of the original Note. On and after the redemption date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Company shall default in the payment of the redemption price. If less than all the outstanding Notes are to be redeemed at any time, selection of the Notes for redemption will be made by the Trustee by lot or, if such method is prohibited by the rules of any stock exchange on which the Notes are then listed, any other method the Trustee considers reasonable, provided that Notes shall be redeemed in principal amounts of $1,000 or integral multiples thereof. MANDATORY REDEMPTION The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, as described below, the Company may be obligated, under certain circumstances, to make an offer to purchase (i) all outstanding Notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, upon a Change of Control; and (ii) outstanding Notes with a portion of the Excess Proceeds of Asset Sales at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. See "-- Change of Control" and "-- Certain Covenants -- Limitation on Use of Proceeds from Asset Sales." CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder will have the right to require the repurchase of all or any part of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Immediately following any Change of Control, the Company is required to mail a notice to the Trustee and to each Holder stating: (i) that the Change of Control Offer is being made pursuant to the Repurchase Upon Change of Control covenant of the Indenture and that all Notes tendered will be accepted for payment; (ii) the amount of the Change of Control Payment and the purchase date (the "Change of Control Payment 18 20 Date"), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed; (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment thereof, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third business day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes (or book-entry notation made with respect thereto) equal in principal amount to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new Note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 or an integral multiple thereof. On the Change of Control Payment Date, the Company will, to the extent lawful, (i) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn, (ii) deposit with the Paying Agent an amount sufficient to pay the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be delivered to the Trustee all Notes so tendered and not withdrawn together with an Officers' Certificate specifying the Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Change of Control Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder a new Note (or cause to be transferred by book entry) equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes triggered by a Change of Control. A "Change of Control" will be deemed to have occurred at such time as any of the following events occur: (i) there is consummated any consolidation or merger of the Company with or into another corporation, or all or substantially all of the assets of the Company are sold, leased or otherwise transferred or conveyed to another Person (other than pursuant to a bona fide pledge of assets to secure Indebtedness made in accordance with the Indenture), and the holders of the Company's common stock outstanding immediately prior to such consolidation, merger, sale, lease or other transfer or conveyance or one or more Exempt Persons do not hold, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or at least a majority of the Equity Interests of such Person; (ii) there is filed a report on Schedule 13D or 14D-1 (or any successor schedule, form or report) pursuant to the Exchange Act disclosing that any person (defined, solely for the purposes of the Change of Control provision, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the combined voting power of all the Company's then outstanding securities entitled to vote generally for the election of directors; provided, however, that a person shall not be deemed to be the beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was 19 21 previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred under clause (ii) of the immediately preceding paragraph solely by virtue of the Company, any Subsidiary of the Company, any employee stock ownership plan or any other employee benefit plan of the Company or any such Subsidiary, any other person holding securities of the Company for or pursuant to the terms of any such employee benefit plan, or any Exempt Person, filing or becoming obligated to file a report on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of securities of the Company, whether in excess of 50% of the combined voting power of the Company's then outstanding securities entitled to vote generally for the election of directors or otherwise. The Change of Control purchase feature may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of the incumbent management. Although the Company has from time to time received and considered proposals which might involve a Change of Control, the Change of Control purchase feature was not adopted as a result of management's knowledge of any specific effort to accumulate shares of Common Stock or to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of antitakeover provisions. Instead, the Change of Control purchase feature is a standard term contained in other similar debt offerings and the terms of such feature result from negotiations between the Company and the Initial Purchasers. If a Change of Control were to occur, there can be no assurance that the Company would have sufficient funds to make the Change of Control Payment in respect of all Notes tendered by Holders thereof. In addition, the Company's ability to make such payment may be limited by the terms of its then-existing borrowings and other agreements applicable to the Company or its Subsidiaries. Certain existing agreements applicable to certain of the Company's Subsidiaries restrict the ability of these Subsidiaries to make distributions to the Company. See "Description of Other Obligations." Neither the Board of Directors of the Company nor the Trustee may waive the Change of Control repurchase feature of the Indenture. One of the events that constitutes a Change of Control under the Indenture is a sale, lease or other transfer or conveyance of all or substantially all of the assets of the Company. There is no precise established definition under applicable law of the term "substantially all" and, accordingly, if the Company were to engage in transactions in which it disposed of less than all of its assets, a question could arise as to whether such disposition was of "substantially all" of its assets and whether because of such disposition the Company was required to repurchase the Notes as a result of a Change of Control. CERTAIN COVENANTS Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend on, or make any distribution in respect of the Company's or any such Restricted Subsidiary's Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by the Company or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of the Company or such Restricted Subsidiary, as the case may be; (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of the Company or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by the Company or any Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary); (iii) prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date any Indebtedness of the Company that is subordinate in right of payment to the Notes (other than in connection with any refinancing of such Indebtedness permitted by the Indenture); or (iv) make any Investment other than Permitted Investments (each such action described in any of clauses (i) through (iv) above being referred to as a "Restricted Payment"), if, at the time of such Restricted Payment, (1) a Default or Event of Default shall have occurred and be continuing 20 22 or shall occur as a consequence thereof; (2) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the issue date of the Original Notes (including, without duplication, Restricted Payments described in the next succeeding paragraph), exceeds the sum of (A) 50% of the cumulative Consolidated Net Income of the Company for the period commencing on January 1, 1997 through the last day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (provided that if the amount of such cumulative Consolidated Net Income divided by the number of full fiscal quarters of the Company in the applicable period exceeds $5,250,000, then such amount shall equal (i) 50% of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period plus (ii) 75% of the amount in excess of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period) (or, if the cumulative Consolidated Net Income of the Company shall be a deficit, minus 100% of such deficit); (B) the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by the Company (other than from a Restricted Subsidiary of the Company) from the issuance and sale of either Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock; (C) an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by the Company or any of its Restricted Subsidiaries after the date of the issuance of the Original Notes as a dividend or other distribution from any Unrestricted Subsidiary; (D) the Fair Market Value of any Investment held by either the Company or any Restricted Subsidiary of the Company in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of the Indenture; and (E) $35,000,000; or (3) the Company could not incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the Limitation on Additional Indebtedness covenant. The foregoing provisions shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof, (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of the Indenture; (ii) the declaration and payment by a Restricted Subsidiary of the Company which is required to file periodic reports under Section 13 or 15(d) of the Exchange Act (a "Reporting Subsidiary") of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends, provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for the immediately preceding fiscal year; (iii) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of the Company or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $2,500,000 in the aggregate in any fiscal year of the Company; (iv) the prepayment, repayment, purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any or all of the 9 7/8% Notes at any time within one year of the scheduled maturity date thereof; and (v) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company. Limitation on Additional Indebtedness. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an "incurrence") any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that the Company may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of the Company for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0. 21 23 The foregoing limitations shall not apply, without duplication, to: (i) Existing Indebtedness; (ii) Indebtedness of (a) the Company represented by the Notes and the Indenture or (b) any Subsidiary Guarantor under any Subsidiary Guaranty; (iii) Indebtedness of the Company and its Restricted Subsidiaries under the Company Credit Facility; provided, that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iii) and outstanding on such date, shall not exceed the greater of (a) $75,000,000 and (b) the sum of 85% of Eligible Receivables of the Company and its Subsidiaries, plus 65% of Eligible Inventory of the Company and its Subsidiaries; (iv) Indebtedness of (a) Broan Limited and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan Limited Credit Facility; provided that (1) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iv) and outstanding on such date, shall not exceed the greater of (x) $30,000,000 (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan Limited and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (iii) above) and (2) such Indebtedness shall be secured only by Liens on assets of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries, and (b) the Company under its limited guaranty of not more than $20,000,000 (Canadian) of the Indebtedness of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries under the Broan Limited Credit Facility; (v) Indebtedness of Universal-Rundle Corporation for facility expansion or improvement or joint venture investment purposes not exceeding at any time $6,000,000 in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of Universal-Rundle Corporation or the applicable joint venture; (vi) Indebtedness of the Company to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary, provided that such Indebtedness is contractually subordinated in right of payment to the Notes, or Indebtedness of any Subsidiary of the Company that is a Restricted Subsidiary to the Company or to any other Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary, provided that if the Company or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of the Company; (vii) Indebtedness of a Restricted Subsidiary under a guaranty of Indebtedness of the Company (other than the Notes) which causes such Restricted Subsidiary to become a Subsidiary Guarantor pursuant to the provisions of the Limitation on Guaranties by Subsidiaries covenant; (viii) Indebtedness of the Company and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements, provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements relate to Indebtedness permitted to be incurred under the Indenture and the notional principal amount of the obligations of the Company and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; 22 24 (ix) Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers; (x) Indebtedness incurred by the Company and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30,000,000 in aggregate outstanding principal amount; (xi) Acquired Indebtedness incurred by a Restricted Subsidiary of the Company to the extent such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Limitation on Additional Indebtedness covenant, after giving pro forma effect to the acquisition of such Restricted Subsidiary by the Company; (xii) Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of the Indenture if immediately prior to such designation such Subsidiary was an Unrestricted Subsidiary, provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Limitation on Additional Indebtedness covenant (assuming for purposes of this clause (xii) only that the Consolidated Cash Flow Coverage Ratio set forth in such paragraph were 2.25 to 1.0); and provided further that, none of the Company or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent the Company or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of this Limitation on Additional Indebtedness covenant (other than solely in accordance with clause (vi) above or this clause (xii)). (xiii) Indebtedness of the Company and its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds incurred or provided in the ordinary course of business; (xiv) Indebtedness of (a) Nortek (UK) Limited and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek (UK) Limited and its Subsidiaries and (b) the Company under its limited guaranty of not more than $10,000,000 of any such Indebtedness of Nortek (UK) Limited and its Subsidiaries; (xv) other Indebtedness of the Company and its Restricted Subsidiaries not to exceed at any time $25,000,000 in aggregate outstanding principal amount; (xvi) Liens permitted under the Limitation on Liens covenant; and (xvii) Indebtedness ("Refinancing Indebtedness") created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute or refund ("refinance"), Indebtedness described in the preceding paragraph or referred to in clauses (i) through (xv) above; provided, however, that (a) the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced, shall not exceed (1) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (iii) through (v) and (xv) above, an amount which, when added to all other Indebtedness outstanding under such clause, shall not exceed the aggregate amount of Indebtedness permitted to be incurred under such clause, and (2) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (i), (ii) and (vi) through (xiii) above, the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness; (b) such Refinancing Indebtedness shall be subordinated in right of payment to the Notes at least to the same 23 25 extent as the Indebtedness to be refinanced; (c) such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence; (d) the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of the Company, shall not be used to refinance Indebtedness of the Company or another Subsidiary of the Company; and (e) the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced. For purposes of this Limitation on Additional Indebtedness covenant, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness. Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries. The Company shall not (i) permit any of its Restricted Subsidiaries to issue or sell to any Person except the Company or a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or (ii) sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued or sold to the Company or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (except to the issuer thereof, the Company or any of its other Wholly-Owned Subsidiaries that is a Restricted Subsidiary). Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any Principal Property or on any shares of Capital Stock of any Restricted Subsidiary of the Company held by the Company or any other Restricted Subsidiary of the Company or on any Indebtedness owed by any Restricted Subsidiary to the Company or any other Restricted Subsidiary of the Company. The foregoing limitation does not apply to (i) Liens securing obligations under the Notes, (ii) Liens securing obligations under the Company Credit Facility (but such Liens shall not secure Indebtedness in excess of the amount of Indebtedness then permitted to be incurred under clause (iii) of the second paragraph of the Limitation on Additional Indebtedness covenant plus the amount of any Indebtedness then outstanding pursuant to such clause (iii)); (iii) other Liens existing on the Closing Date; (iv) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted Subsidiary that is a Wholly-Owned Subsidiary of the Company to secure Indebtedness owing to the Company or such Wholly-Owned Subsidiary by such Restricted Subsidiary; (v) Liens permitted by clauses (iv), (v), (x), (xiii) and (xiv) of the Limitation on Additional Indebtedness covenant; (vi) Liens granted in connection with the extension, renewal or refinancing, in whole or in part, of any Indebtedness under the Notes or described in clause (iii) above; provided that (1) such new Indebtedness is permitted to be incurred under the Limitation on Additional Indebtedness covenant and (2) the amount of Indebtedness secured by such Lien is not increased thereby; and provided, further, that the extension, renewal or refinancing of Indebtedness of the Company may not be secured by Liens on assets of any Restricted Subsidiary other than to the extent the Indebtedness being extended, renewed or refinanced was at any time previously secured by Liens on assets of such Restricted Subsidiary; and (vii) Permitted Liens. Limitation on Certain Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by the Company or any of its Restricted Subsidiaries, (ii) pay or repay any Indebtedness owed to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iii) make loans or advances to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iv) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary or (v) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company except, in each case, for such encumbrances or restrictions existing under or by reason of (a) applicable law, (b) the Indenture, (c) customary nonassignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries, (d) any instrument governing Indebtedness of a Person acquired by the Company or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to 24 26 any Person, or the properties or assets of any Person, other than the Person so acquired, (e) agreements existing as of the issue date of the Original Notes, (f) the Company Credit Facility, (g) the Broan Limited Credit Facility, (h) any other agreement pursuant to which any Restricted Subsidiary of the Company incurs Indebtedness in accordance with the Limitation on Additional Indebtedness covenant and (i) any agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (d), (e), (f), (g) or (h) above, provided that the terms and conditions of any such encumbrances and restrictions are not materially less favorable to the Holders than those under the agreement or instrument evidencing the Indebtedness being refinanced. The foregoing shall not restrict the ability of any Restricted Subsidiary of the Company to grant any Lien to the extent otherwise permitted in the Indenture. Repurchase upon Change of Control. See "-- Change of Control" above. Limitation on Use of Proceeds from Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and (ii) at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, "Cash Proceeds") or indebtedness for borrowed money of the Company or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of the Company whose stock is purchased by the transferee. Any Net Cash Proceeds (a) in excess of the amount of cash applied by the Company or any Restricted Subsidiary of the Company during the period beginning 12 months prior to the date of the Asset Sale (but not prior to the issue date of the Original Notes) and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by the Company and its Subsidiaries as of the issue date of the Original Notes or at the date of such Asset Sale and (b) not applied within 12 months after the date of the Asset Sale to reduce Indebtedness of the Company (other than Indebtedness which is subordinated by its terms to the Notes) or any Restricted Subsidiary shall be deemed to be "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15,000,000, the Company shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to purchase the Notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the principal amount plus accrued and unpaid interest, if any, thereon and Liquidated Damages, if any, to the date fixed for the closing of such offer, substantially in accordance with the procedures for a Change of Control Offer described in the Repurchase upon Change of Control covenant. To the extent that the aggregate amount of Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company may use the remaining Excess Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate principal amount of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the Notes. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws are applicable in connection with the repurchase of Notes pursuant to an Excess Proceeds Offer. Limitation on Transactions with Affiliates. Except as otherwise permitted by the Indenture, neither the Company nor any of its Restricted Subsidiaries shall make any Investment, loan, advance, guaranty or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless (i) such transaction or series of transactions is in the best interests of the Company or such Restricted Subsidiary based on all relevant facts and circumstances; (ii) such transaction or series of transactions is fair to the Company or such Restricted Subsidiary and on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been 25 27 obtained in a comparable transaction on an arms' length basis from a Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and (iii) (a) with respect to a transaction or series of related transactions involving aggregate payments in excess of $2,500,000, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions complies with clauses (i) and (ii) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $10,000,000, the Company receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to the Company from a financial point of view. Certain transactions subject to this covenant, such as the repurchase of Capital Stock from, or an Investment in, an Affiliate of the Company or any of its Restricted Subsidiaries may also be subject to the Limitation on Restricted Payments covenant. The foregoing limitation shall not apply to: (i) any payment of money or issuance of securities by the Company or any Restricted Subsidiary of the Company pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors' and officers' liability insurance; (ii) reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of the Company or any of its Restricted Subsidiaries and reimbursement of expenses related thereto; or (iii) transactions between the Company and any Restricted Subsidiary of the Company, or between one Restricted Subsidiary of the Company and another Restricted Subsidiary of the Company, provided that not more than 20% of such Restricted Subsidiary is owned by any Affiliate of the Company or any of Restricted Subsidiaries (other than the Company or a Wholly-Owned Subsidiary of the Company). Limitation on Guaranties by Subsidiaries. The Company shall not permit any Restricted Subsidiary of the Company, directly or indirectly, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Company or any Subsidiary Guarantor (other than the Notes), unless (a) such liability is in respect of the Company Credit Facility or (b) such Restricted Subsidiary is a Subsidiary Guarantor or simultaneously executes and delivers (i) to the Company and the Trustee a supplemental indenture to the Indenture providing for a Subsidiary Guaranty of the Notes by such Restricted Subsidiary and any other Subsidiary Guarantors having such terms as are set forth in an exhibit to the Indenture and (ii) to the Trustee a Subsidiary Guaranty. Notwithstanding the foregoing, in the event that a Subsidiary Guarantor is released from all obligations which pursuant to the first sentence of this paragraph obligate it to become a Subsidiary Guarantor, such Subsidiary Guarantor shall be deemed automatically and unconditionally released from all obligations under its Subsidiary Guaranty without any further action required on the part of the Trustee or any Holder. In addition, (i) upon the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with the terms of the Indenture or (ii) upon any sale or disposition (by merger or otherwise) of any Subsidiary Guarantor by the Company or a Restricted Subsidiary of the Company to any Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries which is otherwise in compliance with the terms of the Indenture, such Subsidiary Guarantor will be deemed to be released from all obligations under its Subsidiary Guaranty. No Lien on the properties or assets of any Restricted Subsidiary of the Company permitted by the Limitation on Liens covenant shall constitute a guaranty of the payment of any Indebtedness of the Company for purposes of this Limitation on Guaranties by Subsidiaries covenant. The provisions of this Limitation on Guaranties by Subsidiaries covenant shall cease to have further force and effect (and if there then exists any Subsidiary Guarantor, such Subsidiary Guarantor will be deemed to be released from all obligations under its Subsidiary Guaranty) at such time as the similar covenant in the indenture governing the Company's 9 7/8% Notes shall cease to have further force and effect (whether by reason of amendment, redemption or repayment of such Indebtedness or otherwise), provided, however, that if the instrument or other agreement governing any Indebtedness incurred to refinance the 9 7/8% Notes includes such a similar covenant, the provisions of this Limitation on Guaranties by Subsidiaries covenant shall continue in full force and effect for so long as such similar covenant remains in force and effect. 26 28 Payments for Consents. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Provision of Reports. The Indenture provides that whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors or prospective investors who request it in writing. MERGER, CONSOLIDATION OR TRANSFER OF ASSETS The Company shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, unless: (1) the Company shall be the continuing Person, or the Person, if other than the Company, formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company or of the Company and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture, and the Indenture remains in full force and effect; (2) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (3) the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the "surviving entity"), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness under the first paragraph of the Limitation on Additional Indebtedness covenant; (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of the Company immediately before such transaction; and (5) each Subsidiary Guarantor, if any, unless it is the other party to the applicable transaction described above or its Subsidiary Guaranty, after giving effect to such transaction, is to be released in accordance with the terms hereof and of such Subsidiary Guaranty, shall have confirmed by supplemental indenture that its Subsidiary Guaranty shall apply to the obligations of the Company or the surviving entity under the Indenture. In connection with any such consolidation, merger or transfer, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with the Indenture and that all conditions precedent therein provided for relating to such transactions have been complied with. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, in accordance with the second preceding paragraph, the successor Person formed by such consolidation or into which the Company is merged or the successor Person to which 27 29 such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor Person had been named as the Company in the Indenture, and when a successor Person assumes all the obligations of its predecessor under the Indenture or the Notes, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes. With respect to the transfer of all or substantially all of the assets of the Company or of the assets of the Company and its Subsidiaries on a consolidated basis, there is no precise established definition of the term "substantially all" under applicable law. Accordingly, if the Company were to engage in transactions in which it disposed of less than all of its assets or the Company or a Subsidiary of the Company were to engage in transactions in which less than all of the assets of the Company and its Subsidiaries on a consolidated basis were disposed of, a question could arise as to whether such disposition was of "substantially all" of the assets of the Company or of the Company and its Subsidiaries on a consolidated basis, as the case may be, and, therefore, whether the transaction was subject to the foregoing provisions of the Indenture. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an "Event of Default": (1) the Company defaults in the payment, when due and payable, of (i) interest on and Liquidated Damages, if any, with respect to any Note and the default continues for a period of 30 days, or (ii) principal of or premium, if any, on any Notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise; (2) the Company fails to comply with any of the provisions set forth under "Merger, Consolidation or Transfer of Assets" above; (3) the Company fails to comply with any of its covenants or agreements in the Notes or the Indenture (other than those referred to in clause (1) or (2) above), or any Subsidiary Guarantor fails to comply with any of its covenants or agreements in the Indenture or its Subsidiary Guaranty, and in either case such failure continues for the period and after receipt by the Company of the notice specified below; (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such indebtedness or guaranty is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15,000,000 or more; (5) the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any bankruptcy law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing its inability to pay its debts generally as they become due; (6) a court of competent jurisdiction enters an order or decree under any bankruptcy law that: (A) is for relief against the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding; (B) appoints a custodian of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; (C) orders the liquidation of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) and (D) remains unstayed and in effect for 60 days; (7) final judgments for the payment of money which in the aggregate exceed $15,000,000 shall be rendered against the Company or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days; or (8) any Subsidiary Guaranty ceases to be in full force and effect or is declared null and void, or any Subsidiary 28 30 Guarantor denies that it has any further liability under any Subsidiary Guaranty or gives notice to such effect (in each case other than by reason of the termination of the Indenture or the release of such Subsidiary Guaranty in accordance with the terms of the Indenture and such Subsidiary Guaranty) and such condition shall have continued for the period and after receipt by the Company of the notice specified below. A Default under clause (3) or (8) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." In the case of any Event of Default (other than as a result of the failure to comply with the Repurchase upon Change of Control covenant) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay if the Company then had elected to redeem the Notes, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law, anything in the Indenture or in the Notes contained to the contrary notwithstanding. In the case of an Event of Default as a result of a failure to comply with the Repurchase upon Change of Control covenant occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay pursuant to the Repurchase upon Change of Control covenant, such premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to the acceleration provisions of the Indenture to the extent permitted by law, anything in the Indenture or in the Notes contained to the contrary notwithstanding. If any Event of Default (other than an Event of Default specified in clause (5) or (6) above) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by such Holders), may, and such Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to the Notes to be due and payable immediately. If an Event of Default specified in clause (5) or (6) above occurs, all unpaid principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to the Notes then outstanding shall ipso facto become and be immediately due and payable without declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences (except an acceleration due to default in payment of principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to, the Notes) if all existing Events of Default have been cured or waived except non-payment of principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to, the Notes that have become due solely because of the acceleration. Subject to certain restrictions set forth in the Indenture, the Holders of at least a majority in principal amount of the outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a default in the payment of principal of, premium, if any, or interest on and Liquidated Damages, if any, with respect to any Note or a Default under a provision which requires consent of all Holders to amend. When a Default or Event of Default is waived, it is cured and ceases. A Holder of Notes may not pursue any remedy with respect to the Indenture or the Notes unless: (i) the Holder gives to the Trustee written notice that an Event of Default is continuing; (ii) the Holders of at least 25% in aggregate principal amount of any Notes outstanding make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee reasonable indemnity or security against any loss, liability or expense satisfactory to the Trustee; (iv) the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity or security; and (v) during such 30-day period the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction which is inconsistent with the request. 29 31 DISCHARGE OF THE INDENTURE AND THE NOTES If, at any time prior to the Stated Maturity of the Notes or the date of redemption of all outstanding Notes, the Company irrevocably deposits with the Trustee money and/or direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged, maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of any reinvestment of such interest, to pay principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to, the outstanding Notes (other than replaced Notes) to maturity or redemption, as the case may be, in accordance with the terms of the Indenture and the Notes, the Indenture and each Subsidiary Guaranty, if any, shall cease to be of further effect as to all outstanding Notes (except, among other things, as to (i) remaining rights of registration of transfer and substitution and exchange of the Notes, (ii) rights of Holders to receive payment of principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to the Notes, and (iii) the rights, obligation and immunities of the Trustee). TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Registrar is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Subject to certain exceptions, with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, the Company and the Trustee may amend the Indenture or the Notes, or may waive compliance by the Company or any Subsidiary Guarantor with any provision of the Indenture, the Notes or such Subsidiary Guarantor's Subsidiary Guaranty. However, without the consent of each Holder affected, a waiver or an amendment to the Indenture or the Notes may not: (i) reduce the percentage of principal amount of the Notes whose Holders must consent to an amendment or waiver; (ii) make any change to the Stated Maturity of the principal of, premium, if any, or any interest on or Liquidated Damages, if any, with respect to, the Notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any Note payable in money or securities other than that stated in the Note; (iii) waive a default in the payment of the principal of, premium, if any, or interest on and Liquidated Damages, if any, with respect to, any Note; (iv) make any change in the provisions of the Repurchase upon Change of Control covenant or the Limitation on Use of Proceeds of Asset Sales covenant; (v) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guaranty or the Indenture other than in compliance with the terms of the Indenture and such Subsidiary Guaranty; or (vi) make any change in the amendment provisions of the Indenture. Notwithstanding the foregoing, without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with the provisions described under "Merger, Consolidation or Transfer of Assets"; (iii) to provide for uncertificated Notes in addition to or in place of certificated Notes so long as such uncertificated Notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended; (iv) to make any other change that does not adversely affect the rights of any Holder; (v) to comply with any requirement of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act; or (vi) to add any Subsidiary of the Company as a Subsidiary Guarantor. CONCERNING THE TRUSTEE State Street Bank and Trust Company is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with respect to the Notes. 30 32 The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, or apply to the Commission for permission to continue or resign. The Holders of not less than a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing (and shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care and skill of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holders of Notes, unless they shall have offered to the Trustee reasonable security or indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Indebtedness" means, with respect to any Person, Indebtedness of such Person (i) assumed in connection with an acquisition of assets or properties from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person provided such Person was not immediately prior thereto an Unrestricted Subsidiary (in each case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Restricted Subsidiary). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise. "Allowable Subsidiary Loans" means Indebtedness of the Company to a Restricted Subsidiary not to exceed the Net Cash Proceeds received by the Company as a result of such Restricted Subsidiary becoming less than a Wholly-Owned Subsidiary through the sale of Equity Interests in compliance with the terms of the Indenture, provided that (i) all such Allowable Subsidiary Loans are contractually subordinated in right of payment to the Notes and (ii) the total amount of all Allowable Subsidiary Loans at any time outstanding does not exceed $35,000,000. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance or other transfer or disposition by such Person of any of its assets or properties (including by way of a sale-and-leaseback and including the sale, issuance or other transfer of any of the Capital Stock of any Subsidiary of such Person), in a single transaction or through a series of related transactions, for aggregate consideration received by such Person or a Subsidiary of such Person (but if such Person is the Company or any Restricted Subsidiary, only if such Subsidiary is a Restricted Subsidiary), net of out-of-pocket costs relating thereto (including, without limitation, legal, accounting and investment banking fees and sales commissions), in excess of $5,000,000. For purposes of this definition, consideration shall include, without limitation, any indebtedness for borrowed money of such Person or such Subsidiary that is assumed by the transferee of any assets or any such indebtedness of any Subsidiary of such Person whose stock is purchased by the transferee. Notwithstanding anything to the contrary in the foregoing provisions of this definition, the term "Asset Sale", with respect to any Person, shall not include (i) the sale, lease or other transfer or disposition of assets acquired and held for resale in the ordinary course of business; (ii) the sale, lease or other transfer or disposition of assets in accordance with the provisions described under "Merger, Consolidation or Transfer of Assets"; (iii) the sale, lease or other transfer or disposition of damaged, worn out or obsolete property in the ordinary course of 31 33 business or other property no longer necessary for the proper conduct of the business of such Person or its Subsidiaries; (iv) the abandonment of assets or properties which are no longer useful in the business of such Person or its Subsidiaries and is not readily saleable; (v) the granting of any Lien permitted under the Limitation on Liens covenant (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure); (vi) any sale, lease, assignment or other disposition by such Person or its Subsidiaries if such Person has outstanding senior debt securities all of which are rated BBB- or higher by S&P and have not been placed on credit watch by S&P for a possible downgrade or are rated Baa3 or higher by Moody's and have not been placed on credit watch by Moody's for a possible downgrade; or (vii) the sale or other transfer or disposition of receivables in connection with an asset securitization transaction by such Person or its Subsidiaries. "Average Life" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment (assuming the exercise by the obligor of such debt security of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such debt security multiplied by the amount of such principal payment by (ii) the sum of all such principal payments. "Broan Limited Credit Facility" means a credit facility between Broan Limited or any of the Canadian Subsidiaries, and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time. "Canadian Subsidiary" means any Subsidiary of Broan Limited and any Subsidiary of the Company whose headquarters is located in Canada. "Capital Lease Obligations" means, with respect to any Person, all obligations under leases of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP, and for purposes of the Indenture the amount of such obligations at any time shall be the aggregate capitalized amount thereof at such time, as determined in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock (including common or preferred stock) or partnership interests. "Cash Equivalents" means (i) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (ii) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, BBB-- or better by S&P or Moody's or the equivalent of such rating by a successor rating agency, (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia which is rated, at the time as of which any Investment therein is made, P-1 or better by Moody's or A-1 or better by S&P, or the equivalent of such rating by a successor rating agency, (iv) Investments in mutual funds, money market funds, investment pools and other savings vehicles, substantially all of the assets of which are invested in Investments described in clause (i), (ii) or (iii) above, and (v) in the case of Broan Limited and the Canadian Subsidiaries, (a) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by Canada or any instrumentality or agency thereof (provided that the full faith and credit of Canada is pledged in support thereof), (b) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, A or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency and (c) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the 32 34 Company) organized and existing under the laws of Canada or any province thereof which is rated, at the time as of which any Investment therein is made, R-1 or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency. "Commodity Agreement" means any agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the prices of commodities used by the Company or any of its Subsidiaries in the ordinary course of business. "Company Credit Facility" means one or more credit facilities between the Company or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Company Credit Facility." All Company Credit Facilities are referred to collectively in the Indenture as the "Company Credit Facility." "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of such Person and its Subsidiaries (or if such Person is the Company, the amortization expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP, excluding any amortization expense included in Consolidated Interest Expense. "Consolidated Cash Flow" means, with respect to any Person for any period, the sum of, without duplication, (i) Consolidated Net Income of such Person for such period, (ii) Consolidated Interest Expense of such Person for such period, (iii) Consolidated Income Tax Expense of such Person for such period, (iv) Consolidated Depreciation Expense of such Person for such period, (v) Consolidated Amortization Expense of such Person for such period, and (vi) the amount, not to exceed 10% of Consolidated Cash Flow of such Person for such period (which amount shall be excluded in determining such Consolidated Cash Flow), by which (A) other non-cash items of expense that reduce Consolidated Net Income of such Person for such period exceed (B) other non-cash items of expense that increase Consolidated Net Income of such Person for such period. "Consolidated Cash Flow Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated Cash Flow of such Person for such period to Consolidated Interest Expense of such Person for such period; provided, however, that, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated on a pro forma basis after giving effect, as if occurring at the beginning of such period, to (i) the incurrence of Indebtedness giving rise to the need to calculate the Consolidated Cash Flow Coverage Ratio and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (ii) the incurrence, during such period or since the last day of such period, of any Indebtedness (other than Indebtedness incurred for working capital purposes), and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (iii) the acquisition by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) of any company or business during such period or since the last day of such period and (iv) the sale or other disposition of assets or properties outside the ordinary course of business by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) and the actual application of the proceeds therefrom during such period or since the last day of such period. "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation and depletion expense of such Person and its Subsidiaries (or if such Person is the Company, the depreciation and depletion expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes (including franchise, net worth or similar taxes) of such Person and its Subsidiaries (or if such Person is the Company, the provision for such taxes of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries (or if such Person is the Company, the 33 35 interest expense of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, all original issue discount and other interest portion of any deferred payment Indebtedness and all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing less any interest income included in Consolidated Net Income for such period, but excluding any deferred financing fees otherwise includible in Consolidated Interest Expense for such period; (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries (or if such Person is the Company, such interest expense paid, accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries) during such period as determined on a consolidated basis in accordance with GAAP; and (iii) all cash dividends or other distributions declared or paid on any Capital Stock (other than common stock or preferred stock that is not Redeemable Stock or, with respect to the Company, Special Common Stock) of such Person and its Subsidiaries (or if such Person is the Company, all such dividends or other distributions declared or paid on any such Capital Stock of the Company and its Restricted Subsidiaries) for such period as determined on a consolidated basis in accordance with GAAP; provided, however, that any Indebtedness bearing a floating rate of interest shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (or if such Person is the Company, the aggregate net income (loss) of the Company and its Restricted Subsidiaries) for such period, before discontinued operations, extraordinary items and the cumulative effect of a change in accounting principles, determined on a consolidated basis in accordance with GAAP, provided that there shall also be excluded from Consolidated Net Income (but only to the extent included in calculating such Consolidated Net Income): (i) any net gains or losses in respect of dispositions of assets other than in the ordinary course of business; (ii) any gains from currency exchange transactions not in the ordinary course of business consistent with past practice; (iii) any gains or losses realized from the termination of any employee pension benefit plan; (iv) any gains or losses realized upon the refinancing of any Indebtedness of such Person or any of its Subsidiaries (or if such Person is the Company, any gains or losses realized upon the refinancing of any Indebtedness of Company and its Restricted Subsidiaries); (v) any gains or losses arising from the destruction of property or assets due to fire or other casualty; (vi) any gains or losses from the revaluation of property or assets; (vii) the net income (or loss) of any Person that is not a Subsidiary of such first Person (or that is not a Restricted Subsidiary if such first Person is the Company) except to the extent of cash dividends or distributions paid to such first Person by such other Person in such period; (viii) the net income (or loss) of any Subsidiary of such first Person except to the extent of the interest of such Person in such Subsidiary; (ix) the net income (or loss) of any Subsidiary of such Person that is subject to any restriction or limitation on the payment of dividends and other distributions (including loans or advances) by operation of the terms of its charter or by agreement, instrument, judgment, decree, order or governmental regulation applicable to such Subsidiary to the extent of such restriction or limitation in such period; and (x) the excess of (a) the consolidated compensation expense recorded by the Company in the computation of net earnings of the Company in respect of shares of Capital Stock (other than Redeemable Stock) or other Equity Interests awarded, pursuant to a plan or other arrangement approved by the Board of Directors of the Company (or of a Reporting Subsidiary, if applicable), to or for the benefit of any employee, officer or director of the Company or any of its Subsidiaries or to or by any employee stock ownership plan or similar trust for the benefit of any such employee, officer or director, over (b) the amount of consolidated income tax benefit recorded by the Company in connection with such consolidated compensation expense of the Company. "Consolidated Net Worth" means, with respect to any Person at any date of determination, the sum of the Capital Stock, additional paid-in capital and cumulative translation, pension and other adjustment account plus retained earnings (or minus accumulated deficit), excluding amounts attributable to Redeemable Stock, any Capital Stock convertible into Indebtedness, or Treasury Stock, of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the 34 36 Company or any of its Restricted Subsidiaries against fluctuations in currency values to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary on the issue date of the Original Notes or becomes a party or a beneficiary thereafter. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors of the Company is required to deliver a Board Resolution under the Indenture, a member of such Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Eligible Inventory" means, with respect to any Person, the finished goods, raw materials and work-in-process of such Person less any applicable reserves, each of the foregoing determined on the FIFO method of accounting in accordance with GAAP. "Eligible Receivables" means, with respect to any Person, the trade receivables of such Person less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP. "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock). "Exchange Notes" means the Company's 9 1/4% Series B Senior Notes due March 15, 2007 issued in exchange for an Original Note pursuant to the Exchange Offer. "Exchange Offer" means the offer by the Company to the Holders of all outstanding Transfer Restricted Securities to exchange all such outstanding Restricted Securities held by such Holders for the Company's 9 1/4% Senior Series B Notes due March 15, 2007, in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. "Exchange Offer Registration Statement" means the registration statement under the Securities Act relating to the Exchange Offer, including the related prospectus. "Exempt Person" means (i) Richard L. Bready, (ii) any Person which is an Affiliate of Richard L. Bready, and (iii) any other Affiliate of such Person so long as such Person is an Affiliate of Richard L. Bready. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries, in existence on the issue date of the Original Notes. "Existing Investments" means (i) Investments of the Company and its Restricted Subsidiaries, in existence on the issue date of the Original Notes and (ii) Investments to be made pursuant to commitments authorized by the Board of Directors of the Company prior to the issue date of the Original Notes (a) in Ecological Engineering Associates, L.P. in an amount not to exceed $3.0 million (including such Investments made prior to the issue date of the Original Notes) and (b) in or related to a joint venture involving Universal-Rundle Corporation in an amount not to exceed $10.0 million. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets of the Company or any of its Subsidiaries shall be determined by the Board of Directors of the Company or, if such subsidiary is a Reporting Subsidiary, of such Reporting Subsidiary, acting in good faith, and evidenced by a Board Resolution of the Company or such Reporting Subsidiary, as the case may be, delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that with respect to the obligations of the Company described under "Certain Covenants" and "Merger, 35 37 Consolidation or Transfer of Assets" and the definitions used therein, GAAP shall be determined on the basis of such principles as in effect on the issue date of the Original Notes. "Indebtedness" means, with respect to any Person, without duplication, any indebtedness, contingent or otherwise, (i) with respect to borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or consisting of reimbursement obligations with respect to letters of credit, or (ii) representing the deferred and unpaid balance of the purchase price of any property excluding any such balance that constitutes a trade payable or an accrued liability, in each case arising in the ordinary course of business, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP, and shall also include, to the extent not otherwise included, (a) any Capital Lease Obligations, (b) the maximum fixed repurchase price of any Redeemable Stock, (c) indebtedness secured by a Lien to which the property or assets owned or held by such Person is subject, whether or not the obligations secured thereby shall have been assumed, (d) guaranties of items that would be included within this definition to the extent of such guaranties, and (e) net liabilities in respect of Commodity Agreements, Currency Agreements and Interest Rate Agreements. For purposes of the immediately preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, provided that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be without duplication (y) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (z) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the Fair Market Value at such date of any property or asset subject to a Lien securing the Indebtedness of others or the amount of the Indebtedness secured. The amount of any Indebtedness issued at a discount shall be equal to the gross proceeds of such issuance (and not the face amount of any bond, note, debenture or similar instrument representing such Indebtedness). "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary thereof. "Investment" means, with respect to any Person, (i) any direct or indirect loan or other extension of credit (other than extensions of trade credit by such Person on commercially reasonable terms and relating to the sale of property or services in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to any other Person, or (ii) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person. "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease intended as security, any option or other agreement to sell or give any security interest and any filing of or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a financing statement covering leased goods under a lease not intended as security). "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement. The holders of Exchange Notes will generally not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See "Exchange Offer -- Registration Rights; Liquidated Damages." 36 38 "Net Cash Proceeds" means the aggregate Cash Proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reasonable reserve in accordance with GAAP for adjustments in respect of the sale price of such asset or assets. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company or any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means the Original Notes and the Exchange Notes. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive Officer or President and the Chief Financial Officer or chief accounting officer of such Person. "Original Notes" means the Company's 9 1/4% Series A Senior Notes due March 15, 2007 issued under the Indenture prior to the issuance of Exchange Notes. "Permitted Investments" means any of the following: (i) Cash Equivalents; (ii) Existing Investments; (iii) Investments by the Company or a Restricted Subsidiary of the Company in any Subsidiary of the Company that is a Restricted Subsidiary or any other Person that concurrently with the making of such Investment becomes a Subsidiary of the Company that is a Restricted Subsidiary; (iv) guaranties by Restricted Subsidiaries of the Company permitted under the Limitation on Additional Indebtedness covenant and the Limitation on Guaranties by Subsidiaries covenant; (v) Indebtedness of the Company to any Restricted Subsidiary of the Company, provided that such Indebtedness is contractually subordinated in right of payment to the Notes; (vi) Investments by the Company or any of its Restricted Subsidiaries in debt securities or debt instruments having maturities of 10 years or less and (A) issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (B) with a rating of BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent of such rating by a successor rating agency; (vii) any Investment by Broan Limited and or any Canadian Subsidiary in debt securities or debt instruments having maturities of 10 years or less and issued or fully guaranteed or insured by Canada or an instrumentality or agency thereof or rated, at the time of such Investment, BBB- or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency, so long as the aggregate amount of all such Investments by Broan Limited and any Canadian Subsidiaries that are Restricted Subsidiaries does not exceed $15,000,000 at any one time outstanding; (viii) loans and advances to officers and directors of the Company or any Restricted Subsidiary of the Company made in the ordinary course of business or pursuant to any employee benefit plan, up to $5,000,000 in the aggregate at any one time outstanding; (ix) loans and advances to vendors, suppliers and contractors of the Company or any Restricted Subsidiary of the Company and made in the ordinary course of business; (x) the receipt by the Company or its Restricted Subsidiaries of consideration other than Cash Proceeds in any Asset Sale made in compliance with the terms of the Indenture; (xi) so long as no Default or Event of Default shall have occurred and be continuing, other Investments made after the issue date of the Original Notes not exceeding in the aggregate at any time outstanding (A) $40,000,000, if at the time of the making of such Investment the Notes are not rated BB+ or better by S&P or Bal or better by Moody's, or (B) $50,000,000, if at the time of the making of such Investment the Notes are rated BB+ or better by S&P or Bal or better by Moody's; (xii) any Lien permitted 37 39 under the Limitation on Liens covenant; and (xiii) Investments by Restricted Subsidiaries of the Company not exceeding in the aggregate $10,000,000 at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term in the Indenture, provided that for purposes of this clause (xiii) an instrument referred to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100,000,000. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings, provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings, provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries, taken as a whole; (vi) Liens securing Purchase Money Obligations permitted to be incurred by the provisions of the Indenture; (vii) leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of the Company or any of its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or any of its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capital Lease Obligation; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any corporation existing at the time such corporation becomes, or becomes a part of, any Restricted Subsidiary; (xii) Liens in favor of the Company or any Subsidiary; (xiii) Liens securing any real property or other assets of the Company or any Restricted Subsidiary of the Company in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the Company or such Restricted Subsidiary of the Company; (xiv) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary of the Company that does not give rise to an Event of Default; (xv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvii) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Company Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements; and (xviii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Closing Date. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Principal Property" means any manufacturing or processing plant, warehouse or other building used by the Company or any Restricted Subsidiary, other than a plant, warehouse or other building that, in the good 38 40 faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by the Company and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of the Company. "Purchase Money Obligations" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed by the Company or a Restricted Subsidiary of the Company in connection with the acquisition of assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased. "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable, in whole or in part, prior to the Stated Maturity of the Notes. "Restricted Subsidiary" means (i) any Subsidiary of the Company in existence on the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary", (ii) any Subsidiary of the Company (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of the Company; provided that, immediately after giving effect to the designation referred to in clause (iii), no Default or Event of Default shall have occurred and be continuing and the Company could incur at least $1.00 of additional Indebtedness under the first paragraph under the Limitation on Additional Indebtedness covenant. The Company shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers' Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of the Registration Rights Agreement which covers all of the Registrable Securities (as defined in the Registration Rights Agreement), on an appropriate form under Rule 415 under the Act or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including a Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the Commission, as such regulation is in effect on the date of the Indenture. "Stated Maturity" means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency). "Subsidiary" of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. 39 41 "Subsidiary Guarantor" means, with respect to any Subsidiary Guaranty, the issuer of such Subsidiary Guaranty, so long as such Subsidiary Guaranty remains outstanding. "Subsidiary Guaranty" means any guaranty of the Notes pursuant to a supplemental indenture executed and delivered pursuant to the Limitation on Guaranties by Subsidiaries covenant, including as the context may require either or both of the guaranty of the Notes set forth as an exhibit to the Indenture upon the execution and delivery by a Subsidiary Guarantor of such supplemental indenture and any separate guaranty of the Notes or confirmation of guaranty executed and delivered by such Subsidiary Guarantor pursuant to such supplemental indenture. "TIA" means the Trust Indenture Act of 1939 as amended and as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Transfer Restricted Securities" means each Original Note until (i) the date on which such Original Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Original Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Original Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Original Note is distributed to the public pursuant to Rule 144 under the Securities Act. "Trustee" means the party named as the "Trustee" in the first paragraph of the Indenture until a successor replaces it pursuant to the applicable provisions of the Indenture and, thereafter, shall mean such successor. "Unrestricted Subsidiary" means, until such time as any of the following shall be designated as a Restricted Subsidiary of the Company by the Board of Directors of the Company as provided in and in compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary of the Company or of a Restricted Subsidiary organized or acquired after the date of the Indenture that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of the Company that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, provided that, (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in the "Limitation on Restricted Payments" covenant, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in accordance with the Limitation on Restricted Payments covenant; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. The Company shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers' Certificate certifying that such designation has been made. "Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries). 40 42 BOOK-ENTRY, DELIVERY AND FORM The certificates representing Exchange Notes will be issued in fully registered form, without coupon. Except as described below, the Exchange Notes will be deposited with, or on behalf of, the Depositary and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the "Global Note Holder") in the form of one or more Global Notes (the "Global Notes") or will remain in the custody of the Trustee. Exchange Notes that are issued as described below under "-- Certificated Securities" will be issued in registered form (the "Certificated Securities"). Upon the transfer of Certificated Securities, such Certificated Securities may, unless the Global Notes have previously been exchanged for Certificated Securities, be exchanged for an interest in a Global Note representing the principal amount of Notes being transferred. The Depositary is a limited-purpose trust company which was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depositary's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depositary's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Depositary's Participants or the Depositary's Indirect Participants. The Company expects that pursuant to procedures established by the Depositary (i) upon deposit of the Global Notes, the Depositary will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes and (ii) ownership of the Exchange Notes evidenced by the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Exchange Notes evidenced by the Global Notes will be limited to such extent. So long as the Global Note Holder is the registered owner of any Exchange Notes, the Global Note Holder will be considered the sole owner or holder of such Exchange Notes outstanding under the Indenture. Beneficial owners of Exchange Notes evidenced by the Global Note will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. The ability of a Person having a beneficial interest in Exchange Notes represented by a Global Note to pledge such interest to Persons or entities that do not participate in the Depositary's system or to otherwise take actions in respect of such interest may be affected by the lack of physical certificate evidencing such interest. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Exchange Notes by the Depositary, or for maintaining, supervising or reviewing any records of the Depositary relating to such Exchange Notes. Payments in respect of the principal of, premium, if any, and Liquidated Damages, if any, with respect to, any Notes registered in the name of a Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of such Global Note Holder in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, interest and Liquidated Damages, if any). 41 43 The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with such payment, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Exchange Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. CERTIFICATED SECURITIES Subject to certain conditions, any Person having a beneficial interest in a Global Note may, upon request to the Company or the Trustee, exchange such beneficial interest for Exchange Notes in the form of Certificated Securities. Upon any such issuance, the Trustee is required to register such Exchange Notes in the name of, and cause the same to be delivered to, such Person or Persons. In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to appoint a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Exchange Notes in the form of Certificated Securities under the Indenture, then, upon surrender by the relevant Global Note Holder of its Global Note, Exchange Notes in such form will be issued to each Person that the Depositary identifies as the beneficial owner of the related Exchange Notes. Neither the Company nor the Trustee shall be liable for any delay by the Depositary in identifying the beneficial owners of the related Exchange Notes and each such Person may conclusively rely on, and shall be protected in relying on, instructions from the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued). SAME-DAY SETTLEMENT AND PAYMENT The Indenture requires that payments in respect of the Exchange Notes (including principal, premium, if any, interest, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the Notes have been designated as eligible for trading in the PORTAL market and are expected to trade in the Depositary's Next-Day Funds Settlement System, and any permitted secondary market trading activity in the Notes will therefore be required by the Depositary to be settled in immediately available funds. The Company expects that secondary trading in the Certificated Notes also will be settled in immediately available funds. 42 44 THE EXCHANGE OFFER REGISTRATION RIGHTS; LIQUIDATED DAMAGES The Company and the Initial Purchasers entered into the Registration Rights Agreement on March 17, 1997 (the "Closing Date"). Pursuant to the Registration Rights Agreement, the Company agreed to use its best efforts to cause to be filed with the Commission the Exchange Offer Registration Statement, of which this Prospectus forms a part, on the appropriate form under the Securities Act with respect to an offer to exchange the Original Notes for Exchange Notes. The Exchange Notes will be substantially identical to the Original Notes, except that the Exchange Notes will not contain terms with respect to transfer restrictions (other than those that might be imposed by state securities laws) or, except as arising out of the obligations set forth in the next sentence, provide for the payment of Liquidated Damages. In the event that (i) the Company is not permitted to commence or accept tenders pursuant to the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) any Holder of Transfer Restricted Securities notifies the Company within 20 business days after the consummation of the Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer or (b) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (c) that it is a broker-dealer and owns Original Notes acquired directly from the Company or an Affiliate of the Company, the Company will file with the Commission a Shelf Registration Statement (as defined above under "Description of Notes -- Certain Definitions") to cover resales of the Original Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each Original Note until (i) the date on which such Original Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a Participating Broker-Dealer in the Exchange Offer of an Original Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such Participating Broker-Dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Original Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Original Note is distributed to the public pursuant to Rule 144 under the Securities Act. This Prospectus covers the offer and sale of the Exchange Notes pursuant to the Exchange Offer made hereby and the resale of Exchange Notes received in the Exchange Offer by any Participating Broker-Dealer who holds Original Notes (other than Original Notes acquired directly from the Company or one of its affiliates). Under existing interpretations by the staff of the Commission, the Exchange Notes would, in general, be freely transferable after the Exchange Offer without further registration under the Securities Act; provided, that Participating Broker-Dealers receiving Exchange Notes in the Exchange Offer will have a prospectus delivery requirement with respect to the resales of Exchange Notes. The Commission has taken the position that such Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of Original Notes) with the prospectus contained in the Exchange Offer Registration Statement. The Company has agreed, for a period of 180 days after consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any Participating Broker-Dealer for use in connection with any resale of any Exchange Notes acquired. Each Holder (other than certain specified holders) who wishes to exchange such Original Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer, it had no arrangement with any Person 43 45 to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and (ii) is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company. The Registration Rights Agreement provides that, to the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, (i) the Company will use its best efforts to cause to be filed with the Commission an Exchange Offer Registration Statement on or prior to 45 days after the Closing Date, (ii) the Company will use its best efforts to have such Exchange Offer Registration Statement declared effective under the Securities Act by the Commission on or prior to 120 days after the Closing Date, (iii) the Company will use its best efforts to cause the Exchange Offer to be consummated on or prior to 45 days after the date on which the Exchange Offer Registration Statement was declared effective under the Securities Act by the Commission and (iv) if obligated to cause to be filed with the Commission the Shelf Registration Statement, the Company will cause to be filed with the Commission a Shelf Registration Statement on or prior to 45 days after such filing obligation arises and use its best efforts to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 90 days after such obligation arises; provided, that if the Company has not consummated the Exchange Offer within 165 days of the Closing Date, then the Company will cause to be filed with the Commission a Shelf Registration Statement on or prior to the 210th day after the Closing Date. The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended until the second anniversary of the Closing Date or such shorter period that will terminate when all the securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. If (a) the Company fails to file any Registration Statement required by the Registration Rights Agreement on or prior to the date specified for such filing, (b) any such Registration Statement is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), (c) the Company fails to consummate the Exchange Offer on or prior to 45 days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), then the Company will be required to pay Liquidated Damages to each Holder affected by such Registration Default on each interest payment date. Liquidated Damages shall accrue from and after the date of each Registration Default, and shall continue to accrue thereafter until such Registration Default has been cured or waived as set forth in the Registration Rights Agreement, at a rate equal to 0.50% per annum of the principal amount of Notes during the first 90-day period immediately following the occurrence of such Registration Default, which rate shall increase by an additional 0.50% per annum during each subsequent 90-day period up to a maximum rate equal to 2.0% per annum. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to this Exchange Offer Registration Statement. See "Available Information." Except as set forth above, after consummation of the Exchange Offer, holders of Original Notes have no registration or exchange rights under the Registration Rights Agreement. See "-- Consequences of Failure to Exchange," and "-- Resales of Exchange Notes; Plan of Distribution." CONSEQUENCES OF FAILURE TO EXCHANGE The Original Notes which are not exchanged for Exchange Notes pursuant to an Exchange Offer and are not included in a resale prospectus will remain restricted securities. Accordingly, such Original Notes may be offered, sold or otherwise transferred prior to the date which is two years after the later of the date of original issue and the last date that the Company or any affiliate of the Company was the owner of such securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Original Notes are eligible for resale pursuant to Rule 144A, to a person the owner reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an "accredited 44 46 investor" within the meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under the Securities Act that is purchasing for his own account or for the account of such an "accredited investor" in each case in a minimum of Original Notes with a purchase price of $500,000 or (c) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Original Notes is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee to the Company and the Trustee, which shall provide, among other things, that the transferee is an "accredited investor" within the meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Prior to any offer, sale or other transfer of Original Notes prior to the Resale Restriction Termination Date pursuant to clauses (d) or (e) above, the issuer and the Trustee may require the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, the Company will accept all Original Notes properly tendered and not withdrawn prior to the applicable Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Original Notes accepted in the Exchange Offer. Holders may tender some or all of their Original Notes pursuant to the Exchange Offer. However, Original Notes may be tendered only in integral multiples of $1,000 principal amount at final maturity. The forms and terms of the Exchange Notes are the same as the form and terms of the Original Notes, except that (i) the Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and therefore will generally not bear legends restricting their transfer (except as may be required under state securities laws) pursuant to the Securities Act, and (iii) the holders of Exchange Notes will generally not be entitled to rights under the Registration Rights Agreement including the provisions providing for liquidated damages, in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The Exchange Notes will evidence the same debt as the Original Notes (which they replace), and will be issued under, and be entitled to the benefits of, the Indenture. Solely for reasons of administration (and for no other purpose) the Company has fixed the close of business on , 1997 as the record date for the Exchange Offer for purpose of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Only a registered holder of Original Notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of the trustee under the governing indenture may participate in the Exchange Offer. There will be no fixed record date for determining registered holders of the Original Notes entitled to participate in the relevant Exchange Offer. Holders of the Original Notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or under the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Original Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Original Notes for the purpose of receiving Exchange Notes. If any tendered Original Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Original Notes will be returned, without expenses, to the tendering holder thereof as promptly as practicable after the Expiration Date. 45 47 Holders of Original Notes who tender in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Original Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATES; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m. New York City time on , 1997 unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will make a public announcement thereof, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right in its sole discretion (i) to delay acceptance of any Original Notes, (ii) to extend the Exchange Offer (iii) if the condition set forth below under "-- Conditions of the Exchange Offer" shall not have been satisfied, to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (iv) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders of the Original Notes and the Exchange Offer will be extended for a period of five to ten business days, as required by law, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. Without limiting the manner in which the Company may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. PROCEDURES FOR TENDERING Only a registered holder of Original Notes may tender such Original Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal to the Exchange Agent at the address set forth below prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, either (i) certificates for such Original Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Original Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the applicable Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the Letter of Transmittal and all other required documents must be received by the Exchange Agent at the address set forth below under "-- Exchange Agent" prior to the applicable Expiration Date. The tender by a holder of Original Notes will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF THE ORIGINAL NOTES AND THE APPLICABLE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIV- 46 48 ERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE APPLICABLE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial owner wishes to tender on his own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined) unless the Original Notes tendered pursuant thereto are tendered (i) by a registered owner who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a participant in a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If a Letter of Transmittal is signed by a person other than the registered owner of any Original Notes listed therein, such Original Notes must be endorsed or accompanied by properly completed bond powers, signed by such registered owner as such registered owner's name appears on the Original Notes, with signature guaranteed by an Eligible Institution. If the Letter of Transmittal or any Original Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company, as applicable, of their authority to so act must be submitted with the Letter of Transmittal designated for such Original Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered Original Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Original Notes not properly tendered or any Original Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any defects, irregularities or conditions of tender as to particular Original Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Original Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Original Notes nor shall any of them incur any liability for failure to give such notification. Tenders of Original Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Original Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering holder of such Original Notes (or, in the case of Original Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such unaccepted or non-exchanged Original Notes will be credited to an account maintained with such Book-Entry Transfer Facility), unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. 47 49 By tendering Original Notes in the Exchange Offer, each registered holder will represent to the issuer of such Original Notes that, among other things, (i) the Exchange Notes to be acquired by the holder and any beneficial owner(s) of such Original Notes ("Beneficial Owner(s)") in connection with the Exchange Offer are being acquired by the holder and any Beneficial Owner(s) in the ordinary course of business of the holder and any Beneficial Owner(s), (ii) the holder and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in a distribution of the Exchange Notes, (iii) the holder and each Beneficial Owner acknowledge and agree that (x) any person participating in an Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction with respect to the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Commission set forth in no-action letters that are discussed herein under "-- Resales of the Exchange Notes", and (y) any Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Original Notes pursuant to an Exchange Offer must deliver a prospectus in connection with any resale of such Exchange Notes, but by so acknowledging, the holder shall not be deemed to admit that, by delivering a prospectus, it is an "underwriter" within the meaning of the Securities Act, (iv) neither the holder nor any Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company except as otherwise disclosed to the Company in writing, and (v) the holder and each Beneficial Owner understands that a secondary resale transaction described in clause (iii) above should be covered by an effective registration statement containing the selling securityholder information required by Item 507 of Regulation S-K of the Commission. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Original Notes at the Book-Entry Transfer Facility, for purposes of the Exchange Offer, within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Original Notes by causing the Book-Entry Transfer Facility to transfer such Original Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Original Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the applicable Letter of Transmittal, with any required signature guarantees and any other documents, must be transmitted to and received by the Exchange Agent at the address set forth below under "-- Exchange Agent" on or prior to the applicable Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available, or (ii) who cannot deliver their Original Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the applicable Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the applicable Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Original Notes, the certificate number or numbers of such Original Notes and the principal amount of Original Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the applicable Expiration Date, the applicable Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the Original Notes to be tendered in proper form for transfer and any other documents required by the applicable Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly completed and executed Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing all tendered Original Notes in proper form for transfer (or confirmation of a book-entry transfer into the Exchange Agent's account at DTC of Original Notes 48 50 delivered electronically) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five business days after the applicable Expiration Date. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Original Notes pursuant to an Exchange Offer, unless theretofore accepted for exchange as provided in the Exchange Offer, may be withdrawn at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date. To be effective, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein to 5:00 p.m., New York City time, on the business day prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn (including the certificate number or numbers and aggregate principal amount of such Original Notes), and (iii) be signed by the holder in the same manner as the original signature on the applicable Letter of Transmittal (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Original Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly retendered. Properly withdrawn Original Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the applicable Expiration Date. Any Original Notes which have been tendered but which are not accepted for exchange due to the rejection of the tender due to uncured defects or the prior termination of the applicable Exchange Offer, or which have been validly withdrawn, will be returned to the holder thereof (unless otherwise provided in the Letter of Transmittal), as soon as practicable following the applicable Expiration Date or, if so requested in the notice of withdrawal, promptly after receipt by the issuer of the Original Notes of notice of withdrawal without cost to such holder. CONDITIONS OF THE EXCHANGE OFFER The Exchange Offer is subject to the condition that the Exchange Offer, or the making of any exchange by a holder, does not violate applicable law or any applicable interpretation of the staff of the Commission. If there has been a change in commission policy such that in the reasonable opinion of Counsel to the Company there is a substantial question whether the Exchange Offer is permitted by applicable federal law, the Company has agreed to seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Exchange Offer. If the Company determines in its reasonable discretion, that the Exchange Offer is not permitted by applicable federal law, it may terminate the Exchange Offer. In connection therewith, the Company may (i) refuse to accept any Original Notes and return any Original Notes that have been tendered by the holders thereof, (ii) extend the Exchange Offer and retain all Original Notes tendered prior to the Expiration of the Exchange Offer, subject to the rights of such holders of tendered Original Notes to withdraw their tendered Original Notes, or (iii) waive such termination event with respect to the Exchange Offer and accept all properly tendered Original Notes that have not been withdrawn. If such waiver constitutes a material change in the Exchange Offer, the Company will disclose such change by means of a supplement to this Prospectus that will be distributed to each registered holder of Original Notes, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders of the Original Notes, if the Exchange Offer would otherwise expire during such period. 49 51 EXCHANGE AGENT State Street Bank and Trust Company has been appointed as "Exchange Agent" for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal and other documents should be directed to the Exchange Agent addressed as follows: BY EXPRESS: BY MAIL: BY HAND: (insured or registered recommended) State Street Bank & Trust State Street Bank & Trust State Street Bank & Trust Company Company Company Corporate Trust Department Corporate Trust Department Corporate Trust Department Two International Place Two International Place Two International Place Boston, MA 02210 Boston, MA 02210 Boston, MA 02210 Attn: Lena Altomare Attn: Lena Altomare Attn: Lena Altomare
FACSIMILE: (617)664-5371 FOR INFORMATION: (617)664-5607 FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation is being made by mail. Additional solicitations may be made by officers and regular employees of the Company and its affiliates in person, by telegraph or telephone. The Company will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith. The Company may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus, Letters of Transmittal and related documents to the beneficial owners of the Original Notes and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the Exchange Offer, including fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, will be paid by the Company and are estimated to be approximately $100,000. The tendering holder will pay all transfer taxes, if any, applicable to the exchange of Original Notes pursuant to the Exchange Offer. ACCOUNTING TREATMENT The terms of the Original Notes are not expected to be materially different from those of the Exchange Notes. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. RESALE OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION Based on no-action letters issued by the staff of the Commission to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Original Notes directly from the Company or an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is such an affiliate) without compliance with the 50 52 registration and prospectus delivery requirements of the Securities Act, provided that the holder is acquiring the Exchange Notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Original Notes wishing to accept the Exchange Offer must represent to the Company that such conditions have been met. In the event that the Company's belief is inaccurate, holders of Exchange Notes who transfer Exchange Notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration thereunder may incur liability under the Securities Act. The Company does not assume or indemnify holders against such liability. Each affiliate of the Company must acknowledge that such person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Each Participating Broker-Dealer that receives Exchange Notes in exchange for Original Notes held for its own account, as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Although a Participating Broker-Dealer may be an "underwriter" within the meaning of the Securities Act, the Letter of Transmittal states that by so acknowledging and by delivering a prospectus, such Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Original Notes. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus and any amendment or supplement to this Prospectus available to any such Participating Broker-Dealer for use in connection with any such resale. 51 53 DESCRIPTION OF OTHER OBLIGATIONS In February 1994, the Company issued $218,500,000 of the 9 7/8% Notes. The indenture governing the 9 7/8% Notes (the "9 7/8% Indenture") restricts, among other things, the payment of cash dividends, repurchase of the Company's capital stock and the making of certain other restricted payments, the incurrence of additional indebtedness, the making of certain investments, mergers, consolidations and sale of assets (all as defined in the 9 7/8% Indenture). Upon certain asset sales (as defined in the 9 7/8% Indenture), the Company will be required to offer to purchase, at 100% principal amount plus accrued interest to the date of purchase, the 9 7/8% Notes in a principal amount equal to any net cash proceeds (as defined in the 9 7/8% Indenture) that are not invested in properties and assets used primarily in the same or related business to those owned and operated by the Company at the issue date of the 9 7/8% Notes or at the date of such asset sale and such net cash proceeds were not applied to permanently reduce Senior Indebtedness (as defined in the 9 7/8% Indenture). The 9 7/8% Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at 104.214% on March 1, 1999, declining to 100% on March 1, 2002 and thereafter. The payment of the principal of, premium, if any, and interest on the 9 7/8% Notes is subordinated in right of payment to the prior payment of all Senior Indebtedness (as defined in the 9 7/8% Indenture). The Company's Canadian subsidiary Broan Limited, has a $14.7 million secured line of credit (based on exchange rates in effect on December 31, 1996). After giving effect to the consummation of the Offering and the Refinancing, there will be no outstanding borrowings under this line of credit. The line of credit contains a covenant prohibiting net aggregate dividends or other distributions to the Company from Broan Limited in excess of $10.8 million. As of December 31, 1996, $8.8 million in dividends or other distributions could have been made to the Company by Broan Limited under this covenant. For additional information regarding the obligations described above, see Note 5 of Notes to Consolidated Financial Statements of the Company included in the Form 10-K incorporated by reference herein. CERTAIN FEDERAL TAX CONSIDERATIONS The following is a general discussion of the material United States federal income tax consequences of the receipt, ownership and disposition of the Exchange Notes to United States Holders (as defined below) and Foreign Holders (as defined below). This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect or proposed on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretations. This discussion does not address the tax consequences to subsequent purchasers of Exchange Notes and is limited to Holders who hold the Exchange Notes as capital assets, within the meaning of Section 1221 of the Code. This discussion also does not address the tax consequences to nonresident aliens or foreign corporations that are subject to United States federal income tax on a net basis on income realized with respect to an Exchange Note because such income is effectively connected with the conduct of a U.S. trade or business. Such Holders are generally taxed in a similar manner to United States Holders; however, certain special rules apply. Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to particular Holders in light of their personal circumstances or to certain types of Holders (such as certain financial institutions, insurance companies, tax-exempt entities, dealers in securities or persons who have hedged a risk of ownership of a Note). No ruling from the Internal Revenue Service ("IRS") will be requested with respect to any of the matters discussed herein. There can be no assurance that the IRS will not take a different position concerning the tax consequences of the receipt, ownership, or disposition of the Notes, or that any such position would be sustained. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH PROSPECTIVE HOLDER OF EXCHANGE NOTES IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR SITUATION, AND AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW OR INTERPRETATIONS THEREOF) AFFECTING THE RECEIPT, HOLDING, AND DISPOSITION OF THE EXCHANGE NOTES. 52 54 TAX CONSEQUENCES TO UNITED STATES HOLDERS As used herein, the term "United States Holder" means a holder of Exchange Notes, that is, for United States federal income tax purposes, (a) a citizen or resident of the United States, (b) treated as a domestic corporation or domestic partnership, or (c) an estate or trust other than a "foreign estate" or "foreign trust" as defined in section 7701(a)(31) of the Code. Exchange of Original Notes for Exchange Notes. The exchange by a United States Holder of an Original Note for an Exchange Note pursuant to the Exchange Offer will not constitute a taxable exchange of the Original Note if the economic terms of the Exchange Note (including the interest rate) are identical to the economic terms of the Original Note. Under the Section 1001 Regulations relating to modifications and exchanges of debt instruments, with certain exceptions, an alteration of a legal right or obligation that occurs by operation of the terms of a debt instrument is not a modification of the debt instrument and thus does not result in a taxable exchange. Therefore, even if Liquidated Damages were payable with respect to the Original Notes but not with respect to the Exchange Notes as a result of a Registration Default as described under "The Exchange Offer -- Registration Rights; Liquidated Damages", the exchange of an Original Note for an Exchange Note would not be treated as a taxable exchange because such Liquidated Damages payments would occur pursuant to the original terms of the Original Note. Accordingly, the Company intends to take the position that in the circumstances described in the preceding sentence, the exchange will not constitute a taxable exchange of the Original Notes. Interest on Exchange Notes. Interest on the Exchange Notes generally will be includible in the income of a United States Holder as ordinary income at the time such interest is received or accrued, in accordance with such Holder's method of accounting for United States federal income tax purposes. Since the Original Notes were issued with original issue discount ("OID") that was less than 1/4 of 1 percent of the stated redemption price at maturity, multiplied by the number of complete years to maturity, the Original Notes qualified for the de minimis exception from the imputed OID interest rules and, therefore, so will the Exchange Notes. Sale, Exchange, Redemption or Retirement. Upon the sale, exchange, redemption, retirement or other disposition of an Exchange Note, a United States Holder will generally recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, redemption or retirement and such Holder's adjusted tax basis in the Exchange Note. A United States Holder's adjusted tax basis in an Exchange Note generally will equal the cost of the Original Note to such Holder. Gain or loss recognized on the disposition of an Exchange Note generally will be capital gain or loss and will be long-term capital gain or loss if, at the time of such disposition, the Exchange Note has been held for more than one year. Backup Withholding. Certain Holders of Exchange Notes may be subject to backup withholding at the rate of 31% with respect to interest and cash received in certain circumstances upon the disposition of such Exchange Notes. Generally, backup withholding will be applied only if the Holder fails to furnish to the Company its taxpayer identification number (social security or employer identification number) in the prescribed manner, to certify that such Holder is not subject to backup withholding, or to otherwise comply with the applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules will be allowed as a credit or refund against a United States Holder's United States federal income tax liability, provided that such United States Holder furnished the required information to the IRS. Certain Holders (including, among others, corporations) are not subject to the backup withholding requirements. UNITED STATES FEDERAL TAXATION OF FOREIGN HOLDERS This section discusses special rules to a Holder of Exchange Notes that is a Foreign Holder. For purposes of this discussion, a "Foreign Holder" means a Holder that is not a United States Holder. Interest on Exchange Notes. In general, interest received by any Foreign Holder will not be subject to United States federal withholding tax, provided that (a) such interest is effectively connected with the conduct by the Holder of a trade or business within the United States and the Company or its paying agent receives a properly completed Form 4224 in advance of the payments, (b)(i) the Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company 53 55 entitled to vote, (ii) the Holder is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (iii) the Holder is not a controlled foreign corporation that is related to the Company actually or constructively through stock ownership and (iv) either (x) the beneficial owner of the Note, under penalties of perjury, provides the Company or its agent with the beneficial owner's name and address and certifies that it is not a United States Holder on IRS Form W-8 (or a suitable substitute form) or (y) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") holds the Exchange Note and certifies to the Company or its agent under penalties of perjury that such a Form W-8 (or a suitable substitute) has been received by it from the beneficial owner of the Exchange Note or qualifying intermediary and furnishes the payor a copy thereof or (c) the Foreign Holder is entitled to the benefits of an income tax treaty under which the interest on the Exchange Notes is exempt from United States withholding tax and the Foreign Holder or such Holder's agent provides a properly executed IRS Form 1001 in the name of the beneficial owner claiming the exemption. Payments of interest not exempt from U.S. federal withholding tax as described above will be subject to such withholding tax at a rate of 30% (subject to reduction under an applicable income tax treaty). Interest payments made to a Foreign Holder that are effectively connected with a United States trade or business conducted by such Foreign Holder are subject to U.S. tax at the graduated rates applicable to U.S. citizens, resident aliens and domestic corporations (an additional branch profits tax may also apply to corporate Holders). Gain on Disposition of Exchange Notes. A Foreign Holder generally will not be subject to United States federal income tax or withholding tax with respect to gain recognized on a disposition of the Exchange Notes, unless (i) in the case of a Foreign Holder that is an individual, such Foreign Holder is present in the United States for 183 or more days in the taxable year of the disposition and certain other requirements are met, (ii) the Foreign Holder is an individual who is a former citizen of the United States who lost such citizenship within the preceding ten-year period (or former long-term permanent resident of the United States who relinquished residency on or after February 6, 1995) whose loss of citizenship or permanent residency had as one of its principal purposes the avoidance of United States tax or (iii) such gain is effectively connected with the conduct in the United States of a trade or business of the Foreign Holder, or, if a treaty applies, the gain is attributable to a permanent establishment in the United States (in either case, the branch profits tax also may apply if the Foreign Holder is a corporation). If a Foreign Holder falls under (i) above, the Holder generally will be subject to United States federal income tax at a rate of 30% on the gain derived from the sale (or reduced treaty rate) and may be subject to withholding in certain circumstances. If a Foreign Holder falls within clause (ii) or (iii) above, the Holder will be taxed on the net gain derived from the sale under the graduated United States federal income tax rates that are applicable to U.S. citizens, resident aliens and domestic corporations, as the case may be, and may be subject to withholding under certain circumstances. Information Reporting and Backup Withholding. Under current Treasury regulations, backup withholding and information reporting on Form 1099 do not apply to payments made by the Company or a paying agent to Foreign Holders if the certification described under "-- Interest on Exchange Notes" is received, provided that the payor does not have actual knowledge that the Holder is a United States Holder. If any payments of principal and interest are made to the beneficial owner of an Exchange Note outside the United States by or through the foreign office of a foreign custodian, foreign nominee or other foreign agent of such beneficial owner, or if the foreign office of a foreign "broker" (as defined in applicable United States Treasury Department regulations) pays the proceeds of the sale of an Exchange Note to the seller thereof, backup withholding and information reporting will not apply. Information reporting requirements (but not backup withholding) will apply, however, to payments by a foreign office of a broker or custodian that is (a) a United States person, (b) derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, or (c) that is a "controlled foreign corporation" (generally, a foreign corporation controlled by certain United States shareholders) with respect to the United States, unless the broker or custodian has documentary evidence in its records that the Holder is a Foreign Holder and certain other conditions are met, or the Holder otherwise establishes an exemption. Payment by a United States office of a broker or custodian is subject to both backup withholding at a rate of 31% and information reporting unless the Holder certifies under penalties of perjury that it is a Foreign Holder, or otherwise establishes an exemption. A Foreign Holder may obtain a refund of, or a credit against such Holder's U.S. federal income 54 56 tax liability for, any amounts withheld under the backup withholding rules, provided the required information is furnished to the IRS. Proposed Regulations. The Internal Revenue Service released proposed regulations on April 22, 1996 that would revise the procedures for withholding tax on interest and the associated backup withholding and information reporting rules described above. In particular, the regulations propose to modify the requirements imposed on a Foreign Holder or certain intermediaries for establishing the recipient's status as a Foreign Holder eligible for exemption from withholding tax and backup withholding. The regulations are generally proposed to be effective for payments of income made after December 31, 1997, although the effective date could be extended under proposed transition rules in particular circumstances. Foreign Holders should consult their tax advisors to determine the effects of the potential application of the proposed regulations to their particular circumstances. 55 57 PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resales. In addition, until , 1997, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver, and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days from the date of the consummation of the Exchange Offer, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. LEGAL MATTERS The legality of the Exchange Notes being offered hereby will be passed upon for the Company by Ropes & Gray, Boston, Massachusetts. EXPERTS The audited consolidated financial statements and schedule incorporated by reference in this Prospectus, and elsewhere in the Registration Statement of which this Prospectus is a part, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto and are included herein in reliance upon the authority of said firm as experts in giving said reports. 56 58 ====================================================== NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES TO ANYONE OR BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------------------- TABLE OF CONTENTS ---------------------------
PAGE ---- Incorporation of Certain Documents by Reference........................... 3 Available Information................. 3 Prospectus Summary.................... 4 Risk Factors.......................... 12 Capitalization........................ 16 Description of Notes.................. 17 The Exchange Offer.................... 43 Description of Other Obligations...... 52 Certain Federal Tax Considerations.... 52 Plan of Distribution.................. 56 Legal Matters......................... 56 Experts............................... 56
====================================================== ====================================================== NORTEK, INC. Exchange Offer $175,000,000 9 1/4 Series B Senior Notes due 2007 ------------------------ PROSPECTUS ------------------------ , 1997 ====================================================== 59 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 102(b)(7) of the DGCL permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to unlawful payment of dividends and unlawful stock purchase and redemption) or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Certificate of Incorporation provides that its Directors shall not be liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exculpation from liabilities is not permitted under the DGCL as in effect at the time such liability is determined. The Company's By-Laws further provides that Registrant shall indemnify its directors and officers to the fullest extent permitted by the DGCL. The directors and officers of the Company are covered under directors' and officers' liability insurance policies maintained by the Company. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------------------------ 1 -- Purchase Agreement dated March 12, 1997 regarding the issuance and sale of the Notes between Nortek and the Initial Purchasers. 4.2 -- Indenture dated as of March 17, 1997 between the Company, and State Street Bank and Trust Company, as Trustee.
II-1 60
EXHIBIT NUMBER DESCRIPTION - ------ ------------------------------------------------------------------------------------ 4.3 -- Registration Rights Agreement dated as of March 17, 1997 between the Company and the Initial Purchasers. 5 -- Opinion of Ropes & Gray regarding legality. 12 -- Schedule regarding computation of ratio of earnings to fixed charges. 23.1 -- Consent of Independent Public Accountants. 23.2 -- Consent of Ropes & Gray (included in Exhibit 5). 24 -- Powers of Attorney (included on signature page). 25 -- Statement of Eligibility of Trustee. 99.1 -- Form of Letter of Transmittal used in connection with the Exchange Offer. 99.2 -- Form of Notice of Guaranteed Delivery used in connection with The Exchange Offer.
ITEM 22. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer of controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by any such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such indemnification is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, (10)(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. II-2 61 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 62 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Providence, State of Rhode Island, on the 18th day of April, 1997. NORTEK, INC. By: /s/ RICHARD L. BREADY ------------------------------------ Name: Richard L. Bready Title: Chairman, President and Chief Executive Officer POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes Richard L. Bready, Almon C. Hall and Kevin W. Donnelly or any of them, severally, with full power of substitution, to execute in the name and on behalf of such person any amendment (including any post-effective amendment) to this Registration Statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act) and to file the same, with exhibits thereto, and other documents in connection therewith, making such changes in this Registration Statement as the person(s) so acting deems appropriate, and appoints each of such persons, each with full power of substitution, attorney-in-fact to sign any amendment (including any post-effective amendment to this Registration Statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act) and to file the same, with exhibits thereto, and other documents in connection therein.
SIGNATURE TITLE DATE - --------------------------------------------- ------------------------------ --------------- /s/ RICHARD L. BREADY Chairman, President and Chief April 18, 1997 - --------------------------------------------- Executive Officer (Principal Richard L. Bready Executive Officer) /s/ ALMON C. HALL Vice President, Controller and April 18, 1997 - --------------------------------------------- Chief Accounting Officer Almon C. Hall (Principal Accounting Officer) /s/ RICHARD J. HARRIS Vice President, Treasurer and April 18, 1997 - --------------------------------------------- Director (Principal Richard J. Harris Financial Officer) /s/ PHILLIP L. COHEN Director April 18, 1997 - --------------------------------------------- Phillip L. Cohen /s/ WILLIAM I. KELLY Director April 18, 1997 - --------------------------------------------- William I. Kelly /s/ J. PETER LYONS Director April 18, 1997 - --------------------------------------------- J. Peter Lyons
II-4 63 EXHIBIT INDEX
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ---------------------------------------------------------------------------- ------ 1 -- Purchase Agreement dated March 12, 1997 regarding the issuance and sale of the Notes between Nortek and the Initial Purchasers. 4.2 -- Indenture dated as of March 17, 1997 between the Company, and State Street Bank and Trust Company, as Trustee. 4.3 -- Registration Rights Agreement dated as of March 17, 1997 between the Company and the Initial Purchasers. 5 -- Opinion of Ropes & Gray regarding legality. 12 -- Schedule regarding computation of ratio of earnings to fixed charges. 23.1 -- Consent of Independent Public Accountants. 23.2 -- Consent of Ropes & Gray (included in Exhibit 5). 24 -- Powers of Attorney (included on signature page). 25 -- Statement of Eligibility of Trustee. 99.1 -- Form of Letter of Transmittal used in connection with the Exchange Offer. 99.2 -- Form of Notice of Guaranteed Delivery used in connection with The Exchange Offer.
II-5 EX-1 2 PURCHASE AGREEMENT DATED MARCH 12,1997 1 ================================================================================ Exhibit 1 NORTEK, INC. $175,000,000 9 1/4 % Senior Notes due 2007 Purchase Agreement March 12, 1997 BEAR, STEARNS & CO. INC. WASSERSTEIN PERELLA SECURITIES, INC. BT SECURITIES CORPORATION ================================================================================ 2 NORTEK, INC. $175,000,000 9 1/4% Senior Notes due 2007 PURCHASE AGREEMENT ------------------ March 12, 1997 New York, New York BEAR, STEARNS & CO. INC. 245 Park Avenue New York, New York 10167 WASSERSTEIN PERELLA SECURITIES, INC. 31 West 52nd Street New York, New York 10019 BT SECURITIES CORPORATION 130 Liberty Street, 30th Floor New York, New York 10006 Ladies & Gentlemen: Nortek, Inc., a Delaware corporation (the "COMPANY"), proposes to issue and sell to Bear, Stearns & Co. Inc., Wasserstein Perella Securities, Inc. and BT Securities Corporation (each, an "INITIAL PURCHASER", and collectively, the "INITIAL PURCHASERS") $175,000,000 aggregate principal amount of its 9 1/4% Senior Notes due 2007 (the "NOTES"), subject to the terms and conditions set forth herein. The Notes will be issued pursuant to the provisions of an indenture dated March 17, 1997 (the "INDENTURE"), among the Company and State Street Bank and Trust Company, as trustee (the "TRUSTEE"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Indenture. The Notes will be offered and sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the "Act"), in reliance on an exemption from the registration requirements of the Act. In connection with the sale of the Notes, the Company prepared a preliminary offering memorandum dated March 5, 1997 (including all documents incorporated therein by reference, the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering memorandum dated March 12, 1997 (including all documents incorporated therein by reference, the "OFFERING MEMORANDUM"), each setting forth certain information concerning the Company and the Notes. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offer and resale of the Notes by the Initial Purchasers. Unless stated to the contrary, all references herein to the Offering Memorandum are to the Offering Memorandum at the date hereof (including any supplements or amendments). 3 The Company understands that each of the Initial Purchasers proposes to make offerings of the Notes only on the terms and in the manner set forth in the Offering Memorandum and Sections 2 and 3 hereof, as soon as each such Initial Purchaser deems advisable after this Agreement has been executed and delivered, (i) to persons in the United States whom such Initial Purchaser reasonably believes to be qualified institutional buyers ("QIBs") as defined in Rule 144A under the Act, as such rule may be amended from time to time ("RULE 144A"), in transactions meeting the requirements of Rule 144A, and/or (ii) to a limited number of other institutional "Accredited investors" ("ACCREDITED INVESTORS") as defined in Rule 501(a)(1), (2), (3) or (7) under Regulation D of the Act, in private sales exempt from registration under the Act. 1. ISSUANCE OF SECURITIES. The Company proposes, upon the terms and subject to the conditions set forth herein, to issue and sell to the Initial Purchasers an aggregate of $175,000,000 principal amount of Notes. The Notes and the Series B Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "NOTES". Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Act, the Notes (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE, EXCEPT (A) TO THE COMPANY,(B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (c) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY 2 4 RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (F) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE. 2. OFFERING. The Notes will be offered and sold to the Initial Purchasers pursuant to an exemption from the registration requirements under the Act. Each of the Initial Purchasers has advised the Company that it proposes to offer the Notes for resale (the "EXEMPT RESALES") on the terms and conditions set forth in this Agreement and in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom such Initial Purchaser reasonably believes to be QIBs, and (ii) a limited[ number of other institutional investors whom such Initial Purchaser reasonably believes to be Accredited Investors that are purchasing for their own accounts or for the account of an Accredited Investor, for investment purposes only and not with a view to, or for offer or sale in connection with, any distribution of the Notes in violation of the Act; PROVIDED, HOWEVER, that with respect to clause (ii) each such Accredited Investor shall be required to complete and deliver a purchaser letter, substantially in the form of Annex A to the Offering Memorandum, to such Initial Purchaser prior to the confirmation of any order. The Initial Purchasers will offer the Notes to such Eligible Purchasers initially at a price equal to 100 % of the principal amount thereof. Such price may be changed at any time without notice. The Initial Purchasers and other holders (including subsequent transferees) of the Notes will have the registration rights set forth in a registration rights agreement relating thereto (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date and substantially in the form of EXHIBIT B hereto, for so long as such Notes constitute "REGISTRABLE SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "COMMISSION"), under the circumstances set forth therein, (i) a registration 3 5 statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the 9 1/4% Senior Notes due 2007 (the "SERIES B NOTES") to be offered in exchange for the Notes (the "EXCHANGE OFFER") and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT") relating to resales by certain holders of the Notes, and, if applicable, the Private Exchange Notes (as defined in the Registration Rights Agreement) and to use its best efforts to cause such Registration Statements to be declared effective and to consummate the Exchange Offer. This Agreement, the Notes, the Series B Notes, the Private Exchange Notes, the Indenture and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS." 3. PURCHASE, SALE AND DELIVERY. (a) On the basis of the representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers agree to purchase from the Company, $175,000,000 aggregate principal amount of Notes. The purchase price for the Notes will be $967.97 per $1,000 principal amount of Notes. (b) Delivery of the Notes shall be made, against payment of the purchase price therefor, at the offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022 on Monday, March 17, 1997, at 10:00 a.m., New York City time, or such other location, date and time as the Initial Purchasers and the Company shall agree (such date and time of delivery and payment, the "CLOSING DATE"). (c) One or more of the Notes in definitive form, registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), having an aggregate amount corresponding to the aggregate amount of the Notes sold pursuant to Exempt Resales to QIBs and Accredited Investors (the "GLOBAL NOTE") shall be delivered by the Company to the Initial Purchasers (or as the Initial Purchasers direct), against payment by the Initial Purchasers of the purchase price therefor, by wire transfer of same day funds, to an account designated by the Company, provided that the Company shall give at least two business days' prior written notice to the Initial Purchasers of the information required to effect such wire transfer. The Global Note shall be made available to the Initial Purchasers for inspection not later than 9:00 a.m., New York City time, on the business day immediately preceding the Closing Date. 4. COVENANTS OF THE COMPANY. The Company covenants and agrees with each of the Initial Purchasers as follows: (a) To advise the Initial Purchasers promptly and, if requested by the Initial Purchasers, confirm such advice in writing, (i) of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Notes-for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority and (ii) of the occurrence of any event that makes any statement of a material fact made in the Offering Memorandum untrue or that requires the making of any additions to or changes in the Offering Memorandum in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company shall use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Notes under any state securities or Blue Sky laws and, if any such order is issued, to obtain the withdrawal or lifting of such order at the earliest possible time. 4 6 (b) The Company will furnish to the Initial Purchasers, counsel for the Initial Purchasers and those persons identified by the Initial Purchasers to the Company, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchasers and counsel for the Initial Purchasers may reasonably request. The Company consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto by the Initial Purchasers in connection with Exempt Resales. (c) Before amending or supplementing the Preliminary Offering Memorandum or the Offering Memorandum, to furnish to the Initial Purchasers a copy of each such proposed amendment or supplement and not to make any such proposed amendment or supplement to which the Initial Purchasers reasonably object. The Company shall promptly prepare, upon the reasonable request of the Initial Purchasers, any amendment or supplement to the Preliminary Offering Memorandum or the Offering Memorandum that may be necessary or advisable in connection with Exempt Resales. (d) If, after the date hereof and prior to completion of any Exempt Resale by the Initial Purchasers to purchasers who are not affiliated with the Initial Purchasers, any event shall occur or condition shall exist as a result of which, in the judgment of the Company or counsel for the Company or counsel for the Initial Purchasers, it becomes necessary or advisable to amend or supplement the Preliminary Offering Memorandum or Offering Memorandum so that it does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time such Preliminary Offering Memorandum or Offering Memorandum is delivered to a purchaser, not misleading, or if in the opinion of the Company or counsel for the Company or counsel to the Initial Purchasers it is necessary or advisable to amend or supplement the Preliminary Offering Memorandum or Offering Memorandum to comply with applicable law, the Company will (i) notify the Initial Purchasers, in writing, to suspend use of the Preliminary Offering Memorandum or Offering Memorandum as promptly as practicable, and (ii) promptly prepare, at its own expense, an appropriate amendment or supplement to such Preliminary Offering Memorandum or Offering Memorandum in accordance with Section 5(c) above, so that the statements therein as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is so delivered to a purchaser, not misleading, or so that such Preliminary Offering Memorandum or Offering Memorandum will comply with applicable law. (e) To cooperate with the Initial Purchasers and counsel for the Initial Purchasers in connection with the qualification or registration of the Notes for the offering and sale under the securities or Blue Sky laws of such states and other jurisdictions as the Initial Purchasers may reasonably request and to continue such qualification in effect so long as required for the Exempt Resales; PROVIDED, HOWEVER, that the Company shall not be required in connection therewith to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, in each case, other than as to matters and transactions relating to the Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in any jurisdiction where it is not now so subject. The Company shall promptly advise the Initial Purchasers of the receipt of any notification with 5 7 respect to the suspension of the qualification or exemption from qualification of the Notes for offering or sale in any jurisdiction or the institution, or to the Company's knowledge the threat or contemplation of any proceeding for such purpose. (f) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement becomes effective or is terminated, the Company will pay all costs, expenses, fees and taxes incident to the performance of the obligations of the Company hereunder, including in connection with: (i)the preparation, printing, filing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, without limitation, financial statements) and all amendments and supplements thereto required pursuant hereto, (ii)the issuance, transfer and delivery by the Company of the Notes to the Initial Purchasers, (iii) the qualification or registration of the Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the cost of preparing, printing and mailing a preliminary and final Blue Sky Memorandum and the reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto) and the expenses related to all other agreements, memoranda, correspondence and all other documents prepared and delivered in connection herewith and with the Exempt Resales, (v) furnishing such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and all amendments and supplements thereto, as may be requested for use in connection with Exempt Resales, (vi) the preparation of certificates for the Notes (including, without limitation, printing and engraving thereof), (vii) the fees, disbursements and expenses of the Company's counsel and accountants, (viii) all expenses and listing fees in connection with the application for quotation of the Notes in the Private Offerings, Resales and Trading Through Automated Linkages ("PORTAL") market of the National Association of Securities Dealers, Inc. ("NASD"), (ix) all fees and expenses (including fees and expenses of counsel) of the Company in connection with the approval of the Notes by DTC for "book-entry" transfer, (x) rating the Notes by rating agencies, (xi) the fees and expenses of the Trustee and its counsel, (xii) the performance by the Company of its other obligations under this Agreement and the other Operative Documents, and (xiii) "roadshow" travel and other expenses incurred in connection with the marketing and sale of the Notes. Except as provided in this Section 4(f) and Sections 6, 7 and 11(d) hereof, the Initial Purchasers shall pay all of their own costs and expenses, including the fees of counsel for the Initial Purchasers. (g) The Company will use the proceeds from the sale of the Notes in the manner specified in the Offering Memorandum under the caption "Use of Proceeds." (h) The Company will not voluntarily claim, and will resist actively any attempts to claim, the benefit of any usury laws against the holders of any Notes. (i) None of the Company, its subsidiaries or affiliates (as defined in Rule 501(b) under the Act) will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that could be integrated with the sale of the Notes in a manner that would require the registration of the Notes under the Act or take any other action that would result in the Exempt Resales not being exempt from registration under the Act. (j) The Company will for so long as any of the Notes remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange 6 8 Act of 1934, as amended (the "EXCHANGE ACT"), and any holder of the Notes is still relying on Rule 144A or another exemption from the registration requirements of the Act, make available to any holder or beneficial owner of Notes in connection with any sale thereof and any prospective purchaser of such Notes from such holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act. (k) The Company will cause the Exchange Offer to be made in the appropriate form to permit registered Series B Notes to be offered in exchange for the Notes and to comply with all applicable federal and state securities laws in connection with the Exchange Offer. (1) The Company will comply with all of the agreements set forth herein and in the other Operative Documents and all agreements set forth in the representation letters of the Company to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (m) The Company will use its best efforts to effect the inclusion of the Notes in PORTAL and obtain approval of the Notes by DTC for "book-entry" transfer. (n) During a period of three years following the Closing Date, the Company will deliver without charge to each Initial Purchaser, as it may reasonably request, promptly upon their becoming available, copies of (i) all reports or other publicly available information that the Company shall mail or otherwise make available to its stockholders, and (ii) all reports, financial statements and proxy or information statements filed by the Company with the Commission or any national securities exchange and such other publicly available information concerning the Company or any of its subsidiaries, including without limitation, press releases. (o) Prior to the Closing Date, the Company will furnish to the Initial Purchasers, as soon as they have been prepared in the ordinary course by the Company, copies of any unaudited interim financial statements for any period subsequent to the periods covered by the financial statements appearing in the Offering Memorandum. (p) Neither the Company nor any of its subsidiaries will take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of any security of the Company in order to facilitate the sale or resale of the Notes. Except as permitted by the Act, the Company will not distribute any (i) preliminary offering memorandum, including, without limitation, the Preliminary Offering Memorandum, (ii) offering memorandum, including, without limitation, the Offering Memorandum or (iii) other offering material in connection with the offering and sale of the Notes. (q) Neither the Company nor any of its affiliates (as defined in Rule 501(b) under the Act) will solicit any offer to buy or offer or sell the Notes or the Series B Notes by means of any form of general solicitation or general advertising (as such terms are used in Regulation D under the Act), or in any manner involving a public offering within the meaning of Section 4(2) of the Act prior to the effectiveness of a registration statement with respect to the Notes or the Series B Notes, as applicable. 7 9 5. Representations and Warranties. ------------------------------ (a) The Company represents and warrants to, and agrees with, the Initial Purchasers that: (i) The Preliminary Offering Memorandum did not as of its date, and the Offering Memorandum does not, and any supplement or amendment to the Offering Memorandum will not, contain an 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 the light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (i), however, with respect to any information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by any Initial Purchaser relating to such Initial Purchaser expressly for use in connection with the preparation thereof. (ii) No stop order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Act, has been issued, nor, to the best knowledge of the Company, is threatened. (iii) Arthur Andersen LLP, which has certified the financial statements and supporting schedules included in the Offering Memorandum, is an independent certified public accounting firm with regard to the Company and its subsidiaries as required by the Act if the Offering were required to be registered under the Act. (iv) Subsequent to the respective dates as of which information is given in the Offering Memorandum, except as set forth in the Offering Memorandum, there has been no material adverse change, or any fact known to the Company which could reasonably be expected to result in a material adverse change, in the business, prospects, properties, assets, liabilities (contingent or otherwise) earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business or any loss of, or damage to, properties (whether or not insured) which could reasonably be expected to affect materially and adversely the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole. Since the date of the latest balance sheet presented in the Offering Memorandum, except as expressly disclosed in the Offering Memorandum or in any reports filed by the Company with the Commission pursuant to the Exchange Act or in accordance with any plan contained in any such report, neither the Company nor any of its subsidiaries has (i) incurred or undertaken any liabilities or obligations, direct or contingent, that are material to the Company and its subsidiaries taken as a whole, (ii) entered into any material transaction not in the ordinary course of business and consistent with past practice or (iii) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock. 8 10 (v) The Company has the requisite corporate power and the authority to enter into this Agreement and each of the other Operative Documents to which it is a party, perform each of its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby including without limitation to issue, sell and deliver the Notes to be sold by it hereunder. This Agreement and the transactions contemplated herein have been duly and validly authorized by the Company and this Agreement has been duly and validly executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally and by general equitable principles and (ii) to the extent that rights to indemnity and contribution hereunder may be limited by federal or state securities laws or the public policy underlying such laws. (vi) The execution, delivery and performance of this Agreement and each of the other Operative Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including the issuance, sale and delivery of the Notes by the Company) do not and will not (a) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default), give rise to any right to accelerate the maturity or require the prepayment of any obligation of the Company or any of its subsidiaries or require any consent, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries, pursuant to the terms of any contract, lease, indenture, mortgage, deed of trust, loan agreement, instrument, franchise, license, permit or other agreement or document to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective properties or assets may be bound, except for such conflicts, breaches, defaults, liens, charges or encumbrances which would not individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole or prohibit or restrict the consummation of the transactions contemplated hereby and thereby; (b) violate or conflict with any provision of the certificate of incorporation or by-laws (or equivalent instruments) of the Company or any of its subsidiaries; or (c) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets except for such violations or conflicts which would not individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole or prohibit or restrict the consummation of the transactions contemplated hereby and thereby. (vii) No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets is required for the valid execution, delivery and performance of this Agreement or any of the other Operative Documents and the consummation by the Company of the transactions contemplated hereby and thereby, including the issuance, sale and delivery of the Notes to be issued, sold and delivered by the Company hereunder except such as have been obtained and made (or, in the case of the Registration Rights Agreement, will be obtained or 9 11 made) under the Act, the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"), and state securities or Blue Sky laws and regulations or such as may be required by the NASD. (viii) All of the outstanding shares of capital stock of the Company are duly and validly authorized and issued, fully paid and nonassessable, were issued in compliance with all applicable federal and state securities laws and were not issued in violation of any preemptive rights nor do any such shares of capital stock have the benefit of any preemptive rights. The Company had, at December 31, 1996, a duly authorized and outstanding capitalization as set forth under the caption "Capitalization" in the Offering Memorandum. On December 31, 1996, after giving pro forma effect to the issuance and sale of the Notes pursuant hereto and the other transactions referred to in the Offering Memorandum, the Company would have had an authorized and outstanding capitalization as set forth in the Offering Memorandum in the "As Adjusted" column under the caption "Capitalization". No holder of any securities of the Company is entitled to have such securities (other than the Notes, the Exchange Notes and the Private Exchange Notes, if any) registered under any registration rights or similar agreement. (ix) The Company and each of its subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. The Company and each of its subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which could not, individually or the aggregate, have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole, and neither the Company nor any of its subsidiaries has received any claim or notice from any official in any jurisdiction that it is required to be qualified or licensed to do business in any jurisdiction in which it is not so qualified or licensed. The Company and each of its subsidiaries has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits of and from all public, regulatory or governmental agencies and bodies, to own, lease and operate its properties and conduct its business as now being conducted and as described in the Offering Memorandum except for consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits the failure to obtain which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, and the Company has not received any notice of any proceedings relating to the revocation or modification of any thereof, nor is the Company aware of any basis therefor, and no such consent, approval, authorization, order, registration, qualification, franchise, license or permit contains a materially burdensome restriction that is not adequately and accurately disclosed in the Offering Memorandum. (x) As of December 31, 1996 and as of the date hereof, all of the outstanding shares of capital stock of each Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Commission) of the Company have been duly and validly issued, are fully paid and non-assessable and were not issued in violation of preemptive rights, repurchase rights 10 12 or rights of first refusal and are owned directly or indirectly by the Company, free and clear of any lien, pledge, encumbrance, claim, security interest, restriction on transfer, stockholders' agreement, voting trust or other defect of title whatsoever. The Company owns no controlling interest in any other corporation, partnership or other entity and does not directly or indirectly own any shares of stock or any other securities of any corporation or have any equity interest in any firm, partnership, association or other entity, other than (a) minority investments in marketable securities that may be made in the ordinary course of business as a part of its investment of excess cash assets and (b) a 40% interest held by the Company in Spalding Composites, Inc. (xi) Except as described in the Offering Memorandum there is no action, suit, investigation or proceeding, governmental or otherwise, to which the Company or any of its subsidiaries is a party or to which any property of the Company or any of its subsidiaries is subject or which is pending or, to the best knowledge of the Company, threatened against the Company or any of its subsidiaries which (i) could reasonably be expected to have a material adverse effect on the Company or its business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations or (ii) seeks to restrain, enjoin, prevent the consummation of, or otherwise challenge the issuance of, the Notes or the execution and delivery of this Agreement or any of the other transactions contemplated hereby, or questions the legality or validity of any such transactions or that seeks to recover damages or obtain other relief in connection with any of such transactions. (xii) Except as provided for in this Agreement, the Company has not taken and will not take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company in order to facilitate the sale or resale of the Notes or since the date of the Preliminary Offering Memorandum (A) sold, bid for, purchased or paid any person any compensation for soliciting purchases of the Notes (other than the Initial Purchasers) or (B) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company. (xiii) The consolidated financial statements, including the notes thereto, and supporting schedules included in the Offering Memorandum comply as to form in all material respects with the requirements applicable to a Report on Form 10-K under the Exchange Act and present fairly the financial condition, results of operations, stockholders' investment and cash flows and other information purported to be shown therein of the Company and its subsidiaries at the dates and for the periods indicated' and the supporting schedules included in the Offering Memorandum present fairly the information required to be stated therein. Except as disclosed in such financial statements, such consolidated financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, and are in accordance with the books and records of the Company and its subsidiaries in all material respects. No other financial statements are required to be included in the Offering Memorandum. The financial data set forth in the Offering Memorandum under the captions "Summary Consolidated Financial Information", "Capitalization", "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" fairly present, on the basis stated in the Offering Memorandum, the information set 11 13 forth therein and have been compiled on a basis consistent with that of the audited financial statements included in the Offering Memorandum. All other financial information and statistical data set forth in the Offering Memorandum are, in all material respects, accurately presented and have been prepared on an accounting basis consistent with the financial statements included in the Offering Memorandum. The "as adjusted" financial information included in the Offering Memorandum that gives effect to the issuance of the Notes, the application of the net proceeds therefrom and the other transactions and events specified therein has been properly compiled on the basis of the assumptions set forth with respect thereto. (xiv) Each of the Company and its subsidiaries has good and marketable title to all the properties and assets reflected as owned in the financial statements (or elsewhere) in the Offering Memorandum, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in the financial statements, or (ii) those which are not material in amount and do not adversely affect the use made and proposed to be made of such property by the Company and its subsidiaries (except for such uses the failure of which to be made would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company or its subsidiaries. Each of the Company and its subsidiaries holds its leased properties under valid, subsisting and enforceable leases, with such exceptions as are not, individually or in the aggregate, material and do not, individually or in the aggregate, interfere with the use made or proposed to be made of such properties by the Company or any of its subsidiaries (except for such uses the failure of which to be made would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company or its subsidiaries. Except as disclosed in the Offering Memorandum, the Company and each of its subsidiaries owns or leases all such properties as are necessary to its operations as now conducted or as proposed to be conducted (except for such properties the failure to own or lease which would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries. (xv) The Company is not, and upon consummation of the transactions contemplated hereby will not be, subject to registration as an "investment company" or an entity "controlled by" an "investment company" within the meaning of Investment Company Act of 1940 and the rules and regulations promulgated thereunder; the Company will conduct its business and financial affairs in such a manner as to ensure that it will not become an "investment company" or an entity "controlled" by an "investment company". (xvi) The Company and each of its subsidiaries have (i) filed all federal, state and local and foreign tax returns which are required to be filed through the date hereof, and all such tax returns are true, complete and accurate in all material respects, or (ii) received valid extensions thereof and have paid all taxes shown on such returns and all assessments received by them except where, in the case of state and local and foreign tax returns, the failure to file in clause (i), or extend the due date of or pay the same in clause (ii), in the aggregate, could not reasonably be expected to have a material adverse effect on the business, prospects, properties, 12 14 assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries' the Company has no knowledge of any tax deficiency which has been or might be asserted against the Company or any of its subsidiaries which could materially and adversely affect the business or properties of the Company and its subsidiaries taken as a whole; to the Company's best knowledge, all tax liabilities are adequately provided for on the consolidated books of the Company. (xvii) The Company and each of its subsidiaries own or possess adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights, technology and know-how necessary to conduct the business now or proposed to be conducted by the Company and each of its subsidiaries as described in the Offering Memorandum except for those patents, trademarks, service marks, trade names, copyrights, technology and know-how the failure to own or have the right to use would not have a material adverse effect on the Company and its subsidiaries taken as a whole, and, except as disclosed in the Offering Memorandum, neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with (or knows of such infringement of or conflict with) rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how except for conflicts which would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries; and to the best knowledge of the Company, the Company and each of its subsidiaries do not in the conduct of their business as now conducted or proposed to be conducted, infringe or conflict with any such rights of any third party. (xviii) There are no contracts, indentures, mortgages, loan agreements, notes, leases or other agreements or instruments or other documents (collectively, "DOCUMENTS") required to be described or referred to in the Offering Memorandum other than those described or referred to therein or in the Form 10-K of the Company for the year ended December 31, 1996 included as Annex B attached thereto and incorporated therein by reference; all such descriptions are accurate in all material respects and present fairly the information described therein. All such Documents to which the Company is a party have been duly authorized, executed and delivered by the Company, constitute valid and binding agreements of the Company and are enforceable against the Company in accordance with the terms thereof, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (xix) There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business), or guarantees of indebtedness by the Company or any of its subsidiaries to or for the benefit of any of the officers or directors of the Company or any of its subsidiaries or any of the members of the families of any of them, except as adequately disclosed in the Offering Memorandum; all such descriptions are accurate in all material respects and present fairly the information required to be described in, or incorporated by reference in, a Registration Statement on Form S-3. 13 15 (xx) Each of the Company and its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxi) Neither the Company nor any of its subsidiaries is in violation or breach of, or in default (nor has any event occurred which with notice, or lapse of time, or both, would constitute a default) of any contract, agreement, indenture, loan or other agreement, instrument, mortgage, note, permit, lease, license, arrangement or understanding to which the Company or any of its subsidiaries is a party or by which the Company, any of its subsidiaries or any of their respective properties may be bound where such default, either individually or together with all such other defaults, could reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, or condition (financial or otherwise) or results of operations of the Company or on the ability of the Company to perform its obligations hereunder. Each such contract, agreement, indenture, instrument, mortgage, note, permit, lease, license, arrangement and understanding is in full force and effect and is the legal, valid, and binding obligation of the Company or its subsidiaries, as the case may be, and, to the Company's knowledge, the other parties thereto and is enforceable against the Company or its subsidiaries, as the case may be, and, to the Company's knowledge, against the other parties thereto in accordance with its terms (except for such failures of enforceability which would not reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries. Each of the Company and each of its subsidiaries enjoys peaceful and undisturbed possession under all material leases and material licenses under which the Company and its subsidiaries are operating except for disturbances which would not, individually or in the aggregate reasonably be expected to have a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries. Neither the Company nor any of its subsidiaries is in violation or breach of, or in default with respect to, any term of its respective articles of incorporation or bylaws. Neither the Company nor any of its subsidiaries is in violation of, or in default with respect to, any law, rule, regulation, order, judgment or decree, except such as are described in the Offering Memorandum or such as, individually or in the aggregate, could not reasonably be expected to have a material adverse effect upon the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company. (xxii) Except as described in the Offering Memorandum, (i) no labor dispute with the employees of the Company and any of its subsidiaries exists or, to the best knowledge of the Company, is threatened and (ii) the Company is not aware of any labor disturbance by the employees of any of its significant manufacturers, suppliers, customers or contractors, that could reasonably be expected in the case of both (i) and (ii) to have a material adverse effect on the 14 16 business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company. (xxiii) Except as described in the Offering Memorandum, (i) the Company is not a party to or bound by any stockholders agreements or voting trusts with respect to any securities of the Company and (ii) there are no contracts, agreements or understandings between the Company or any of its subsidiaries and any person or entity granting such person or entity the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or entity or to require the Company to include such securities in the securities to be registered in the Exchange Offer. (xxiv) To the best knowledge of the Company, except as disclosed in the Offering Memorandum, neither the Company nor any of its subsidiaries is in violation of any federal or state law or regulation relating to occupational safety and health or to the storage, handling or transportation of hazardous or toxic materials, and the Company and each of its subsidiaries have received all permits, licenses or other approvals required under applicable federal and state occupational safety and health and environmental laws and regulations to conduct their respective businesses, and the Company and each of its subsidiaries is in compliance with all terms and conditions of any such permits, licenses or approvals, except any such violation of law or regulation, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals which could not, individually or together' with all such other violations or failures, have a material adverse effect on the Company or its business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations. (xxv) Neither the Company nor, to its knowledge, any director, officer, agent, employee or other person associated with or acting on behalf of the Company has used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment or violated any provision of the Foreign Corrupt Practices Act of 1977. (xxvi) The Company has not incurred any liability for any fee, commission or other compensation on account of the employment of a broker or finder (other than the Initial Purchasers) in connection with the transactions contemplated by the Operating Documents. Neither the Company nor any of its directors, officers or controlling persons has since the date of the Preliminary Offering Memorandum (a) sold, bid for, purchased or paid to any person other than the Initial Purchasers any compensation for soliciting purchases of, the Notes, the Exchange Notes, or the Private Exchange Notes, if any, or (b) paid or agreed to pay to any person other than the Initial Purchasers any compensation for soliciting another person to purchase any other securities of the Company. (xxvii) The Company, either directly or through one or more of its subsidiaries, maintains reasonably adequate insurance with respect to its business and properties and the business and properties of its subsidiaries. 15 17 (xxviii) The Company has complied and will comply with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws of Florida). (xxix) When the Notes are issued and delivered pursuant to this Agreement, no Note will be of the same class (within the meaning of Rule 144A under the Act) as securities of the Company or that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated inter-dealer quotation system. The Company has been advised that the Notes have been designated PORTAL eligible securities in accordance with the rules and regulations of the NASD. (xxx) Each of the Operative Documents (other than the Notes, the Exchange Notes and the Private Exchange Notes) has been duly and validly authorized by the Company and, when duly executed and delivered by the Company, will be the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as (i) the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity. The Offering Memorandum contains an accurate summary in all material respects of the terms of each of the Operative Documents. (xxxi) The Notes have been duly and validly authorized by the Company for issuance and sale to the Initial Purchasers pursuant to this Agreement and, when issued and authenticated in accordance with the terms of the Indenture and delivered against payment therefor in accordance with the terms hereof and thereof, will be the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, except as (i) the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity. (xxxii) The Series B Notes and the Private Exchange Notes, if any, have been duly and validly authorized for issuance by the Company and, when issued and authenticated in accordance with the terms of the Exchange Offer and the Indenture, will be the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, except as (i) the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity. (xxxiii) No registration under the Act of the Notes is required for the sale of the Notes to the Initial Purchasers as contemplated hereby or for the Exempt Resales assuming (A) that the purchasers who buy the Notes in the Exempt Resales are either QIBs or Accredited Investors and (B) the accuracy of the representations of the Initial Purchasers regarding the absence of general solicitation in connection with the sale of Notes to the Initial Purchasers and Exempt Resales contained herein. No form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) was used by the Company or any of its representatives (other than 16 18 the Initial Purchasers, as to which the Company makes no representation or warranty) in connection with the offer and sale of any of the Notes in connection with Exempt Resales, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. None of the Company, its subsidiaries or affiliates (as defined in Rule 501(b) under the Act) has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any security that is or will be integrated with the sale of the Notes in a manner that would require the registration of the Notes under the Act. (xxxiv) Set forth on EXHIBIT A hereto is a list of each funded employee pension or benefit plan, as defined in Article 3, Section 2(A) of ERISA and qualified under Section 401(a) of the Internal Revenue Code, with respect to which the Company or any of its subsidiaries, or any corporation considered an affiliate of any of them within the meaning of Section 407(d)(7) of ERISA, is a party in interest or disqualified person. (xxxv) None of the execution, delivery and performance of this Agreement, the issuance and sale of the Notes, the application of the proceeds from the issuance and sale of the Notes and the consummation of the transactions contemplated thereby as set forth in the Offering Memorandum, will violate Regulations G, T, U or X promulgated by the Board of Governors of the Federal Reserve System or analogous foreign laws and regulations. The Company acknowledges that the Initial Purchasers and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 8 hereof, counsel for the Company and counsel for the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations and hereby consent to such reliance. (b) Each Initial Purchaser, severally and not jointly, represents, warrants and covenants to the Company and agrees that: (i) Such Initial Purchaser is a QIB, with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes. (ii) Such Initial Purchaser (A) is not acquiring the Notes with a view to any distribution thereof that would violate the Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Notes only to QIBs in reliance on the exemption from the registration requirements of the Act provided by Rule 144A and to Accredited Investors in a private placement exempt from the registration requirements of the Act. (iii) No form of general solicitation or general advertising has been or will be used by such Initial Purchaser or any of its representatives in connection with the offer and sale of any of the Notes, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any 17 19 seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (iv) Such Initial Purchaser agrees that, in connection with the Exempt Resales, it will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, QIBs and Accredited Investors. Such Initial Purchaser further agrees (A) that it will offer to sell the Notes only to, and will solicit offers to buy the Notes only from (1) QIBs who in purchasing such Notes will be deemed to have represented and agreed that they are purchasing the Notes for their own accounts or accounts with respect to which they exercise sole investment discretion and that they or such accounts are QIBs and (2) Accredited Investors who make the representations contained in, and execute and return to such Initial Purchaser, a certificate in the form of ANNEX A attached to the Offering Memorandum and (B) that, in the case of such QIBs and Accredited Investors, acknowledges and agrees that such Notes will not have been registered under the Act and may be resold, pledged or otherwise transferred only (1) to the Company, (2) to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of another QIB in compliance with the resale provisions of Rule 144A under the Act, (3) to an institutional Accredited Investor that, prior to such transfer, furnishes to the Trustee a written certification containing certain representations and agreements relating to the restrictions on transfer of such Notes, (4) pursuant to the resale limitations provided by Rule 144 under the Act, if available, (5) pursuant to and effective registration statement under the Act, (6) outside the United States to a foreign person in a transaction meeting the requirements of Regulation S under the Act or (7) pursuant to any other available exemption from the registration requirements of the Act, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and (c) that the holder will, and each subsequent holder is required to, notify any purchaser of the security evidenced thereby of the resale restrictions set forth in (B) above. Each Initial Purchaser understands that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 8 hereof, counsel for the Company and counsel for the Initial Purchasers will rely upon the accuracy and truth of the foregoing representations, and hereby consents to such reliance. 6. Indemnification. --------------- (a) The Company agrees to indemnify and hold harmless each Initial Purchaser, its officers, directors, partners, employees, agents and counsel, and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act, any state securities or Blue Sky law or otherwise, insofar as such losses, liabilities, claims, damages, obligations, penalties, judgments, awards, costs, disbursements or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement thereto or amendment thereof, or arise 18 20 out of or are based upon the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that (i) the Company will not be liable to an Initial Purchaser in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage, obligation, penalty, judgment, award, cost, disbursement or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Initial Purchaser expressly for use therein and (ii) the indemnity agreement contained in this Section 6(a) with respect to any Preliminary Offering Memorandum (or the Offering Memorandum) shall not inure to the benefit of an Initial Purchaser (or to the benefit of any person controlling such Initial Purchaser) from whom the person asserting any such losses, liabilities, claims, damages or expenses purchased the Notes which is the subject thereof if at or prior to the written confirmation of the sale of such Notes a copy of the Offering Memorandum (or the Offering Memorandum as amended or supplemented) was not sent or delivered to such person and the untrue statement or omission of a material fact contained in such Preliminary Offering Memorandum (or the Offering Memorandum) was corrected in the Offering Memorandum (or the Offering Memorandum as amended or supplemented) and delivery of such Offering Memorandum (or the Offering Memorandum as amended or supplemented) would have eliminated any such loss, liability, claim, damage or expense unless the failure is the result of non-compliance by the Company with Section 4(b) hereof; PROVIDED, HOWEVER, the indemnity agreement in this Section 6(a) shall not apply to any portion of any such loss, liability, claim, damage, obligation, penalty, judgment, award, cost, disbursement or expense to the extent it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of such Initial Purchaser. This indemnity agreement will be in addition to any liability which the Company may otherwise have including, without limitation, under this Agreement. (b) Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of the directors of the Company, and each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Initial Purchaser expressly for use therein; PROVIDED, HOWEVER, that in no case shall any Initial Purchaser be liable or responsible for any amount in excess of the discounts and commissions applicable to the Notes purchased by such Initial Purchaser hereunder. This indemnity will be in addition to any liability which the Initial Purchasers may otherwise have including, without limitation, under this Agreement. 19 21 (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure to so notify an indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent the indemnifying party is materially prejudiced by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case all indemnified parties having consistent interests, and such different or additional defenses, shall be entitled to engage one additional counsel in each jurisdiction to direct such different or additional defenses), in any of which events such fees and expenses shall be borne by the indemnifying parties. In no event will the indemnifying parties hereunder be responsible for the fees and expenses of more than one such counsel (together with appropriate local counsel). Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld. 7. CONTRIBUTION. In order to provide for contribution in circumstances in which the indemnification provided for in Section 6 hereof is for any reason unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, then each indemnifying party shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including without limitation any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from persons, other than the Initial Purchasers, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and directors of the Company) as incurred to which the Company and the Initial Purchasers may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Notes or, if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of discounts and commissions but before deducting expenses) received by the 20 22 Company, and (y) the discounts and commissions received by the Initial Purchasers, in each case as set forth in the table on the cover page of the Offering Memorandum, bear to the aggregate offering price of the Notes. The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or an Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall an Initial Purchaser be liable or responsible for any contribution obligation in excess its proportional share, based upon the proportion of the aggregate principal amount of Notes purchased by it set forth opposite its name on Schedule I hereto, of the total discounts and commissions set forth in the table on the cover page of the Offering Memorandum, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Initial Purchaser controlled by it, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 (except to the extent such party or parties from whom contribution may be sought is materially prejudiced by such failure) or otherwise. No party shall be liable for contribution with respect to any action or claim settled without consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld. 8. CONDITIONS TO THE OBLIGATIONS OF THE INITIAL PURCHASERS. The obligations of the Initial Purchasers to purchase and pay for the Notes, as provided herein, shall be subject to the satisfaction of the following conditions precedent: (a) All of the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on the date hereof and on the Closing Date with the same force and effect as if made on and as of the date hereof and the Closing Date, respectively. The Company shall have performed or complied in all material respects with all of the agreements herein contained and required to be performed or complied with by it at or prior to the Closing Date. (b) The Offering Memorandum shall have been printed and copies distributed to the Initial Purchasers on the day following the date of this Agreement or at such later date and time as to which the Initial Purchasers may agree, and no stop order suspending the qualification or exemption from qualification of the Notes in any jurisdiction referred to in Section 4(e) shall have 21 23 been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (c) The Company shall not have sustained, (i) since the date of the latest audited financial statements included in the Offering Memorandum, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree otherwise than as set forth or expressly contemplated in the Offering Memorandum which loss or interference has had, or would reasonably be expected to have, a materially adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole, and (ii) since the respective dates as of which information is given in the Offering Memorandum, there shall not have been any change in the capital stock (other than as disclosed in the Offering Memorandum or in any reports filed by the Company with the Commission pursuant to the Exchange Act or in accordance with any plan contained in any such report), or in the long-term or short-term debt of the Company or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company, otherwise than as set forth or expressly contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii) of this Section 8(c), in the reasonable judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the Offering or the delivery of the Notes being delivered on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum. (d) The Initial Purchasers shall have received a certificate, dated the Closing Date, signed by the Chief Executive Officer and President on behalf of the Company, in form and substance satisfactory to the Initial Purchasers, confirming, as of the Closing Date, the matters set forth in paragraphs (a) and (b) of this Section 8 and that, as of the Closing Date, the obligations of the Company to be performed hereunder on or prior thereto have been duly performed and subsequent to the respective dates as of which information is given in the Preliminary Offering Memorandum and the Offering Memorandum, the Company and each of its subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding which had, or would reasonably be expected to have, a material adverse effect on the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company anti its subsidiaries, and there has not been any material adverse change, or any development involving a material adverse change, in the business, prospects, properties, assets, liabilities (contingent or otherwise), earnings, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole, except in each case as described in or expressly contemplated by the Offering Memorandum. (e) The Initial Purchasers shall have received on the Closing Date an opinion dated the Closing Date, in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, of (i) Ropes & Gray, counsel for the Company, to the effect set forth in 22 24 EXHIBIT C-1 hereto, and (ii) the General Counsel of the Company, to the effect set forth in EXHIBIT C-2 hereto. (f) At the time this Agreement is executed and at the Closing Date, the Initial Purchasers shall have received from Arthur Andersen LLP, independent certified public accountants, dated as of the date of this Agreement and as of the Closing Date, customary comfort letters addressed to the Initial Purchasers and in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers with respect to the financial statements and certain financial information of the Company and its subsidiaries contained in the Offering Memorandum. (g) The Initial Purchasers shall have received an opinion, dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, of Paul, Hastings, Janofsky & Walker LLP, counsel for the Initial Purchasers, covering such matters as are customarily covered in such opinions. (h) Paul, Hastings, Janofsky & Walker LLP, shall have been furnished with such documents, in addition to those set forth above, as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 8 and in order to evidence the accuracy, completeness or satisfaction in all material respects of any of the representations, warranties or conditions herein contained. (i) Prior to the Closing Date, the Company shall have furnished to the Initial Purchasers such further information, certificates and documents as the Initial Purchasers may reasonably request. (j) The Company and the Trustee shall have entered into and delivered the Indenture and the Initial Purchasers shall have received a counterpart, conformed as executed, thereof. The Indenture shall be in full force and effect. (k) The Company shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received a counterpart, conformed as executed, thereof. The Registration Rights Agreement shall be in full force and effect. (1) After the execution and delivery of this Agreement, there shall not have been (i) any downgrading by Standard & Poor's Ratings Group ("S&P") in the rating of the Notes; (ii) any downgrading by Moody's Investors Service Inc. ("MOODY'S") in the rating of the Notes; or (iii) any notice given by S&P or Moody's of any intended or potential downgrading in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change. All opinions, certificates, letters and other documents required by this Section 8 to be delivered by the Company will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Initial Purchasers. The Company will furnish the Initial Purchasers with such conformed copies of such opinions, certificates, letters and other documents as it shall reasonably request. 23 25 9. INFORMATION FURNISHED BY THE INITIAL PURCHASER. The Company acknowledges that the statements with respect to the offering of the Notes set forth in the first sentence of the last paragraph of the cover page and the third paragraph under the caption "Plan of Distribution" in such Offering Memorandum constitute the only information furnished in writing by the Initial Purchasers expressly for use in the Offering Memorandum. 10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and warranties, covenants and agreements of the Initial Purchasers and the Company contained in this Agreement, including the agreements contained in Sections 4(f) and 11(d), the indemnity agreements contained in Section 6 and the contribution agreements contained in Section 7, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Initial Purchasers or any controlling person thereof or by or on behalf of the Company, any of its officers and directors or any controlling person thereof, and shall survive delivery of and payment for the Notes to and by the Initial Purchasers. The representations contained in Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall survive the termination of this Agreement, including any termination pursuant to Section 11. 11. EFFECTIVE DATE OF AGREEMENT; TERMINATION. (a) This Agreement shall become effective upon execution and delivery of a counterpart hereof by each of the parties hereto. (b) The Initial Purchasers shall have the right to terminate this Agreement at any time prior to the Closing Date by notice to the Company from the Initial Purchasers, without liability (other than with respect to Sections 4(f), 6, 7 and 17, which shall remain in effect) to the Company on the part of the Initial Purchasers if, on or prior to such date, (i) the Company shall have failed, refused or been unable to perform in any material respect any agreement on its part to be performed hereunder, (ii) any other condition to the obligations of the Initial Purchasers hereunder as provided in Section 8 is not fulfilled when and as required in any material respect, (iii) any material adverse change shall have occurred since the respective dates as of which information is given in the Offering Memorandum in the condition (financial or otherwise), business, properties, assets, liabilities, prospects, net worth, results of operations or cash flows of the Company and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business other than as set forth in the Offering Memorandum, such as, in the judgment of the Initial Purchasers, makes it inadvisable or impracticable to proceed with the Offering or delivery of the Notes as contemplated hereby and by the Offering Memorandum, or (iv)(A) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Initial Purchasers will in the immediate future materially disrupt, the market for the Company's securities or for securities in general; or (B) trading in securities on the New York or American Stock Exchanges or over-the-counter market shall have been generally suspended or materially limited, or minimum or maximum prices shall have been generally established, or maximum price ranges for prices for securities shall have been generally required, on the New York or American Stock Exchanges or in the over-the-counter market by the Commission, or by such exchange or other regulatory body or governmental authority having jurisdiction; or (C) a general banking moratorium shall have been declared by a federal or state authority; or (D) there is an outbreak or escalation of armed hostilities involving the United States on or after the date hereof, or there has been a declaration by the United States of a national emergency or war, the effect of which shall be, in the judgment of the Initial Purchasers, to make it inadvisable or impracticable to proceed with the offering or delivery of the Notes on the terms and in the manner 24 26 contemplated in the Offering Memorandum; or (E) there shall have occurred such a material adverse change in general economic, political or financial conditions or the effect of international conditions on the financial markets in the United States shall be such as, in the judgment of the Initial Purchasers, makes it inadvisable or impracticable to proceed with the offering or delivery of the Notes as contemplated hereby and by the Offering Memorandum. (c) Any notice of termination pursuant to this Section 11 shall be by telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 11(b) (except clauses (i) and (ii) thereof)), or if the sale of the Notes provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will reimburse the Initial Purchasers for all out-of-pocket expenses (including the reasonable fees and expenses of counsel to the Initial Purchasers), incurred by the Initial Purchasers in connection herewith. 12. DEFAULT BY AN INITIAL PURCHASER. If one of the Initial Purchasers shall fail at the Closing Date to purchase the Notes that it is obligated to purchase under the terms of this Agreement, the other Initial Purchasers shall have the right, but not the obligation, within 24 hours thereafter, to make arrangements to purchase all, but not less than all, of such Notes upon the terms herein set forth; if, however, the other Initial Purchaser(s) shall not have completed such arrangements within such 24-hour period, then this Agreement shall terminate without liability on the part of any nondefaulting Initial Purchaser. No action pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default that does not result in a termination of this Agreement, either a nondefaulting Initial Purchaser or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days to effect any required changes in the Offering Memorandum or in any other documents or arrangement. 13. NOTICE. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and, if sent to the Initial Purchaser shall be mailed, delivered, or telexed, telegraphed or telecopied and confirmed in writing to the Initial Purchasers c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, Attention: Joseph Sheehan, facsimile number: (212) 272-3092, with a copy to Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022, Attention: William F. Schwitter, facsimile number (212) 319-4090; and if sent to the Company, shall be mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing to 50 Kennedy Plaza, Providence, Rhode Island 02903-2603, Attention: Almon C. Hall, facsimile number: (401) 751-4610, with a copy to Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624, Attention: Douglass N. Ellis, Jr., telecopy number: (617) 951-7050. 14. PARTIES. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Initial Purchasers and the Company and the controlling persons and agents referred to in Sections 6 and 7, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Notes from an Initial Purchaser. 25 27 15. CAPTIONS. The captions included in this Agreement are included solely for convenience of reference and are not to be considered a part of this Agreement. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts which together shall constitute one and the same instrument. 17. GOVERNING LAW; CONSTRUCTION. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any provisions relating to conflicts of laws. TIME IS OF THE ESSENCE IN THIS AGREEMENT. 18. PARTIAL INVALIDITY. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 26 28 If the foregoing correctly sets forth the understanding among the Initial Purchasers and the Company please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, NORTEK, INC. By: /s/ Almon C. Hall --------------------------------- Name: Almon C. Hall Title: Vice President Accepted and agreed as of the date first above written: BEAR, STEARNS & CO., INC. By: ------------------------------ Name: Title: WASSERSTEIN PERELLA SECURITIES, INC. BY: /s/ Peter H. Rothschild ------------------------------ Name: Peter H. Rothschild Title: BT SECURITIES CORPORATION BY: /s/ Amelia Silver ------------------------------ Name: Amelia Silver Title: Vice President 29 SCHEDULE I
Principal Amount of Initial Purchaser Notes ----------------- --------- Bear, Stearns & Co., Inc. ........................................ $105,000,000 Wasserstein Perella Securities, Inc. ............................. $ 52,500,000 BT Securities Corporation ........................................ $ 17,500,000 ------------ TOTAL ................................................... $175,000,000 ============
I-1 30 EXHIBIT A List of Employee Pension and Benefit Plans of Nortek, Inc. and its Subsidiaries A-1 31 NORTEK, INC. DEFINED BENEFIT PLANS PLANS LOCATED IN THE MASTER TRUST AT HOSPITAL TRUST (THE TRUSTEE) - -------------------------------------------------------------------------------- DEFINED BENEFIT PLANS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NORTEK, INC. RETIREMENT PLAN - -------------------------------------------------------------------------------- BROAN MFG. CO., INC. PENSION PLAN "A" Appendix II to the Nortek, Inc. Retirement Plan BROAN MFG. CO., INC. PENSION PLAN "B" Appendix III to the Nortek, Inc. Retirement Plan PENSION PLAN FOR EMPLOYEES OF NORDYNE, INC. Appendix VI to the Nortek, Inc. Retirement Plan MUSIC & SOUND, INC. PENSION PLAN FOR NON-PRODUCTION EMPLOYEES Appendix VIII to the Nortek, Inc. Retirement Plan NORTEK, INC. PENSION PLAN FOR CERTAIN EMPLOYEES OF PROVIDENCE, RI Appendix IX to the Nortek, Inc. Retirement Plan SMB CORPORATION EMPLOYEES PENSION PLAN--GOVERNAIR Appendix XII of the Nortek, Inc. Retirement Plan SMB CORPORATION EMPLOYEES PENSION PLAN--TEMTROL Appendix XII of the Nortek, Inc. Retirement Plan MOHAWK FLUSH DOORS PENSION PLAN FOR SALARIED EMPLOYEES Appendix XIV, III MOHAWK FLUSH DOORS PENSION PLAN FOR HOURLY-RATED EMPLOYEES OF NORTHUMBERLAND Appendix XV - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNIVERSAL-RUNDLE CORPORATION RETIREMENT PLAN "A" - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MILWAUKEE FAUCETS RETIREMENT INCOME PLAN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NORTHWAY PRODUCTS RETIREMENT INCOME PLAN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAMMOTH NEGOTIATED HOURLY PENSION PLAN - -------------------------------------------------------------------------------- 32 NORTEK, INC. - ---------------------------------------------------------------------------------------------------------------------
DEFINED CONTRIBUTION PLANS TRUSTEE(S) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- CES GROUP FLEXIBLE SAVINGS PLAN (401(k)) American Express Trust Company - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- NORTHWAY PRODUCTS SAVINGS PLAN Evan Kaffenes William Morris Carol Wyman - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- MAMMOTH NEGOTIATED HOURLY 401(k) PLAN Capital Guardian Trust Company - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- UNIVERSAL-RUNDLE PROFIT SHARING AND THRIFT PLAN Evan Kaffenes William Morris Carol Wyman - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- UNIVERSAL-RUNDLE SAVINGS PLAN FOR UNION EMPLOYEES Evan Kaffenes William Morris Carol Wyman - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- M & S SYSTEMS, INC. 401(k) SAVINGS PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- NORDYNE, INC. 401(k) SAVINGS PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- BROAN MFG. CO., INC. 401(k) SAVINGS PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- LINEAR CORPORATION 401(k) PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- MOORE-O-MATIC, INC. 401(k) PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- NORTEK, INC. 401(k) SAVINGS PLAN Hospital Trust (Master Trust) - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- THE BROAN GROUP 401(k) PLAN FOR EMPLOYEES OF JENSEN INDUSTRIES, INC. AND Hospital Trust (Master Trust) AUBREY MANUFACTURING, INC. - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- RANGAIRE, INC. 401(k) PLAN Hospital Trust (Master Trust) - ---------------------------------------------------------------------------------------------------------------------
33 EXHIBIT B Form of Registration Rights Agreement 34 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of March 17, 1997 between NORTEK, INC., a Delaware corporation (the "COMPANY"), and Bear, Stearns & Co. Inc., Wasserstein Perella Securities, Inc. and BT Securities Corporation (collectively, the "INITIAL PURCHASERS"). This Agreement is made pursuant to the Purchase Agreement dated as of March 12, 1997 (the "PURCHASE AGREEMENT"), between the Company and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of an aggregate of $175,000,000 aggregate principal amount of the Company's 9 1/4% Senior Notes due 2007 (the "NOTES"). In order to induce the Initial Purchasers to enter into the Purchase Agreement and to purchase the Notes, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights for the Notes set forth in this Agreement. The execution and delivery of this Agreement is a condition precedent to the obligations of the Initial Purchasers under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized defined terms shall have the following meanings (and, unless otherwise indicated, capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement): "ACT" shall mean the Securities Act of 1933, as amended. "AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "APPLICABLE PERIOD" shall have the meaning set forth in Section 3(t) hereof. "CLOSING DATE" shall mean the Closing Date as defined in the Purchase Agreement. "COMMISSION" shall mean the Securities and Exchange Commission, or such other federal agency administering the Act or the Exchange Act. "COMPANY" shall have the meaning set forth in the preamble to this Agreement, and shall also include the Company's successors. "DEPOSITORY" shall mean The Depository Trust Company, or any successor depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary must have an address in the Borough of Manhattan, The City of New York. 35 "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(b) hereof. "EVENT DATE" shall have the meaning set forth in Section 2(e) hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCHANGE OFFER" shall mean the exchange offer by the Company of Exchange Notes for Notes pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION" shall mean a registration under the Act affected pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean the registration statement (on Form S-4 or, if applicable, on any other appropriate form) relating to the Exchange Offer, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a) hereof. "EXCHANGE NOTES" shall mean the 9 1/4% Series B Senior Notes due 2007, to be issued by the Company under the Indenture and containing terms identical to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from March 17, 1997, and (ii) the transfer restrictions thereon shall be eliminated) to be offered to Holders of Notes in exchange for Notes pursuant to the Exchange Offer. "HOLDER" shall mean each Initial Purchaser, for so long as it owns any Registrable Securities, and each of its respective successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "INDENTURE" shall mean the Indenture dated as of March 17, 1997 by and between the Company and State Street Bank and Trust Company, as trustee, as the same may be amended or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS" shall have the meaning set forth in the preamble to this Agreement. "INSPECTORS" shall have the meaning set forth in Section 3(n) hereof. "LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(e) hereof. 2 36 "MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate principal amount of outstanding (as determined under the Indenture) Registrable Securities. "NASD" shall mean the National Association of Securities Dealers, Inc. "NOTES" shall have the meaning set forth in the preamble to this Agreement. "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 3(t) hereof. "PERSON" shall mean any individual, corporation, limited liability company, general or limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, charitable foundation, unincorporated organization, government or agency or political subdivision thereof or any other entity. "PRIVATE EXCHANGE" shall have the meaning set forth in Section 2(a) hereof. "PRIVATE EXCHANGE NOTES" shall have the meaning set forth in Section 2(a) hereof. "PROSPECTUS" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, including post-effective amendments, and in each case including all material incorporated by reference therein. "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "RECORDS" shall have the meaning set forth in Section 3(n) hereof. "REGISTRABLE SECURITIES" shall mean the Notes and, if issued, the Private Exchange Notes; PROVIDED, HOWEVER, that Notes or Private Exchange Notes, as the case may be, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Notes or Private Exchange Notes or the resale thereof shall have been declared effective under the Act and such Notes or Private Exchange Notes, as the case may be, shall have been disposed of pursuant to such Registration Statement, (ii) such Notes or Private Exchange Notes, as the case may be, shall have become eligible to be sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Act, (iii) such Notes or Private Exchange Notes, as the case may be, shall have ceased to be outstanding or (iv) with 3 37 respect to the Notes, such Notes have been exchanged for Exchange Notes upon consummation of the Exchange Offer. "REGISTRATION EXPENSES" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including, without limitation: (i) Commission, stock exchange or NASD registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with the blue sky qualification of any of the Exchange Notes or Registrable Securities) and compliance with the rules of the NASD, (iii)expenses of any Persons in preparing or assisting in preparing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with the obligations under this Agreement, (iv) rating agency fees, (v) fees and disbursements of counsel for and independent certified public accountants of the Company, including the expenses of any "cold comfort" letters required by or incident to such performance and compliance, (vi) fees and expenses of the Trustee, and any exchange agent or custodian, (vii) fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement. "REGISTRATION STATEMENT" shall mean any registration statement of the Company relating to the Exchange Notes or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SHELF REGISTRATION" shall mean a registration affected pursuant to Section 2(b) hereof. "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 4 38 "TIA" shall mean the Trust Indenture Act of 1939, as amended. "TRANSFER RESTRICTED SECURITIES" shall mean each Note until (i) the date on which such Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. "TRUSTEE" shall mean the trustee under the Indenture. 2. Registration Under the Act. -------------------------- (a) EXCHANGE OFFER. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, the Company shall, for the benefit of the Holders, at the Company's cost, use its best efforts to cause to be filed with the Commission an Exchange Offer Registration Statement on or prior to 45 days after the Closing Date on an appropriate form under the Act covering the offer by the Company to the Holders to exchange all of the Registrable Securities (other than Private Exchange Notes) for a like aggregate principal amount of Exchange Notes, to cause such Exchange Offer Registration Statement to be declared effective under the Act by the Commission on or prior to 120 days after the Closing Date, to cause such Registration Statement to remain effective until the closing of the Exchange Offer and to cause the Exchange Offer to be consummated on or prior to 45 days after the date on which the Exchange Offer Registration Statement was declared effective under the Act by the Commission. The Exchange Notes will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder (other than Participating Broker-Dealers (as defined in Section 3(t) hereof)) eligible and electing to exchange Registrable Securities for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Notes) to transfer such Exchange Notes from and after their receipt without any limitations or restrictions under the Act or under state securities or blue sky laws. In connection with the Exchange Offer, the Company shall (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; 5 39 (ii) keep the Exchange Offer open for acceptance for a period of not less than 30 days after the date notice thereof is mailed to the Holders, or longer if required by applicable law (such period being referred to herein as the "EXCHANGE PERIOD"); (iii) utilize the services of the Depository for the Exchange Offer; (iv) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York City time, on the last business day of the Exchange Period, by sending to the institution specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for exchange, and a statement that such Holder is withdrawing its election to have such Notes exchanged; (v) notify each Holder that any Note not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (vi) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company upon the request of such Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "PRIVATE EXCHANGE") for Notes held by the Initial Purchasers a like principal amount of debt securities of the Company that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") and which are issued pursuant to the Indenture (which will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes will vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter). The Private Exchange Notes shall be of the same series as and shall bear the same CUSIP number as the Exchange Notes. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all Notes or portions thereof duly tendered and not validly withdrawn pursuant to the Exchange Offer; 6 40 (ii) accept for exchange all Notes or portions thereof duly tendered pursuant to the Private Exchange; and (iii) deliver, or cause to be delivered, to the Trustee for cancellation all Notes or portions thereof so accepted for exchange by the Company, and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, a new Exchange Note or Private Exchange Note, as the case may be, equal in principal amount to the principal amount of the Notes surrendered by such Holder. To the extent not prohibited by applicable law or any applicable interpretation of the staff of the Commission, the Company shall use its best efforts to complete the Exchange Offer as provided above, and shall comply with all applicable requirements of the Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Exchange Offer shall not be subject to any condition, other than that (i) the Exchange Offer does not violate any applicable law or interpretation of the staff of the Commission, (ii) no action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might impair the ability of the Company to proceed with the Exchange Offer, (iii) there has not been any material change, or development involving a prospective material change, in the business or financial affairs of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, would materially impair the Company's ability to consummate the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated, (iv) there has not been proposed, adopted, or enacted any law, statute, rule or regulation which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated or (v) all governmental approvals which the Company shall reasonably deem necessary for the consummation of the Exchange Offer as contemplated shall have been obtained. Each Holder of Registrable Securities who wishes to exchange such Registrable Securities for Exchange Notes in the Exchange Offer will be required to make certain customary representations in connection therewith, including representations that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, that any Exchange Notes to be received by it will be acquired in the ordinary course of business and that at the time of the commencement of the Exchange Offer it had no arrangement with any Person to participate in the distribution (within the meaning of the Act) of the Exchange Notes and will be required to make such other representations as may be necessary under applicable Commission rules, regulations or interpretations to render available the use of Form S-4 or any other appropriate form under the Act. The Company shall inform the Initial Purchasers, after consultation with the Trustee and the Initial Purchasers, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. 7 41 In the event that the Company is unable to consummate the Exchange Offer due to any event listed in clauses (i) through (v) in the paragraph immediately above, the Company shall not be deemed to have breached any covenant under this Section 2(a). Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Securities that are Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the Company shall have no further obligation to register Registrable Securities (other than Private Exchange Notes) pursuant to Section 2(b) of this Agreement. (b) SHELF REGISTRATION. In the event that (i) the Company is not permitted to commence or accept tenders pursuant to the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) any Holder of Transfer Restricted Securities notifies the Company within 20 business days after the consummation of the Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer, (b) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (c) that it is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, or (iii) the Exchange Offer is not for any other reason consummated within 165 days of the Closing Date, the Company shall, at its cost, cause to be filed with the Commission as promptly as practicable after such determination or date, as the case may be, and, in any event, on or prior to 45 days thereafter, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities, and shall use its best efforts to cause such Shelf Registration Statement declared effective by the Commission on or prior to 90 days after such determination or date. No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the Commission to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in the applicable Shelf Registration Statement or Prospectus included therein by the rules and regulations of the Commission applicable to the Shelf Registration Statement in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company agrees, subject to applicable law or applicable interpretation of the staff of the Commission, to use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended under the Act for a period ending on the earlier of the date which is two years from the Closing Date (subject 8 42 to extension pursuant to the last paragraph of Section 3) or the date on which all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding (the "EFFECTIVENESS PERIOD"). The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration. The Company will, in the event a Shelf Registration Statement is declared effective, provide to each Holder copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective and take certain other actions as are customary to permit unrestricted resales of the Registrable Securities covered by the Shelf Registration Statement. The Company further agrees, if necessary, to use its reasonable best efforts to supplement or amend the Shelf Registration Statement, if required by the Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by any other rules and regulations thereunder for shelf registrations, or if reasonably requested by the Majority Holders, and the Company agrees to furnish to the Holders copies of any such supplement or amendment promptly after its being used or filed with the Commission. (c) EXPENSES. The Company shall pay all Registration Expenses in connection with registrations pursuant to Section 2(a) or 2(b). Each Holder shall pay all expenses of its counsel (other than the fees described in clauses (i) and (ii) of the definition of "Registration Expenses"), underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Exchange Offer Registration Statement and the Shelf Registration Statement. (d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the Commission; PROVIDED, HOWEVER, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. (e) LIQUIDATED DAMAGES. In the event that an Exchange Offer Registration Statement has not been filed with the Commission on or prior to 45 days after the Closing Date, additional interest payable by the Company as liquidated damages ("LIQUIDATED DAMAGES") will accrue on the Notes from and including the 31st day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is filed. In addition, if on or prior to 120 days after the Closing Date, such Exchange Offer Registration Statement is not declared effective under the Act by the Commission, Liquidated Damages will accrue on the Notes from and including the 121st day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is declared effective. Further, if on or prior to 45 days after the date specified for effectiveness of the Exchange Offer Registration 9 43 Statement the Exchange Offer is not consummated, Liquidated Damages will accrue on the Notes from and including the 46th day after the date specified for effectiveness of the Exchange Offer Registration Statement, but excluding, the consummation of the Exchange Offer. If a Shelf Registration Statement is required to be filed pursuant to Section 2(b) and such Shelf Registration Statement is not filed or declared effective within the time periods provided by Section 2(b) hereof for such filing or declaration, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the effective date of the Shelf Registration Statement. Further, if the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable during the time periods specified in this Agreement, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the date such Registration Statement becomes effective or usable. In each case, such Liquidated Damages will be payable in cash semiannually in arrears, with the first semiannual payment due on the first interest payment date in respect of the Notes (or the Private Exchange Notes) following the date from which Liquidated Damages begin to accrue, and will accrue, under each circumstance set forth above at a rate per annum equal to an additional one half of one percent (0.50%) of the principal amount of the Notes (or the Private Exchange Notes) upon the occurrence of each such circumstance, which rate will increase by one half of one percent (0.50%) for each 90-day period that such Liquidated Damages continue to accrue under any circumstance, with an aggregate maximum increase in the interest rate per annum equal to two percent (2.00%). Upon the filing of the Exchange Offer Registration Statement, the effectiveness of the Exchange Offer Registration Statement, or the consummation of the Exchange Offer, as the case may be, the interest rate borne by the Notes will be reduced by the full amount of any such increase to the extent that such increase related to the failure of any such event to have occurred. Upon the effectiveness of a Shelf Registration Statement, the interest rate borne by the Notes (and the Private Exchange Notes) shall be reduced, from and as of the date of such effectiveness, to the original interest rate of the Notes unless and until increased as described above. Notwithstanding anything to the contrary contained herein, the Company (i) shall not be required to amend or supplement the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference and (ii) may suspend the effectiveness of any such Shelf Registration Statement in the event that, and for a period not to exceed, for so long as this Agreement is in effect, an aggregate of 90 days in any one calendar year if (A) an event occurs and is continuing as a result of which the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading, and (B) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company; 10 44 provided that any such suspension shall not relieve the Company from its obligation to pay Liquidated Damages. The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Liquidated Damages is required to be paid (an "EVENT DATE"). Liquidated Damages shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Notes, Exchange Notes or Private Exchange Notes, as the case may be, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Liquidated Damages then due. The Liquidated Damages due shall be payable on each interest payment date to the record Holder of Notes entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to accrue from and including the day following the applicable Event Date. (f) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof would result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall: (a) prepare and file with the Commission a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) within the relevant time periods specified in Section 2 hereof on the appropriate form under the Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith, and the Company shall use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2; PROVIDED, HOWEVER, that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating Broker-Dealer who seeks to sell Exchange Notes, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company, if requested, shall furnish to and afford the Holders and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable 11 45 opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed at least five business days prior to such filing. The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders, pursuant to this Agreement, must be afforded an opportunity to review prior to the filing of such document, if the Majority Holders or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object; (b) subject to Section 3(a) hereof, prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the Effectiveness Period or the Applicable Period, as the case may be, and cause each Prospectus to be supplemented by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Act, and comply with the provisions of the Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all securities covered by each Registration Statement during the Effectiveness Period or the Applicable Period, as the case may be, in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders, (ii) furnish to each Holder and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities, and (iii) subject to the last paragraph of this Section 3, consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto, provided that such use complies with all applicable laws and regulations; (d) use its best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the Commission, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the dis- 12 46 position in each such jurisdiction of such Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify as a foreign partnership or foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (iii) subject itself to taxation in any such jurisdiction if it is not then so subject; (e) in the case of (A) a Shelf Registration or (B) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver Prospectuses, notify each Holder, or such Participating Broker-Dealers, as the case may be, their counsel and the managing underwriters, if any, promptly and, if requested by such Holder or Participating Broker-Dealer, confirm such notice in writing (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, (vi) of the happening of any event or the failure of any event to occur or the discovery of any facts or otherwise, during the period a Shelf Registration Statement is effective or the Applicable Period, as the case may be, which makes any statement made in the Shelf Registration Statement, the Exchange Offer Registration Statement or any related Prospectus untrue in any material respect or which causes such Registration Statement or Prospectus, as the case may be, to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vii) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; (f) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; 13 47 (g) in the case of a Shelf Registration, furnish to each Holder, upon request and without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates, if any, representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with the Depository; and cause such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the managing underwriters may reasonably request at least two business days prior to the closing of any sale of Registrable Securities; (i) subject to Section 3(a) hereof and the second paragraph of Section 2(e) hereof, in the case of a Shelf Registration or an Exchange Offer Registration, upon the occurrence of any circumstance contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement and the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of any such circumstance, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, upon request and without charge, a reasonable number of copies of any document which is incorporated by reference into or is an exhibit to a Registration Statement or a Prospectus after the initial filing of a Registration Statement; (k) obtain a CUSIP number for all Exchange Notes or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Notes or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depository; (l) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Notes or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture 14 48 as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, enter into such agreements (including underwriting agreements) as are customary in underwritten public offerings and take all such other appropriate actions as are reasonably requested in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Company and its subsidiaries and the Registration Statement, the Prospectus and all documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when reasonably requested; (ii) obtain customary opinions of counsel to the Company and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority in principal amount of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten public offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired or to be acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to the selling Holders of Registrable Securities and to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten public offerings; and (iv) if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder; (n) if (a) a Shelf Registration is filed pursuant to Section 2(b) or (B) A Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating 15 49 Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and as to which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless, after prior consultation with the Company, (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to an effective subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction or is otherwise required upon the written advice of counsel to such Participating Broker-Dealer, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the Records deemed confidential; (o) comply with all applicable rules and regulations of the Commission and, as soon as reasonably practicable, make generally available to the Holders earnings statements of the Company covering at least 12 months satisfying the provisions of Section 11(a) of the Act and Rule 158 thereunder (or any similar rule promulgated under the Act); (p) upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) the 16 50 Company has duly authorized, executed and delivered the Exchange Notes and Private Exchange Notes and the Indenture, as the case may be, and (ii) each of the Exchange Notes or the Private Exchange Notes and the Indenture, as the case may be, constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (in each case, with customary exceptions); (q) if an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Securities delivered by such Holders that such Registrable Securities are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (r) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (s) use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (t) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which section shall be reasonably acceptable to the Initial Purchasers or another representative of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer (a "PARTICIPATING BROKER-DEALER") that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers or such other representative, represent the prevailing views of the staff of the Commission, including a statement that any such broker-dealer who receives Exchange Notes for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Act in connection with any resale of such Exchange Notes, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus 17 51 included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) subject to the last paragraph of this Section 3, hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the Commission, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Notes covered by the Prospectus or any amendment or supplement thereto, (iv) use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Act for such period of time as such Persons must comply with such requirements in order to resell the Exchange Notes (PROVIDED, HOWEVER, that such period shall not be required to exceed 180 days, or such longer period if extended pursuant to the last sentence of this Section 3 (the "APPLICABLE PERIOD")), and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree all necessary information for such offeree to participate in the Exchange Offer; (B) in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers or to another representative of the Participating Broker-Dealers on behalf of the Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel substantially in the form attached hereto as EXHIBIT A, (ii) an Officers' Certificate containing certifications substantially similar to those set forth in Section 8(d) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities, and (iii) a comfort letter in customary form permitted by Statement of Auditing Standards No. 72 of the American Institute of Certified Public Accountants. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the proposed distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. The Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. In the case of (i) a Shelf Registration Statement or (ii) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver copies of such Prospectus, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities 18 52 pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities or Exchange Notes, as the case may be, current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Securities or Exchange Notes, as the case may be, pursuant to a Registration Statement, the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Registration Statement and shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Company shall have made available to the Holders copies of the supplemented or amended Prospectus necessary to resume such dispositions or shall have advised the Holders in writing that the use of the applicable Prospectus may be resumed. 4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each underwriter who participates in an offering of Registrable Securities, each of their respective affiliates, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each of their respective directors, officers, partners, employees, representatives and agents, to the fullest extent lawful as follows' (i) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereto pursuant to which the offer and sale of the Registrable Securities or Exchange Notes were registered under the Act including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements thereto not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any court or governmental agency or body, whether commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or 19 53 omission, if and only if such settlement is effected with the prior written consent of the Company; and (iii) from and against any and all expenses whatsoever (including reasonable fees and disbursements of counsel chosen by the Initial Purchasers, Holder, Participating Broker-Dealer or underwriter (except to the extent otherwise expressly provided in Section 4(c) hereof)), as incurred, reasonably incurred in investigating, preparing for or defending against any litigation, or any investigation or proceeding by any court or governmental agency or body, whether commenced or threatened, or any other claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission (i) made solely in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers, such Holder, such Participating Broker-Dealer or any underwriter in writing expressly for use in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) contained in any preliminary prospectus or any Prospectus if the Initial Purchasers, such Holder, such Participating Broker-Dealer or such underwriter failed to send or deliver a copy of the Prospectus (as then amended or supplemented if the Company shall have timely furnished any amendments or supplements thereto) to the Person asserting such losses, liabilities, claims or damages on or prior to the delivery of written confirmation of any sale of securities covered thereby to such Person in any case where such delivery is required by the Act and such Prospectus (as so amended or supplemented) would have corrected such untrue statement or omission and the delivery thereof would have eliminated such losses, claims, damages or liabilities. Any amounts advanced by the Company to an indemnified party pursuant to this Section 4 as a result of such losses shall be returned to the Company if it shall be determined by a court that such indemnified party was not entitled to indemnification by the Company. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Initial Purchasers, each underwriter who participates in an offering of Registrable Securities and the other selling Holders and each of their respective directors, officers (including each officer of the Company who signed the Registration Statement), employees, representatives and agents, and each Person, if any, who controls the Company, the Initial Purchasers, any underwriter or any other selling Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as reasonably incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) solely in reliance upon and in conformity with written information furnished to the 20 54 Company by such selling Holder expressly for use in the Registration Statement (or any amendment thereto) or any such Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that, in the case of a Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, enclosing a copy of all papers properly served on such indemnified party (but failure to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have other than on account of this indemnity agreement). An indemnifying party may participate, at its own expense, in the defense of any such action. If an indemnifying party so elects within a reasonable time after receipt of such notice, such indemnifying party, jointly with any other indemnifying party, may assume the defense of such action with counsel chosen by it and reasonably satisfactory to the indemnified parties defendant in such action; PROVIDED, HOWEVER, that if any such indemnified party reasonably determines, upon written advice of counsel, that there may be legal defenses available to such indemnified party which are different from or in addition to those available to such indemnifying party or that representation of such indemnifying party and any indemnified party by the same counsel would present a conflict of interest, then one additional counsel in each jurisdiction for all indemnified parties having consistent interests and such different or additional defenses or subject to such conflict shall be entitled to conduct the defense of such indemnified parties with the fees and expenses of such counsel to be borne by the indemnifying party or parties. If an indemnifying party assumes the defense of an action in accordance with and as permitted by the provisions of this Section 4(c), such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action (except to the extent set forth in the proviso contained in the immediately preceding sentence). In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action, or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4, unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Notwithstanding any payment or payments made by the Company hereunder, the Company hereby expressly waives subrogation to, and agrees that it shall not 21 55 be entitled to be subrogated to, any of the rights of any indemnified party against the Company or any other right of offset held by any indemnified party for the payment of any amounts owed to any indemnified party pursuant to this Section 4; PROVIDED, HOWEVER, that if any of the foregoing provisions of this paragraph are held to be contrary to applicable law or unenforceable by a court of competent jurisdiction, the Company hereby expressly agrees that any right of subrogation or contribution that the Company may have as a result of such applicable law or unenforceability, as the case may be, shall be subordinate in right of payment to the payment in full in cash of all amounts owed to any indemnified party pursuant to this Section 4. (e) If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to herein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Notes pursuant to the Purchase Agreement, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Notes pursuant to the Purchase Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Notes pursuant to the Purchase Agreement (before deducting expenses) received by the Company and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Notes. The relative fault of the Company on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders, and the respective parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by PRO RATA allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(e). The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4(e) shall be deemed to include 22 56 any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing for or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any untrue or alleged untrue statement or omission or alleged omission referred to in Section 4(a)(i). Notwithstanding the provisions of this Section 4(e), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discount received by such Initial Purchaser in respect of the purchase price of the Notes purchased by it from the Company exceeds the amount of any damages which the Initial Purchasers have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(e), each person, if any, who controls an Initial Purchaser, a Holder, a Participating Broker-Dealer, an underwriter who participates in an offering of Registrable Securities, or the affiliates of any of them, within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director, officer (including each officer of the Company who signed the Registration Statement), partner, employee, representative and agent of the Company, the Initial Purchasers, each Holder, each Participating Broker-Dealer, and each underwriter who participates in an offering of Registrable Securities and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. 5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any customary underwriting arrangements approved by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents reasonably required in connection with such underwriting arrangements. 6. SELECTION OF UNDERWRITERS. In any underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering; PROVIDED, HOWEVER, that such underwriters and managers must be reasonably satisfactory to the Company. 23 57 7. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor will the Company on or after the date of this Agreement enter into any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders; PROVIDED, HOWEVER, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if sent by registered or certified mail, postage prepaid, sent by any national courier service guaranteeing overnight delivery or transmitted by any standard form of telecommunication, as follows: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 7(c), which address, with respect to an Initial Purchaser, shall initially be the address provided for such Initial Purchaser in the Purchase Agreement; and (ii) if to the Company, at its address as set forth in the Purchase Agreement, or at such other address provided in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given at the earlier of: (i) the time of actual receipt by the addressee; or (ii) the time delivered, if personally delivered, or five business days after being sent by registered or certified mail, postage prepaid, if mailed, or when answered back, if telexed, or when transmission is confirmed, if telecopied, or on the next business day, if timely delivered to a national courier service guaranteeing overnight delivery. Copies of all notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee at its address specified in the Indenture. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and 24 58 holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (e) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries of the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and the Holders shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of any of the other Holders. (f) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. (h) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any affiliate of the Company (as such term is defined in Rule 405 under the Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts and, when so executed, all such counterparts taken together shall constitute one and the same agreement. 25 59 Exhibit A --------- Form of Opinion of Counsel -------------------------- 1. Each of the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial and statistical data and supplemental schedules included or referred to therein or omitted therefrom and the Form T-l, as to which such counsel need express no opinion), complies as to form in all material respects with the applicable requirements of the Act and the applicable rules and regulations promulgated under the Act. 2. In the course of such counsel's review and discussion of the contents of the Exchange Offer Registration Statement and the Prospectus with certain officers and other representatives of the Company and representatives of the independent certified public accountants of the Company, but without independent check or verification or responsibility for the accuracy, completeness or fairness of the statements contained therein, on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Company), no facts have come to such counsel's attention which cause such counsel to believe that the Exchange Offer Registration Statement (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein and the Form T-l, as to which such counsel need express no belief), at the time the Exchange Offer Registration Statement became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. A-1 60 EXHIBIT C-1 Form of Opinion of Ropes & Gray Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Purchase Agreement. 1. The Company is duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole. The Company has all requisite corporate authority to carry on its business as it is currently being conducted and to own, lease and operate its properties as described in the Offering Memorandum. The Company has all requisite corporate authority to execute, deliver and perform its obligations under the Purchase Agreement and each of the other Operative Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, including, without limitation, the corporate power and authority to issue, sell and deliver the Notes as provided herein and therein. 2. The Purchase Agreement has been duly authorized, executed and delivered by the Company. 3. The Indenture has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the Trustee, is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity. 4. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally, (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity and (iii) rights of indemnity or contribution thereunder may be limited by federal or state securities laws or regulations or the public policy underlying such laws or regulations. 5. The Notes have been duly authorized, executed and delivered by the Company for issuance and sale to the Initial Purchasers pursuant to the Purchase Agreement and, when issued and authenticated in accordance with the terms of the Indenture and delivered against payment therefor in accordance with the terms hereof and thereof, will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or C-l-1 61 similar laws relating to or affecting the rights of creditors generally, and subject to limitations on rights of acceleration and the availability of equitable remedies under general principles of equity. 6. The Series B Notes and the Private Exchange Notes, if any, have been duly authorized by the Company for issuance and, when executed, delivered, issued and authenticated in accordance with the terms of the Registration Rights Agreement and the Indenture, will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws relating to or affecting the rights of creditors generally, and subject to limitations on rights of acceleration and the availability of equitable remedies under general principles of equity. 7. When the Notes are issued and delivered pursuant to the Purchase Agreement, no Note will be of the same class (within the meaning of Rule 144A under the Act) as securities of the Company that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated inter-dealer quotation system. 8. The execution and delivery by the Company of the Purchase Agreement and of the other Operative Documents, the performance by the Company of its agreements pursuant to the Purchase Agreement and the other Operative Documents and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance, sale and delivery of the Notes by the Company) do not (i) conflict with or result in a breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right to accelerate the maturity of or require the prepayment of any obligation of the Company, or require any consent, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, the terms of any contract, agreement or document identified as an exhibit to the Company's Annual Report on Form 10-K, (ii) violate or conflict with any provisions of the certificate of incorporation or bylaws of the Company or (iii) to such counsel's knowledge (assuming, solely for purposes of the opinion set forth in this clause (iii), compliance with state securities or Blue Sky laws and the antifraud provisions of federal and state securities laws, as to which such counsel need not express an opinion), violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its respective properties or assets, except for such breaches, violations or conflicts which, individually or in the aggregate, do not and would not reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities (contingent or otherwise), earnings, operations, conditions (financial and otherwise) or results of operations of the Company and its subsidiaries taken as a whole. Assuming compliance with applicable state securities and Blue Sky laws, as to which such counsel need express no opinion, and except for the filing of a registration statement under the Act and qualification of the Indenture under the Trust Indenture Act, in each case as contemplated by the Registration Rights Agreement, no consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with any court or governmental agency, body or administrative agency is required for (1) the execution, delivery and performance by the Company of the Purchase Agreement or any of the other Operative Documents to which it is a party; or (2) the issuance and sale of the Notes, except such as have been obtained and made or have been disclosed in the Offering Memorandum. C-1-2 62 9. Neither the Company nor any subsidiary of the Company is and upon consummation of the transactions contemplated in the Purchase Agreement none of the Company or any subsidiary of the Company will be, subject to registration as an "investment company" within the meaning of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. 10. Assuming (i) the accuracy of, and compliance with, the representations, warranties, covenants and agreements of the Company and the Initial Purchasers contained in the Purchase Agreement, (ii) the accuracy of, and compliance with, the representations, warranties, covenants and agreements of each of the persons to whom the Initial Purchasers initially resells or otherwise transfers the Notes, as specified in the Offering Memorandum, and (iii) the compliance by the Initial Purchasers with the offering and transfer procedures and restrictions described in the Offering Memorandum, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers or in connection with the initial resale of the Notes by the Initial Purchasers in the manner contemplated by the Purchase Agreement and the Offering Memorandum to register the sale of the Notes to the Initial Purchasers or the Exempt Resales under the 1933 Act, it being understood that such counsel need not express any opinion as to any subsequent reoffers, resales or other transfers of any Notes, or to qualify the Indenture under the Trust Indenture Act of 1939, as amended. 11. None of the execution, delivery and performance of the Purchase Agreement, the issuance and sale of the Notes, the application of the proceeds from the issuance and sale of the Notes and the consummation of the transactions contemplated thereby as set forth in the Offering Memorandum, will violate Regulation G, T, U or X promulgated by the Board of Governors of the Federal Reserve System. 12. The Purchase Agreement, the Indenture, the Notes and the Registration Rights Agreement conform in all material respects as to the descriptions thereof contained in the Offering Memorandum. 13. To such counsel's knowledge, no stop order preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by the Purchase Agreement are subject to the registration requirements of the Act, has been issued. In addition, such counsel shall state that (i) it has participated in certain discussions with representatives of and counsel to the Initial Purchasers, and representatives of the Company and its independent accountants, in which the business and affairs of the Company and the contents of the Offering Memorandum were discussed; (ii) such counsel has not reviewed individual litigation files of the Company or consulted with counsel directly involved in handling particular legal or governmental proceedings for the Company and its investigation of pending or threatened legal or governmental proceedings consisted solely of its participation in such discussions; (iii) on the basis of information that such counsel has gained in the course of its representation of the Company in connection with its preparation of the Offering Memorandum and its participation in the discussions referred to above, such counsel has no reason to believe that, as of the date of the Offering Memorandum or the Closing Date, the Offering Memorandum contained or contains any untrue statement of a material fact or omitted or omits 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. Such counsel need express C-I-3 63 no opinion as to the financial statements, including the notes and schedules thereto, or any other financial, statistical or accounting information set forth or referred to in the Offering Memorandum, or as to any statement or omission made by the Company in reliance upon information furnished in writing to the Company by any Initial Purchaser in connection with the Offering Memorandum. C- 1-4 64 EXHIBIT C-2 Form of Opinion of General Counsel to the Company Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Purchase Agreement. 1. The Company is duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole. The Company has all requisite corporate authority to carry on its business as it is currently being conducted and to own, lease and operate its properties as described in the Offering Memorandum. The Company has all requisite corporate authority to execute, deliver and perform its obligations under the Purchase Agreement and each of the other Operative Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, including, without limitation, the corporate power and authority to issue, sell and deliver the Notes as provided herein and therein. 2. Each Significant Subsidiary of the Company is duly incorporated and is validly existing as a corporation in good standing under the laws of the state of its incorporation and is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole. Each Significant Subsidiary of the Company has all requisite corporate authority to carry on its business as it is currently being conducted and to own, lease and operate its properties as described in the Offering Memorandum. 3. All of the outstanding capital stock of the Company has been duly authorized, validly issued, and is fully paid and nonassessable and, to such counsel's knowledge, was not issued in violation of any preemptive or similar rights. 4. The Purchase Agreement has been duly authorized, executed and delivered by the Company. 5. The Indenture has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the Trustee, is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity. 6. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) the enforceability thereof C-2-1 65 may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally, (ii) rights of acceleration and the availability of equitable remedies may be limited by general principles of equity and (iii) rights of indemnity or contribution thereunder may be limited by federal or state securities laws or regulations or the public policy underlying such laws or regulations. 7. The Notes have been duly authorized, executed and delivered by the Company for issuance and sale to the Initial Purchasers pursuant to the Purchase Agreement and, when issued and authenticated in accordance with the terms of the Indenture and delivered against payment therefor in accordance with the terms hereof and thereof, will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws relating to or affecting the rights of creditors generally, and subject to limitations on rights of acceleration and the availability of equitable remedies under general principles of equity. 8. The Series B Notes and the Private Exchange Notes, if any, have been duly authorized by the Company for issuance and, when executed, delivered, issued and authenticated in accordance with the terms of the Registration Rights Agreement and the Indenture, will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws relating to or affecting the rights of creditors generally, and subject to limitations on rights of acceleration and the availability of equitable remedies under general principles of equity. 9. The execution and delivery by the Company of the Purchase Agreement and of the other Operative Documents, the performance by the Company of its agreements pursuant to the Purchase Agreement and the other Operative Documents and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance, sale and delivery of the Notes by the Company) do not (i) conflict with or result in a breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right to accelerate the maturity of or require the prepayment of any obligation of the Company or any Significant Subsidiary, or require any consent, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Significant Subsidiary pursuant to, the terms of any contract, agreement or document identified as an exhibit to the Company's Annual Report on Form 10-K, (ii) violate or conflict with any provisions of the certificate of incorporation or bylaws of the Company or any Significant Subsidiary or (iii) to such counsel's knowledge (assuming, solely for purposes of the opinion set forth in this clause (iii), compliance with state securities or Blue Sky laws and the antifraud provisions of federal and state securities laws, as to which such counsel need not express an opinion), violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any Significant Subsidiary or any of their respective properties or assets, except for such breaches, violations or conflicts which, individually or in the aggregate, do not and would not reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities (contingent or otherwise), earnings, operations, conditions (financial and otherwise) or results of operations of the Company and its subsidiaries taken as a whole. Assuming compliance with applicable state securities and Blue Sky laws, as to which such counsel need express no opinion, and C-2-2 66 except for the filing of a registration statement under the Act and qualification of the Indenture under the Trust Indenture Act, in each case as contemplated by the Registration Rights Agreement, no consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with any court or governmental agency, body or administrative agency is required for (1) the execution, delivery and performance by the Company of the Purchase Agreement or any of the other Operative Documents to which it is a party; or (2) the issuance and sale of the Notes, except such as have been obtained and made or have been disclosed in the Offering Memorandum. 10. To such counsel's knowledge, there is no litigation, action, suit, investigation or proceeding, governmental or otherwise, before any court or before or by any public, regulatory or governmental agency or body pending or threatened against, or involving the properties or business of, the Company or relating to the issuance or sale of the Notes, which would have a material adverse effect on the ability of the Company to perform its obligations under any Operative Document or to consummate the transactions contemplated by the Offering Memorandum or the Operative Documents. 11. Except as set forth in the Registration Rights Agreement, to such counsel's knowledge, there are no holders of securities of the Company or any of its subsidiaries who, by reason of the execution by the Company of the Purchase Agreement or any other Operative Document or the consummation by the Company and of the transactions contemplated hereby and thereby, have the right to request or demand that the Company or any of its subsidiaries register under the Act or analogous foreign laws and regulations securities held by them. 12. The Purchase Agreement, the Indenture, the Notes and the Registration Rights Agreement conform in all material respects as to the descriptions thereof contained in the Offering Memorandum. 13. To such counsel's knowledge, no stop order preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by the Purchase Agreement are subject to the registration requirements of the Act, has been issued. In addition, such counsel shall state that (i) it has participated in certain discussions with representatives of and counsel to the Initial Purchasers, and representatives of the Company and its independent accountants, in which the business and affairs of the Company and the contents of the Offering Memorandum were discussed; (ii) although such counsel has responsibility for the legal affairs of the Company, the Company is represented by separate litigation counsel with respect to litigation matters, and such counsel has not reviewed individual litigation files of the Company or consulted with counsel directly involved in handling particular legal or governmental proceedings for the Company and such counsel's investigation of pending or threatened legal or governmental proceedings has consisted of the regular conduct of such counsel's duties as the Company's general counsel and correspondence with litigation counsel and representatives of the Company; (iii) on the basis of information that such counsel has gained in the regular conduct of such counsel's duties as the Company's general counsel, such counsel does not know of any legal or governmental proceeding to which the Company or any of its subsidiaries is a party or to which any of its property is subject required to be described in the Offering Memorandum which is not so described, nor of any contract or other document of a character required to be described in the Offering Memorandum which is not so described; (iv) based on such information and participation, C-2-3 67 such counsel has no reason to believe that, as of the date of the Offering Memorandum or the Closing Date, the Offering Memorandum contained or contains any untrue statement of a material fact or omitted or omits 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. Such counsel need express no opinion as to the financial statements, including the notes and schedules thereto, or any other financial, statistical or accounting information set forth or referred to in the Offering Memorandum, or as to any statement or omission made by the Company in reliance upon information furnished in writing to the Company by any Initial Purchaser in connection with the Offering Memorandum. C-2-4 EX-4.2 3 INDENTURE DATED MARCH 17,1997 1 Exhibit 4.2 EXECUTION COPY -------------- NORTEK, INC., Company, and STATE STREET BANK AND TRUST COMPANY, Trustee ------------------------------------- INDENTURE Dated as of March 17, 1997 ------------------------------------- $175,000,000 Series A and Series B 9 1/4% Senior Notes due March 15, 2007 2 TABLE OF CONTENTS1/ -------------------
Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.............................................1 SECTION 1.01 Definitions..........................................................1 SECTION 1.02 Other Definitions...................................................17 SECTION 1.03 Incorporation by Reference of Trust Indenture Act...................17 SECTION 1.04 Rules of Construction...............................................18 SECTION 1.05 Acts of Holders.....................................................18 SECTION 1.06 Exchange Rates......................................................19 ARTICLE 2 THE NOTES.............................................................................19 SECTION 2.01 Form and Dating.....................................................19 SECTION 2.02 Execution and Authentication........................................20 SECTION 2.03 Registrar and Paying Agent..........................................21 SECTION 2.04 Paying Agent to Hold Money in Trust.................................22 SECTION 2.05 Holder Lists........................................................22 SECTION 2.06 Transfer and Exchange...............................................22 SECTION 2.07 Replacement Notes...................................................32 SECTION 2.08 Outstanding Notes; Determinations of Holders' Action .................................................................................33 SECTION 2.09 Temporary Notes.....................................................33 SECTION 2.10 Cancellation........................................................34 SECTION 2.11 CUSIP Number........................................................34 SECTION 2.12 Defaulted Interest..................................................34 SECTION 2.13 Liquidated Damages Under Registration Rights Agreement .................................................................................34 ARTICLE 3 REDEMPTION .....................................................................................35 SECTION 3.01 Right to Redeem; Notices to Trustee.................................35 SECTION 3.02 Selection of Notes to be Redeemed...................................35 SECTION 3.03 Notice of Redemption................................................35 SECTION 3.04 Effect of Notice of Redemption......................................36 SECTION 3.05 Deposit of Redemption Price.........................................36
- -------- [FN] 1/ This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. i 3
SECTION 3.06 Notes Redeemed in Part..............................................36 ARTICLE 4 COVENANTS.............................................................................36 SECTION 4.01 Payment of Notes....................................................36 SECTION 4.02 Reports.............................................................37 SECTION 4.03 Compliance Certificates.............................................38 SECTION 4.04 Further Instruments and Acts........................................39 SECTION 4.05 Maintenance of Office or Agency.....................................39 SECTION 4.06 Limitation on Restricted Payments...................................39 SECTION 4.07 Limitation on Additional Indebtedness...............................41 SECTION 4.08 Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries...........................................................45 SECTION 4.09 Limitation on Liens.................................................45 SECTION 4.10 Limitation on Certain Restrictions Affecting Subsidiaries .................................................................................46 SECTION 4.11 Repurchase Upon Change of Control...................................47 SECTION 4.12 Limitation On Use of Proceeds from Asset Sales......................49 SECTION 4.13 Limitation on Transactions With Affiliates..........................50 SECTION 4.14 Limitation on Guaranties by Subsidiaries............................50 SECTION 4.15 Payment of Taxes and Other Claims...................................51 SECTION 4.16 Corporate Existence.................................................51 SECTION 4.17 Maintenance of Properties and Insurance.............................52 SECTION 4.18 Stay, Extension and Usury Laws......................................52 SECTION 4.19 Investment Company Act..............................................52 SECTION 4.20 Payments for Consents...............................................52 SECTION 4.21 Covenant to Comply with Securities Laws Upon Purchase of Notes.............................................................................52 ARTICLE 5 SUCCESSOR CORPORATION.................................................................53 SECTION 5.01 When the Company May Merge or Transfer Assets.......................53 SECTION 5.02 Successor Corporation Substituted...................................54 ARTICLE 6 DEFAULTS AND REMEDIES .....................................................................................55 SECTION 6.01 Events of Default...................................................55 SECTION 6.02 Acceleration........................................................57 SECTION 6.03 Other Remedies......................................................58 SECTION 6.04 Waiver of Past Defaults.............................................58 SECTION 6.05 Control by Majority.................................................58 SECTION 6.06 Limitation on Suits.................................................58
ii 4
SECTION 6.07 Rights of Holders to Receive Payment................................59 SECTION 6.08 Collection Suit by Trustee..........................................59 SECTION 6.09 Trustee May File Proofs of Claim....................................59 SECTION 6.10 Priorities..........................................................60 SECTION 6.11 Undertaking for Costs...............................................60 SECTION 6.12 Restoration of Rights and Remedies..................................60 ARTICLE 7 TRUSTEE...............................................................................61 SECTION 7.01 Duties of Trustee...................................................61 SECTION 7.02 Rights of Trustee...................................................62 SECTION 7.03 Individual Rights of Trustee........................................63 SECTION 7.04 Trustee's Disclaimer................................................63 SECTION 7.05 Notice of Defaults..................................................63 SECTION 7.06 Reports by Trustee to Holders.......................................63 SECTION 7.07 Compensation and Indemnity..........................................63 SECTION 7.08 Replacement of Trustee..............................................64 SECTION 7.09 Successor Trustee by Merger.........................................65 SECTION 7.10 Eligibility; Disqualification.......................................65 SECTION 7.11 Preferential Collection of Claims Against the Company .................................................................................65 ARTICLE 8 DISCHARGE OF INDENTURE................................................................65 SECTION 8.01 Discharge of Liability on Notes.....................................65 SECTION 8.02 Repayment to the Company or Subsidiary Guarantors...................66 ARTICLE 9 AMENDMENTS............................................................................67 SECTION 9.01 Without Consent of Holders..........................................67 SECTION 9.02 With Consent of Holders.............................................67 SECTION 9.03 Compliance with Trust Indenture Act.................................68 SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions .................................................................................68 SECTION 9.05 Notation on or Exchange of Notes....................................69 SECTION 9.06 Trustee to Sign Supplemental Indentures.............................69 SECTION 9.07 Effect of Supplemental Indentures...................................69 ARTICLE 10 MISCELLANEOUS.........................................................................69 SECTION 10.01 Trust Indenture Act Controls.......................................69 SECTION 10.02 Notices............................................................70 SECTION 10.03 Communication by Holders with Other Holders........................71
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SECTION 10.04 Certificate and Opinion as to Conditions Precedent.................71 SECTION 10.05 Statements Required in Certificate or Opinion......................71 SECTION 10.06 Separability Clause................................................71 SECTION 10.07 Rules by Trustee, Paying Agent and Registrar.......................72 SECTION 10.08 Legal Holidays.....................................................72 SECTION 10.09 GOVERNING LAW......................................................72 SECTION 10.10 No Recourse Against Others.........................................72 SECTION 10.11 Successors.........................................................72 SECTION 10.12 Multiple Originals.................................................72
iv 6 INDENTURE, dated as of March 17, 1997, between Nortek, Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts trust company (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 9 1/4% Series A Senior Notes due March 15, 2007 (the "Series A Notes") and the 9 1/4% Series B Senior Notes due March 15, 2007 (the "Series B Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions. "Acquired Indebtedness" means, with respect to any Person, Indebtedness of such Person (i) assumed in connection with an acquisition of assets or properties from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person provided such Person was not immediately prior thereto an Unrestricted Subsidiary (in each case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Restricted Subsidiary). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise. "Agent" means any Registrar, Paying Agent or co-registrar. "Allowable Subsidiary Loans" means Indebtedness of the Company to a Restricted Subsidiary not to exceed the Net Cash Proceeds received by the Company as a result of such Restricted Subsidiary becoming less than a Wholly-Owned Subsidiary through the sale of Equity Interests in compliance with the terms of the Indenture, provided that (i) all such Allowable Subsidiary Loans are contractually subordinated in right of payments to the Notes and (ii) the total amount of all Allowable Subsidiary Loans at any time outstanding does not exceed $35,000,000. "Asset Sale" means, with respect to any Person, the sale, lease, conveyance or other transfer or disposition by such Person of any of its assets or properties (including by way of a sale-and-leaseback and including the sale, issuance or other transfer of any of the Capital Stock of any Subsidiary of such Person), in a single transaction or through a series of related 7 transactions, for aggregate consideration received by such Person or a Subsidiary of such Person (but if such Person is the Company or any Restricted Subsidiary, only if such Subsidiary is a Restricted Subsidiary), net of out-of-pocket costs relating thereto (including, without limitation, legal, accounting and investment banking fees and sales commissions), in excess of $5,000,000. For purposes of this definition, consideration shall include, without limitation, any indebtedness for borrowed money of such Person or such Subsidiary that is assumed by the transferee of any assets or any such indebtedness of any Subsidiary of such Person whose stock is purchased by the transferee. Notwithstanding anything to the contrary in the foregoing provisions of this definition, the term "Asset Sale", with respect to any Person, shall not include (i) the sale, lease or other transfer or disposition of assets acquired and held for resale in the ordinary course of business; (ii) the sale, lease or other transfer or disposition of assets in accordance with the provisions of Article 5 hereof; (iii) the sale, lease or other transfer or disposition of damaged, worn out or obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of the business of such Person or its Subsidiaries; (iv) the abandonment of assets or properties which are no longer useful in the business of such Person or its Subsidiaries and are not readily saleable; (v) the granting of any Lien permitted under Section 4.09 hereof (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure); (vi) any sale, lease, assignment or other disposition by such Person or its Subsidiaries if such Person has outstanding senior debt securities all of which are rated BBB-- or higher by S&P and have not been placed on credit watch by S&P for a possible downgrade or are rated Baa3 or higher by Moody's and have not been placed on credit watch by Moody's for a possible downgrade; or (vii) the sale or other transfer or disposition of receivables in connection with an asset securitization transaction by such Person or its Subsidiaries. "Average Life" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment (assuming the exercise by the obligor of such debt security of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such debt security multiplied by the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" of any corporation means the Board of Directors of such corporation, or any duly authorized committee of such Board of Directors. "Board Resolution" means, with respect to any Person, a copy of a resolutions certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, as filed with the corporate records of such Person. "Broan Limited Credit Facility" means a credit facility between Broan Limited or any of the Canadian Subsidiaries, and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time. 2 8 "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions in the Commonwealth of Massachusetts are authorized or required to close. "Canadian Subsidiary" means any Subsidiary of Broan Limited and any Subsidiary of the Company whose headquarters is located in Canada. "Capital Lease Obligations" means, with respect to any Person, all obligations under leases of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP, and for purposes of this Indenture the amount of such obligations at any time shall be the aggregate capitalized amount thereof at such time, as determined in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock (including common or preferred stock) or partnership interests. "Cash Equivalents" means (i) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (ii) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, BBB-- or better by S&P or Moody's or the equivalent of such rating by a successor rating agency, (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia which is rated, at the time as of which any Investment therein is made, P-1 or better by Moody's or A-1 or better by S&P, or the equivalent of such rating by a successor rating agency, (iv) Investments in mutual funds, money market funds, investment pools and other savings vehicles, substantially all of the assets of which are invested in Investments described in clause (i), (ii) or (iii) above, and (v) in the case of Broan Limited and the Canadian Subsidiaries, (a) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by Canada or any instrumentality or agency thereof (provided that the full faith and credit of Canada is pledged in support thereof), (b) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, A or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency and (c) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of Canada or any province thereof which is rated, at the time as of which 3 9 any Investment therein is made, R-1 or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency. "Commodity Agreement" means any agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the prices of commodities used by the Company or any of its Subsidiaries in the ordinary course of business. "Company Credit Facility" means one or more credit facilities between the Company or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Company Credit Facility." All Company Credit Facilities are referred to collectively in the Indenture as the "Company Credit Facility." "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of such Person and its Subsidiaries (or if such Person is the Company, the amortization expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP, excluding any amortization expense included in Consolidated Interest Expense. "Consolidated Cash Flow" means, with respect to any Person for any period, the sum of, without duplication, (i) Consolidated Net Income of such Person for such period, (ii) Consolidated Interest Expense of such Person for such period, (iii) Consolidated Income Tax Expense of such Person for such period, (iv) Consolidated Depreciation Expense of such Person for such period, (v) Consolidated Amortization Expense of such Person for such period, and (vi) the amount, not to exceed 10% of Consolidated Cash Flow of such Person for such period (which amount shall be excluded in determining such Consolidated Cash Flow), by which (A) other non-cash items of expense that reduce Consolidated Net Income of such Person for such period exceed (B) other non-cash items of expense that increase Consolidated Net Income of such Person for such period. "Consolidated Cash Flow Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated Cash Flow of such Person for such period to Consolidated Interest Expense of such Person for such period; provided, however, that, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated on a pro forma basis after giving effect, as if occurring at the beginning of such period, to (i) the incurrence of Indebtedness giving rise to the need to calculate the Consolidated Cash Flow Coverage Ratio and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (ii) the incurrence, during such period or since the last day of such period, of any Indebtedness (other than Indebtedness incurred for working capital purposes), and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (iii) the acquisition by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) of any company or business during such period or since the last day of such period and (iv) the sale or other disposition of assets or properties 4 10 outside the ordinary course of business by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Company and directly or through a Subsidiary of such Person if such Person is not the Company) and the actual application of the proceeds therefrom during such period or since the last day of such period. "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation and depletion expense of such Person and its Subsidiaries (or if such Person is the Company, the depreciation and depletion expense of the Company and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP. "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes (including franchise, net worth or similar taxes) of such Person and its Subsidiaries (or if such Person is the Company, the provision for such taxes of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries (or if such Person is the Company, the interest expense of the Company and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, all original issue discount and other interest portion of any deferred payment Indebtedness and all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing less any interest income included in Consolidated Net Income for such period, but excluding any deferred financing fees otherwise includible in Consolidated Interest Expense for such period; (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries (or if such Person is the Company, such interest expense paid, accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries) during such period as determined on a consolidated basis in accordance with GAAP; and (iii) all cash dividends or other distributions declared or paid on any Capital Stock (other than common stock or preferred stock that is not Redeemable Stock or, with respect to the Company, special common stock) of such Person and its Subsidiaries (or if such Person is the Company, all such dividends or other distributions declared or paid on any such Capital Stock of the Company and its Restricted Subsidiaries) for such period as determined on a consolidated basis in accordance with GAAP; provided, however, that any Indebtedness bearing a floating rate of interest shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (or if such Person is the Company, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries) for such period, before discontinued operations, extraordinary items and the cumulative effect of a change in accounting principles, determined on a consolidated basis in accordance with GAAP, 5 11 provided that there shall also be excluded from Consolidated Net Income (but only to the extent included in calculating such Consolidated Net Income): (i) any net gains or losses in respect of dispositions of assets other than in the ordinary course of business; (ii) any gains from currency exchange transactions not in the ordinary course of business consistent with past practice; (iii) any gains or losses realized from the termination of any employee pension benefit plan; (iv) any gains or losses realized upon the refinancing of any Indebtedness of such Person or any of its Subsidiaries (or if such Person is the Company, any gains or losses realized upon the refinancing of any Indebtedness of Company and its Restricted Subsidiaries); (v) any gains or losses arising from the destruction of property or assets due to fire or other casualty; (vi) any gains or losses from the revaluation of property or assets; (vii) the net income (or loss) of any Person that is not a Subsidiary of such first Person (or that is not a Restricted Subsidiary if such first Person is the Company) except to the extent of cash dividends or distributions paid to such first Person by such other Person in such period; (viii) the net income (or loss) of any Subsidiary of such first Person except to the extent of the interest of such Person in such Subsidiary; (ix) the net income (or loss) of any Subsidiary of such Person that is subject to any restriction or limitation on the payment of dividends and other distributions (including loans or advances) by operation of the terms of its charter or by agreement, instrument, judgment, decree, order or governmental regulation applicable to such Subsidiary to the extent of such restriction or limitation in such period; and (x) the excess of (a) the consolidated compensation expense recorded by the Company in the computation of net earnings of the Company in respect of shares of Capital Stock (other than Redeemable Stock) or other Equity Interests awarded, pursuant to a plan or other arrangement approved by the Board of Directors of the Company (or of a Reporting Subsidiary, if applicable), to or for the benefit of any employee, officer or director of the Company or any of its Subsidiaries or to or by any employee stock ownership plan or similar trust for the benefit of any such employee, officer or director, over (b) the amount of consolidated income tax benefit recorded by the Company in connection with such consolidated compensation expense of the Company. "Consolidated Net Worth" means, with respect to any Person at any date of determination, the sum of the Capital Stock, additional paid-in capital and cumulative translation, pension and other adjustment account plus retained earnings (or minus accumulated deficit), excluding amounts attributable to Redeemable Stock, any Capital Stock convertible into Indebtedness, or Treasury Stock, of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in currency values to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary on the issue date of the Notes or becomes a party or a beneficiary thereafter. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. 6 12 "Definitive Notes" means Notes that are in the form of Exhibit A attached hereto (but without including the text referred to in footnote 1 thereto and the additional schedule referred to therein). "Depository" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depository with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter "Depository" shall mean or include such successor. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors of the Company is required to deliver a Board Resolution under the Indenture, a member of such Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Eligible Inventory" means, with respect to any Person, the finished goods, raw materials and work-in-process of such Person less any applicable reserves, each of the foregoing determined on the FIFO method of accounting in accordance with GAAP. "Eligible Receivables" means, with respect to any Person, the trade receivables of such Person less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP. "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Note" means any Series B Note issued in exchange for an Original Note pursuant to the Exchange Offer or the Private Exchange. "Exchange Offer" means the offer by the Company to the Holders of all outstanding Transfer Restricted Securities to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series B Notes, in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. "Exchange Offer Registration Statement" means the registration statement under the Securities Act relating to the Exchange Offer, including the related prospectus. 7 13 "Exempt Person" means (i) Richard L. Bready, (ii) any Person which is an Affiliate of Richard L. Bready, and (iii) any other Affiliate of such Person so long as such Person is an Affiliate of Richard L. Bready. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries, in existence on the issue date of the Notes. "Existing Investments" means (i) Investments of the Company and its Restricted Subsidiaries, in existence on the issue date of the Notes and (ii) Investments to be made pursuant to commitments authorized by the Board of Directors of the Company prior to the issue date of the Notes (a) in Ecological Engineering Associates, L.P. in an amount not to exceed $3.0 million (including such Investments made prior to the issue date of the Notes) and (b) in or related to a joint venture involving Universal-Rundle Corporation in an amount not to exceed $10.0 million. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets of the Company or any of its Subsidiaries shall be determined by the Board of Directors of the Company or, if such Subsidiary is a Reporting Subsidiary, of such Reporting Subsidiary, acting in good faith, and evidenced by a Board Resolution of the Company or such Reporting Subsidiary, as the case may be, delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that for purposes of Articles 4 and 5 hereof and the definitions used therein, GAAP shall be determined on the basis of such principles as in effect on the issue date of the Notes. "Global Note" means a Note registered in the name of the Depository or its nominee that contains the paragraph referred to in footnote 1 and the additional schedule referred to in the form of Note attached hereto as Exhibit A. "Guaranty" means, with respect to any obligation, (i) a guaranty (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, of all or any part of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure the payment or performance of (or payment of damages in the event of non-performance) of all or any part of such obligation. "Holder" means a Person in whose name a Note is registered on the Registrar's books. 8 14 "Indebtedness" means, with respect to any Person, without duplication, any indebtedness, contingent or otherwise, (i) with respect to borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or consisting of reimbursement obligations with respect to letters of credit, or (ii) representing the deferred and unpaid balance of the purchase price of any property excluding any such balance that constitutes a trade payable or an accrued liability, in each case arising in the ordinary course of business, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP, and shall also include, to the extent not otherwise included, (a) any Capital Lease Obligations, (b) the maximum fixed repurchase price of any Redeemable Stock, (c) indebtedness secured by a Lien to which the property or assets owned or held by such Person is subject, whether or not the obligations secured thereby shall have been assumed, (d) guaranties of items that would be included within this definition to the extent of such guaranties, and (e) net liabilities in respect of Commodity Agreements, Currency Agreements and Interest Rate Agreements. For purposes of the immediately preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, provided that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be without duplication (y) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (z) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the Fair Market Value at such date of any property or asset subject to a Lien securing the Indebtedness of others or the amount of the Indebtedness secured. The amount of any Indebtedness issued at a discount shall be equal to the gross proceeds of such issuance (and not the face amount of any bond, note, debenture or similar instrument representing such Indebtedness). "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary thereof. "Investment" means, with respect to any Person, (i) any direct or indirect loan or other extension of credit (other than extensions of trade credit by such Person on commercially 9 15 reasonable terms and relating to the sale of property or services in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to any other Person, or (ii) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person. "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease intended as security, any option or other agreement to sell or give any security interest and any filing of or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a financing statement covering leased goods under a lease not intended as security). "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means the aggregate Cash Proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reasonable reserve in accordance with GAAP for adjustments in respect of the sale price of such asset or assets. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company or any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means the Original Notes and the Exchange Notes. "9 7/8% Notes" means the Company's 9 7/8% Senior Subordinated Notes due 2004. 10 16 "Note Custodian" means the Trustee, as custodian for the Depository with respect to the Notes in global form, or any successor entity thereto. "Officer" means, with respect to any corporation, the Chairman of the Board, any Vice Chairman, the President, any Vice President, any Assistant Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of such corporation. "Officers' Certificate" means, with respect to any Person, a certificate containing the information specified in Sections 10.04 and 10.05 hereof signed by the Chief Executive Officer or President and the Chief Financial Officer or chief accounting officer of such Person. "Opinion of Counsel" means a written opinion containing the information specified in Sections 10.04 and 10.05 hereof, rendered by legal counsel (who may be counsel to the Company) acceptable to the Trustee. "Original Notes" means the Series A Notes initially issued under this Indenture prior to the issuance of Exchange Notes. "Permitted Investments" means any of the following: (i) Cash Equivalents; (ii) Existing Investments; (iii) Investments by the Company or a Restricted Subsidiary of the Company in any Subsidiary of the Company that is a Restricted Subsidiary or any other Person that concurrently with the making of such Investment becomes a Subsidiary of the Company that is a Restricted Subsidiary; (iv) guaranties by Restricted Subsidiaries of the Company permitted under Section 4.07 or 4.14 hereof; (v) Indebtedness of the Company to any Restricted Subsidiary of the Company, provided that such Indebtedness is contractually subordinated in right of payment to the Notes; (vi) Investments by the Company or any of its Restricted Subsidiaries in debt securities or debt instruments having maturities of 10 years or less and (A) issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (B) with a rating of BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent of such rating by a successor rating agency; (vii) any Investment by Broan Limited and or any Canadian Subsidiary in debt securities or debt instruments having maturities of 10 years or less and issued or fully guaranteed or insured by Canada or an instrumentality or agency thereof or rated, at the time of such Investment, BBB- or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency, so long as the aggregate amount of all such Investments by Broan Limited and any Canadian Subsidiaries that are Restricted Subsidiaries does not exceed $15,000,000 at any one time outstanding; (viii) loans and advances to officers and directors of the Company or any Restricted Subsidiary of the Company made in the ordinary course of business or pursuant to any employee benefit plan, up to $5,000,000 in the aggregate at any one time outstanding; (ix) loans and advances to vendors, suppliers and contractors of the Company or any Restricted Subsidiary of the Company and made in the ordinary course of business; (x) the receipt by the Company or its Restricted Subsidiaries of consideration other than Cash Proceeds in any Asset Sale made in compliance with the terms of the Indenture; (xi) so long as no Default or Event 11 17 of Default shall have occurred and be continuing, other Investments made after the issue date of the Series A Notes not exceeding in the aggregate at any time outstanding (A) $40,000,000, if at the time of the making of such Investment the Notes are not rated BB+ or better by S&P or Bal or better by Moody's, or (B) $50,000,000, if at the time of the making of such Investment the Notes are rated BB+ or better by S&P or Bal or better by Moody's; (xii) any Lien permitted under Section 4.09 hereof; and (xiii) Investments by Restricted Subsidiaries of the Company not exceeding in the aggregate $10,000,000 at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term in this Indenture, provided that for purposes of this clause (xiii) an instrument referred to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100,000,000. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings, provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings, provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social Note; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries, taken as a whole; (vi) Liens securing Purchase Money Obligations permitted to be incurred by the provisions of the Indenture; (vii) leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of the Company or any of its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or any of its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capital Lease Obligation; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any corporation existing at the time such corporation becomes, or becomes a part of, a Restricted Subsidiary; (xii) Liens in favor of the Company or any Subsidiary; (xiii) Liens securing any real property or other assets of the Company or any Restricted Subsidiary of the Company in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the 12 18 Company or such Restricted Subsidiary of the Company; (xiv) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary of the Company that does not give rise to an Event of Default; (xv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvii) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Company Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements; and (xviii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Closing Date. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Principal Property" means any manufacturing or processing plant, warehouse or other building used by the Company or any Restricted Subsidiary, other than a plant, warehouse or other building that, in the good faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by the Company and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of the Company. "Private Exchange" means a private exchange pursuant to Section 2(a) of the Registration Rights Agreement. "Purchase Money Obligations" means any Indebtedness of the Company or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed by the Company or a Restricted Subsidiary of the Company in connection with the acquisition of assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased. "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable, in whole or in part, prior to the Stated Maturity of the Notes. 13 19 "Redemption Date" or "redemption date" means the date specified for redemption of the Notes in accordance with the terms of the Notes and this Indenture. "Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 6 of the Notes. "Registration Rights Agreement" means the Registration Rights Agreement dated the date hereof between the Company and the Initial Purchasers named therein. "Restricted Subsidiary" means (i) any Subsidiary of the Company in existence on the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary", (ii) any Subsidiary of the Company (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company as provided in and in compliance with the definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of the Company; provided that, immediately after giving effect to the designation referred to in clause (iii), no Default or Event of Default shall have occurred and be continuing and the Company could incur at least $1.00 of additional Indebtedness under Section 4.07 hereof. The Company shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers' Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series A Notes" means the Company's 9 1/4% Series A Senior Notes due March 15, 2007 to be issued pursuant to this Indenture. "Series B Notes" means the Company's 9 1/4% Series B Senior Notes due March 15, 2007 to be issued pursuant to this Indenture in the Exchange Offer and the Private Exchange. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of the Registration Rights Agreement which covers all of the Registrable Securities (as defined in the Registration Rights Agreement), on an appropriate form under Rule 415 under the Act or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 14 20 "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the SEC, as such regulation is in effect on the date of the Indenture. "Stated Maturity" means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency). "Subsidiary" of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "Subsidiary Guarantor" means, with respect to any Subsidiary Guaranty, the issuer of such Subsidiary Guaranty, so long as such Subsidiary Guaranty remains outstanding. "Subsidiary Guaranty" means any guaranty of the Notes pursuant to a supplemental indenture executed and delivered pursuant to Section 4.14 hereof, including as the context may require either or both of the guaranty of the Notes set forth in Article 11 hereof attached hereto as Exhibit E, upon the execution and delivery by a Subsidiary Guarantor of such supplemental indenture and any separate guaranty of the Notes, substantially in the form of Exhibit F hereto, or confirmation of guaranty executed and delivered by such Subsidiary Guarantor pursuant to such supplemental indenture. "TIA" means the Trust Indenture Act of 1939 as amended and as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Transfer Restricted Securities" means each Note until (i) the date on which such Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. 15 21 "Trust Officer," when used with respect to the Trustee, means any officer assigned to and working in the corporate trust department of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. "Unrestricted Subsidiary" means, until such time as any of the following shall be designated as a Restricted Subsidiary of the Company by the Board of Directors of the Company as provided in and in compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary of the Company or of a Restricted Subsidiary organized or acquired after the date of the Indenture that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of the Company that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Company, provided that, (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in Section 4.06, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in accordance with Section 4.06; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. The Company shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers' Certificate certifying that such designation has been made and that such designation complies with the requirements of the Indenture and all conditions thereto have been satisfied. "Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries). 16 22 SECTION 1.02 Other Definitions. -----------------
Term Defined - ---- in Section ------- "Act"........................................................... 1.05 "Bankruptcy Law"................................................ 6.01 "Cash Proceeds"................................................. 4.12 "Change of Control"............................................. 4.11 "Change of Control Offer"....................................... 4.11 "Change of Control Payment Date"................................ 4.11 "Custodian"..................................................... 6.01 "Event of Default".............................................. 6.01 "Excess Proceeds Offer"......................................... 4.12 "incurrence".................................................... 4.07 "Legal Holiday"................................................. 10.08 "Paying Agent".................................................. 2.03 "refinance"..................................................... 4.07 "Refinancing Indebtedness"...................................... 4.07 "Registrar"..................................................... 2.03 "Reporting Subsidiary".......................................... 4.06 "Restricted Payment"............................................ 4.06 "Securities Act"................................................ 7.04 "surviving entity".............................................. 5.01 "U.S. Government Obligations"................................... 8.01
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "Indenture to be qualified" means this Indenture. "Indenture trustee" or "institutional trustee" means the Trustee. "Obligor" on the Notes means the Company and each Subsidiary Guarantor, if any, and each other obligor on the Notes or any Subsidiary Guaranty. 17 23 All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04 RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural, and words in the plural include the singular. SECTION 1.05 Acts Of Holders. --------------- (1) any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (2) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient. (3) The ownership of Notes shall be proved by the Register. (4) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note as the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 18 24 (5) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Notes have authorized or agreed or consented to such request, demand, authorization, directions, notice, consent, waiver or other Act, and for that purpose the outstanding Notes shall be computed as of such record date, PROVIDED that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 1.06 EXCHANGE RATES. Except as otherwise required under GAAP or in connection with the preparation of any financial statements, any computation of the U.S. dollar equivalent of any foreign currency required for any calculation or computation under this Indenture (including, without limitation, in connection with the limitations under the definition of "Consolidated Net Income" and Section 4.03 hereof) shall be made at the exchange rate published in THE WALL STREET JOURNAL which is in effect as of the close of business on the first Business Day in the month in which such computation is required to be made hereunder. ARTICLE 2 THE NOTES --------- SECTION 2.01 FORM AND DATING. The Original Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto, with such appropriate insertions, substitutions and other variations as are required or permitted by this Indenture. The Exchange Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto, with such appropriate insertions, substitutions and other variations as are required or permitted by this Indenture; provided, that Exchange Notes issued in the Exchange Offer shall not bear the legend set forth in Exhibit A hereto as indicated by footnote 2; provided, further, that Exchange Notes issued in either the Exchange Offer or the Private Exchange shall not contain any reference to Liquidated Damages and shall not include paragraph 19 of Exhibit A hereto. The Notes may have notations, legends or endorsements required by this Indenture, law, stock exchange rule, depository rule or usage. Any such notation, legend or endorsement shall be delivered in writing to the Trustee by the Company. Each Note shall be dated the date of its issuance and show the date of its authentication. 19 25 The terms and provisions contained in the Notes, annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company, by its execution and delivery of this Indenture, expressly agrees to such terms and provisions and to be bound thereby. The Original Notes initially will be issued in global form, substantially in the form of Exhibit A attached hereto (including the text set forth in footnote 1 thereto and the additional schedule referred to therein) and may be issued in definitive form, substantially in the form of Exhibit A hereto (not including the text set forth in footnote 1 thereto and the additional schedule referred to therein). The Original Notes initially will be deposited with the Trustee, as Note Custodian. The Global Notes initially shall be registered in the name of the Depository or the nominee of the Depository. A Global Note shall represent such of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee, as Note Custodian, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. To the extent permitted by the terms of the 9-7/8% Notes and the indenture governing the 9-7/8% Notes (the "9-7/8% Indenture"), all obligations owing under this Indenture and the Notes, including interest accruing after the occurrence of an event described in clause (5) or (6) of Section 6.01 of the Indenture, shall constitute "Specified Senior Indebtedness" or similarly- designated indebtedness under the 9-7/8% Notes and the 9-7/8% Indenture and under any other existing or future subordinated indebtedness of the Company. SECTION 2.02 EXECUTION AND AUTHENTICATION. The Notes shall be executed on behalf of the Company by its Chairman of the Board, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any such officer on the Notes may be manual or facsimile. If an Officer of the Company whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto, manually executed by the Trustee, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate of authentication executed by the Trustee upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and made available for delivery hereunder. 20 26 At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a request for the authentication and delivery of such Notes signed by an Officer of the Company, and the Trustee, in accordance with such request, shall authenticate and deliver such Notes as provided in this Indenture. The Trustee shall authenticate (i) Original Notes for original issue in the aggregate principal amount not to exceed $175,000,000, and (ii) Exchange Notes issued, either (x) in the Exchange Offer for the Original Notes pursuant to the Exchange Offer Registration Statement filed with the Commission from time to time, for issue only in exchange for a like principal amount of Original Notes or (y) in the Private Exchange, for issue only in exchange for a like principal amount of Original Notes, in each case, upon written order of the Company in the form of an Officers' Certificate. Such Officers' Certificate shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Original Notes or Exchange Notes and whether the Notes are to be Definitive Notes or Global Notes. Except as contemplated by Section 2.07 hereof, the aggregate principal amount of Notes outstanding at any time may not exceed $175,000,000. Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matter as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. The Trustee shall not be liable for any act or failure to act of the authenticating agent to perform any duty either required herein or authorized herein to be performed by such person in accordance with this Indenture. Each authenticating agent shall be acceptable to the Company and otherwise comply in all respects with the eligibility requirements of the Trustee contained in this Indenture. SECTION 2.03 REGISTRAR AND PAYING AGENT. The Company shall maintain or cause to be maintained an office or agency where (a) Notes may be presented for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for purchase or payment ("Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agents. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee of the name and address of 21 27 any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and agent for service of notices and demands in connection with the Notes. SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. Except as otherwise provided herein, prior to each due date of the principal, premium, if any, and interest on any Note, the Company shall deposit with the Paying Agent a sum of money sufficient to pay such principal, premium, if any, and interest or Liquidated Damages so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, and interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes) and shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the request of the Trustee, forthwith pay to the Trustee all money so held in trust and account for any money disbursed to it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. SECTION 2.05 HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing, within five Business Days of such request, a list in such form as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06 Transfer and Exchange. --------------------- (1) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive Notes are presented to the Registrar with the request to register the transfer of the Definitive Notes, or to exchange such Definitive Notes for an equal principal amount of Definitive Notes of 22 28 other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided, however, that the Definitive Notes presented or surrendered for registration of transfer or exchange: (a) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Holder thereof or by an attorney who is duly authorized in writing to act on behalf of the Holder; and (b) shall, in the case of a Transfer Restricted Security, be accompanied by the following additional information and documents, as applicable: (i) if such Transfer Restricted Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); or (ii) if such Transfer Restricted Securities are being transferred (1) to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A under the Securities Act or (2) pursuant to an exemption from registration in a transaction meeting the requirements of Rule 144 under the Securities Act (based upon an Opinion of Counsel if the Company so requests) or (3) pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (iii) if such Transfer Restricted Securities are being transferred to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto); (iv) if such Transfer Restricted Securities are being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based on an Opinion of Counsel if the Company so requests), certification to that effect from such Holder (in substantially the form of Exhibits B and D hereto); or 23 29 (v) if such Transfer Restricted Securities are being transferred in reliance on another exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such Holder (in substantially the form of Exhibit B hereto). (2) TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Holder thereof or by an attorney who is duly authorized in writing to act on behalf of the Holder, together with: (a) if such Definitive Note is being delivered to the Trustee by a Holder, without transfer, to enable such Holder to obtain a beneficial interest in a Global Note, a certification from such Holder to that effect (in substantially the form of Exhibit B hereto); provided that such Holder provides a certification that such Holder is otherwise permitted to hold a beneficial interest in a Global Note; (b) if such Definitive Note is a Transfer Restricted Security and is being transferred, certification, substantially in the form of Exhibit B hereto, that either (A) such Definitive Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A under the Securities Act, (B) to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), provided that the Trustee receives a certification from such transferee (in substantially the form of Exhibit C hereto), or (C) to a foreign person outside the U.S. pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based upon an Opinion of Counsel if the Company so requests), provided, that the Trustee receives a certification from such transferor (in substantially the form of Exhibit D hereto); and (c) whether or not such Definitive Note is a Transfer Restricted Security, written instructions directing the Trustee to cause, or directing the Note Custodian to cause in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased; then the Trustee shall cancel such Definitive Note in accordance with Section 2.01 hereof and cause, or direct the Note Custodian to cause, in accordance with the standing instructions and 24 30 procedures existing between the Depository and the Note Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased accordingly. If no Global Notes are then outstanding, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, and an agreement with the Depository in customary form and substance acceptable to the Trustee, the Trustee shall authenticate a new Global Note in the appropriate principal amount. (3) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture and the procedures of the Depository therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act; provided, however, that neither the Trustee nor the Registrar shall have any obligation to monitor or restrict the transfer of any beneficial interest in the Notes transferable through the book-entry facilities of the Depository. (4) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A DEFINITIVE NOTE. (a) Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Definitive Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (i) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (in substantially the form of Exhibit B hereto); or (ii) if such beneficial interest is being transferred (1) to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A under the Securities Act or (2) pursuant to an exemption from registration in a transaction meeting the requirements of Rule 144 under the Securities Act (based upon an Opinion of Counsel if the Company so requests) or (3) pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto); or (iii) if such beneficial interest is being transferred to an institutional "accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from 25 31 the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such transferor (in substantially the form of Exhibit B hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto); or (iv) if such beneficial interest is being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based upon an Opinion of Counsel if the Company so requests), certifications to that effect from such transferor (in substantially the form of Exhibits B and D hereto); and (v) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act (based upon an Opinion of Counsel if the Company so requests), a certification to that effect from such transferor (in substantially the form of Exhibits B and D hereto); then the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, cause the aggregate principal amount of Global Notes to be reduced accordingly and, following such reduction, the Company shall execute and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the transferee a Definitive Note in the appropriate principal amount. (b) Definitive Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.06(4) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Notes to or as directed by the Persons in whose names such Notes are so registered. (5) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provisions of this Indenture (other than the provisions set forth in subsection (6) of this Section 2.06), a Global Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (6) Authentication Of Definitive Notes. If at any time: ---------------------------------- 26 32 (a) the Company notifies the Trustee in writing that the Depository for the Notes is no longer willing or able to act as Depository for the Global Notes and a successor Depository for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (b) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture; then the Company will execute, and the Trustee, upon receipt of an Officers' Certificate requesting the authentication and delivery of Definitive Notes, will authenticate and deliver Definitive Notes, in an aggregate principal amount equal to the principal amount of the Global Notes, in exchange for such Global Notes and registered in such names as the Depository shall instruct the Trustee or the Company in writing. (7) LEGENDS. (a) Except as permitted by the following paragraphs (c) and (d), each Note certificate evidencing the Global Notes and the Definitive Notes (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form until after the second anniversary of the later of the date of original issuance of the Note and the last day on which the Company or any Affiliate of the Company was the owner of such Note (or any predecessor Note or any beneficial interest therein): "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, 27 33 SELL OR OTHERWISE TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, OR TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (F) OUTSIDE THE U.S. TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN THE CASE OF CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE." (b) Each Global Note shall also bear the following legend: 28 34 UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE CIRCUMSTANCES SET FORTH IN SECTION 2.06 OF THE INDENTURE, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.06 OF THE INDENTURE. (c) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act: (i) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the legend set forth in clause (a) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (ii) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in clause (a) above if all other interests in such 29 35 Global Note have been or are concurrently being sold or transferred pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, but such Transfer Restricted Securities shall continue to be subject to the provisions of Section 2.06(3) hereof; provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Definitive Note that does not bear a legend set forth in clause (a) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B hereto). (d) Notwithstanding the foregoing, upon consummation of the Exchange Offer, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate Series B Notes in exchange for Series A Notes accepted for exchange in the Exchange Offer, which Series B Notes shall not bear the legend set forth in clause (a) above, and the Registrar shall rescind any restriction on the transfer of such Notes, in each case unless the Holder of such Series A Notes is either (A) a broker-dealer, (B) a Person participating in the distribution (within the meaning of the Securities Act) of the Series A Notes or (C) a Person who is an affiliate (as defined in Rule 501 under the Securities Act) of the Company. The Company shall identify to the Trustee such Holders of the Notes in a written certification signed by an Officer of the Company and, absent certification from the Company to such effect, the Trustee shall assume that there are no such Holders. (e) By its acceptance of any Note bearing the legend set forth in Section 2.06(7)(a) hereof, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in such legend and agrees that it will transfer such Note only as provided in this Indenture. (8) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTE. At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be returned to or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an endorsement shall be made on such Global Note, by the Trustee or the Note Custodian, at the direction of the Trustee to reflect such reduction. (9) General Provisions with Respect to Transfer and Exchange. -------------------------------------------------------- 30 36 (a) To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, pursuant to the terms of this Indenture, Definitive Notes and Global Notes at the Registrar's request. (b) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchange or transfer pursuant to Section 2.09, 3.01, 4.11, 4.12, and 9.05 hereof). (c) Neither the Company nor the Registrar shall be required to register the transfer or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (d) All Definitive Notes and Global Notes issued upon any registration of transfer or exchange of Definitive Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefit under this Indenture as the Definitive Notes or Global Notes surrendered upon such registration of transfer or exchange. (e) The Company shall not be required to issue or register the transfer or exchange of Notes during a period beginning at the opening of 15 days before the day of any selection of Notes for redemption under Section 3.02 and ending at the close of business on the day of selection. (f) Prior to due presentment for registration of transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, and premium, interest and Liquidated Damages, if any, on such Note, and neither the Trustee, any Agent nor the company shall be affected by notice to the contrary. (g) The Trustee shall authenticate Definitive Notes and Global Notes in accordance with the provisions of Section 2.02 hereof. (h) Neither the Company nor the Trustee shall be liable for any delay by the Depository in identifying the beneficial owners of the Notes and each such Person may conclusively rely on, and shall be protected in relying on, instructions from the Depository for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of any Notes to be issued). 31 37 (i) Members of, or participants in, the Depository shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as the Note Custodian, or under the Global Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (x) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or (y) impair, as between the Depository and members of, or participants in, the Depository, the operation of customary practices governing the exercise of the rights of a Holder of any Note. SECTION 2.07 REPLACEMENT NOTES. If any mutilated Note is surrendered to the Company or the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request, the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Upon the issuance of new Notes under this Section 2.07, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Note issued pursuant to this Section 2.07 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefit of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 32 38 SECTION 2.08 OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS' ACTION. Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those referred to in Section 2.07 hereof, or purchased by the Company pursuant to Article 3 hereof and those described in this Section 2.08 as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate thereof holds the Note; PROVIDED, HOWEVER, that in determining whether the holders of the requisite principal amount of Notes have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company, any other obligor upon the Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee knows based upon an examination of the Register to be so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time of such determination shall be considered in any such determination (including determinations pursuant to Articles 6 and 9). If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the Paying Agent (other than the Company) holds, in accordance with this Indenture, at maturity or on a Redemption Date, money sufficient to pay the Notes payable on that date, then immediately on the date of maturity or such Redemption Date, as the case may be, such Notes shall cease to be outstanding and interest, if any, on such Notes shall cease to accrue. SECTION 2.09 TEMPORARY NOTES. Pending the preparation of Definitive Notes, the Company may execute, and upon receipt of an Officers' Certificate from the Company, the Trustee shall authenticate and make available for delivery, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers of the Company executing such Notes may determine, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Company will cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 2.03 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and the Trustee, upon receipt of an Officers' Certificate from the Company, shall authenticate and make available for delivery in exchange therefor a like principal amount of Definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes. 33 39 SECTION 2.10 CANCELLATION. All Notes surrendered for payment, purchase by the Company, redemption by the Company pursuant to Article 3 hereof, or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and made available for delivery hereunder which the Company may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Trustee. The Company may not reissue, or issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.10, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be destroyed by the Trustee. SECTION 2.11 CUSIP NUMBER. The Company, in issuing the Notes may use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification number printed on the Notes and any redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.12 DEFAULTED INTEREST. If the Company defaults on a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest (as provided in Section 4.01), to the Persons who are Holders on a subsequent special record date, and such special record date, as used in this Section 2.12 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. The Company may also pay defaulted interest in any other lawful manner. SECTION 2.13 LIQUIDATED DAMAGES UNDER REGISTRATION RIGHTS AGREEMENT. Under certain circumstances, the Company shall be obligated to pay certain Liquidated Damages to the Holders, all as set forth in Section 2 of the Registration Rights Agreement. In any such case, and for all purposes hereunder, the Trustee shall rely conclusively upon the Company's certification as to the existence and amount of any obligation to pay any such Liquidated Damages, and as to any other matters pertaining thereto. 34 40 ARTICLE 3 REDEMPTION ---------- SECTION 3.01 RIGHT TO REDEEM; NOTICES TO TRUSTEE. At any time on and after March 15, 2002, the Company, at its option, may redeem the Notes for cash in accordance with this Article 3 and the provisions of paragraph 6 of the Notes. If the Company elects to redeem Notes pursuant to paragraph 6 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.01 at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED. If less than all the outstanding Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed by lot or, if such method is prohibited by the rules of any stock exchange on which the Notes are then listed, any other method the Trustee considers reasonable. The Trustee shall make the selection at least 30 but not more than 60 days before the Redemption Date from outstanding Notes not previously called for redemption. Notes and portions of them the Trustee selects shall be in principal amount of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be redeemed. SECTION 3.03 NOTICE OF REDEMPTION. At least 30 days but not more than 60 day before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first-class mail, postage prepaid, to each Holder of Notes to be redeemed at the Holder's last address as it shall appear on the registry book. A copy of such notice shall be mailed to the Trustee on the same day the notice is mailed to Holders of Notes. The notice shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the CUSIP number (subject to the provisions of Section 2.11 hereof); (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (6) if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed; and 35 41 (7) that, unless the Company defaults in making such redemption payment together with accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date, interest will cease to accrue on Notes called for redemption on and after the Redemption Date. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; PROVIDED, HOWEVER, that in all cases, the text of such notice of redemption shall be prepared or approved by the Company and the Trustee shall have no responsibility whatsoever with regard to such notice being accurate or correct. SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is given, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon the later of the Redemption Date and the date such Notes are surrendered to the Paying Agent, such Notes called for redemption shall be paid at the Redemption Price if money sufficient for that purpose has been deposited as provided in Section 3.05 hereof. Notice of redemption shall be deemed to be given when mailed in the manner provided in Section 3.03, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the Notes. SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. Prior to the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption which prior thereto have been delivered by the Company to the Trustee for cancellation. SECTION 3.06 NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall execute, and the Trustee shall authenticate at the expense of the Company and make available for delivery to the Holder, a new Note in an authorized denomination equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE 4 COVENANTS --------- SECTION 4.01 PAYMENT OF NOTES. The Company shall pay the principal of, premium, if any, and interest (including interest accruing on or after the filing of a petition in bankruptcy or reorganization relating to the Company, whether or not a claim for post-filing interest is allowed in such proceeding) on the Notes on (or prior to) the dates and in the manner provided 36 42 in the Notes or pursuant to this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the applicable date due if on such date the Trustee or the Paying Agent shall have received before 12:00 noon on such date and shall then hold, in accordance with this Indenture, money sufficient to pay all of such installment then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. If any Liquidated Damages become payable, the Company shall not later than three Business Days prior to the date that any payment of Liquidated Damages is due (i) deliver an Officers' Certificate to the Trustee setting forth the amount of Liquidated Damages payable to Holders and (ii) instruct the Paying Agent to pay such amount of Liquidated Damages to Holders entitled to receive such Liquidated Damages. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest and Liquidated Damages, if any (including interest accruing on or after the filing of a petition in bankruptcy or reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), to the extent lawful, at 2% above the rate per annum borne by the Notes, which interest on overdue interest shall accrue from the date such amounts became overdue. SECTION 4.02 Reports. ------- (1) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information with the SEC for public availability (unless the SEC will not accept such filing) and make such information available to investors or prospective investors who request it in writing. (2) If the Company is not subject to and in compliance with the informational requirements of Sections 13 or 15(d) of the Exchange Act at any time while the Notes constitute "restricted securities" within the meaning of the Securities Act, it will furnish to the Holders of the Notes and prospective purchasers of the Notes designated by Holders of the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company either exchanges all of the Notes for the Exchange Notes or has registered under the Securities Act and continues to maintain a registration statement with respect to the resale of all of the Notes pursuant to the Registration Rights Agreement. 37 43 (3) Upon qualification of this Indenture under the TIA, the Company shall also comply with the provisions of TIA [section].314(a). (4) For so long as any Transfer Restricted Securities remain outstanding, the Company shall, if it is not subject to and in compliance with the informational requirements of Section 13 or 15(d) of the Exchange Act, furnish to all Holders or beneficial owners of Notes and prospective purchasers of the Notes designated by the Holders of Transfer Restricted Securities, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (5) The Company shall deliver directly, or shall at its own expense provide the Trustee with a sufficient number of copies thereof for delivery at the Company's expense by the Trustee, all reports and other documents and information that the Company may be required to deliver to the Holders under this Section 4.02. SECTION 4.03 Compliance Certificates. ----------------------- (1) The Company shall deliver to the Trustee within 90 days after the end of each of the Company's fiscal years an Officers' Certificate executed by Officers of the Company, stating whether or not the signers know of any Default or Event of Default. Such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Company as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 4.03(1), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If they do know of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default, and its status. (2) So long as not contrary to the then current recommendation of the American Institute of Certified Public Accountants, the Company shall deliver to the Trustee within 125 days after the end of each fiscal year a written statement by the Company's independent certified public accountants stating (a) that their audit examination has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, and (b) whether, in connection with their audit examination, any Default has come to their attention and, if such a Default has come to their attention, specifying the nature and period of the existence thereof; PROVIDED, HOWEVER, that the independent certified public accountants delivering such statement shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with GAAP. (3) The Company shall deliver to the Trustee as soon as possible and in any event within 15 days after the Company becomes aware of the occurrence of each Default or 38 44 Event of Default, which is continuing, an Officers' Certificate setting forth the details of such Default or Event of Default, and the action which the Company proposes to take with respect thereto. SECTION 4.04 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.05 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain or cause to be maintained an office or agency of the Trustee, Registrar and Paying Agent where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer, exchange or redemption and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The corporate trust office of the Trustee at the address specified in Section 10.02 hereof shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of any change of location of such office or agency. If at any time the Company shall fail to maintain or cause to be maintained any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 10.02 hereof. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in location of any such other office or agency. SECTION 4.06 LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend on, or make any distribution in respect of the Company's or any such Restricted Subsidiary's Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by the Company or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of the Company or such Restricted Subsidiary, as the case may be; (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of the Company or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by the Company or any Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary); (iii) prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date any Indebtedness of the Company that is subordinate in right of payment to the Notes (other than in connection with any refinancing of such Indebtedness permitted by this Indenture); or (iv) make any Investment other than Permitted Investments (each such action described in any of clauses (i) through (iv) above being referred to as a "Restricted Payment"), if, at the time of such Restricted Payment, 39 45 (1) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (2) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the issue date of the Notes (including, without duplication, Restricted Payments described in the next succeeding paragraph), exceeds the sum of (A) 50% of the cumulative Consolidated Net Income of the Company for the period commencing on January 1, 1997 through the last day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (provided that if the amount of such cumulative Consolidated Net Income divided by the number of full fiscal quarters of the Company in the applicable period exceeds $5,250,000, then such amount shall equal (i) 50% of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period plus (ii) 75% of the amount in excess of the product of $5,250,000 multiplied by the number of full fiscal quarters in such period) (or, if the cumulative Consolidated Net Income of the Company shall be a deficit, minus 100% of such deficit); (B) the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by the Company (other than from a Restricted Subsidiary of the Company) from the issuance and sale of either Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of the Company (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock; (C) an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by the Company or any of its Restricted Subsidiaries after the date of the issuance of the Notes as a dividend or other distribution from any Unrestricted Subsidiary; (D) the Fair Market Value of any Investment held by either the Company or any Restricted Subsidiary of the Company in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of this Indenture; and (E) $35,000,000; or (3) the Company could not incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of Section 4.07 hereof. The foregoing provisions shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof, (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of this Indenture; (ii) the declaration and payment by a Restricted Subsidiary of the Company which is required to file periodic reports under Section 13 or 15(d) of the Exchange Act (a "Reporting Subsidiary") of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends, provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for 40 46 the immediately preceding fiscal year; (iii) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of the Company or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $2,500,000 in the aggregate in any fiscal year of the Company; (iv) the prepayment, repayment, purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any or all of the 9 7/8% Notes at any time within one year of the scheduled maturity date thereof; and (v) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company. SECTION 4.07 LIMITATION ON ADDITIONAL INDEBTEDNESS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an "incurrence") any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that the Company may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of the Company for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0. The foregoing limitations set forth in this Section 4.07 shall not apply, without duplication, to: (i) Existing Indebtedness; (ii) Indebtedness of (a) the Company represented by the Notes and this Indenture or (b) any Subsidiary Guarantor under any Subsidiary Guaranty; (iii) Indebtedness of the Company and its Restricted Subsidiaries under the Company Credit Facility; provided, that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iii) and outstanding on such date, shall not exceed the greater of (a) $75,000,000 and (b) the sum of 85% of Eligible Receivables of the Company and its Subsidiaries, plus 65% of Eligible Inventory of the Company and its Subsidiaries; (iv) Indebtedness of (a) Broan Limited and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan Limited 41 47 Credit Facility; provided that (1) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iv) and outstanding on such date, shall not exceed the greater of (x) $30,000,000 (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan Limited and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (iii) above) and (2) such Indebtedness shall be secured only by Liens on assets of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries; and (b) the Company under its limited guaranty of not more than $20,000,000 (Canadian) of the Indebtedness of Broan Limited and the Canadian Subsidiaries which are Restricted Subsidiaries under the Broan Limited Credit Facility; (v) Indebtedness of Universal-Rundle Corporation for facility expansion or improvement or joint venture investment purposes not exceeding at any time $6,000,000 in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of Universal-Rundle Corporation or the applicable joint venture; (vi) Indebtedness of the Company to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary, provided that such Indebtedness is contractually subordinated in right of payment to the Notes, or Indebtedness of any Subsidiary of the Company that is a Restricted Subsidiary to the Company or to any other Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary, provided that if the Company or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly- Owned Subsidiary of the Company that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of the Company; (vii) Indebtedness of a Restricted Subsidiary under a guaranty of Indebtedness of the Company (other than the Notes) which causes such Restricted Subsidiary to become a Subsidiary Guarantor pursuant to the provisions of Section 4.14 hereof; 42 48 (viii) Indebtedness of the Company and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements, provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements relate to Indebtedness permitted to be incurred under this Indenture and the notional principal amount of the obligations of the Company and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (ix) Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers; (x) Indebtedness incurred by the Company and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30,000,000 in aggregate outstanding principal amount; (xi) Acquired Indebtedness incurred by a Restricted Subsidiary of the Company to the extent such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Section 4.07, after giving pro forma effect to the acquisition of such Restricted Subsidiary by the Company; (xii) Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of this Indenture if immediately prior to such designation such Subsidiary was an Unrestricted Subsidiary, provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by the Company under the limitations set forth in the preceding paragraph of this Section 4.07 (assuming for purposes of this clause (xii) only that the Consolidated Cash Flow Coverage Ratio set forth in such paragraph were 2.25 to 1.0); and provided further that, none of the Company or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent the Company or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of 43 49 this Section 4.07 (other than solely in accordance with clause (vi) above or this clause (xii)). (xiii) Indebtedness of the Company and its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds incurred or provided in the ordinary course of business; (xiv) Indebtedness of (a) Nortek (UK) Limited and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek (UK) Limited and its Subsidiaries and (b) the Company under its limited guaranty of not more than $10,000,000 of any such Indebtedness of Nortek (UK) Limited and its Subsidiaries; (xv) other Indebtedness of the Company and its Restricted Subsidiaries not to exceed at any time $25,000,000 in aggregate outstanding principal amount; (xvi) Liens permitted under Section 4.09; and (xvii) Indebtedness ("Refinancing Indebtedness") created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute or refund ("refinance"), Indebtedness described in the preceding paragraph or referred to in clauses (i) through (xv) above; provided, however, that (a) the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced, shall not exceed (1) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (iii) through (v) and (xv) above, an amount which, when added to all other Indebtedness outstanding under such clause, shall not exceed the aggregate amount of Indebtedness permitted to be incurred under such clause, and (2) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (i), (ii) and (vi) through (xiii) above, the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness; (b) such Refinancing Indebtedness 44 50 shall be subordinated in right of payment to the Notes at least to the same extent as the Indebtedness to be refinanced; (c) such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence; (d) the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of the Company, shall not be used to refinance Indebtedness of the Company or another Subsidiary of the Company; and (e) the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced. For purposes of this Section 4.07, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness. SECTION 4.08 LIMITATION ON SALE OR ISSUANCE OF PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not (i) permit any of its Restricted Subsidiaries to issue or sell to any Person except the Company or a Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or (ii) sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued or sold to the Company or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (other than to the issuer of such preferred stock, the Company or another Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary). SECTION 4.09 LIMITATION ON LIENS. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any Principal Property or on any shares of Capital Stock of any Restricted Subsidiary of the Company held by the Company or any other Restricted Subsidiary of the Company or on any Indebtedness owed by any Restricted Subsidiary to the Company or any other Restricted Subsidiary of the Company. The foregoing limitation does not apply to: (i) Liens securing obligations under the Notes; (ii) Liens securing obligations under the Company Credit Facility (but such Liens shall not secure Indebtedness in excess of the amount of Indebtedness then permitted to be incurred under clause (iii) of the second paragraph of Section 4.07 plus the amount of any Indebtedness then outstanding pursuant to such clause (iii)); (iii) other Liens existing on the Closing Date; 45 51 (iv) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted Subsidiary that is a Wholly-Owned Subsidiary of the Company to secure Indebtedness owing to the Company or such Wholly-Owned Subsidiary by such Restricted Subsidiary; (v) Liens permitted by clauses (iv), (v), (x), (xiii) and (xiv) of Section 4.07; (vi) Liens granted in connection with the extension, renewal or refinancing, in whole or in part, of any Indebtedness under the Notes or described in clause (iii) above; provided that (1) such new Indebtedness is permitted to be incurred under Section 4.07 and (2) the amount of Indebtedness secured by such Lien is not increased thereby; and provided, further, that the extension, renewal or refinancing of Indebtedness of the Company may not be secured by Liens on assets of any Restricted Subsidiary other than to the extent the Indebtedness being extended, renewed or refinanced was at any time previously secured by Liens on assets of such Restricted Subsidiary; and (vii) Permitted Liens. SECTION 4.10 LIMITATION ON CERTAIN RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by the Company or any of its Restricted Subsidiaries, (ii) pay or repay any Indebtedness owed to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iii) make loans or advances to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, (iv) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary or (v) guarantee any Indebtedness of the Company or any other Restricted Subsidiary of the Company except, in each case, for such encumbrances or restrictions existing under or by reason of (a) applicable law, (b) the Indenture, (c) customary nonassignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries, (d) any instrument governing Indebtedness of a Person acquired by the Company or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired, (e) agreements existing as of the issue date of the Notes, (f) the Company Credit Facility, (g) the Broan Limited Credit Facility, (h) any other agreement pursuant to which any Restricted Subsidiary of the Company incurs Indebtedness in accordance with Section 4.07 and (i) any 46 52 agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (d), (e), (f), (g) or (h) above, provided that the terms and conditions of any such encumbrances and restrictions are not materially less favorable to the Holders than those under the agreement or instrument evidencing the Indebtedness being refinanced. The foregoing shall not restrict the ability of any Restricted Subsidiary of the Company to grant any Lien to the extent otherwise permitted in this Indenture. SECTION 4.11 REPURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder will have the right to require the repurchase of all or any part of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Immediately following any Change of Control, the Company is required to mail a notice to the Trustee and to each Holder stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.11 of this Indenture and that all Notes tendered will be accepted for payment; (ii) the amount of the Change of Control Payment and the purchase date (the "Change of Control Payment Date"), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed; (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment thereof, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes (or book-entry notation made with respect thereto) equal in principal amount to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new Note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 or an integral multiple thereof. On the Change of Control Payment Date, the Company will, to the extent lawful: (i) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn; (ii) deposit with the Paying Agent an amount sufficient to pay the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn; and (iii) deliver or cause to be delivered to the Trustee all Notes so tendered and not withdrawn together with an Officers' Certificate specifying the Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Change of Control Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder a new Note (or cause to be transferred by book entry) equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such 47 53 new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. A "Change of Control" will be deemed to have occurred at such time as any of the following events occur: (i) there is consummated any consolidation or merger of the Company with or into another corporation, or all or substantially all of the assets of the Company are sold, leased or otherwise transferred or conveyed to another Person (other than pursuant to a bona fide pledge of assets to secure Indebtedness made in accordance with this Indenture), and the holders of the Company's common stock outstanding immediately prior to such consolidation, merger, sale, lease or other transfer or conveyance or one or more Exempt Persons do not hold, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or at least a majority of the Equity Interests of such Person; (ii) there is filed a report on Schedule 13D or 14D-1 (or any successor schedule, form or report) pursuant to the Exchange Act disclosing that any person (defined, solely for the purposes of the Change of Control provision, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the combined voting power of all the Company's then outstanding securities entitled to vote generally for the election of directors; provided, however, that a person shall not be deemed to be the beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board 48 54 of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred under clause (ii) of the immediately preceding paragraph solely by virtue of the Company, any Subsidiary of the Company, any employee stock ownership plan or any other employee benefit plan of the Company or any such Subsidiary, any other Person holding securities of the Company for or pursuant to the terms of any such employee benefit plan, or any Exempt Person, filing or becoming obligated to file a report on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of securities of the Company, whether in excess of 50% of the combined voting power of the Company's then outstanding securities entitled to vote generally for the election of directors or otherwise. SECTION 4.12 LIMITATION ON USE OF PROCEEDS FROM ASSET SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and (ii) at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, "Cash Proceeds") or indebtedness for borrowed money of the Company or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of the Company whose stock is purchased by the transferee. Any Net Cash Proceeds (a) in excess of the amount of cash applied by the Company or any Restricted Subsidiary of the Company during the period beginning 12 months prior to the date of the Asset Sale (but not prior to the issue date of the Notes) and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by the Company and its Subsidiaries as of the issue date of the Notes or at the date of such Asset Sale and (b) not applied within 12 months after the date of the Asset Sale to reduce Indebtedness of the Company (other than Indebtedness which is subordinated by its terms to the Notes) or any Restricted Subsidiary shall be deemed to be "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15,000,000, the Company shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to purchase the Notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the principal amount plus accrued and unpaid interest, if any, thereon and Liquidated Damages, if any, to the date fixed for the closing of such offer, substantially in accordance with the procedures for a Change of Control Offer described in Section 4.11. To the extent that the aggregate amount of Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company may use the remaining Excess 49 55 Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate principal amount of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the Notes. SECTION 4.13 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Except as otherwise permitted by this Indenture, neither the Company nor any of its Restricted Subsidiaries shall make any Investment, loan, advance, guaranty or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless (i) such transaction or series of transactions is in the best interests of the Company or such Restricted Subsidiary based on all relevant facts and circumstances; (ii) such transaction or series of transactions is fair to the Company or such Restricted Subsidiary and on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arms' length basis from a Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and (iii) (a) with respect to a transaction or series of related transactions involving aggregate payments in excess of $2,500,000, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions complies with clauses (i) and (ii) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $10,000,000, the Company receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to the Company from a financial point of view. The foregoing limitation shall not apply to: (i) any payment of money or issuance of securities by the Company or any Restricted Subsidiary of the Company pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors' and officers' liability insurance; (ii) reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of the Company or any of its Restricted Subsidiaries and reimbursement of expenses related thereto; or (iii) transactions between the Company and any Restricted Subsidiary of the Company, or between one Restricted Subsidiary of the Company and another Restricted Subsidiary of the Company, provided that not more than 20% of such Restricted Subsidiary is owned by any Affiliate of the Company or any of its Restricted Subsidiaries (other than the Company or a Wholly-Owned Subsidiary of the Company). SECTION 4.14 LIMITATION ON GUARANTIES BY SUBSIDIARIES. The Company shall not permit any Restricted Subsidiary of the Company, directly or indirectly, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Company or any Subsidiary Guarantor (other than the Notes), unless (a) such liability is in respect of the Company Credit 50 56 Facility or (b) such Restricted Subsidiary is a Subsidiary Guarantor or simultaneously executes and delivers (i) to the Company and the Trustee a supplemental indenture to this Indenture providing for a Subsidiary Guaranty of the Notes by such Restricted Subsidiary and any other Subsidiary Guarantors by adding an Article 11 to this Indenture, in the form of Exhibit E hereto and (ii) to the Trustee a Subsidiary Guaranty substantially in the form of Exhibit F hereto. No Lien on the properties or assets of any Restricted Subsidiary of the Company permitted by Section 4.09 shall constitute a guaranty of the payment of any Indebtedness of the Company for purposes of this Section 4.14. The provisions of this Section 4.14 and any supplemental indenture referred to in this Section 4.14 shall cease to have further force and effect (and if there then exists any Subsidiary Guarantor, such Subsidiary Guarantor will be deemed to be released from all obligations under its Subsidiary Guaranty) at such time as Section 4.15 in the indenture governing the Company's 9 7/8% Notes shall cease to have further force and effect (whether by reason of amendment, redemption or repayment of such Indebtedness or otherwise), provided, however, that if the instrument or other agreement governing any Indebtedness incurred to refinance the 9 7/8% Notes includes such a covenant similar to Section 4.15 of the indenture governing the 9 7/8% Notes, the provisions of this Section 4.14 and any supplemental indenture referred to in this Section 4.14 shall continue in full force and effect for so long as such similar covenant remains in force and effect. SECTION 4.15 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before any penalty accrues thereon, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries upon the income, profits or property of the Company or any of its Subsidiaries and (ii) all material lawful claims for labor, materials and supplies which, if unpaid, would by law become a Lien upon the property of the Company or any of its Subsidiaries; provided that none of the Company or any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claims the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders. SECTION 4.16 CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of any of its Subsidiaries in accordance with the respective organizational documents of such Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any such Subsidiary, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not 51 57 adverse in any material respect to the Holders. SECTION 4.17 MAINTENANCE OF PROPERTIES AND INSURANCE. The Company shall cause all material properties owned by or leased to it or any of its Subsidiaries and used or useful in the conduct of its business or the business of such Subsidiary to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.17 shall prevent the Company or any of its Subsidiaries from discontinuing the maintenance of any such properties, if such discontinuance is desirable in the conduct of its business or the business of such Subsidiary The Company shall provide or cause to be provided, for itself and any of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, public liability insurance, with reputable insurers in such amounts with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. SECTION 4.18 STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not resort to any such law that would hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.19 INVESTMENT COMPANY ACT. The Company shall not become an investment company subject to registration under the Investment Company Act of 1940, as amended. SECTION 4.20 PAYMENTS FOR CONSENTS. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. SECTION 4.21 COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF NOTES. In connection with any offer to purchase or purchase of Notes under Section 4.11 or 4.12 hereof, the Company shall (i) comply with Rule 14e-1 under the Exchange Act, and (ii) otherwise comply 52 58 with all Federal and state securities laws so as to permit the rights and obligations under Sections 4.11 and 4.12 hereof to be exercised in the time and in the manner specified in Sections 4.11 and 4.12 hereof. ARTICLE 5 SUCCESSOR CORPORATION --------------------- SECTION 5.01 When the Company May Merge or Transfer Assets, Etc. --------------------------------------------------- (a) The Company shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, unless: (1) the Company shall be the continuing Person, or the Person, if other than the Company, formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company or of the Company and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental to this Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture, and this Indenture remains in full force and effect; (2) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (3) the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the "surviving entity"), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness under the first paragraph of Section 4.07 hereof; (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of the Company immediately before such transaction; and (5) each Subsidiary Guarantor, if any, unless it is the other party to the applicable transaction described above or its Subsidiary Guaranty, after giving effect to such transaction, is to be released in accordance with the terms hereof and of such Subsidiary 53 59 Guaranty, shall have confirmed by supplemental indenture that its Subsidiary Guaranty shall apply to the obligations of the Company or the surviving entity under this Indenture. In connection with any such consolidation, merger or transfer, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with this Section 5.01(a) and that all conditions precedent provided for relating to such transactions have been complied with. (b) A Subsidiary Guarantor shall not, and the Company shall not permit a Subsidiary Guarantor to, consolidate with, or merge with or into, any Person unless its Subsidiary Guaranty, after giving effect to such merger or consolidation, is to be released in accordance with the terms hereof and of such Subsidiary Guaranty or: (1) such Subsidiary Guarantor or the Company shall be the continuing person or the resulting or surviving person in such transaction ("the surviving entity") or the surviving entity shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume, by a supplemental indenture executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all of the obligations of such Subsidiary Guarantor under this Indenture, as modified by such supplemental indenture, and its Subsidiary Guaranty; and (2) immediately before and immediately after giving effect to such merger or consolidation, no Event of Default and no Default shall have occurred and be continuing. In connection with any such consolidation or merger, the Company shall deliver, or caused to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation or merger, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Section 5.01(b) and that all conditions precedent provided for in this Indenture relating to such transaction have been complied with. SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis, in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into which the Company or any Subsidiary Guarantor, as the case may be, is merged or the successor Person to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Subsidiary Guarantor, as the case may be, under this Indenture and, in the case of such Subsidiary Guarantor, under such 54 60 Subsidiary Guaranty, with the same effect as if such successor Person had been named as the Company in this Indenture or as such Subsidiary Guarantor in this Indenture and such Subsidiary Guaranty, as the case may be, and when a successor Person assumes all the obligations of its predecessor under this Indenture, the Notes or a Subsidiary Guaranty, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes. ARTICLE 6 DEFAULTS AND REMEDIES --------------------- SECTION 6.01 EVENTS OF DEFAULT. An "Event of Default" occurs if one of the following shall have occurred and be continuing: (1) the Company defaults in the payment, when due and payable, of (i) interest on or Liquidated Damages, if any, with respect to any Note and the default continues for a period of 30 days, or (ii) principal of or premium, if any, on any Notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise; (2) the Company fails to comply with any of its covenants or agreements under Article 5 hereof. (3) the Company fails to comply with any of its covenants or agreements in the Notes or this Indenture (other than those referred to in clause (1) or (2) above), or any Subsidiary Guarantor fails to comply with any of its covenants or agreements in this Indenture or its Subsidiary Guaranty, and in either case such failure continues for the period and after receipt by the Company of the notice specified below; (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such indebtedness or guaranty is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15,000,000 or more; 55 61 (5) the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding; (b) consents to the entry of an order for relief against it in an involuntary case or proceeding; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing its inability to pay its debts generally as they become due; (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding; (b) appoints a Custodian of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; (c) orders the liquidation of the Company or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary); (d) and in each case the order or decree remains unstayed and in effect for 60 days; (7) final judgments for the payment of money which in the aggregate exceed $15,000,000 shall be rendered against the Company or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days; or (8) any Subsidiary Guaranty ceases to be in full force and effect or is declared null and void, or any Subsidiary Guarantor denies that it has any further liability under any Subsidiary Guaranty or gives notice to such effect (in each case other than by reason of the termination of this Indenture or the release of such Subsidiary Guaranty in accordance with the terms of this Indenture and such Subsidiary Guaranty) and such condition shall 56 62 have continued for the period and after receipt by the Company of the notice specified below. "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. A Default under clause (3) or (8) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." In the case of any Event of Default (other than as a result of the failure to comply with Section 4.11) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay if the Company then had elected to redeem the Notes, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. In the case of an Event of Default as a result of a failure to comply with Section 4.11 hereof occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have to pay pursuant to Section 4.11, such premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to Section 6.02 hereof to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. SECTION 6.02 ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 6.01 hereof) occurs and is continuing, the Trustee may, by Notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare the unpaid principal, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to, the Notes to be due and payable immediately. If any Event or Default under clause (5) or (6) of Section 6.01 hereof occurs, all unpaid principal, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes then outstanding shall IPSO FACTO become and be immediately due and payable without declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee and to the Company may rescind an acceleration and its consequences (except an acceleration due to a default in payment of principal of, premium, if any, and accrued interest on and Liquidated Damages, if any, with respect to, the Notes) if all existing Events of Default have been cured or waived except non-payment of principal of, premium, if any, and accrued interest on and 57 63 Liquidated Damages, if any, that has become due solely because of the acceleration. SECTION 6.03 OTHER REMEDIES. If any Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Notes or does not produce any of the Notes in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, by notice to the Trustee (and without notice to any other Holder), may waive an existing Default or Event of Default and its consequences except (i) an Event of Default described in Section 6.01(1) hereof, or (ii) a Default in respect of a provision that under Section 9.02 hereof cannot be amended without the consent of each Holder affected. When a Default or Event of Default is waived, it is deemed cured and shall cease to exist, but no such wavier shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 6.05 CONTROL BY MAJORITY. The Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding may direct, by an instrument or concurrent instruments in writing delivered to the Trustee, the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability. Subject to the provisions of Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.06 LIMITATION ON SUITS. Except as provided in Section 6.07 hereof, a Holder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense satisfactory to the Trustee; 58 64 (4) the Trustee does not comply with the request within 30 days after receipt of the notice, the request and the offer of security or indemnity; and (5) the Holders of a majority in aggregate principal amount of the Notes at the time outstanding do not give the Trustee a direction inconsistent with the request during such 30-day period. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over any other Holder. SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the principal amount, premium, if any, or interest, or Liquidated Damages, if any, in respect of the Notes held by such Holder, on or after the respective due dates expressed in the Notes, any Redemption Date, any Change in Control Payment Date or any payment date respecting an Excess Proceeds Offer, or to bring suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default described in Section 6.01(1) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount owing with respect to the Notes and the amounts provided for in Section 7.07 hereof. SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or to any other obligor on the Notes or the property of such obligor, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of the principal amount, premium, if any, and interest on the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable 59 65 compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Holders for amounts due and unpaid on the Notes for the principal amount, premium, if any, interest, if any, and Liquidated Damages, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Notes; and THIRD: the balance, if any, to the Company or to the Person or Persons otherwise entitled thereto. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merit and good faith of the claims or defense made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holder of more than 10% in aggregate principal amount of the Notes at the time outstanding. SECTION 6.12 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture, any Note or any Subsidiary Guaranty and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, each Subsidiary Guarantor, if any, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 60 66 ARTICLE 7 TRUSTEE ------- SECTION 7.01 Duties of Trustee. ----------------- (1) If an Event of Default has occurred and is continuing (and is not cured), the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (2) Except during the continuance of an Event of Default: (a) the Trustee need perform only those duties that are specifically set forth in this Indenture and not others and no implied covenants or obligations shall be read into this Indenture against the Trustee and the duties of the Trustee shall be determined solely by the express provisions of this Indenture; and (b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificate or opinion which by any provision hereof is specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirement of this Indenture. The Trustee shall not be liable for any interest on any money received by it. (3) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its willful misconduct, except that: (a) this paragraph (3) does not limit the effect of paragraph (2) of this Section 7.01; (b) the Trustee shall not be liable for any error of judgment made in good faith by any Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.04 or 6.05 hereof. (4) Whether or not expressly so provided, every provision of this Indenture that 61 67 in any way relates to the Trustee is subject to paragraphs (1), (2), (3), (5) and (7) of this Section 7.01 and Section 7.02. (5) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives reasonable security or indemnity satisfactory to it against any loss, liability or expense. (6) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money held by it hereunder. (7) The Trustee shall not be deemed to have knowledge of the existence of any fact or matter unless such fact or matter is known to one of its Trust Officers. SECTION 7.02 Rights of Trustee. ------------------ (1) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in any such document but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters stated in any such document as it sees fit. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate and Opinion of Counsel. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (5) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (6) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security and indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. 62 68 SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Section 7.10 and 7.11 hereof. SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement in the registration statement for the Notes under the Securities Act of 1933, as amended (the "Securities Act") (other than statements contained in the Form T-1 filed with the SEC under the TIA) or in this Indenture or the Notes (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05 NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Holder as their names and addresses appear on the Note Register, notice of the Default within 90 days after it becomes known to the Trustee unless such Default shall have been cured or waived. Except in the case of a Default described in Section 6.01(1) hereof, the Trustee may withhold such notice if and so long as a committee of Trust Officers in good faith determines that the withholding of such notice is in the interests of Holders. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15th beginning with May 15, 1997, the Trustee shall mail to each Holder a brief report dated as of such May 15th in accordance with and to the extent required under Section 313 of the TIA. A copy of each report at the time of its mailing to Holders shall be filed with the Company, the SEC and each stock exchange on which the Notes are listed. The Company agrees to promptly notify the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof. SECTION 7.07 Compensation and Indemnity. The Company agrees: -------------------------- (1) To pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) To reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, disbursements and advances of its agents and counsel and other persons not regularly in 63 69 its employ), including all reasonable expenses, disbursements and advances incurred or made by the Trustee in connection with any membership on any creditor's committee, except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) To indemnify the Trustee, its officers, directors and shareholders, for, and to hold it harmless against, any and all loss, liability or expense, incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall have a claim and lien prior to the Notes as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 7.07, except with respect to funds held in trust for the payment of principal of, premium, if any, or interest on particular Notes. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee renders services or incurs expenses after the occurrence of a Default specified in Section 6.01(5) or (6) hereof, the compensation for services and expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08 REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation; PROVIDED, HOWEVER, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee subject to the consent of the Company. The Trustee shall resign if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by a Board Resolution, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall 64 70 become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. Subject to payment of all amounts owing to the Trustee under Section 7.07 hereof and subject further to its lien under Section 7.07, the retiring Trustee shall promptly transfer all property held by it as Trustee to successor Trustee. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including this Trusteeship) to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and (5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recently published annual report of condition. The Trustee shall comply with TIA Section 310(b). In determining whether the Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) shall be deemed incorporated herein. SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Notes), the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against the Company (or any such other obligor). ARTICLE 8 DISCHARGE OF INDENTURE ---------------------- SECTION 8.01 DISCHARGE OF LIABILITY ON NOTES. When (i) the Company delivers to the Trustee all outstanding Notes (other than Notes replaced pursuant to Section 2.07 hereof or Notes which are purchased pursuant to Section 4.11 or 4.12 hereof or Notes for whose payment money has theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.02 hereof) for cancellation or (ii) the Company irrevocably deposits with the Trustee money and/or direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the 65 71 United States is pledged ("U.S. Government Obligations"), maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of any reinvestment of such interest, to pay principal of, premium, if any, interest on, or Liquidated Damages with respect to the outstanding Notes (other than Notes replaced pursuant to Section 2.07 hereof) to maturity or redemption, as the case may be, in accordance with the terms of this Indenture and the Notes issued hereunder, and if in either case the Company pays all other sums payable here under by the Company, then this Indenture shall, subject to Sections 2.06 and 7.07 hereof, and each Subsidiary Guaranty, if any, shall except as to the obligations of the Subsidiary Guarantor thereunder in respect of such Sections, cease to be of further effect. The Trustee shall join in the execution of any documents prepared by the Company acknowledging satisfaction and discharge of this Indenture and each such Subsidiary Guaranty on written demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. In the case of any such deposit pursuant to clause (ii) above, the obligation to pay the principal of and any interest on such Notes and the obligations under Section 7.07 hereof shall continue until the Notes are paid in full (provided that the provisions of Section 7.07 hereof shall survive the payment of the Notes and discharge of the Indenture). The Company will be entitled to make such a deposit if the Company has delivered to the Trustee (i)(A) a ruling directed to the Trustee from the Internal Revenue Service to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of this Indenture and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred, or (B) an opinion of counsel, reasonably satisfactory to the Trustee, to the same effect as clause (i)(A) above, (ii) an Opinion of Counsel (who may be an employee of or counsel for the Company), and an Officers' Certificate in accordance with this Indenture and (iii) a report from a nationally recognized firm of independent public accountants stating that the amount of such deposit is sufficient to pay and discharge the amounts described in clause (ii) above with respect to the Notes. If the Trustee or Paying Agent is unable to apply any money in accordance with this Section 8.01 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company and each Subsidiary Guarantor under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with this Section 8.01; PROVIDED, HOWEVER, that if the Company or any Subsidiary Guarantor, as the case may be, makes any payment of interest on or principal of any Note following the reinstatement of its obligations, the Company or any Subsidiary Guarantor, as the case may be, shall be subrogated to the right of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. SECTION 8.02 REPAYMENT TO THE COMPANY OR SUBSIDIARY GUARANTORS. Subject to Section 7.07 hereof, the Trustee and the Paying Agent shall promptly pay to the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to such Subsidiary Guarantor, upon written request 66 72 any excess money or U.S. Government Obligations held by them at any time. The Trustee and the Paying Agent shall adhere to applicable law and appropriate regulations in the disposition of any unclaimed funds. After return to the Company or any SUBSIDIARY Guarantor, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. ARTICLE 9 AMENDMENTS ---------- SECTION 9.01 WITHOUT CONSENT OF HOLDERS. From time to time, when authorized by Board Resolutions of each of them, the Company and the Trustee, without notice to or the consent of the Holders of the Notes issued hereunder, may amend or supplement this Indenture or the Notes as follows: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article 5 hereof; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes so long as such uncertificated Notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended; (4) to make any other change that does not adversely affect the rights of any Holder; (5) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA; or (6) to add any Subsidiary of the Company as a Subsidiary Guarantor. SECTION 9.02 WITH CONSENT OF HOLDERS. With the consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, the Company and the Trustee may amend this Indenture or the Notes or may waive future compliance by the Company or any Subsidiary Guarantor with any provisions of this Indenture, the Notes or such Subsidiary Guarantor's Subsidiary Guaranty. However, without the consent of each Holder affected, a waiver or an amendment to this Indenture or the Notes may not: (1) reduce the percentage of principal amount of the Notes whose Holders must consent to an amendment or waiver; or (2) make any change to the Stated Maturity of the principal of, premium, if any, 67 73 or any interest on or Liquidated Damages, if any, with respect to, the Notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any Note payable in money or securities other than that stated in the Note; or (3) waive a default in the payment of the principal of, premium, if any, interest on, or Liquidated Damages with respect to any Note; (4) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guaranty or the Indenture other than in compliance with the terms of the Indenture and such Subsidiary Guaranty; or (5) make any change in the provisions of Sections 4.11, 4.12, 6.04 or 6.07 hereof; or (6) make any change to Section 9.01 or 9.02 hereof. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. In the event that certain Holders are willing to defer or waive certain obligations of the Company hereunder with respect to Notes held by them, such deferral or waiver shall not be deemed to affect any other Holder who receives the subject payment or performance in a timely manner. After an amendment or waiver under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment or waiver. SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA. SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS. Until an amendment, waiver or other action by Holders becomes effective, a consent to it or any other action by a Holder of a Note hereunder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same obligation as the consenting Holder's Note, even if notation of the consent, waiver or action is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the consent of the requisite aggregate principal amount of the Notes then outstanding has been obtained and not revoked. After an amendment, waiver or action becomes effective, it shall 68 74 bind every Holder, except as provided in Section 9.02 hereof. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver. If a record date is fixed, then, notwithstanding the first two sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES. Notes authenticated and made available for delivery after the execution of any supplemental indenture pursuant to this Article 9 may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and made available for delivery by the Trustee in exchange for outstanding Notes. SECTION 9.06 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing such amendment the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. SECTION 9.07 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article 9, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and made available for delivery hereunder shall be bound thereby. ARTICLE 10 MISCELLANEOUS ------------- SECTION 10.01 TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of subsection (c) of Section 318 of the TIA, the imposed duties shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that impose duties on any Person (including provisions automatically deemed included in an indenture unless the indenture provides that such provisions are excluded) are a part of and govern this Indenture, except as, and to the extent, expressly excluded from this Indenture, as permitted by the TIA. 69 75 SECTION 10.02 NOTICES. Any notice or communication shall be in writing and delivered in Person or mailed by first-class mail, postage prepaid, addressed as follows: if to the Company: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903-2360 Attention: Mr. Richard L. Bready if to any Subsidiary Guarantor: [Name of Guarantor] c/o Nortek Inc. 50 Kennedy Plaza Providence, RI 02903-2360 Attention: President if to the Trustee: State Street Bank and Trust Company 61 Broadway Concourse Level New York, NY 10006 -with a copy to- State Street Bank and Trust Company Two International Place - 4th Floor Boston, MA 02110 Attention: Corporate Trust Department The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Holder shall be mailed to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect 70 76 its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-registrar. SECTION 10.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each Person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, he has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 10.06 SEPARABILITY CLAUSE. In case any provision in this Indenture, the Notes or any Subsidiary Guaranty shall be invalid, illegal or unenforceable, the validity, legality and 71 77 enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.07 RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and Paying Agent may make reasonable rules for their functions. SECTION 10.08 LEGAL HOLIDAYS. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Notes, no principal, premium, if any, interest installment or Liquidated Damages, if any, shall accrue for the intervening period. SECTION 10.09 GOVERNING LAW. THIS INDENTURE, THE NOTES AND EACH SUBSIDIARY GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH OF THE PARTIES AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. SECTION 10.10 NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any obligations of such Subsidiary Guarantor under its Subsidiary Guaranty or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes. SECTION 10.11 SUCCESSORS. All agreements of the Company and any Subsidiary Guarantor in this Indenture, the Notes and any Subsidiary Guaranties shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.12 MULTIPLE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 72 78 SIGNATURES IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. NORTEK, INC. By: ----------------------------- Name: --------------------- Title: -------------------- STATE STREET BANK AND TRUST COMPANY By: ----------------------------- Name: --------------------- Title: -------------------- 73 79 EXHIBIT A [FORM OF FACE OF NOTE] NORTEK, INC. 9 1/4% [Series A/B] Senior Note due March 15, 2007 No. CUSIP No. --- ------- $ ---------- Nortek, Inc., a Delaware corporation ("the Company", which term includes any successor corporation under the Indenture hereinafter referred to), promises to pay to or its registered assigns, the principal amount of Dollars on March 15, 2007. Interest Payment Dates: March 15 and September 15, commencing September 15, 1997. Record Dates: March 1 and September 1. Reference is hereby made to the further provisions of this Note set forth on the following pages which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. NORTEK, INC. By: -------------------------- Name: Title: ATTESTED: By: --------------------------- Name: Title: A-1 80 [SEAL] Dated: ------------------------ TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. STATE STREET BANK AND TRUST COMPANY, as Trustee By: -------------------------- Authorized Officer A-2 81 [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE CIRCUMSTANCES SET FORTH IN SECTION 2.06 OF THE INDENTURE, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.06 OF THE INDENTURE.1/] ["THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE - -------- 1/ This paragraph should be included only if the Note is issued in global form. A-3 82 SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (F) OUTSIDE THE U.S. TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN THE CASE OF CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION A-4 83 TERMINATION DATE."]2/ - -------- 2/ This paragraph should not be included on Exchange Notes received in an Exchange Offer. A-5 84 [FORM OF REVERSE SIDE OF NOTE] 9 1/4% [Series A/B] Senior Note due March 15, 2007 (1) Interest. -------- Nortek, Inc., a Delaware corporation ("the Company") promises to pay interest on the principal amount of this Note at the rate per annum shown above and to pay Liquidated Damages, if any, payable pursuant to Section 2 of the Registration Rights Agreement referred to below. Interest will be payable semi-annually on each interest payment date, commencing September 15, 1997. Interest and Liquidated Damages, if any, on the Notes will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from March 17, 1997; provided that, if there is no existing Event of Default in the payment of interest and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and interest on overdue installments of interest and Liquidated Damages, to the extent lawful, at 2% above the rate per annum borne by the Notes. (2) Method of Payment ----------------- The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the persons who are registered Holders at the close of business on March 1, and September 1, as the case may be, immediately preceding the interest payment date even if the Note is cancelled on registration of transfer or registration of exchange (other than with respect to the purchase of Notes pursuant to an offer to purchase Notes made in connection with Section 4.11 or 4.12 of the Indenture after such record date). Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, interest and Liquidated Damages, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, interest and Liquidated Damages, if any, by its check payable in such money; provided, that payment by wire transfer of immediately available/same day funds will be required with respect to principal, premium, if any, interest and Liquidated Damages, if any, on all Global Notes. It may mail an interest payment to a Holder's address as it appears on the Register. (3) Paying Agent and Registrar -------------------------- Initially, the Trustee will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent or Registrar without notice, other than notice to the Trustee. The Company or any Subsidiary or an Affiliate of either of them may act as Paying A-6 85 Agent, Registrar or co-registrar. (4) Indenture --------- The Company issued the Notes under an Indenture, dated as of March 17, 1997 (the "Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended and as in effect on the date of the Indenture (the "TIA") and as provided in the Indenture. Capitalized terms used herein and not defined herein have the meaning ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms. The Notes are unsecured obligations of the Company limited to $175,000,000 aggregate principal amount. To the extent permitted by the terms of the Company's 9 7/8% Senior Subordinated Notes due 2004 (the "9 7/8% Notes") and the indenture governing the 9 7/8% Notes (the "9 7/8% Indenture"), all obligations owing under the Indenture and the Notes, including interest accruing after the occurrence of an event described in clause (5) or (6) of Section 6.01 of the Indenture, shall constitute "Specified Senior Indebtedness" or similarly-designated indebtedness under the 9 7/8% Notes and the 9 7/8% Indenture and under any other existing or future subordinated indebtedness of the Company. (5) Guaranties ---------- This Note may be entitled after the date hereof to certain senior Subsidiary Guaranties made for the benefit of the Holders. Reference is hereby made to Section 4.14 of the Indenture and to Exhibits E and F to the Indenture for the terms of any such Subsidiary Guaranty. (6) Optional Redemption ------------------- The Notes are redeemable as a whole, or from time to time in part, at any time on and after March 15, 2002 at the option of the Company at the following redemption prices (expressed as a percentage of principal) together with accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date (the "Redemption Price") if redeemed in the twelve-month period commencing: A-7 86
March 15, Redemption Price --------- ---------------- 2002 104.625% 2003 103.083% 2004 101.542% 2005 and thereafter 100.000%
(7) Notice Of Redemption -------------------- Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at the Holder's registered address. Notes in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount. (8) Requirement that the Company Offer to Purchase Notes under Certain Circumstances ------------------------------------------------------------------ Subject to the terms and conditions of the Indenture, the Company shall become immediately obligated to offer to purchase the Notes pursuant to Section 4.11 of the Indenture after the occurrence of a Change in Control of the Company at a price equal to 101% of aggregate principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. In addition, to the extent that there are Net Cash Proceeds from Asset Sales which are not reinvested, the Company will be obliged to offer to purchase Securities at 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, in accordance with Section 4.12 of the Indenture. (9) Denominations: Transfer: Exchange --------------------------------- The Notes are in registered form, without coupons, in denominations of $1,000 of principal amount and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before selection of Notes to be redeemed. (10) Persons Deemed Owners --------------------- The registered Holder of this Note may be treated as the owner of this Note for all purposes. (11) Amendment: Waiver ----------------- A-8 87 Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding and (ii) certain defaults or noncompliance with certain provisions may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Notes in addition to certificated Notes, or to comply with any requirements of the Securities and Exchange Commission in connection with the qualification of the Indenture under the TIA, or to make any change that does not adversely affect the rights of any Holder. (12) Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) default in payment of the principal amount, premium, if any, interest or Liquidated Damages, if any, in respect of the Notes when the same becomes due and payable subject, in the case of interest and Liquidated Damages, to the grace period contained in the Indenture; (ii) failure by the Company to comply with other agreements in the Indenture or the Notes, subject to notice and lapse of time; (iii) certain events of acceleration prior to maturity of certain indebtedness; (iv) certain final judgments which remain undischarged; (v) certain events of bankruptcy or insolvency; or (vi) certain failures of Subsidiary Guaranties. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding, may declare all the Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes becoming due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) above) if it determines that withholding notice is in their interests. (13) Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. A-9 88 (14) No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any obligations of a Subsidiary Guarantor under its Subsidiary Guaranty or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. (15) Authentication -------------- This Note shall not be valid until an authorized officer of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Note. (16) Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). (17) Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company or, if applicable, a Subsidiary Guarantor upon request. After that, Holders entitled to money must look to the Company or such Subsidiary Guarantor for payment. (18) Discharge Prior to Maturity --------------------------- If the Company or any Subsidiary Guarantor deposits with the Trustee or Paying Agent money or U.S. Government Obligations sufficient to pay the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes to maturity, the Company and the Subsidiary Guarantors will be discharged from the Indenture except for certain Sections thereof. (19) Registration Rights Agreement ----------------------------- In addition to the rights provided to and the obligations of Holders of Notes under the Indenture, Holders of Transfer Restricted Securities shall have all the rights and shall be subject to all the obligations set forth in the Registration Rights Agreement, dated as of the date of the Indenture. A-10 89 (20) CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company will cause CUSIP numbers to be printed on the Notes as a convenience to Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. (21) Successor --------- When a successor Person to the Company or a Subsidiary Guarantor assumes all the obligations of its predecessor under the Notes, a Subsidiary Guaranty and the Indenture such predecessor shall be released from those obligations. (22) Governing Law ------------- THE INDENTURE, THIS NOTE AND ANY SUBSIDIARY GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (23) Indenture --------- Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture or Registration Rights Agreement. A-11 90 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ______________________________________________________________________________ (INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX I.D. NUMBER) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE) and irrevocably appoint_______________________________________________________ _______________________agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _________________ Signature: __________________________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE) Signature Guarantee: ___________________________________________________________________ (Participant in recognized signature guarantee medallion program) NOTICE: Your Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Guarantee Programs: (i) the Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any other guarantee program acceptable to the Trustee. In connection with any transfer of this Note the Holder hereof may be required by the Indenture to deliver to the Trustee and the Registrar a certification substantially in the form of Exhibit B to the Indenture. A-12 91 OPTION OF HOLDER TO ELECT PURCHASE If you wish to elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.11 ("Change of Control Offer") or Section 4.12 ("Excess Proceeds Offer") of the Indenture, check the applicable boxes: [ ] Change of Control Offer: [ ] Excess Proceeds Offer: in whole [ ] in whole [ ] in part [ ] in part [ ] Amount to be Amount to be purchased: $ purchased: $ ---- ----- Dated: _____________________ Signature: _______________________________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE) Signature Guarantee: _____________________________________________________________________ (PARTICIPANT IN RECOGNIZED SIGNATURE GUARANTEE MEDALLION PROGRAM) Social Security Number/ or Taxpayer Identification Number: _____________________________________________ A-13 92 SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES The following exchanges of a part of this Global Note for Definitive Notes have been made:
PRINCIPAL AMOUNT OF SIGNATURE OF AMOUNT OF DECREASE AMOUNT OF INCREASE THIS GLOBAL NOTE AUTHORIZED OFFICER OF DATE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH TRUSTEE OR NOTE EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE DECREASE (OR INCREASE) CUSTODIAN - -------------- ---------------------- ---------------------- ----------------------- ---------------------
93 EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES Re: 9 1/4% [Series [A/B] Senior Notes due 2007 of Nortek, Inc. This Certificate relates to $ principal amount of Notes held in */ book-entry or */ definitive form by (the "Transferor"). The Transferor:*/ [ ] has requested the Registrar by written order to exchange or register the transfer of a Note or Notes; or [ ] has requested the Trustee by written order to exchange its Note or Notes in definitive, registered form for a beneficial interest in a Global Note held by the Depository equal to the principal amount of Notes it holds (or the portion thereof indicated above); or [ ] has requested the Trustee by written order to deliver in exchange for its beneficial interest in a Global Note held by the Depository a Note or Notes in definitive, registered form equal to its beneficial interest in such Global Note (or the portion thereof indicated above). In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relative to the above captioned Notes and that the transfer of this Note does not require registration under the Securities Act (as defined below) because:*/ [ ] Such Note is being acquired for the Transferor's own account without transfer (in satisfaction of Section 2.06(1)(b)(i), Section 2.06(2)(a) or Section 2.06(4)(a)(i) of the Indenture). [ ] Such Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")), in a transaction meeting the requirements of Rule 144A under the Securities Act. - -------- */ Check applicable box. B-1 94 [ ] Such Note is being transferred outside the U.S. to a foreign person pursuant to an exemption from registration in a transaction meeting the requirements of Regulation S under the Securities Act (based on an opinion of counsel if the Company so requests and together with a certification in substantially the form of Exhibit D to the Indenture). [ ] Such Note is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act (based on an opinion of counsel if the Company so requests). [ ] Such Note is being transferred pursuant to an effective registration statement under the Securities Act. [ ] Such Note is being transferred to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act (based on an opinion of counsel if the Company so requests together with a certification in substantially the form of Exhibit C to the Indenture). [ ] Such Note is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act (based on an opinion of counsel if the Company so requests). -------------------------------- [INSERT NAME OF TRANSFEROR] By: ----------------------------- Name: Title: Address: Date: TO BE COMPLETED BY TRANSFEREE IF SECOND BOX ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A B-2 95 under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: Signed: ----------------------- --------------------------------- NOTICE: To be executed by an executive officer B-3 96 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED BY ACCREDITED INSTITUTIONS ----------------- --, ---- State Street Bank and Trust Company, as Registrar Attn: Corporate Trust Department Dear Sirs: In connection with our proposed purchases of $ aggregate principal amount of % Series [A/B] Senior Notes due 2007 (the "Notes") of Nortek, Inc. (the "Issuer"), a Delaware corporation, we confirm that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor," and we are acquiring the Notes for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or the laws of any state or other jurisdiction, and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions of the Securities Act. 3. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as described below. We agree, on our own behalf and on behalf of any account for which we are purchasing the Notes, and each subsequent holder of the Notes by its acceptance thereof will agree, not to offer, sell or otherwise transfer such Notes prior to the date which is two years after the later of the date of original issue of such Notes and the last date on which the Issuer or any affiliate of the Issuer was the owner of such Notes (the "Resale Restriction Termination Date"), except (A) to the Issuer, (B) in accordance with Rule 144A under the Securities Act to C-1 97 a "qualified institution buyer" (as defined therein) in a transaction meeting the requirements of Rule 144A, (C) to an institutional "accredited investor" (as defined above) that is purchasing for his own account or for the account of such an "accredited investor" and that, prior to such transfer, furnishes to the Trustee (as defined in the Indenture) a signed letter, substantially identical to this letter, containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, if available, (E) pursuant to an effective registration statement under the Securities Act, (F) outside the U.S. to a foreign person in a transaction meeting the requirements of Regulation S under the Securities Act, or (G) pursuant to any other available exemption from the registration requirements of the Securities Act (based, in the cases of clauses (C), (D), (F) and (G), upon an opinion of counsel reasonably acceptable to the Issuer if the Issuer so requests), subject in each of the foregoing cases, to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with applicable securities laws of any state of other jurisdiction. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 4. We understand that, on any proposed offer, sale or other transfer of any Notes prior to the Resale Restriction Termination Date, we will be required to furnish to the Trustee and the Issuer such certifications, legal opinions, and other information as either of them may reasonably require to confirm that the proposed transaction complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend reflecting the substance of this and the preceding paragraph. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. We acknowledge that you, the Trustee and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy thereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. We agree to notify you promptly in writing if any of our representations or warranties ceases to be accurate and complete. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ----------------------------------- (Name of Purchaser) By: --------------------------- Name: Title: Address: C-2 98 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S ------------------ --, ---- State Street Bank and Trust Company, as Registrar Attention: Corporate Trust Department Ladies and Gentlemen: In connection with our proposed sale of $ aggregate principal amount of 9 1/4% Series [A/B] Senior Notes due 2007 (the "Notes") of Nortek, Inc., a Delaware corporation (the "Company"), we represent that: (i) the offer of the Notes was not made to a person in the United States; (ii) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (iii) no directed selling efforts have been made by us, any of our affiliates or any person acting on our or their behalf in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (iv) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. D-1 99 You and the Company are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, --------------------------- [Name of Transferor] By: ----------------------- Name: Date: Title: D-2 100 EXHIBIT E ARTICLE 11 GUARANTY OF NOTES ----------------- SECTION 11.01. SUBSIDIARY GUARANTY. Subject to the provisions of this Article 11, each Subsidiary Guarantor hereby unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee that: (i) the principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to the Notes will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and all other obligations of the Company or the Subsidiary Guarantors to the Holders or the Trustee hereunder or thereunder (including fees and expenses) will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any such obligations with respect to the Notes, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. This Subsidiary Guaranty is a present and continuing guaranty of payment and performance, and not of collectibility. Accordingly, failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders under this Indenture or the Notes, for whatever reason, each Subsidiary Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. Each Subsidiary Guarantor hereby agrees that its obligations under its Subsidiary Guaranty shall be absolute and unconditional, irrespective of any invalidity, irregularity or unenforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Subsidiary Guarantor or any other obligor under the Notes, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Subsidiary Guaranty is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company or any other obligor under the Notes, any right to require a proceeding first against the Company or any such obligor, protest, notice and all demands whatsoever and covenants that its Subsidiary Guaranty will not be discharged except by complete performance the obligations contained in the Notes, this Indenture and its Subsidiary Guaranty. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Subsidiary Guarantor, any amount paid by the Company or such Subsidiary Guarantor to the Trustee or such Holder, each Subsidiary Guaranty, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary E-1 101 Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (i) subject to this Article 11, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of each Subsidiary Guaranty, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed by this Subsidiary Guaranty, and (ii) in the event of any acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of its Subsidiary Guaranty. Upon the effectiveness of any acceleration of the obligations guaranteed by this Subsidiary Guaranty the Trustee shall promptly make a demand for payment of such obligations by each Subsidiary Guarantor under this subsidiary Guaranty. The obligations of the Subsidiary Guarantors under this Subsidiary Guaranty shall be joint and several. Each Subsidiary Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded, or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. No stockholder, officer, director, employer or incorporator, past, present or future, of any Subsidiary Guarantor, as such, shall have any personal liability under such Subsidiary Guarantor's Subsidiary Guaranty by reason of his, her or its status as such stockholder, officer, director, employer or incorporator. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under any Subsidiary Guaranty. Each Subsidiary Guaranty may be modified from time to time, without the consent of the Holders, to reflect such fraudulent conveyance savings provisions, net worth or maximum amount limitations as to recourse or similar provisions as are set forth in, and after giving effect to, any guaranty by any Subsidiary Guarantor of any Senior Indebtedness with respect to the Company Credit Facility as such guaranty may be amended or otherwise modified from time to time, PROVIDED that no such modification of this Subsidiary Guaranty shall adversely affect the Holders in any respect or shall disadvantage the Holders relative to the holders of Indebtedness of such Subsidiary Guarantor with respect to the Company Credit Facility. E-2 102 SECTION 11.02. EXECUTION DELIVERY OF SUBSIDIARY GUARANTY. The validity and enforceability of this Subsidiary Guaranty shall not be affected by the fact that it is not affixed to any particular Note, and each Subsidiary Guarantor hereby agrees that its Subsidiary Guaranty shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guaranty. If an Officer of a Subsidiary Guarantor whose signature is on the Indenture or a Subsidiary Guaranty no longer holds that office at the time the Trustee authenticates any Note or at any time thereafter, such Subsidiary Guarantor's Subsidiary Guaranty of such Note shall be valid nevertheless. The delivery by any Subsidiary Guarantor to the Trustee of any Subsidiary Guaranty as required by Section 4.14 shall constitute due delivery of such Subsidiary Guaranty on behalf of such Subsidiary Guarantor to and for the benefit of all Holders of the Notes. SECTION 11.03. ADDITIONAL GUARANTORS. Any person may become a guarantor of the Notes by executing and delivering to the Trustee (i) a supplemental indenture in form and substance satisfactory to the Trustee, which subjects such person to the provisions of this Indenture as a guarantor of the Notes, and (ii) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such person and constitutes the legal, valid, binding and enforceable obligation of such person (subject to such customary exceptions concerning fraudulent conveyance laws, creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion). SECTION 11.04. RELEASE OF SUBSIDIARY GUARANTOR. Notwithstanding anything to the contrary contained in this Indenture in the event that Section 4.14 of the Indenture ceases to have further force or effect each Subsidiary Guarantor shall be, and in the event a Subsidiary Guarantor is released from all obligations which pursuant to Section 4.14 hereof obligate it to become a Subsidiary Guarantor such Subsidiary Guarantor shall be, deemed automatically and unconditionally released from all obligations under its Subsidiary Guaranty without any further action required on the part of the Trustee or any Holder, PROVIDED that, to the extent the provisions of Section 4.14 remain in force and effect, the provisions of Section 4.14 hereof shall apply anew in the event that such Subsidiary Guarantor subsequent to being released incurs any obligations that pursuant to Section 4.14 hereof obligate it to become a Subsidiary Guarantor. In addition, upon (i) the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with the terms of the Indenture or (ii) the sale or other disposition of all of the Capital Stock of a Subsidiary Guarantor by the Company or a Subsidiary of the Company to, or upon the consolidation or merger of a Subsidiary Guarantor with or into, any person other than the Company or an Affiliate of the Company or any of its Subsidiaries, such Subsidiary Guarantor shall be deemed automatically and unconditionally released from all obligations under its Subsidiary Guaranty without any further action required on the part of the Trustee or any Holder, PROVIDED that such sale or other disposition, or consolidation or merger is made in accordance with the terms of this Indenture, including E-3 103 Sections 4.12 and 5.01 hereof; PROVIDED, HOWEVER, that the foregoing proviso shall not apply to the sale or disposition of a subsidiary Guarantor or of the Capital Stock thereof in a foreclosure proceeding (whether or not judicial) to the extent that such proviso would be inconsistent with the requirements of the Uniform Commercial Code. Notwithstanding the immediately preceding sentence, upon receipt of a request of the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 11.04, the Trustee shall deliver an appropriate instrument evidencing the release of such Subsidiary Guarantor. Any Subsidiary Guarantor not so released or the entity surviving such Subsidiary Guarantor, as applicable, shall remain or be liable under its Subsidiary Guaranty as provided in this Article 11. E-4 104 EXHIBIT F SENIOR GUARANTY --------------- For value received. the undersigned hereby unconditionally guarantees to the holder of a Note (as that term is defined in the Indenture dated as of March 17, 1997 (the "Indenture"), between Nortek, Inc. (the "Company") and State Street Bank and Trust Company, as trustee (the "Trustee") and the Trustee, the payments of principal of, premium, if any, interest on and Liquidated Damages, if any, with respect to such Note in the amounts and at the time when due and interest on the overdue principal, premium, if any, interest and Liquidated Damages, if any, of such Note, if lawful, and the payments or performance of all other obligations of the Company under the Indenture or the Notes, all in accordance with and subject to the terms and limitations of such Note, Article 11 of the Indenture and this Guaranty. This Guaranty shall become effective in accordance with Article 11 of the Indenture. The validity and enforceability of this Guaranty shall not be affected by the fact that it is not affixed to any particular Note. The obligations of the undersigned to the holders of Notes and to the Trustee pursuant to this Guaranty and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of this Guaranty and all of the other provisions of the Indenture to which this Guaranty relates. Each holder of a Note, by accepting the same, agrees to and shall be bound by such provisions. This Guaranty is subject to release upon the terms set forth in the Indenture. [NAME OF SUBSIDIARY GUARANTOR] By: _____________________________ Name: Title: F-1 105 CROSS REFERENCE TABLE4/
TIA Indenture Section Section - ------- ------- 310(a)(1)............................................... 7.10 (a)(2)............................................ 7.10 (a)(3)............................................ N.A.5/ (a)(4)............................................ N.A. (a)(5)....................................................7.10 (b)............................................... 7.08; 7.10 (c)............................................... N.A. 311(a).................................................. 7.11 (b)............................................... 7.11 (c)............................................... N.A. 312(a).................................................. 2.05 (b)............................................... 10.03 (c)............................................... 10.03 313(a).................................................. 7.06 (b)(1)............................................ N.A. (b)(2)............................................ 7.06 (c)............................................... 10.02 (d)............................................... 7.06 314(a).................................................. 4.02; 10.02 (b)............................................... N.A. (c)(1)............................................ 10.04 (c)(2)............................................ 10.04 (c)(3)............................................ N.A. (d)............................................... N.A. (e)............................................... 10.05 (f)............................................... 4.03 315(a).................................................. 7.01 (b)............................................... 7.05; 10.02 (c)............................................... 7.01 (d)............................................... 7.07 (e)............................................... 6.11 316(a) (last sentence).................................. 2.08 (a)(1)(A)......................................... 6.05 (a)(1)(B)......................................... 6.04 (a)(2)............................................ N.A.
- -------- 4/ Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of this Indenture. 5/ N.A. means Not Applicable. F-i 106 (b)............................................... 6.07 (c)............................................... N.A. 317(a)(1)............................................... 6.08 (a)(2)............................................ 6.09 (b)............................................... 2.04 318(a).................................................. 10.01
F-ii EX-4.3 4 REGISTRATION RIGHTS AGREEMENT DATED MARCH 17,1997 1 Exhibit 4.3 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into as of March 17, 1997 between NORTEK, INC., a Delaware corporation (the "COMPANY"), and Bear, Stearns & Co. Inc., Wasserstein Perella Securities, Inc. and BT Securities Corporation (collectively, the "INITIAL PURCHASERS"). This Agreement is made pursuant to the Purchase Agreement dated as of March 12, 1997 (the "PURCHASE AGREEMENT"), between the Company and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of an aggregate of $175,000,000 aggregate principal amount of the Company's 9 1/4% Senior Notes due 2007 (the "NOTES"). In order to induce the Initial Purchasers to enter into the Purchase Agreement and to purchase the Notes, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights for the Notes set forth in this Agreement. The execution and delivery of this Agreement is a condition precedent to the obligations of the Initial Purchasers under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized defined terms shall have the following meanings (and, unless otherwise indicated, capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement): "ACT" shall mean the Securities Act of 1933, as amended. "AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "APPLICABLE PERIOD" shall have the meaning set forth in Section 3(t) hereof. "CLOSING DATE" shall mean the Closing Date as defined in the Purchase Agreement. "COMMISSION" shall mean the Securities and Exchange Commission, or such other federal agency administering the Act or the Exchange Act. "COMPANY" shall have the meaning set forth in the preamble to this Agreement, and shall also include the Company's successors. "DEPOSITORY" shall mean The Depository Trust Company, or any successor depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary must have an address in the Borough of Manhattan, The City of New York. 2 "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(b) hereof. "EVENT DATE" shall have the meaning set forth in Section 2(e) hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCHANGE OFFER" shall mean the exchange offer by the Company of Exchange Notes for Notes pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION" shall mean a registration under the Act effected pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean the registration statement (on Form S-4 or, if applicable, on any other appropriate form) relating to the Exchange Offer, and all amendments and supplements to such registration statement. including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a) hereof. "EXCHANGE NOTES" shall mean the 9 1/4% Series B Senior Notes due 2007, to be issued by the Company under the Indenture and containing terms identical to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from March 17, 1997, and (ii) the transfer restrictions thereon shall be eliminated) to be offered to Holders of Notes in exchange for Notes pursuant to the Exchange Offer. "HOLDER" shall mean each Initial Purchaser, for so long as it owns any Registrable Securities, and each of its respective successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "INDENTURE" shall mean the Indenture dated as of March 17, 1997 by and between the Company and Sate Street Bank and Trust Company, as trustee, as the same may be amended or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS" shall have the meaning set forth in the preamble to this Agreement. "INSPECTORS" shall have the meaning set forth in Section 3(n) hereof. "LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(e) hereof. 2 3 "MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate principal amount of outstanding (as determined under the Indenture) Registrable Securities. "NASD" shall mean the National Association of Securities Dealers, Inc. "NOTES" shall have the meaning set forth in the preamble to this Agreement. "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 3(t) hereof. "PERSON" shall mean any individual, corporation, limited liability company, general or limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, charitable foundation, unincorporated organization, government or agency or political subdivision thereof or any other entity. "PRIVATE EXCHANGE" shall have the meaning set forth in Section 2(a) hereof. "PRIVATE EXCHANGE NOTES" shall have the meaning set forth in Section 2(a) hereof. "PROSPECTUS" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, including post-effective amendments, and in each case including all material incorporated by reference therein. "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "RECORDS" shall have the meaning set forth in Section 3(n) hereof. "REGISTRABLE SECURITIES" shall mean the Notes and, if issued, the Private Exchange Notes; PROVIDED, HOWEVER, that Notes or Private Exchange Notes, as the case may be, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Notes or Private Exchange Notes or the resale thereof shall have been declared effective under the Act and such Notes or Private Exchange Notes, as the case may be, shall have been disposed of pursuant to such Registration Statement, (ii) such Notes or Private Exchange Notes, as the case may be, shall have become eligible to be sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Act, (iii) such Notes or Private Exchange Notes, as the case may be, shall have ceased to be outstanding or (iv) with 3 4 respect to the Notes, such Notes have been exchanged for Exchange Notes upon consummation of the Exchange Offer. "REGISTRATION EXPENSES" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including, without limitation: (i) Commission, stock exchange or NASD registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD. (ii) fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with the blue sky qualification of any of the Exchange Notes or Registrable Securities) and compliance with the rules of the NASD, (iii) expenses of any Persons in preparing or assisting in preparing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with the obligations under this Agreement, (iv) rating agency fees, (v) fees and disbursements of counsel for and independent certified public accountants of the Company, including the expenses of any "cold comfort" letters required by or incident to such performance and compliance, (vi) fees and expenses of the Trustee, and any exchange agent or custodian, (vii) fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement. "REGISTRATION STATEMENT" shall mean any registration statement of the Company relating to the Exchange Notes or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SHELF REGISTRATION" shall mean a registration effected pursuant to Section 2(b) hereof. "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 4 5 "TIA" shall mean the Trust Indenture Act of 1939, as amended. "TRANSFER RESTRICTED SECURITIES" shall mean each Note until (i) the date on which such Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. "TRUSTEE" shall mean the trustee under the Indenture. 2. Registration Under the Act. -------------------------- (a) EXCHANGE OFFER. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, the Company shall, for the benefit of the Holders, at the Company's cost, use its best efforts to cause to be filed with the Commission an Exchange Offer Registration Statement on or prior to 45 days after the Closing Date on an appropriate form under the Act covering the offer by the Company to the Holders to exchange all of the Registrable Securities (other than Private Exchange Notes) for a like aggregate principal amount of Exchange Notes, to cause such Exchange Offer Registration Statement to be declared effective under the Act by the Commission on or prior to 120 days after the Closing Date, to cause such Registration Statement to remain effective until the closing of the Exchange Offer and to cause the Exchange Offer to be consummated on or prior to 45 days after the date on which the Exchange Offer Registration Statement was declared effective under the Act by the Commission. The Exchange Notes will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder (other than Participating Broker-Dealers (as defined in Section 3(t) hereof)) eligible and electing to exchange Registrable Securities for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Notes) to transfer such Exchange Notes from and after their receipt without any limitations or restrictions under the Act or under state securities or blue sky laws. In connection with the Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement together with an appropriate letter of transmittal and related documents; 5 6 (ii) keep the Exchange Offer open for acceptance for a period of not less than 30 days after the date notice thereof is mailed to the Holders, or longer if required by applicable law (such period being referred to herein as the "EXCHANGE PERIOD"); (iii) utilize the services of the Depository for the Exchange Offer; (iv) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York City time, on the last business day of the Exchange Period, by sending to the institution specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for exchange, and a statement that such Holder is withdrawing its election to have such Notes exchanged; (v) notify each Holder that any Note not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (vi) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company upon the request of such Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "PRIVATE EXCHANGE") for Notes held by the Initial Purchasers a like principal amount of debt securities of the Company that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") and which are issued pursuant to the Indenture (which will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes will vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter). The Private Exchange Notes shall be of the same series as and shall bear the same CUSIP number as the Exchange Notes. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall; (i) accept for exchange all Notes or portions thereof duly tendered and not validly withdrawn pursuant to the Exchange Offer; 6 7 (ii) accept for exchange all Notes or portions thereof duly tendered pursuant to the Private Exchange; and (iii) deliver, or cause to be delivered, to the Trustee for cancellation all Notes or portions thereof so accepted for exchange by the Company, and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, a new Exchange Note or Private Exchange Note, as the case may be, equal in principal amount to the principal amount of the Notes surrendered by such Holder. To the extent not prohibited by applicable law or any applicable interpretation of the staff of the Commission, the Company shall use its best efforts to complete the Exchange Offer as provided above, and shall comply with all applicable requirements of the Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Exchange Offer shall not be subject to any condition, other than that (i) the Exchange Offer does not violate any applicable law or interpretation of the staff of the Commission, (ii) no action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might impair the ability of the Company to proceed with the Exchange Offer, (iii) there has not been any material change, or development involving a prospective material change, in the business or financial affairs of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, would materially impair the Company's ability to consummate the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated, (iv) there has not been proposed, adopted, or enacted any law, statute, rule or regulation which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or have a material adverse effect on the Company if the Exchange Offer is consummated or (v) all governmental approvals which the Company shall reasonably deem necessary for the consummation of the Exchange Offer as contemplated shall have been obtained. Each Holder of Registrable Securities who wishes to exchange such Registrable Securities for Exchange Notes in the Exchange Offer will be required to make certain customary representations in connection therewith, including representations that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the Act, that any Exchange Notes to be received by it will be acquired in the ordinary course of business and that at the time of the commencement of the Exchange Offer it had no arrangement with any Person to participate in the distribution (within the meaning of the Act) of the Exchange Notes and will be required to make such other representations as may be necessary under applicable Commission rules, regulations or interpretations to render available the use of Form S-4 or any other appropriate form under the Act. The Company shall inform the Initial Purchasers, after consultation with the Trustee and the Initial Purchasers, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. 7 8 In the event that the Company is unable to consummate the Exchange Offer due to any event listed in clauses (i) through (v) in the paragraph immediately above, the Company shall not be deemed to have breached any covenant under this Section 2(a). Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Securities that are Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the Company shall have no further obligation to register Registrable Securities (other than Private Exchange Notes) pursuant to Section 2(b) of this Agreement. (b) SHELF REGISTRATION. In the event that (i) the Company is not permitted to commence or accept tenders pursuant to the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) any Holder of Transfer Restricted Securities notifies the Company within 20 business days after the consummation of the Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer, (b) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (c) that it is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, or (iii) the Exchange Offer is not for any other reason consummated within 165 days of the Closing Date, the Company shall, at its cost, cause to be filed with the Commission as promptly as practicable after such determination or date, as the case may be, and, in any event, on or prior to 45 days thereafter, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities, and shall use its best efforts to cause such Shelf Registration Statement declared effective by the Commission on or prior to 90 days after such determination or date. No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the Commission to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in the applicable Shelf Registration Statement or Prospectus included therein by the rules and regulations of the Commission applicable to the Shelf Registration Statement in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company agrees, subject to applicable law or applicable interpretation of the staff of the Commission, to use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended under the Act for a period ending on the earlier of the date which is two years from the Closing Date (subject 8 9 to extension pursuant to the last paragraph of Section 3) or the date on which all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding (the "EFFECTIVENESS PERIOD"). The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration. The Company will, in the event a Shelf Registration Statement is declared effective, provide to each Holder copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective and take certain other actions as are customary to permit unrestricted resales of the Registrable Securities covered by the Shelf Registration Statement. The Company further agrees, if necessary, to use its reasonable best efforts to supplement or amend the Shelf Registration Statement, if required by the Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by any other rules and regulations thereunder for shelf registrations, or if reasonably requested by the Majority Holders, and the Company agrees to furnish to the Holders copies of any such supplement or amendment promptly after its being used or filed with the Commission. (c) EXPENSES. The Company shall pay all Registration Expenses in connection with registrations pursuant to Section 2(a) or 2(b). Each Holder shall pay all expenses of its counsel (other than the fees described in clauses (i) and (ii) of the definition of "Registration Expenses"), underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Exchange Offer Registration Statement and the Shelf Registration Statement. (d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the Commission; PROVIDED, HOWEVER, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. (e) LIQUIDATED DAMAGES. In the event that an Exchange Offer Registration Statement has not been filed with the Commission on or prior to 45 days after the Closing Date, additional interest payable by the Company as liquidated damages ("LIQUIDATED DAMAGES") will accrue on the Notes from and including the 31st day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is filed. In addition, if on or prior to 120 days after the Closing Date, such Exchange Offer Registration Statement is not declared effective under the Act by the Commission, Liquidated Damages will accrue on the Notes from and including the 121st day after the Closing Date until but excluding the date such Exchange Offer Registration Statement is declared effective. Further, if on or prior to 45 days after the date specified for effectiveness of the Exchange Offer Registration 9 10 Statement the Exchange Offer is not consummated, Liquidated Damages will accrue on the Notes from and including the 46th day after the date specified for effectiveness of the Exchange Offer Registration Statement, but excluding, the consummation of the Exchange Offer. If a Shelf Registration Statement is required to be filed pursuant to Section 2(b) and such Shelf Registration Statement is not filed or declared effective within the time periods provided by Section 2(b) hereof for such filing or declaration, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the effective date of the Shelf Registration Statement. Further, if the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable during the time periods specified in this Agreement, Liquidated Damages will accrue on the Notes (other than those exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may be, from and including the day immediately following such default until but excluding the date such Registration Statement becomes effective or usable. In each case, such Liquidated Damages will be payable in cash semiannually in arrears, with the first semiannual payment due on the first interest payment date in respect of the Notes (or the Private Exchange Notes) following the date from which Liquidated Damages begin to accrue, and will accrue, under each circumstance set forth above at a rate per annum equal to an additional one half of one percent (0.50%) of the principal amount of the Notes (or the Private Exchange Notes) upon the occurrence of each such circumstance, which rate will increase by one half of one percent (0.50%) for each 90-day period that such Liquidated Damages continue to accrue under any circumstance, with an aggregate maximum increase in the interest rate per annum equal to two percent (2.00%). Upon the filing of the Exchange Offer Registration Statement, the effectiveness of the Exchange Offer Registration Statement, or the consummation of the Exchange Offer, as the case may be, the interest rate borne by the Notes will be reduced by the full amount of any such increase to the extent that such increase related to the failure of any such event to have occurred. Upon the effectiveness of a Shelf Registration Statement, the interest rate borne by the Notes (and the Private Exchange Notes) shall be reduced, from and as of the date of such effectiveness, to the original interest rate of the Notes unless and until increased as described above. Notwithstanding anything to the contrary contained herein, the Company (i) shall not be required to amend or supplement the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference and (ii) may suspend the effectiveness of any such Shelf Registration Statement in the event that, and for a period not to exceed, for so long as this Agreement is in effect, an aggregate of 90 days in any one calendar year if (A) an event occurs and is continuing as a result of which the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading, and (B) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company; 10 11 provided that any such suspension shall not relieve the Company from its obligation to pay Liquidated Damages. The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Liquidated Damages is required to be paid (an "EVENT DATE"). Liquidated Damages shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Notes, Exchange Notes or Private Exchange Notes, as the case may be, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Liquidated Damages then due. The Liquidated Damages due shall be payable on each interest payment date to the record Holder of Notes entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to accrue from and including the day following the applicable Event Date. (f) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof would result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall: (a) prepare and file with the Commission a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) within the relevant time periods specified in Section 2 hereof on the appropriate form under the Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith, and the Company shall use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2; PROVIDED, HOWEVER that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating Broker-Dealer who seeks to sell Exchange Notes, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company, if requested, shall furnish to and afford the Holders and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable 11 12 opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed at least five business days prior to such filing. The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders, pursuant to this Agreement, must be afforded an opportunity to review prior to the filing of such document, if the Majority Holders or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object; (b) subject to Section 3(a) hereof, prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the Effectiveness Period or the Applicable Period. as the case may be, and cause each Prospectus to be supplemented by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Act, and comply with the provisions of the Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all securities covered by each Registration Statement during the Effectiveness Period or the Applicable Period, as the case may be, in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders, (ii) furnish to each Holder and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities, and (iii) subject to the last paragraph of this Section 3, consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto, provided that such use complies with all applicable laws and regulations; (d) use its best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the Commission, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the dis- 12 13 position in each such jurisdiction of such Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify as a foreign partnership or foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (iii) subject itself to taxation in any such jurisdiction if it is not then so subject; (e) in the case of (A) a Shelf Registration or (B) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver Prospectuses, notify each Holder, or such Participating Broker-Dealers, as the case may be, their counsel and the managing underwriters, if any, promptly and, if requested by such Holder or Participating Broker-Dealer, confirm such notice in writing (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the Commission or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, (vi) of the happening of any event or the failure of any event to occur or the discovery of any facts or otherwise, during the period a Shelf Registration Statement is effective or the Applicable Period, as the case may be, which makes any statement made in the Shelf Registration Statement, the Exchange Offer Registration Statement or any related Prospectus untrue in any material respect or which causes such Registration Statement or Prospectus, as the case may be, to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vii) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; (f) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; 13 14 (g) in the case of a Shelf Registration. furnish to each Holder. upon request and without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates, if any, representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with the Depository; and cause such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the managing underwriters may reasonably request at least two business days prior to the closing of any sale of Registrable Securities; (i) subject to Section 3(a) hereof and the second paragraph of Section 2(e) hereof, in the case of a Shelf Registration or an Exchange Offer Registration. upon the occurrence of any circumstance contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement and the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of any such circumstance, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, upon request and without charge, a reasonable number of copies of any document which is incorporated by reference into or is an exhibit to a Registration Statement or a Prospectus after the initial filing of a Registration Statement; (k) obtain a CUSIP number for all Exchange Notes or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Notes or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depository; (1) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Notes or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture 14 15 as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustee to execute. all documents as may be required to effect such changes. and all other forms and documents required to be filed with the Commission to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, enter into such agreements (including underwriting agreements) as are customary in underwritten public offerings and take all such other appropriate actions as are reasonably requested in order to expedite or facilitate the registration or the disposition of such Registrable Securities. and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Company and its subsidiaries and the Registration Statement, the Prospectus and all documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when reasonably requested; (ii) obtain customary opinions of counsel to the Company and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority in principal amount of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten public offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired or to be acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to the selling Holders of Registrable Securities and to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten public offerings; and (iv) if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement. or as and to the extent required thereunder; (n) if (A) a Shelf Registration is filed pursuant to Section 2(b) or (B) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Act by any Participating 15 16 Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and as to which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless, after prior consultation with the Company, (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to an effective subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public, other than as a result of a breach of confidentiality or secrecy to the Company. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction or is otherwise required upon the written advice of counsel to such Participating Broker-Dealer, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the Records deemed confidential; (o) comply with all applicable rules and regulations of the Commission and, as soon as reasonably practicable, make generally available to the Holders earnings statements of the Company covering at least 12 months satisfying the provisions of Section 11(a) of the Act and Rule 158 thereunder (or any similar rule promulgated under the Act); (p) upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) the 16 17 Company has duly authorized, executed and delivered the Exchange Notes and Private Exchange Notes and the Indenture, as the case may be, and (ii) each of the Exchange Notes or the Private Exchange Notes and the Indenture, as the case may be, constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (in each case, with customary exceptions); (q) if an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Securities delivered by such Holders that such Registrable Securities are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (r) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD: (s) use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (t) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which section shall be reasonably acceptable to the Initial Purchasers or another representative of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer (a "PARTICIPATING BROKER-DEALER") that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers or such other representative, represent the prevailing views of the staff of the Commission, including a statement that any such broker-dealer who receives Exchange Notes for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Act in connection with any resale of such Exchange Notes, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus 17 18 included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) subject to the last paragraph of this Section 3, hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the Commission, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Notes covered by the Prospectus or any amendment or supplement thereto, (iv) use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Act for such period of time as such Persons must comply with such requirements in order to resell the Exchange Notes (PROVIDED, HOWEVER, that such period shall not be required to exceed 180 days, or such longer period if extended pursuant to the last sentence of this Section 3 (the "APPLICABLE PERIOD")), and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree all necessary information for such offeree to participate in the Exchange Offer; (B) in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers or to another representative of the Participating Broker-Dealers on behalf of the Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel substantially in the form attached hereto as EXHIBIT A, (ii) an Officers' Certificate containing certifications substantially similar to those set forth in Section 8(d) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities, and (iii) a comfort letter in customary form permitted by Statement of Auditing Standards No. 72 of the American Institute of Certified Public Accountants. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the proposed distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. The Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. In the case of (i) a Shelf Registration Statement or (ii) Participating Broker-Dealers who have notified the Company that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are required to deliver copies of such Prospectus, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities 18 19 pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities or Exchange Notes, as the case may be, current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Securities or Exchange Notes, as the case may be, pursuant to a Registration Statement, the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Registration Statement and shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Company shall have made available to the Holders copies of the supplemented or amended Prospectus necessary to resume such dispositions or shall have advised the Holders in writing that the use of the applicable Prospectus may be resumed. 4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each underwriter who participates in an offering of Registrable Securities, each of their respective affiliates, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each of their respective directors, officers, partners, employees, representatives and agents, to the fullest extent lawful as follows: (i) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereto pursuant to which the offer and sale of the Registrable Securities or Exchange Notes were registered under the Act including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto. or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any court or governmental agency or body, ,whether commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or 19 20 omission, if and only if such settlement is effected with the prior written consent of the Company; and (iii) from and against any and all expenses whatsoever (including reasonable fees and disbursements of counsel chosen by the Initial Purchasers, Holder, Participating Broker-Dealer or underwriter (except to the extent otherwise expressly provided in Section 4(c) hereof)), as incurred, reasonably incurred in investigating, preparing for or defending against any litigation. or any investigation or proceeding by any court or governmental agency or body. whether commenced or threatened, or any other claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission (i) made solely in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers, such Holder, such Participating Broker-Dealer or any underwriter in writing expressly for use in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) contained in any preliminary prospectus or any Prospectus if the Initial Purchasers, such Holder, such Participating Broker-Dealer or such underwriter failed to send or deliver a copy of the Prospectus (as then amended or supplemented if the Company shall have timely furnished any amendments or supplements thereto) to the Person asserting such losses, liabilities. claims or damages on or prior to the-delivery of written confirmation of any sale of securities covered thereby to such Person in any case where such delivery is required by the Act and such Prospectus (as so amended or supplemented) would have corrected such untrue statement or omission and the delivery thereof would have eliminated such losses, claims, damages or liabilities. Any amounts advanced by the Company to an indemnified party pursuant to this Section 4 as a result of such losses shall be returned to the Company if it shall be determined by a court that such indemnified party was not entitled to indemnification by the Company. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Initial Purchasers, each underwriter who participates in an offering of Registrable Securities and the other selling Holders and each of their respective directors, officers (including each officer of the Company who signed the Registration Statement), employees, representatives and agents, and each Person, if any, who controls the Company, the Initial Purchasers, any underwriter or any other selling Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as reasonably incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions. made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) solely in reliance upon and in conformity with written information furnished to the 20 21 Company by such selling Holder expressly for use in the Registration Statement (or any amendment thereto) or any such Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that, in the case of a Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, enclosing a copy of all papers properly served on such indemnified party (but failure to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have other than on account of this indemnity agreement). An indemnifying party may participate, at its own expense, in the defense of any such action. If an indemnifying party so elects within a reasonable time after receipt of such notice, such indemnifying party, jointly with any other indemnifying party. may assume the defense of such action with counsel chosen by it and reasonably satisfactory to the indemnified parties defendant in such action; PROVIDED, HOWEVER, that if any such indemnified party reasonably determines, upon written advice of counsel, that there may be legal defenses available to such indemnified party which are different from or in addition to those available to such indemnifying party or that representation of such indemnifying party and any indemnified party by the same counsel would present a conflict of interest, then one additional counsel in each jurisdiction for all indemnified parties having consistent interests and such different or additional defenses or subject to such conflict shall be entitled to conduct the defense of such indemnified parties with the fees and expenses of such counsel to be borne by the indemnifying party or parties. If an indemnifying party assumes the defense of an action in accordance with and as permitted by the provisions of this Section 4(c), such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action (except to the extent set forth in the proviso contained in the immediately preceding sentence). In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action, or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4, unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Notwithstanding any payment or payments made by the Company hereunder, the Company hereby expressly waives subrogation to, and agrees that it shall not 21 22 be entitled to be subrogated to, any of the rights of any indemnified party against the Company or any other right of offset held by any indemnified party for the payment of any amounts owed to any indemnified party pursuant to this Section 4; PROVIDED, HOWEVER, that if any of the foregoing provisions of this paragraph are held to be contrary to applicable law or unenforceable by a court of competent jurisdiction, the Company hereby expressly agrees that any right of subrogation or contribution that the Company may have as a result of such applicable law or unenforceability, as the case may be, shall be subordinate in right of payment to the payment in full in cash of all amounts owed to any indemnified party pursuant to this Section 4. (e) If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to herein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Notes pursuant to the Purchase Agreement, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Notes pursuant to the Purchase Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Notes pursuant to the Purchase Agreement (before deducting expenses) received by the Company and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Notes. The relative fault of the Company on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to sate a material fact relates to information supplied by the Company or by the Holders, and the respective parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(e). The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4(e) shall be deemed to include 22 23 any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing for or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any untrue or alleged untrue statement or omission or alleged omission referred to in Section 4(a)(i). Notwithstanding the provisions of this Section 4(e), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discount received by such Initial Purchaser in respect of the purchase price of the Notes purchased by it from the Company exceeds the amount of any damages which the Initial Purchasers have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(c), each person, if any, who controls an Initial Purchaser, a Holder, a Participating Broker-Dealer, an underwriter who participates in an offering of Registrable Securities, or the affiliates of any of them, within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director, officer (including each officer of the Company who signed the Registration Statement), partner, employee, representative and agent of the Company, the Initial Purchasers, each Holder, each Participating Broker-Dealer, and each underwriter who participates in an offering of Registrable Securities and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. 5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any customary underwriting arrangements approved by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents reasonably required in connection with such underwriting arrangements. 6. SELECTION OF UNDERWRITERS. In any underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering; PROVIDED, HOWEVER, that such underwriters and managers must be reasonably satisfactory to the Company. 23 24 7. Miscellaneous. ------------- (a) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor will the Company on or after the date of this Agreement enter into any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if sent by registered or certified mail, postage prepaid, sent by any national courier service guaranteeing overnight delivery or transmitted by any standard form of telecommunication, as follows: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 7(c), which address, with respect to an Initial Purchaser, shall initially be the address provided for such Initial Purchaser in the Purchase Agreement; and (ii) if to the Company, at its address as set forth in the Purchase Agreement, or at such other address provided in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given at the earlier of: (i) the time of actual receipt by the addressee; or (ii) the time delivered, if personally delivered, or five business days after being sent by registered or certified mail, postage prepaid, if mailed, or when answered back, if telexed, or when transmission is confirmed, if telecopied, or on the next business day, if timely delivered to a national courier service guaranteeing overnight delivery. Copies of all notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee at its address specified in the Indenture. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and 24 25 holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (e) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries of the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and the Holders shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of any of the other Holders. (f) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. (h) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any affiliate of the Company (as such term is defined in Rule 405 under the Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) COUNTERPARTS. This Agreement may be executed in one or more counterparts and, when so executed, all such counterparts taken together shall constitute one and the same agreement. 25 26 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above. NORTEK, INC. By: /s/ Almon C. Hall ------------------------------ Name: Almon C. Hall Title: Vice President Accepted as of the date first above written: BEAR, STEARNS & CO. INC. By: /s/ ------------------------- Name: Title: WASSERSTEIN PERELLA SECURITIES, INC. By: /s/ Peter H. Rothschild ------------------------- Name: Peter H. Rothschild Title: BT SECURITIES CORPORATION By: /s/ Amelia Silver ------------------------- Name: Amelia Silver Title: Vice President 26 27 Exhibit A --------- Form of Opinion of Counsel -------------------------- 1. Each of the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial and statistical data and supplemental schedules included or referred to therein or omitted therefrom and the Form T-1 as to which such counsel need express no opinion), complies as to form in all material respects with the applicable requirements of the Act and the applicable rules and regulations promulgated under the Act. 2. In the course of such counsel's review and discussion of the contents of the Exchange Offer Registration Statement and the Prospectus with certain officers and other representatives of the Company and representatives of the independent certified public accountants of the Company, but without independent check or verification or responsibility for the accuracy, completeness or fairness of the statements contained therein, on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Company), no facts have come to such counsel's attention which cause such counsel to believe that the Exchange Offer Registration Statement (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein and the Form T-l, as to which such counsel need express no belief), at the time the Exchange Offer Registration Statement became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. A-1 EX-5 5 OPINION OF ROPES & GRAY 1 Exhibit 5 [Ropes & Gray Letterhead] April 18, 1997 Nortek, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Ladies and Gentlemen: This opinion is rendered to you in connection with a registration statement (the "Registration Statement") on Form S-4 filed today with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), relating to the exchange offer (the "Exchange Offer") by Nortek, Inc. ("Nortek") to exchange its $175,000,000 9 1/4% Series B Notes due 2007 (the "Exchange Notes") for its outstanding $175,000,000 9 1/4% Series A Notes due 2007 (the "Original Notes"). The Original Notes were, and the Exchange Notes are to be, issued pursuant to the provisions of an indenture (the "Indenture") entered into between Nortek and State Street Bank and Trust Company, a national banking association, as Trustee (the "Trustee"). We have acted as special counsel for Nortek in connection with the Exchange Offer and the preparation of the Registration Statement. For purposes of this opinion, we have examined and relied upon the information set forth in the Registration Statement and such other documents and records as we have deemed necessary. We express no opinion as to the laws of any jurisdiction other than those of the Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware and the federal laws of the Unites States of America. We call your attention to the fact that each of the Indenture and the Exchange Notes provides that it is to be governed by the laws of the State of New York. For purposes of the opinion provided herein, we have assumed with your permission that the Indenture and the Exchange Notes would be governed by and construed in accordance with the domestic substantive laws of The Commonwealth of Massachusetts without giving effect to any choice of law or conflict of laws rule or provision that would cause the application of the domestic substantive laws of any other jurisdiction. Based upon the foregoing, we are of the opinion that, when the Exchange Notes have been duly authorized, executed, issued and delivered as provided in the Indenture, and delivered in exchange for the Original Notes, as described in the Registration Statement, and assuming due authentication by the Trustee, the Exchange Notes will constitute valid and binding obligations of Nortek, enforceable against Nortek, in accordance with their terms, except as enforceability (i) may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally (including, without limitation, Section 548 of Title 11 of The United States Code and fraudulent conveyance or similar provisions of state law) and (ii) is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and will be entitled to the benefits of the Indenture. 2 Nortek, Inc. -2- April 18, 1997 We hereby consent to the filing of this opinion as part of the Registration Statement and to the use of our name therein and in the related prospectus under the caption "Legal Matters." It is understood that this opinion is to be used only in connection with the Exchange Offer while the Registration Statement is in effect. Very truly yours, Ropes & Gray EX-12 6 SCHED. RE:COMPUTATION OF EARNINGS TO FIXED CHARGES 1 Exhibit 12 NORTEK, INC. AND SUBSIDIARIES CALCULATION OF EARNINGS TO FIXED CHARGES (Dollars amounts in Millions)
PRO FORMA 1992 1993 1994 1995 1996 1996 Earnings (Loss) from Continuing Operations (21.0) (12.6) 17.2 15.0 22.0 18.1 Provision (Credit) for Income Taxes 3.0 1.0 10.2 9.3 14.0 12.3 -------------------------------------------------------- "Earnings" (18.0) (11.6) 27.4 24.3 36.0 30.4 ======================================================== Fixed Charges: Interest Expense including amortization of Debt Expense and Debt Discount 29.2 26.5 26.2 24.9 30.1 42.4 Interest factor of non-capitalized leases 3.2 2.3 2.1 2.1 2.0 2.0 Interest on Indebtedness of a Former Subsidiary guaranteed by the Company 0.8 0.0 0.0 0.0 0.0 0.0 -------------------------------------------------------- "Fixed Charges" 33.2 28.8 28.3 27.0 32.1 44.4 ======================================================== Earnings Available for Fixed Charges 15.2 17.2 55.7 51.3 68.1 74.8 ==== ==== ==== ==== ==== ==== Ratio of Earnings to Fixed Charges N/A N/A 1.97 1.90 2.12 1.68 ==== ==== ===== ===== ===== ===== N/A % not applicable, since ratio is less than 1.0:1. * Pro forma for Offering and Refinancing.
EX-23.1 7 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To Nortek, Inc.: As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report dated February 12, 1997 included in Nortek, Inc.'s Form 10-K for the year ended December 31, 1996 and to all references to our Firm included in this Registration Statement. Arthur Andersen LLP Boston, Massachusetts April 14, 1997 EX-25 8 STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) __ STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) John R. Towers, Esq. Senior Vice President and Corporate Secretary 225 Franklin Street, Boston, Massachusetts 02110 (617)654-3253 (Name, address and telephone number of agent for service) --------------------- NORTEK, INC. (Exact name of obligor as specified in its charter) MASSACHUSETTS 05-0314991 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 KENNEDY PLAZA PROVIDENCE, RHODE ISLAND 02903 (Address of principal executive offices) (Zip Code) 9 1/4% SERIES B SENIOR NOTES DUE 2007 (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Boston Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 1 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the April 11, 1997. STATE STREET BANK AND TRUST COMPANY By: /s/ Donald E. Smith ----------------------------------------- NAME DONALD E. SMITH TITLE VICE PRESIDENT 2 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by {NORTEK, INC.}. of its 9 1/4% Series B Senior Notes due 2007, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Donald E. Smith ----------------------------------------- NAME DONALD E. SMITH TITLE VICE PRESIDENT DATED: APRIL 11, 1997 3 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company of Boston, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business DECEMBER 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ......... 1,561,409 Interest-bearing balances .................................. 7,562,240 Securities .......................................................... 9,388,513 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ........................ 5,622,962 Loans and lease financing receivables: Loans and leases, net of unearned income .... 4,858,187 Allowance for loan and lease losses ......... 72,614 Loans and leases, net of unearned income and allowances .... 4,785,573 Assets held in trading accounts ..................................... 874,700 Premises and fixed assets ........................................... 383,955 Other real estate owned ............................................. 870 Investments in unconsolidated subsidiaries .......................... 93,621 Customers' liability to this bank on acceptances outstanding ........ 35,022 Intangible assets ................................................... 148,190 Other assets ........................................................ 932,673 ---------- Total assets ........................................................ 31,389,728 ========== LIABILITIES Deposits: In domestic offices ........................................ 8,508,096 Noninterest-bearing ................ 6,435,131 Interest-bearing ................... 2,072,965 In foreign offices and Edge subsidiary ..................... 11,395,724 Noninterest-bearing ................ 27,508 Interest-bearing ................... 11,368,216 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ........................ 7,518,222 Demand notes issued to the U.S. Treasury and Trading Liabilities .... 733,935 Other borrowed money ................................................ 650,578 Bank's liability on acceptances executed and outstanding ............ 35,022 Other liabilities ................................................... 770,029 ---------- Total liabilities ................................................... 29,611,606 ---------- EQUITY CAPITAL Common stock ........................................................ 29,931 Surplus ............................................................. 358,146 Undivided profits ................................................... 1,389,720 Cumulative foreign currency translation adjustments ................. 325 ---------- Total equity capital ................................................ 1,778,122 ---------- Total liabilities and equity capital ................................ 31,389,728 ==========
4 6 I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Rex S. Schuette We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. David A. Spina Marshall N. Carter Charles F. Kaye 5 EX-99.1 9 FORM OF LETTER OF TRANSMITTAL 1 Exhibit 99.1 LETTER OF TRANSMITTAL - ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______________, 1997 UNLESS EXTENDED BY NORTEK IN ITS SOLE DISCRETION (THE "EXPIRATION DATE"). TENDERS OF ORIGINAL NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. - ------------------------------------------------------------------------------- NORTEK, INC. $175,000,000 9 1/4% NOTES DUE 2007 PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed, and submitted to the Exchange Agent, by registered or certified mail, overnight carrier, hand delivery or facsimile transmission at the following address, for receipt no later than the Expiration Date: STATE STREET BANK & TRUST COMPANY, EXCHANGE AGENT
By Express: By Mail: By Hand: (insured or registered recommended) State Street Bank & Trust Company State Street Bank & Trust Company State Street Bank & Trust Company Corporate Trust Department Corporate Trust Department Corporate Trust Department Two International Place Two International Place Two International Place Boston, MA 02110 Boston, MA 02110 Boston, MA 02110 Attn: Lena Altomare Attn: Lena Altomare Attn: Lena Altomare
FACSIMILE (617) 664-5371 TELEPHONE (617) 664-5607 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. By execution hereof, the undersigned acknowledges receipt of the prospectus dated _________, 1997 (the "Prospectus"), of Nortek, Inc., a Delaware corporation ("Nortek"), which, together with this Letter of Transmittal and the instructions hereto (the "Letter of Transmittal"), constitute Nortek's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 9 1/4% Series B Notes due 2007 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which the Prospectus constitutes a part, for each $1,000 principal amount of its outstanding 9 1/4% Series A Notes due 2007 (the "Original Notes"), upon the terms and subject to the conditions set forth in the Prospectus. This Letter of Transmittal is to be used by Holders (as defined below) if: (i) certificates representing Original Notes are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Original Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company (the "Depository") pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Procedures 2 for Tendering" by any financial institution that is a participant in the Depository and whose name appears on a security position listing as the owner of Original Notes; or (iii) tender of Original Notes is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO THE DEPOSITORY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Original Notes are registered on the books of Nortek or any other person who has obtained a properly completed bond power from the registered Holder; or (ii) whose Original Notes are held of record by the Depository who desires to deliver such Original Notes by book-entry transfer at the Depository. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Original Notes must complete this letter in its entirety. All capitalized terms used herein and not defined shall have the meaning ascribed to them in the Prospectus. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 8 herein. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR ORIGINAL NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. -2- 3 Ladies and Gentlemen: Subject to the terms of the Exchange Offer, the undersigned hereby tenders to Nortek the principal amount of Original Notes indicated below. Subject to and effective upon the acceptance for exchange of the principal amount of Original Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, Nortek all right, title and interest in and to the Original Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of Nortek and as Trustee under the Indenture for the Original Notes and the Exchange Notes) with respect to the tendered Original Notes with full power of substitution to (i) deliver certificates for such Original Notes to Nortek, or transfer ownership of such Original Notes on the account books maintained by The Depository Trust Company ("DTC") together, in either such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Nortek and (ii) present such Original Notes for transfer on the books of Nortek and receive all benefits and otherwise exercise all rights of beneficial ownership of such Original Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, sell, assign and transfer the Original Notes tendered hereby and that Nortek will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by Nortek. The undersigned also acknowledges that this Exchange Offer is being made in reliance upon an interpretation by the staff of the Securities and Exchange Commission that the Exchange Notes issued in exchange for the Original Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) a broker - dealer who purchased such Original Notes directly from Nortek or any of its "affiliates" within the meaning of Rule 405 under the Securities Act for resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is such an "affiliate" of Nortek) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that the holder is acquiring the Exchange Notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The undersigned represents that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being acquired by the undersigned and any beneficial owner thereof in the ordinary course of business of the undersigned and any such beneficial owner, (ii) neither the undersigned nor any such beneficial owner has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and (iii) except as indicated below, neither the undersigned nor any such beneficial owner is an "affiliate," as defined under Rule 405 of the Securities Act, of Nortek. If the undersigned or any beneficial owner for whom the undersigned is tendering securities is an affiliate of Nortek, then such person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned or any beneficial owner for whom the undersigned is tendering securities is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned or such beneficial owner will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or Nortek to be necessary or desirable to complete the assignment and transfer of the Original Notes tendered hereby. For purposes of the Exchange Offer, Nortek shall be deemed to have accepted validly tendered Original Notes when Nortek has given oral or written notice thereof to the Exchange Agent. If any tendered Original Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Original Notes will be returned (except as noted below with respect to tenders through DTC), without expense, to the undersigned at the address shown below or -3- 4 at a different address as may be indicated under "Special Issuance Instructions" as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. The undersigned understands that tenders of Original Notes pursuant to the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and Nortek upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Issuance Instructions," please issue the certificates representing the Exchange Notes issued in exchange for the Original Notes accepted for exchange and return any Original Notes not tendered or not exchanged, in the name(s) of the undersigned (or in either such event in the case of Original Notes tendered by DTC, by credit to the account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the Exchange Notes issued in exchange for the Original Notes accepted for exchange and any certificates for Original Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signatures, unless, in either event, tender is being made through DTC. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Original Notes accepted for exchange and return any Original Notes not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that Nortek has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Original Notes from the name of the registered holder(s) thereof if Nortek does not accept for exchange any of the Original Notes so tendered. -4- 5 ============================================================================================================= DESCRIPTION OF ORIGINAL NOTES TENDERED - --------------------------------------------------------------- ----------------------- --------------------- Certificate Aggregate Number(s)* (Attach Principal Amount Name(s) and Address(es) of Holder(s) signed list if Tendered (if less (Please fill in, if blank) necessary) than all)** - --------------------------------------------------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- --------------------- ----------------------- --------------------- - --------------------------------------------------------------- ----------------------- --------------------- TOTAL PRINCIPAL AMOUNT OF ORIGINAL NOTES TENDERED ============================================================================================================= * Need not be completed by Holders tendering by book-entry transfer. ** Need not be completed by Holders who wish to tender with respect to all Original Notes listed. See Instruction 2. - ------------------------------------------------------------------------------------------------------------- ============================================================================================================= ============================================================================================================= BENEFICIAL OWNER(S) - ------------------------------------------------- ----------------------------------------------------------- STATE OF PRINCIPAL RESIDENCE OF EACH BENEFICIAL PRINCIPAL AMOUNT OF TENDERED ORIGINAL OWNER OF TENDERED ORIGINAL NOTES NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER - ------------------------------------------------- ----------------------------------------------------------- - ------------------------------------------------- ----------------------------------------------------------- - ------------------------------------------------- ----------------------------------------------------------- - ------------------------------------------------- ----------------------------------------------------------- - ------------------------------------------------- ----------------------------------------------------------- - ------------------------------------------------- ----------------------------------------------------------- =============================================================================================================
-5- 6 ================================================================================ USE OF BOOK ENTRY TRANSFER [ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ------------------------------------------ DTC Book-Entry Account No.: --------------------------------------------- Transaction Code No.: -------------------------------------------------- ================================================================================ ================================================================================ USE OF GUARANTEED DELIVERY If Holders desire to tender Original Notes pursuant to the Exchange Offer and (i) certificates representing such Original Notes are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing such Original Notes or other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior the Expiration Date, such Holders may effect a tender of such Original Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." [ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO THE NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s) of Original Notes: ---------------------------- ---------------------------------------------------------------------- Window Ticket No. (if any): ------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ---------------------------------------- Name of Eligible Institution that Guaranteed Delivery: ---------------------------------------------------------------------- If Delivered by Book-Entry Transfer: Name of Tendering Institution: ---------------------------------------- DTC Book-Entry Account No.: ------------------------------------------- Transaction Code No.: ------------------------------------------------- ================================================================================ ================================================================================ BROKER-DEALER COPIES OF PROSPECTUS [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ----------------------------------------------------------------- Address: -------------------------------------------------------------- ---------------------------------------------------------------------- ================================================================================ ================================================================================ FOR USE BY AFFILIATES [ ] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU ARE TENDERING SECURITIES IS AN AFFILIATE OF NORTEK. ================================================================================ -6- 7 ================================================================================ PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS OF ORIGINAL NOTES REGARDLESS OF WHETHER ORIGINAL NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH) This Letter of Transmittal must be signed by the Holder(s) of Original Notes exactly as their name(s) appear(s) on certificate(s) for Original Notes or, if tendered by a participant in DTC, exactly as such participant's name appears on a security position listing as the owner of Original Notes, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to Nortek of such person's authority to so act. See Instruction 3 herein. If the signature appearing below is not of the registered Holder(s) of the Original Notes, then the registered Holder(s) must sign a valid proxy. X Date: ------------------------------------- ---------------------- X Date: ------------------------------------- ---------------------- Signature(s) of Holder(s) or Authorized Signatory Name(s): Address: ----------------------------- ----------------------------- ----------------------------- ----------------------------- (Please Print) (Including Zip Code) Capacity: Area Code and Telephone No.: ----------------------------- --------- Social Security No.: ------------------ PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION - -------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signatures) - -------------------------------------------------------------------------------- (Address (including zip code) and Telephone Number (including area code) of Firm) - -------------------------------------------------------------------------------- (Authorized Signature) - -------------------------------------------------------------------------------- (Printed Name) - ------------------------------------------------------------------------------- (Title) Date: ---------------- ================================================================================ -7- 8 ================================================================================ SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for Original Notes in a principal amount not tendered are to be issued in the name of, or the Exchange Notes issued pursuant to the Exchange Offer are to be issued to the order of, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled "Description of Original Notes Tendered" within this Letter of Transmittal, or if Original Notes tendered by book-entry transfer that are not accepted for purchase are to be credited to an account maintained at DTC. Name: ------------------------------------------------------------------- (Please Print) Address: ---------------------------------------------------------------- (Please Print) - ------------------------------------------------------------------------ Zip Code - ------------------------------------------------------------------------ Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) ================================================================================ ================================================================================ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for Original Notes in a principal amount not tendered or not accepted for purchase or the Exchange Notes issued pursuant to the Exchange Offer are to be sent to someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled "Description of Original Notes Tendered" within this Letter of Transmittal. Name: ------------------------------------------------------------------- (Please Print) Address: ---------------------------------------------------------------- (Please Print) - ------------------------------------------------------------------------ Zip Code - ------------------------------------------------------------------------ Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) ================================================================================ -8- 9 PAYER'S NAME: -------------------------------- ==================================================================================================================== SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW FORM W-9 ------------------------ Social Security Number DEPARTMENT OF THE TREASURY OR INTERNAL REVENUE SERVICE ---------------------- Employer Identification Number PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) ------------------------------------------------- ----------------------------- PART 2--Certification--Under Penalties PART 3- of Perjury, I certify that: Awaiting TIN [ ] (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Services ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------- Certificate instructions-- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax returns. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE DATE ------------------------------- ------------------------- ====================================================================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. -9- 10 ================================================================================ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 20 percent of all reportable payments made to me thereafter will be withheld until I provide a number. - ---------------------------------------- ------------------------- Signature Date ================================================================================ -10- 11 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER AND THE SOLICITATION 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL NOTES. The certificates for the tendered Original Notes (or a confirmation of a book-entry transfer into the Exchange Agent's account at DTC of all Original Notes delivered electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 P.M., New York City time, on the Expiration Date. The method of delivery of the tendered Original Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Original Notes should be sent to Nortek. Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available or (ii) who cannot deliver their Original Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Original Notes and follow the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the Original Notes, the certificate number or numbers of such Original Notes and the principal amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five business days after the Expiration Date, this Letter of Transmittal (or facsimile hereof) together with the certificate(s) representing the Original Notes (or a confirmation of electronic delivery of book-entry delivery into the Exchange Agent's account at DTC) and any of the required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or facsimile hereof), as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered Original Notes in proper form for transfer (or a confirmation of electronic mail delivery of book-entry delivery into the Exchange Agent's account at DTC), must be received by the Exchange Agent within five business days after the Expiration Date, all as provided in the Prospectus under the caption "Exchange Offers -- Guaranteed Delivery Procedures." Any Holder of Original Notes who wishes to tender his Original Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York City time, on the Expiration Date. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Original Notes will be determined by Nortek in its sole discretion, which determination will be final and binding. Nortek reserves the absolute right to reject any and all Original Notes not properly tendered or any Original Notes Nortek's acceptance of which would, in the opinion of counsel for Nortek, be unlawful. Nortek also reserves the right to waive any irregularities or conditions of tender as to particular Original Notes. Nortek's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Original Notes must be cured within such time as Nortek shall determine. Neither Nortek, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Original Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Original Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Original Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering Holders of Original Notes, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 2. PARTIAL TENDERS. Tenders of Original Notes will be accepted in all denominations of $1,000 principal amount and integral multiples in excess thereof. If less than the entire principal amount of any Original Note is tendered, the tendering Holder should fill in the principal amount tendered in the third column -11- 12 of the chart entitled "Description of Original Notes Tendered." The entire principal amount of Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Original Notes is not tendered, Original Notes for the principal amount of Original Notes not tendered and a certificate or certificates representing Exchange Notes issued in exchange for any Original Notes accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal or unless tender is made through DTC, promptly after the Original Notes are accepted for exchange. 3. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder(s) of the Original Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the Original Notes without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder(s) of Original Notes tendered and the certificate(s) for Exchange Notes issued in exchange therefor is to be issued (or any untendered principal amount of Original Notes is to be reissued) to the registered Holder, such Holder need not and should not endorse any tendered Original Note, nor provide a separate bond power. In any other case, such Holder must either properly endorse the Original Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or facsimile hereof) is signed by a person other than the registered Holder(s) of any Original Notes listed, such Original Notes must be endorsed or accompanied by appropriate bond powers signed as the name of the registered Holder(s) appears on the Original Notes. If this Letter of Transmittal (or facsimile hereof) or any Original Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or other acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by Nortek, evidence satisfactory to of their authority so to act must be submitted with this Letter of Transmittal. Endorsements on Original Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal (or facsimile hereof) must be guaranteed by an Eligible Institution unless the Original Notes tendered pursuant thereto are tendered (i) by a registered Holder (including any participant in DTC whose name appears on a security position listing as the owner of Original Notes) who has not completed the box set forth herein entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" or (ii) for the account of an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should indicate, in the applicable spaces, the name and address to which Exchange Notes or substitute Original Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of the Original Notes through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 5. TRANSFER TAXES. Nortek will pay all transfer taxes, if any, applicable to the exchange of Original Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Original Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the Original Notes tendered hereby, or if tendered Original Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Original Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the Original Notes listed in this Letter of Transmittal. -12- 13 6. WAIVER OF CONDITIONS. Nortek reserves the absolute right to amend, waive or modify specified conditions in the Exchange Offer in the case of any Original Notes tendered. 7. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL SENIOR SUBORDINATED NOTES. Any tendering Holder whose Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instruction. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus and herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. -13- 14 (DO NOT WRITE IN SPACE BELOW) =============================================================================== Certificate Surrendered Original Notes Tendered Original Notes Accepted - ------------------------- --------------------------- ------------------------- - ------------------------- --------------------------- ------------------------- - ------------------------- --------------------------- ------------------------- - ------------------------- --------------------------- ------------------------- - ------------------------- --------------------------- ------------------------- Delivery Prepared by Checked by Date -------------- -------------- ------------ =============================================================================== -14- 15 IMPORTANT TAX INFORMATION Under federal income tax laws, a Holder whose tendered Original Notes are accepted for payment is required to provide the Exchange Agent (as payer) with such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such Holder is an individual, the TIN is his social security number. If the Exchange Agent is not provided with the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service, and payments made with respect to Original Notes purchased pursuant to the Exchange Offer may be subject to backup withholding. Certain Holders (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Exchange Agent is required to withhold 31% of any payments made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments made with respect to the Exchange Offer, the Holder is required to provide the Exchange Agent with either: (i) the Holder's correct TIN by completing the form above, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not been notified by the Internal Revenue Service that the Holder is subject to backup withholding as a result of failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Holder that the Holder is no longer subject to backup withholding; or (ii) an adequate basis for exemption. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered Holder of the Original Notes. If the Original Notes are held in more than one name or are held not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. -15- 16 The Exchange Agent for the Exchange Offer is: STATE STREET BANK AND TRUST COMPANY
By Express: By Mail: By Hand: (insured or registered recommended) State Street Bank & Trust Company State Street Bank & Trust Company State Street Bank & Trust Company Corporate Trust Department Corporate Trust Department Corporate Trust Department Two International Place Two International Place Two International Place Boston, MA 02110 Boston, MA 02110 Boston, MA 02110 Attn: Lena Altomare Attn: Lena Altomare Attn: Lena Altomare
FACSIMILE (617) 664-5371 TELEPHONE (617) 664-5607 -16- EX-99.2 10 FORM OF NOTICE OF GUARANTEED DELIVERY 1 Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY for $175,000,000 9 1/4% Senior Note due 2007 of NORTEK, INC. As set forth in the Prospectus, dated ________, 1997 (the "Prospectus"), of Nortek, Inc. ("Nortek") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), holders who wish to tender their 9 1/4% Series A Senior Notes due 2007 ("Original Notes") and (i) whose Original Notes are not immediately available, or (ii) who cannot deliver their Original Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date (as hereinafter defined), may effect a tender if: (1) The tender is made through an Eligible Institution; (2) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution this properly completed and duly executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile transmission) setting forth the name and address of the holder, the certificate number(s) of such Original Notes and the principal amount of the Original Notes being tendered, stating that the tender is being made thereby and guaranteeing that, within five business days after the Expiration Date, the Letter of Transmittal together with the certificate(s) representing the Original Notes (or a Book-Entry Confirmation) and any other documents required by the applicable Letter of Transmittal will be delivered by the Eligible Institution to the Exchange Agent; and (3) Such properly completed and executed Letter of Transmittal, as well as the certificate(s) representing all tendered Original Notes in proper form for transfer (or a Book-Entry Confirmation) and all other documents required by the applicable Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date. This form may be delivered by an Eligible Institution by mail or hand delivery or transmitted, via facsimile, to the Exchange Agent as set forth below. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus. - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ___________, 1997 UNLESS THE OFFER IS EXTENDED BY NORTEK IN ITS SOLE DISCRETION (THE "EXPIRATION DATE"). TENDERS OF ORIGINAL NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- EXCHANGE AGENT:STATE STREET BANK & TRUST COMPANY
By Express: By Mail: By Hand: (insured or registered recommended) State Street Bank & Trust Company State Street Bank & Trust Company State Street Bank & Trust Company Corporate Trust Department Corporate Trust Department Corporate Trust Department Two International Place Two International Place Two International Place Boston, MA 02110 Boston, MA 02110 Boston, MA 02110 Attn: Lena Altomare Attn: Lena Altomare Attn: Lena Altomare
FACSIMILE (617) 664-5371 TELEPHONE (617) 664-5607 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR A TRANSMISSION, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 LADIES AND GENTLEMEN: The undersigned hereby tender(s) to Nortek, upon the terms and subject to the conditions set forth in the Exchange Offer and the Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Original Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus. The undersigned understands that tenders of Original Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of Original Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. Tenders of Original Notes may be withdrawn if the Exchange Offer is terminated without any such Original Notes being purchased thereunder or as otherwise provided in the Prospectus. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. PLEASE COMPLETE AND SIGN Signature(s) of Registered Owner(s) or Authorized Signatory: ---------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Principal Amount of Original Notes tendered: - -------------------------------------------------------------------------------- Certificate No(s). of Original Notes (if available): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date: --------------------------------------------------------------------------- Name(s) of Registered Holder(s): ------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone No.: ---------------------------------------------------- If Original Notes will be delivered by book-entry transfer at The Depository Trust Company, insert Depository Account No.: - -------------------------------------------------------------------------------- ================================================================================ This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Original Notes exactly as its (their) name(s) appear on certificates for Original Notes or on a security position listing as the owner of Original Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): ------------------------------------------------------------ ------------------------------------------------------------ Capacity: ------------------------------------------------------------ Address(es): ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ Do not send Original Notes with this form. Original Notes should be sent to the Exchange Agent together with a properly completed and duly executed Letter of Transmittal. ================================================================================ 3 ================================================================================ GUARANTEE (Not to be used for signature guarantee) The undersigned, a participant in a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act, hereby (a) represents that each holder of Original Notes on whose behalf this tender is being made "own(s)" the Original Notes covered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that such tender of Original Notes complies with such Rule 14e-4, and (c) guarantees that, within five New York Stock Exchange trading days from the date of this Notice of Guaranteed Delivery, a properly completed and duly executed Nortek Letter of Transmittal (or a facsimile thereof), together with certificates representing the Original Notes covered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus) and required documents will be deposited by the undersigned with the Exchange Agent. The undersigned acknowledges that it must deliver the Letter of Transmittal and Original Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in financial loss to the undersigned. Name of Firm: -------------------------- ------------------------------------ Authorized Signature Address: Name: ------------------------------- ----------------------------------- Title: - --------------------------------------- ---------------------------------- Area Code and Telephone No.: Date: ----------- ----------------------------------- ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----