FORM S-4

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o


(1)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) of the Securities Act of 1933.

(2)	The registration fee has been calculated pursuant to Rule 457(f) under the Securities Act of 1933.

(3)	No additional consideration is being received for the guarantees, and, therefore no additional fee is required.

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

The address of each of the additional registrants is c/o Ply Gem Industries, Inc., 303 West Major Street, Kearney, Missouri 64060, (800) 800-2244.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.


•	We are offering to exchange $225,000,000 of our outstanding 9% Senior Subordinated Notes due 2012, which were issued on February 12, 2004 and which we refer to as the initial notes, for a like aggregate amount of our registered 9% Senior Subordinated Notes due 2012, which we refer to as the exchange notes. The exchange notes will be issued under an indenture dated as of February 12, 2004.

•	The exchange notes will mature on February 15, 2012. We will pay interest on the exchange notes on February 15 and August 15, beginning on August 15, 2004.

•	The exchange notes are guaranteed on a senior subordinated unsecured basis by our parent, Ply Gem Holdings, Inc., and our domestic subsidiaries: Great Lakes Window, Inc., Kroy Building Products, Inc., Napco, Inc., Thermal-Gard, Inc., Variform, Inc. and Napco Window Systems, Inc.

•	The exchange notes will be our unsecured senior subordinated obligations. They will be subordinated to our existing and future senior debt, including borrowings under our new senior credit facilities, and effectively subordinated to any secured debt and to any indebtedness of our subsidiaries that are not guarantors. As of December 31, 2003, on a pro forma basis, the notes would have been subordinated to approximately $222.6 million of senior debt and approximately $32.5 million ($65.0 million new revolving credit facility net of (i) approximately $3.0 million drawn at closing and (ii) approximately $29.5 million of undrawn letters of credit relating to our assumed indebtedness) would have been available for borrowing as additional senior debt under the revolving portion of our new senior credit facilities. We will be permitted to incur additional indebtedness, including senior debt, in the future under the terms of the indenture.


•	It will expire at 5:00 p.m., New York City time, on 2004, unless we extend it.

•	If all the conditions to this exchange offer are satisfied, we will exchange all of our outstanding initial notes, which are validly tendered and not withdrawn, for exchange notes.

•	You may withdraw your tender of initial notes at any time before the expiration of this exchange offer.

•	The exchange notes that we will issue you in exchange for your initial notes will be substantially identical to your initial notes except that, unlike your initial notes, the exchange notes will have no transfer restrictions or registration rights.

•	The exchange notes that we will issue you in exchange for your initial notes are new securities with no established market for trading.

Before participating in this exchange offer, please refer to the section in this prospectus entitled “Risk Factors” commencing on page 17.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Certain of the matters discussed in this prospectus may constitute forward-looking statements.

These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this prospectus which are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the “Risk Factors” and other cautionary statements included herein. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results or to changes in our expectations.

The information in this prospectus is not a complete description of our business or the risks associated with an investment in our securities. There can be no assurance that other factors will not affect the accuracy


	•	our high degree of leverage and significant debt service obligations;

	•	restrictions under the indenture governing the notes and our new senior credit facilities;

	•	the competitive nature of our industry;

	•	changes in interest rates, and general economic, home repair and remodeling and new home construction market conditions;

	•	changes in the price and availability of raw materials; and

	•	changes in our relationships with our significant customers.

Industry data and other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well as the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness.

We own all of the following trademarks and brands in connection with our goods: Ambassador^(TM), American ‘76 Collection®, American Comfort®, American Herald®, American Splendor^(TM), American Tradition®, Camden Pointe®, Cedar Select®, Chateau®, Consul^(TM), Contractor’s Choice®, Durabuilt®, Duragrain®, Diplomat^(TM), Envoy^(TM), Great Lakes®, Great Lakes Gold^(TM), Hampton III®, Millbridge^(TM), Monitor^(TM), Napco®, Napco Premium 2000^(TM), Napco Premium 3000^(TM), Napco Prime^(TM), Nostalgia Series®, Olde Providence®, Ply Gem^(TM), Premier^(TM), Regency^(TM), Timber Oak®, Uniframe®, Varigrain Preferred® and Victoria Harbor®.

Castle Ridge®, Cedar Lane®, Chatham Ridge^(TM), Forest Ridge®, Heritage Hill^(TM), New World Scallops^(TM), Oakside®, Parkridge®, Parkside^(TM), Rough Sawn Cedar^(TM), Somerset^(TM) and Vision Pro® are trademarks and brands owned by Georgia-Pacific Corporation.

All other trademarks or service marks referred to in this prospectus are the property of their respective owners and are not our property.

Ply Gem Industries, Inc., which we also refer to in this prospectus as “Ply Gem,” is a Delaware corporation, incorporated in 1987. Upon completion of the Acquisition described in this prospectus, we became a wholly-owned subsidiary of Ply Gem Holdings, Inc., a Delaware corporation, which we refer to in this prospectus as “Ply Gem Holdings.” Ply Gem Holdings is a wholly-owned subsidiary of Ply Gem Investment Holdings, Inc., which we refer to in this prospectus as “Ply Gem Investment Holdings,” an entity formed by Caxton-Iseman Capital, Inc. and its affiliates.

Prior to the Acquisition, we were a wholly-owned subsidiary of WDS LLC, a limited liability company. WDS LLC is a wholly-owned subsidiary of Nortek, Inc., which we refer to in this prospectus as “Nortek,” or our former parent. Nortek is a wholly-owned subsidiary of Nortek Holdings, Inc., which we refer to as “Nortek Holdings.” Prior to the Acquisition, we were known as the Windows, Doors and Siding division of Nortek.

PROSPECTUS SUMMARY

This summary may not contain all of the information that may be important to you. You should read this prospectus carefully in its entirety before making an investment decision. In particular, you should read the section entitled “Risk factors” and the consolidated financial statements and notes related to those statements included elsewhere in this prospectus. Unless the context indicates otherwise, the terms “our company,” “we,” “us” and “our” refer to Ply Gem Industries, Inc. and its consolidated subsidiaries, after giving effect to the completion of the acquisition of Ply Gem Industries, Inc. by Ply Gem Holdings, or the “Acquisition,” as described in this prospectus. References to statements as being “pro forma” or “on a pro forma basis” mean after giving effect to the Acquisition and the other transactions described in our unaudited pro forma financial statements. See “Unaudited pro forma financial information.” Unless otherwise noted, references to “EBITDA” and other financial terms have the meanings set forth under “— Summary historical and pro forma financial information.”

Our Company

We are a leading manufacturer of residential exterior building products in North America. We offer a comprehensive product line of vinyl siding and skirting, vinyl windows and doors, and vinyl and composite fencing, railing and decking that serves both the home repair and remodeling and new home construction sectors in all 50 states and Western Canada. Vinyl products, which represented approximately 88.3% of our 2003 net sales on a pro forma basis, have the leading and increasing share of sales by volume in siding and windows, and the fastest growing share of sales by volume in fencing in the U.S. We also manufacture vinyl and aluminum soffit and siding accessories, aluminum trim coil, wood windows and steel and fiberglass doors, enabling us to bundle complementary and color-matched products and accessories with our core vinyl products. We believe our broad product offering and geographically diverse manufacturing base allow us to better serve our customers and provide us with a competitive advantage over other vinyl building products suppliers. For the year ended December 31, 2003, on a pro forma basis, we had net sales of $531.4 million, net earnings of $16.4 million, and EBITDA of $75.4 million.

We market our products using several leading brands across multiple price points, which enables us to diversify our sales across distribution channels with minimal channel conflict. We believe this strategy allows us to reach the greatest number of end customers and provide nationwide service. Additionally, we have developed a proprietary vendor managed inventory, or “VMI,” program for certain of our siding and accessories customers, which enables us to track, forecast and place purchase orders on behalf of those customers. Customers who have implemented our VMI program have experienced higher service levels, more accurate fill rates, higher inventory turns and lower selling, general and administrative expenses. We believe we are able to compete on favorable terms and maintain our strong customer base as a result of our extensive distribution coverage, high quality, innovative and comprehensive product line, proprietary VMI program and production efficiency.

Siding and accessories accounted for approximately 58.6% of our pro forma net sales for the year ended December 31, 2003. We sell our siding and accessories to specialty distributors (one-step distribution) and to wholesale distributors (two-step distribution). Our specialty distributors sell directly to remodeling contractors and builders. Our wholesale distributors sell to retail home centers and lumberyards who, in turn, sell to remodeling contractors, builders and consumers. In the wholesale channel, we are the sole supplier of vinyl siding and accessories to Georgia-Pacific Corporation, the largest building products distributor in the U.S. Through Georgia-Pacific and our Georgia-Pacific dedicated, 22 person sales force, our vinyl siding and accessories are sold to major retail home centers, lumberyards and manufactured housing manufacturers. A portion of our siding and accessories is also sold directly to Lowe’s Home Improvement Centers under our Durabuilt brand.

Windows and doors accounted for approximately 30.4%, and fencing, railing and decking products accounted for approximately 11.0%, of our pro forma net sales for the year ended December 31, 2003, respectively. We market our windows and doors through wholesale, millwork and specialty distributors and

contractors, and we market our fencing, railing and decking primarily through a nationwide network of fabricators.

We operate a total of nine manufacturing facilities across all our product categories, strategically located near our customers. We are a low-cost manufacturer of high-quality vinyl siding. We have adopted and implemented a strategy and deployed related technologies in our siding operations which we call “virtual plant,” which provides us with the flexibility to quickly move production between plants based on capacity utilization in order to maximize our manufacturing efficiency. We believe our strategically located facilities and virtual plant strategy enable us to control manufacturing and transportation costs and provide customers with reliable service and product delivery times.

Industry Overview and Trends

We estimate the total size of the residential exterior building products sectors in which we compete in the U.S. to be approximately $31.0 billion. Demand for exterior building products, including siding and accessories, windows and doors, and fencing, railing and decking, is primarily driven by repair and remodeling of existing homes and construction of new homes, which are affected by changes in national and local economic and demographic conditions, employment levels, availability of financing, interest rates, consumer confidence and other factors. Within exterior building products, vinyl is taking share of sales by volume from certain alternative materials due to its low maintenance, durability, high performance, ease of installation, energy efficiency, lower price and superior aesthetics.


	*Vinyl siding*

Vinyl represents approximately 45% of U.S. residential siding sales by volume. According to the Freedonia Group, vinyl is expected to grow to approximately 47% of residential siding sales by volume by 2007. Vinyl siding has grown to represent nearly two-thirds of home repair and remodeling siding sales by volume, and between 1992 and 2002 more than tripled sales by volume to account for approximately 30% of siding used in new home construction.


	*Vinyl windows and doors*

Vinyl has also become the preferred material for replacement windows, and in recent years has achieved increased acceptance in new home construction. Vinyl windows now account for over 54% of the units sold for U.S. home repair and remodeling, and approximately 38% of windows sold for U.S. new home construction. Vinyl accounted for approximately 36% of patio door demand in 2002 and is expected to become the leading material used for patio doors by 2004. The demand for vinyl continues to grow in both the patio door and residential entry and passage door sectors.


	*Vinyl fencing, railing and decking*

Demand for U.S. fencing and decking products is estimated to be $5.4 billion in 2003. Vinyl and composite materials represent 18.0% of fencing demand and 10.4% of decking sales by volume. Demand for vinyl and composite fencing has grown by over 37% per year from 1997 to 2003, while sales by volume of vinyl and composite decking have grown by approximately 35% annually from 1998 to 2003. Demand for fencing products is expected to grow at an annual rate of 16.8% for the period 2003 to 2008, and sales by volume of vinyl and composite decking products are expected to grow at an annual rate of 17.1% for the same period. Management estimates that U.S. railing sales are approximately $1.1 billion in size and that vinyl and composite represent approximately $100.0 million, or 9.1%, of railing sales.

Our Competitive Strengths

We believe we are well positioned in our industry and that our key competitive strengths are:

• Leading Sector Positions. We believe we are the No. 3 supplier of vinyl siding in the U.S. overall, and hold the No. 1 position in the retail and manufactured housing channels. We continue to gain volume


		in the one-step distribution channel of siding and accessories and have increased our unit sales within this channel by 19.0% from 2000 to 2003, which exceeds the channel growth rate. We believe we are the largest domestic manufacturer of vinyl skirting and the fourth largest manufacturer of metal accessories. We are recognized as a leader and innovator in the growing fencing, railing and decking product category and believe we currently hold the No. 2 position in vinyl fencing. We have established ourselves as a leading window and door manufacturer in Western Canada.

	•	High Quality Products with Strong Brand Names. Our brands are well recognized for innovation and quality in the building trade, and we believe that they are a distinguishing factor in customer selection. We sell our high-quality products under several brand names, including: American Splendor, Camden Pointe, CWD, Durabuilt, Great Lakes Gold, Kroy, Monitor, Napco, Ply Gem, Regency, Timberlast, Timber Oak, Uniframe and Variform, among others, and through Georgia-Pacific. During the last three years, we have introduced a number of new brands, including American Splendor premium vinyl siding, which has received critical praise from a leading consumer rating organization. We believe there are significant opportunities to leverage our existing brands by targeting cross-selling opportunities.

	•	Multi-Channel Distribution Network. We have a multi-channel distribution network that serves both the home repair and remodeling and new home construction sectors, which exhibit different, but often counter-balancing, demand characteristics. Our multiple brand and multi-channel distribution strategy has increased our sales and penetration within these sectors. We have also grown our sales by establishing new distribution points. We believe our strategy minimizes channel conflict and reduces our reliance on any one channel, which provides us with greater ability to sustain our financial performance through economic fluctuations.

	•	Diversified Sales Base. We offer a comprehensive product line to a diverse customer base in all 50 states and Western Canada. Our customer base includes distributors, retail home centers, lumberyards, remodeling contractors and builders. We have long-standing relationships with Georgia-Pacific and Lowe’s. We have been the sole supplier of vinyl siding and accessories to Georgia-Pacific since 1988 and currently are the sole supplier to Lowe’s. In addition to our broad product offering and strong customer base, our sales base is also broadened by our ability to provide a complete product package by bundling our core vinyl siding products with our color-matched line of vinyl and metal soffit and accessories and other complementary products.

	•	Efficient Manufacturing. We are a low-cost manufacturer of high-quality vinyl siding. We continue to achieve manufacturing efficiencies across our product categories through strategic sourcing, process-based reductions in material, production and warranty costs, and control of selling, general and administrative expense. Our production efficiency and quality processes have historically resulted in warranty claim rates that are below the industry average, and our productivity initiatives have helped reduce our vinyl siding manufacturing cost per pound by approximately 16.2% from 2000 to 2003. We are committed to continuous improvement across product categories and have made approximately $31.3 million in capital expenditures, including upgrades to equipment, facilities and technology, over the three years ended December 31, 2003.

	•	Strong Management Team with Significant Ownership. We are led by an experienced and committed senior management team with an average of approximately 20 years of relevant industry experience. Under our CEO, Lee Meyer, we have successfully increased our share of sales by volume within the residential exterior building products industry and have continuously improved our manufacturing operations to develop a low-cost manufacturing platform. As a result, we have significantly improved our operating earnings as a percentage of net sales, from 3.1% in 2000 to 11.1%, on a pro forma basis, for the year ended December 31, 2003. In connection with the Acquisition, members of our management team made significant investments in the equity of Ply Gem Investment Holdings, our indirect parent. They acquired stock and received phantom stock awards representing approximately 14.5% of the common stock and 1.9% of the preferred stock of Ply Gem Investment Holdings on a fully diluted basis.

Our Strategy

We seek to distinguish ourselves from other manufacturers of residential exterior building products and to sustain our profitability through the following key strategies:

• Continue Share Gains. We intend to increase our share of total sales in each of our product categories. We have successfully expanded geographic coverage, increased sales and gained relative volume in several key sectors, including vinyl siding and fencing in the U.S., by establishing new distribution points. For example, in vinyl siding we have increased the number of Variform and Napco distribution points from 231 in 1999 to 418 in 2003. We will target several additional geographic areas by adding brands and distributors. We will also pursue opportunities for cross-selling and bundling our products within existing sectors, to further leverage our channel partners and exclusive industry partnerships. In our fencing product category, we acquired an additional plant in 2001 and we will continue to expand our fencing and decking product line and geographic coverage.

• Expand Brand Coverage and Product Innovation. We intend to leverage the reputation of our brands for innovation and quality to fill in our product offerings and price points. In addition, we plan to maximize the value of our new product innovations and technologies by deploying best practices and manufacturing techniques across our product categories. For example, we believe our recent innovations and expertise in manufacturing composite materials for railing and decking have favorably positioned our siding and accessories products as the siding sector prepares for the introduction of composite materials. We currently employ 15 research and development professionals dedicated to new product development, reformulation, product redesign and other manufacturing and product improvements.

• Further Improve Manufacturing Efficiencies. While we have significantly improved our vinyl siding manufacturing cost structure over the last several years, we believe that there are further opportunities for improvement. In addition, we intend to introduce similar manufacturing improvements and best practices in our other product categories, including, for example, expansion of our virtual plant strategy to our windows manufacturing facilities. We also plan to optimize product development, sales and marketing, materials procurement, operations and administrative functions across all of our product categories. A significant opportunity involves leveraging total raw material expenditures to obtain volume discounts and minimize costs. In addition, integration of our sales and marketing efforts across our product categories provides an ongoing opportunity to significantly improve sector penetration while lowering overall selling, general and administrative expense as a percentage of sales.

The Transactions

On February 12, 2004, Ply Gem Investment Holdings, through Ply Gem Holdings, acquired all of our outstanding shares of capital stock, in accordance with a stock purchase agreement entered into among Ply Gem Investment Holdings, Nortek and WDS LLC on December 19, 2003, for aggregate consideration of $560.0 million (less net assumed indebtedness and the aggregate value of certain management stock options cancelled or forfeited in connection with the Acquisition). We refer to this stock purchase as the “Acquisition.” As a result, Ply Gem Holdings became our direct parent and Ply Gem Investment Holdings became our indirect parent.

Prior to the consummation of the Acquisition, an investor group led by Caxton-Iseman Capital and its affiliates, together with certain members of our management, made an aggregate investment of approximately $141.0 million (in cash and the value of management equity awards) in Ply Gem Investment Holdings, which in turn made an equity contribution to Ply Gem Holdings. We refer to this transaction as the “Equity Contribution.”

Simultaneously with the closing of the Acquisition, we entered into $255.0 million of new senior credit facilities, consisting of a $65.0 million revolving credit facility and $190.0 million of term loan facilities. At closing, we borrowed the full amounts under the term loan facilities and approximately $3.0 million under the

revolving credit facility to fund the Acquisition and pay related transaction costs and expenses. We refer to this transaction as the “Bank Financing.”

As used in this prospectus, the term “Transactions” means, collectively:

• the Acquisition;

• the Equity Contribution;

• the Bank Financing; and

• the offering of the initial notes.

Ownership Structure

The chart below summarizes our ownership and corporate structure upon completion of the Transactions.

(CHART)

Our Equity Sponsor

Caxton-Iseman Capital is a New York-based private equity investment firm specializing in leveraged buyouts. The firm’s investment vehicles currently have equity capital in excess of $1.8 billion available for buyout investments. The firm was founded in 1993 by Frederick Iseman and Caxton Corporation. Caxton Corporation is a New York-based investment management firm managing funds currently in excess of

$7.5 billion. Since the firm’s inception in 1993, Caxton-Iseman Capital has made equity investments in the following industries: restaurants, food service, information technology services, leisure and gaming, print and database publishing, defense, medical devices and hotel management.

(1) Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to increase our U.S. term loan facility from $160.0 million to $170.0 million.

(2) Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to reduce our revolving credit facility from $65.0 million to $55.0 million.

Current and prior portfolio holdings include: Anteon International Corporation, Buffets Holdings, Inc., Cremascoli Ortho, Deanco, Franklin Hotels, Glass’s Information Service, Leisure Link Group and Magnavox Electronic Systems.

Our company is incorporated under the laws of the State of Delaware. Our principal executive offices are located at 303 West Major Street, Kearney, Missouri 64060. Our telephone number is (800) 800-2244.

Our parent, Ply Gem Holdings, Inc., is a Delaware corporation, incorporated in 2004. Ply Gem Holdings is a holding company whose only substantial asset is our stock. Ply Gem Holdings has no operations. Our subsidiaries, Kroy Building Products, Inc., Napco, Inc. and Napco Window Systems, Inc. are Delaware corporations, incorporated in 1994, 1989 and 2000, respectively. Our subsidiary Great Lakes Window, Inc., is an Ohio corporation, incorporated in 1986. Our subsidiary Thermal-Gard, Inc. is a Pennsylvania corporation, incorporated in 1999. Our subsidiary Variform, Inc. is a Missouri corporation, incorporated in 1964.

Summary of the Exchange Offer

We are offering to exchange $225,000,000 aggregate principal amount of our exchange notes for a like aggregate principal amount of our initial notes. In order to exchange your initial notes, you must properly tender them and we must accept your tender. We will exchange all outstanding initial notes that are validly tendered and not validly withdrawn.


Exchange Offer		We will exchange our exchange notes for a like aggregate principal amount at maturity of our initial notes.

Expiration Date		This exchange offer will expire at 5:00 p.m., New York City time, on , 2004, unless we decide to extend it.

Conditions to the Exchange Offer		We will complete this exchange offer only if:

		• the exchange offer does not violate applicable law or any applicable interpretation of the staff of the Commission,

		• no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair our ability to proceed with the exchange offer, and no material adverse development shall have occurred in any existing action or proceeding with respect to us, and

		• all governmental approvals shall have been obtained, which approvals we deem necessary for the consummation of the exchange offer.

		Please refer to the section in this prospectus entitled “The Exchange Offer — Conditions to the Exchange Offer.”

Procedures for Tendering Initial Notes		To participate in this exchange offer, you must complete, sign and date the letter of transmittal or its facsimile and transmit it, together with your initial notes to be exchanged and all other documents required by the letter of transmittal, to U.S. Bank National Association, as exchange agent, at its address indicated under “The Exchange Offer — Exchange Agent.” In the alternative, you can tender your initial notes by book-entry delivery following the procedures described in this prospectus. For more information on tendering your notes, please refer to the section in this prospectus entitled “The Exchange Offer — Procedures for Tendering Initial Notes.”

Special Procedures for Beneficial Owners		If you are a beneficial owner of initial notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your initial notes in the exchange offer, you should contact the registered holder promptly and instruct that person to tender on your behalf.

Guaranteed Delivery Procedures		If you wish to tender your initial notes and you cannot get the required documents to the exchange agent on time, you may tender your notes by using the guaranteed delivery procedures described under the section of this prospectus entitled “The Exchange Offer — Procedures for Tendering Initial Notes — Guaranteed Delivery Procedure.”


Withdrawal Rights		You may withdraw the tender of your initial notes at any time before 5:00 p.m. New York City time, on the expiration date of the exchange offer. To withdraw, you must send a written or facsimile transmission notice of withdrawal to the exchange agent at its address indicated under “The Exchange Offer — Exchange Agent” before 5:00 p.m., New York City time, on the expiration date of the exchange offer.

Acceptance of Initial Notes and Delivery of Exchange Notes		If all the conditions to the completion of this exchange offer are satisfied, we will accept any and all initial notes that are properly tendered in this exchange offer on or before 5:00 p.m., New York City time, on the expiration date. We will return any initial note that we do not accept for exchange to you without expense as promptly as practicable after the expiration date. We will deliver the exchange notes to you as promptly as practicable after the expiration date and acceptance of your initial notes for exchange. Please refer to the section in this prospectus entitled “The Exchange Offer — Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes.”

Federal Income Tax Considerations Relating to the Exchange Offer		Exchanging your initial notes for exchange notes will not be a taxable event to you for United States federal income tax purposes. Please refer to the section of this prospectus entitled “Certain U.S. Federal Income Tax Considerations.”

Exchange Agent		U.S. Bank National Association is serving as exchange agent in the exchange offer.

Fees and Expenses		We will pay all expenses related to this exchange offer. Please refer to the section of this prospectus entitled “The Exchange Offer — Fees and Expenses.”

Use of Proceeds		We will not receive any proceeds from the issuance of the exchange notes. We are making this exchange offer solely to satisfy certain of our obligations under our registration rights agreement entered into in connection with the offering of the initial notes.

Consequences to Holders Who Do Not Participate in the Exchange Offer		If you do not participate in this exchange offer:

		• except as set forth in the next paragraph, you will not necessarily be able to require us to register your initial notes under the Securities Act,

		• you will not be able to resell, offer to resell or otherwise transfer your initial notes unless they are registered under the Securities Act or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act, and

		• the trading market for your initial notes will become more limited to the extent other holders of initial notes participate in the exchange offer.


		You will not be able to require us to register your initial notes under the Securities Act unless:

		• changes in applicable law or the interpretations of the staff of the Commission do not permit us to effect the exchange offer,

		• for any reason the exchange offer is not consummated by September 9, 2004,

		• any holder notifies us prior to the 30th day following consummation of this exchange offer that it is prohibited by law or Commission policy from participating in the exchange offer,

		• in the case of any holder who participates in the exchange offer, such holder notifies us prior to the 30th day following the consummation of the exchange offer that it did not receive exchange notes that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours within the meaning of the Securities Act), or

		• any initial purchaser of the notes so requests with respect to initial notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution.

		In these cases, the registration rights agreement requires us to file a registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for the benefit of the holders of the initial notes described in this paragraph. We do not currently anticipate that we will register under the Securities Act any notes that remain outstanding after completion of the exchange offer.

		Please refer to the section of this prospectus entitled “Risk Factors — Your failure to participate in the exchange offer will have adverse consequences.”

Resales		It may be possible for you to resell the notes issued in the exchange offer without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to the conditions described under “— Obligations of Broker-Dealers” below.

		To tender your initial notes in this exchange offer and resell the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act, you must make the following representations:

		• you are authorized to tender the initial notes and to acquire exchange notes, and that we will acquire good and unencumbered title thereto,

		• the exchange notes acquired by you are being acquired in the ordinary course of business,

		• you have no arrangement or understanding with any person to participate in a distribution of the exchange notes and are not participating in, and do not intend to participate in, the distribution of such exchange notes,


		• you are not an “affiliate,” as defined in Rule 405 under the Securities Act, of ours, or you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable,

		• if you are not a broker-dealer, you are not engaging in, and do not intend to engage in, a distribution of exchange notes, and

		• if you are a broker-dealer, initial notes to be exchanged were acquired by you as a result of market-making or other trading activities and you will deliver a prospectus in connection with any resale, offer to resell or other transfer of such exchange notes.

		Please refer to the sections of this prospectus entitled “The Exchange Offer — Procedure for Tendering Initial Notes — Proper Execution and Delivery of Letters of Transmittal,” “Risk Factors — Risks Relating to the Exchange Offer — Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes” and “Plan of Distribution.”

Obligations of Broker-Dealers		If you are a broker-dealer (1) that receives exchange notes, you must acknowledge that you will deliver a prospectus in connection with any resales of the exchange notes, (2) who acquired the initial notes as a result of market making or other trading activities, you may use the exchange offer prospectus as supplemented or amended, in connection with resales of the exchange notes, or (3) who acquired the initial notes directly from the issuers in the initial offering and not as a result of market making and trading activities, you must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act in connection with resales of the exchange notes.

Summary of the Terms of the Exchange Notes

The following summary is not intended to be complete. For a more detailed description of the notes, see “Description of the notes.”


Issuer		Ply Gem Industries, Inc.

Exchange Notes		$225,000,000 aggregate principal amount of 9% Senior Subordinated Notes due 2012. The form and terms of the exchange notes are the same as the form and terms of the initial notes, except that the issuance of the exchange notes is registered under the Securities Act, the exchange notes will not bear legends restricting their transfer and the exchange notes will not be entitled to registration rights under our registration rights agreement. The exchange notes will evidence the same debt as the initial notes, and both the initial notes and the exchange notes will be governed by the same indenture.

Interest		The notes will accrue interest from the date of their issuance at the rate of 9% per year. Interest on the notes will be payable semi-annually in arrears on February 15 and August 15 of each year, starting on August 15, 2004.


Maturity Date		February 15, 2012.

Optional Redemption		We may redeem the notes, in whole or part, at any time on or after February 15, 2008 at a redemption price equal to 100% of the principal amount plus a premium declining ratably to par, plus accrued and unpaid interest.

		At any time prior to February 15, 2007, we may redeem up to 35% of the aggregate principal amount of the notes with the proceeds of qualified equity offerings at a redemption price equal to 109% of the principal amount, plus accrued and unpaid interest; provided that:

		• at least 65% of the aggregate principal amount of the notes remains outstanding immediately after the occurrence of such redemption; and

		• such redemption occurs within 90 days of the date of the closing of any such qualified equity offering.

Change of Control		If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. We might not be able to pay you the required price for notes you present to us at the time of a change of control because our new senior credit facilities or other indebtedness may prohibit payment or we might not have enough funds at that time. Following any such offer to purchase, under certain circumstances, prior to February 15, 2008, we may redeem all, but not less than all, of the notes not tendered in such offer at a price equal to 101% of the principal amount, plus accrued and unpaid interest. In addition, if we experience a change of control prior to February 15, 2008, we may redeem all, but not less than all, of the notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium.

Ranking; Guarantees		The notes will be unsecured and will be subordinated in right of payment to all of our existing and future senior debt, including borrowings under our new senior credit facilities. The notes will be effectively subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries that are not guarantors.

		Our parent company, Ply Gem Holdings, and each of our existing and future restricted subsidiaries that guarantee our new senior credit facilities, subject to certain exceptions, will jointly and severally guarantee the notes on a senior subordinated basis. The guarantees will be general unsecured obligations of the guarantors and will be subordinated in right of payment to all existing and future senior debt of the guarantors, which includes their guarantees of our new senior credit facilities.

		As of December 31, 2003, on a pro forma basis, we and the guarantors would have had approximately $222.6 million of senior debt and we would have approximately an additional $32.5 million available to be borrowed under the revolving portion of our new senior credit facilities. Our Canadian subsidiary would have had an


		additional $1.5 million of liabilities (including trade payables), to which the notes would have been effectively subordinated.

Certain Covenants		The indenture governing the notes will contain covenants that will limit our ability and the ability of our subsidiaries to, among other things:

		• incur additional indebtedness;

		• pay dividends or make other distributions or repurchase or redeem our stock;

		• make investments;

		• sell assets;

		• incur certain liens;

		• enter into agreements restricting our subsidiaries’ ability to pay dividends;

		• enter into transactions with affiliates; and

		• consolidate, merge or sell all or substantially all of our assets.

		These covenants are subject to important exceptions and qualifications, which are described under the heading “Description of the notes” in this prospectus.

Absence of a Public Market		The exchange notes are new securities and there is currently no established market for them. We cannot assure you as to the development or liquidity of any market for the exchange notes. Please refer to the section of this prospectus entitled “Risk Factors — Risks Relating to the Exchange Offer — There may be no active or liquid market for the exchange notes.”

Use of Proceeds		We will not receive any proceeds from the issuance of the exchange notes in exchange for the outstanding initial notes. We are making this exchange solely to satisfy our obligations under the registration rights agreement entered into in connection with the offering of the initial notes.

Form of the Exchange Notes		The exchange notes will be represented by one or more permanent global securities in registered form deposited on behalf of The Depository Trust Company with U.S. Bank National Association as custodian. You will not receive exchange notes in certificated form unless one of the events described in the section of this prospectus entitled “Description of Notes — Book Entry; Delivery and Form” occurs. Instead, beneficial interests in the exchange notes will be shown on, and transfers of these exchange notes will be effected only through, records maintained in book-entry form by The Depository Trust Company with respect to its participants.

Risk Factors		See “Risk factors” beginning on page 17 for discussion of factors you should carefully consider before deciding to invest in the notes.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The summary historical financial information presented below under the captions “Statement of operations data” and “Other financial data” for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of two years in the period ended December 31, 2002, are derived from our audited financial statements, which are included elsewhere in this prospectus together with the report thereon.

On January 9, 2003, our former indirect parent, Nortek Holdings, was acquired in a recapitalization transaction, or the “Nortek Recapitalization,” by certain affiliates and designees of Kelso & Company L.P. and certain members of management of our former parent, Nortek. The Nortek Recapitalization was accounted for as a purchase and resulted in a new valuation of the assets and liabilities of Nortek Holdings and its subsidiaries, including us. The results of operations for these periods are not necessarily indicative of the results for the full fiscal year.

The unaudited statement of operations data for the full year ended December 31, 2003, which includes the Pre-Recapitalization period from January 1, 2003 through January 9, 2003 and the Post Re-capitalization period from January 10, 2003 through December 31, 2003, has been compared to the historical fiscal year ended December 31, 2002 for purposes of comparison and management’s discussion and analysis of the results of operations. Any references to fiscal 2003 refer to such full year.

The summary unaudited pro forma financial data set forth below give effect to the Transactions and the other matters described under “Unaudited pro forma financial information” included elsewhere in this prospectus, as if such matters occurred on January 1, 2003 in the case of the unaudited pro forma statement of operations data and as of December 31, 2003 in the case of the unaudited pro forma balance sheet data. The unaudited pro forma information does not purport to represent what our results of operations or financial position would have been if the Transactions and such other matters had occurred as of the dates indicated or what those results will be for future periods.

This summary historical and pro forma financial information are qualified in their entirety by the more detailed information appearing in our financial statements and related notes, “Unaudited pro forma financial information,” “Management’s discussion and analysis of financial condition and results of operations” and other financial information included elsewhere in this prospectus.



	Pre-Nortek Recapitalization(1)									Post-Nortek
										Recapitali-
										zation(1)
																Pro Forma
	Fiscal Year Ended												Full Year			Full Year
	December 31,						Jan. 1, 2003			Jan. 10, 2003			Ended			Ended
							to Jan. 9,			to Dec. 31,			December 31,			December 31,
	2001			2002			2003			2003			2003			2003

(Dollars in thousands)																(Unaudited)
Statement of operations data:
Net Sales	$	484,973		$	508,953		$	8,824		$	522,565		$	531,389		$	531,389
Costs and Expenses:
Cost of products sold		363,187			368,802			7,651			393,674			401,325			401,325
Selling, general and administrative expense, net		71,943			79,625			1,529			73,933			75,462			67,182
Amortization of goodwill and intangible assets(2)		10,648			3,118			70			3,837			3,907			3,907

		445,778			451,545			9,250			471,444			480,694			472,414

Operating earnings (loss)		39,195			57,408			(426	)		51,121			50,695			58,975
Interest expense, net		(26,195	)		(33,508	)		(974	)		(32,921	)		(33,895	)		(32,091	)

Earnings (loss) from continuing operations before provision (benefit) for income taxes		13,000			23,900			(1,400	)		18,200			16,800			26,884
Provision (benefit) for income taxes		6,200			8,100			(500	)		7,200			6,700			10,533

Earnings (loss) from continuing operations		6,800			15,800			(900	)		11,000			10,100			16,351
Earnings (loss) from discontinued operations(3)		(21,800	)		3,400			—			—			—			—

Net Earnings (loss)	$	(15,000	)	$	19,200		$	(900	)	$	11,000		$	10,100		$	16,351

Other financial data:
Net cash provided by operating activities	$	43,918		$	24,147		$	1,853		$	24,205		$	26,058		$	N/A
Net cash provided by (used in) investing activities		(15,699	)		67,076			(312	)		(7,973	)		(8,285	)		N/A
Net cash used in financing activities		(28,399	)		(144,993	)		(4,706	)		(11,443	)		(16,149	)		N/A
Capital expenditures		13,819			9,397			349			7,687			8,036			8,036
Depreciation and amortization expense(2)		21,044			14,071			327			16,089			16,416			16,416
EBITDA(4)		60,239			71,479			(99	)		67,210			67,111			75,391
Ratio of earnings to fixed charges(5)		1.4	x		1.6	x		N/A			1.5	x		1.5	x		1.8x
Pro forma balance sheet data (at period end):
Restricted cash and cash equivalents																$	1,538
Working capital(6)																$	51,716
Total assets																$	695,332
Total debt, including current maturities																$	447,562
Stockholder’s equity																$	141,000

(1) On January 9, 2003, our former indirect parent, Nortek Holdings, was acquired in a recapitalization transaction by certain affiliates and designees of Kelso & Company L.P. and certain members of management of our former parent, Nortek. The Nortek Recapitalization was accounted for as a purchase and resulted in a new valuation of the assets and liabilities of Nortek Holdings and its subsidiaries, including us. See note 1 of the notes to our combined financial statements included elsewhere in this prospectus.

(2) Amortization of goodwill and intangible assets reflects the adoption of SFAS No. 142 “Goodwill and other Intangible Assets” on January 1, 2002. Amortization of goodwill included in 2001 was $7.6 million with no amortization recorded in 2002 or 2003.

(3) Discontinued operations consist of our subsidiaries, Peachtree Doors and Windows, Inc. and SNE Enterprises, Inc. (sold in September 2001), Hoover Treated Wood Products, Inc. (sold in April 2002) and Richwood Building Products, Inc. (sold in November 2002).

(4) EBITDA means net earnings (loss) plus earnings (loss) from discontinued operations, interest expense (net of investment income), provision (benefit) for income taxes, and depreciation and amortization. Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Management believes that the presentation of EBITDA included in this prospectus provides useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA included in this prospectus should be considered in addition to, and not as a substitute for, net earnings in accordance with GAAP as a measure of performance in accordance with GAAP. You are cautioned not to place undue reliance on EBITDA. The following sets forth the reconciliation of EBITDA to net earnings (loss):



		Pre-Nortek Recapitalization(1)									Post-Nortek
											Recapitali-
											zation(1)
													Combined		Pro Forma
		Fiscal Year Ended											Full Year		Full Year
		December 31,						Jan. 1, 2003			Jan. 10, 2003		Ended		Ended
								to Jan. 9,			to Dec. 31,		December 31,		December 31,
		2001			2002			2003			2003		2003		2003

															(Unaudited)
(Dollars in thousands)
Net earnings (loss)(a)		$	(15,000	)	$	19,200		$	(900	)	$	11,000	$	10,100	$	16,351
Less: Earnings (loss) from discontinued operations			21,800			(3,400	)		—			—		—		—
	Interest expense, net		26,195			33,508			974			32,921		33,895		32,091
	Provision (benefit) for income taxes		6,200			8,100			(500	)		7,200		6,700		10,533
	Depreciation and amortization		21,044			14,071			327			16,089		16,416		16,416

EBITDA		$	60,239		$	71,479		$	(99	)	$	67,210	$	67,111	$	75,391	(b)

(a) Net earnings (loss) for historical periods have not been adjusted to eliminate Nortek’s historical allocations to Ply Gem for Nortek’s management fees and Nortek’s historical allocation to Ply Gem of corporate expenses, which will be replaced with our stand-alone costs estimated to be $2.4 million annually, following consummation of the Acquisition. Historical management fees were $5.4 million, $10.2 million and $7.2 million for the fiscal years ended December 31, 2001, 2002 and 2003, respectively. Historical allocations of corporate expenses were $(0.3) million, $3.5 million and $3.4 million for the fiscal years ended December 31, 2001, 2002 and 2003, respectively.

(b) Pro forma EBITDA for the fiscal year ended December 31, 2003 has not been adjusted to account for:

(i) losses of $0.6 million from our Thermal-Gard, Inc. subsidiary, the operations of which we intend to close in 2004;

(ii) the additional savings of $1.9 million that we would have realized from lower PVC resin costs that were renegotiated effective July 2003 had they been in place for the entire fiscal year ended December 31, 2003.

(iii) the additional savings of $1.3 million that we would have realized from the closure of our Butler, PA vinyl siding facility in May 2003 had it been closed for the entire fiscal year ended December 31, 2003.

(iv) the severance and direct costs of $0.8 million, including removal and transfer of equipment, we incurred in connection with the closure of our Butler, PA vinyl siding facility.

(v) the direct costs of $1.9 million we incurred in establishing our new retail fencing business, including the net cost of the buy-out of competitors’ material, and excess manufacturing and freight cost associated with the start-up of a new fabrication process at our Fairbluff, NC facility.

(vi) the severance and relocation costs of $0.7 million we incurred in connection with changes in senior management at a windows products subsidiary.

(5) For the purposes of calculating the ratio of earnings to fixed charges, earnings represent earnings (loss) from continuing operations before provision for income taxes plus fixed charges. Fixed charges consist of interest expense, plus amortization of deferred financing expense and our estimate of the interest within rental expense. Earnings for the period January 1, 2003 to January 9, 2003 were inadequate to cover fixed charges by $2.4 million.

(6) Working capital is defined as current assets (excluding cash and cash equivalents, restricted cash and cash equivalents, unrestricted marketable securities available for sale, at fair value, and assets from discontinued operations), less current liabilities (excluding the current portion of long-term debt and liabilities from discontinued operations).

Our business, operations and financial condition are subject to various risks. Some of these risks are described below, and you should take these risks into account in evaluating us or any investment decision involving us. This section does not describe all risks applicable to us, our industry or our business, and it is intended only as a summary of certain material risk factors.

We have substantial indebtedness. As of December 31, 2003, on a pro forma basis, we would have had approximately $447.6 million of indebtedness outstanding and up to $32.5 million of additional borrowing capacity under the revolving portion of our new senior credit facilities. In addition, subject to restrictions in the indenture and our new senior credit facilities, we may incur additional indebtedness.

Our high level of indebtedness could have important consequences to you. For example, it could:


	•	make it more difficult for us to satisfy our obligations on the notes;

	•	require us to dedicate a substantial portion of our cash flow from operations to interest and principal payments on our indebtedness, reducing the availability of our cash flow for other purposes, such as capital expenditures, acquisitions and working capital;

	•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

	•	increase our vulnerability to general adverse economic and industry conditions;

	•	place us at a disadvantage compared to our competitors that have less debt;

	•	expose us to fluctuations in the interest rate environment because our new senior credit facilities are at variable rates of interest; and

	•	limit our ability to borrow additional funds.

We expect to obtain the money to pay our expenses, fund working capital and capital expenditures, and to pay the interest on the notes, our new senior credit facilities and other debt from cash flow from our operations and from borrowings under our new senior credit facilities. Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the industry in which we operate and competitive pressures. We cannot be certain that our cash flow will be sufficient to allow us to pay principal and interest on our debt (including the notes) and to meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt (including the notes), sell assets or borrow more money. We cannot guarantee that we will be able to do so on terms acceptable to us or at all. In addition, the terms of existing or future debt agreements, including our new senior credit facilities and the indenture governing the notes, may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve such alternatives could significantly adversely affect the value of the notes and our ability to pay principal of and interest on the notes.

The indenture for the notes and our new senior credit facilities impose significant operating and financial restrictions on us. These restrictions will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, make investments, sell assets, incur certain liens, enter into agreements restricting our subsidiaries’ ability to pay dividends, or merge or consolidate. In addition, our new senior credit facilities require us to maintain specified financial ratios. We cannot assure you that these covenants will not

We compete with other national and regional manufacturers of vinyl exterior building products. Some of these companies are larger and have greater financial resources than us. Accordingly, these competitors may be better able to withstand changes in conditions within the industries in which we operate and may have significantly greater operating and financial flexibility than we do. These competitors could take a greater share of sales and cause us to lose business from our customers. Additionally, our products face competition from alternative materials: wood, metal, fiber cement and masonry in siding, and wood and aluminum in windows. An increase in competition from other vinyl exterior building products manufacturers and alternative building materials may adversely impact our business and financial performance.

The home repair and remodeling and new home construction sectors may be significantly affected by changes in economic and other conditions such as gross domestic product levels, employment levels, demographic trends and consumer confidence. These factors can negatively affect the demand for and pricing of our products. More specifically, for example, demand for home repair and remodeling products may be adversely affected by material increases in interest rates and the reduced availability of financing for home improvements. Any deterioration in these factors could have a material adverse effect on our business, financial condition and results of operations.

Our principal raw materials, PVC resin and aluminum, have been subject to rapid price changes, particularly PVC resin in 2000. While we have historically been able to substantially pass on significant PVC resin and aluminum cost increases through price increases to our customers, our results of operations for individual quarters can and have been negatively impacted by a delay between the time of PVC resin and aluminum cost increases and price increases in our products. While we expect that any significant future PVC resin and aluminum cost increases will be offset over time by price increases to our customers, we may not be able to pass on any future price increases.

Our top ten customers together accounted for approximately 42.4% of our net sales in the year ended December 31, 2003. Our largest customer, Georgia-Pacific, distributes our vinyl siding and accessories through multiple channels within its building products distribution division, and accounted for approximately 28.4% of our 2003 net sales. We expect a small number of customers will continue to account for a substantial portion of our net sales for the foreseeable future.

The loss of, or a significant adverse change in, our relationships with Georgia-Pacific or any other major customer could have a material adverse effect on us. On March 12, 2004, Georgia-Pacific announced that it has reached a definitive agreement to sell its building products distribution business to a new company owned by Cerberus Capital Management, L.P., a private, New York-based investment firm, and members of the distribution business’ management team. The loss of, or a reduction in orders from, any significant customers, losses arising from customers’ disputes regarding shipments, fees, merchandise condition or related matters, or

Markets for our products are seasonal and can be affected by inclement weather conditions. Historically, our business has experienced increased sales in the second and third quarters of the year due to increased construction during those periods. Because much of our overhead and expense are fixed throughout the year, our operating profits tend to be lower in the first and fourth quarters. Inclement weather conditions can affect the timing of when our products are applied or installed, causing reduced profit margins when such conditions exist.

We periodically make capital investments to, among other things, maintain and upgrade our facilities and enhance our production processes. As we grow our businesses, we may have to incur significant capital expenditures. We cannot assure you that we will have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, or that the amount of future capital expenditures will not be materially in excess of our anticipated or current expenditures. If we are unable to make necessary capital expenditures, our product offering may become dated, our productivity may decrease and the quality of our products may be adversely affected, which, in turn, could reduce our sales and profitability.

Our financial performance is affected by the availability of qualified personnel and the cost of labor. Currently, approximately 8.5% of our employees are represented by labor unions. We cannot assure you that strikes or other types of conflicts with personnel will not arise or that we will not become a subject of union organizing activity. Furthermore, some of our direct and indirect suppliers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these suppliers could result in slowdowns or closures of facilities where components of our products are manufactured. Any interruption in the production or delivery of our products could reduce sales of our products and increase our costs.

Since being acquired in 1997, we have operated as a division of Nortek. As a result of the Acquisition, we became an independent entity, which we believe will result in full incremental stand-alone selling, general and administrative expense of approximately $2.4 million in our first year. We believe that this represents the full incremental stand-alone expense, and compares to a pre-Acquisition management fee of $7.2 million and an additional corporate allocation of approximately $3.4 million we paid in 2003. We cannot assure you that our estimate is accurate or that our separation from Nortek will progress smoothly, either of which could adversely impact our results. Stand-alone expenses may increase. Following the Acquisition, we will in the future pay Caxton-Iseman Capital an annual advisory fee based on our EBITDA, as defined in our General Advisory Agreement. With respect to 2004 only, this fee is contingent upon achievement of certain financial performance metrics. See “Certain relationships and related transactions — Caxton-Iseman arrangements.”

Under the terms of the stock purchase agreement governing the Acquisition, our former parent, Nortek, has agreed to indemnify us for liabilities arising from our former ownership or operation of subsidiaries or properties where such ownership or operation ceased prior to the completion of the Acquisition, including

We may, from time to time, explore opportunities to acquire related businesses, some of which could be material to us. As of the date of this prospectus, we have no agreements and are not in any discussions to acquire any material businesses or assets. We may not be able to effectively integrate any companies we acquire or successfully implement appropriate operational, financial and management systems and controls to achieve the benefits expected to result from such acquisitions. We may also be subject to unexpected claims and liabilities arising from acquisitions we have made or may make in the future and the Acquisition itself. These claims and liabilities could be costly to defend, could be material in amount and might exceed either the limitations of any applicable indemnification provisions or the financial resources of the indemnifying parties. The diversion of management’s attention and any delays or difficulties encountered in connection with the integration of businesses we acquire could negatively impact our business and results of operations. Further, the benefits that we anticipate from these acquisitions may not develop. For details on the indemnification provisions of the stock purchase agreement relating to the Acquisition, see “The Transactions — The Acquisition.”

We face an inherent business risk of exposure to product liability claims in the event that the use of any of our products results in personal injury or property damage. In the event that any of our products prove to be defective, among other things, we may be responsible for damages related to any defective products and we may be required to recall or redesign such products. Because of the long useful life of our products, it is possible that latent defects might not appear for several years. We can not assure you that any insurance we maintain will continue to be available on terms acceptable to us or that such coverage will be adequate for liabilities actually incurred. Further, any claim or product recall could result in adverse publicity against us, which could adversely affect our sales or increase our costs.

Our continued success depends to a large extent upon the continued services of our senior management and certain key employees. We have entered into various equity-based compensation agreements with our senior executives, including Messrs. Meyer, Wayne, Poe, Watson, Sveinson and McCready, designed to encourage their retention. Each member of our senior management team has substantial experience and expertise in our industry and has made significant contributions to our growth and success. We cannot assure you, however, that members of our senior management will continue in their current positions, and the loss of the services of any of these individuals could have a material adverse effect on our revenue, our financial performance and our results of operations.

Our dependency upon regular deliveries from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made. If any of our suppliers were unable to deliver materials to us for an extended period of time, as the result of financial difficulties, catastrophic events affecting their facilities or other factors beyond our control, or if we were unable to negotiate acceptable terms for the supply of materials with these or alternative suppliers, our

Our facilities are subject to numerous U.S. and Canadian federal, state, provincial and local laws and regulations relating to the presence of hazardous materials, pollution and the protection of the environment, including those governing emissions to air, discharges to water, use, storage and transport of hazardous materials, storage, treatment and disposal of waste, remediation of contaminated sites and protection of worker health and safety. From time to time, our facilities are subject to investigation by governmental regulators. We believe we are in material compliance with all applicable requirements of such laws and regulations. However, our efforts to comply with environmental requirements do not remove the risk that we may be held liable, or incur fines or penalties, and that the amount of liability, fines or penalties may be material, for, among other things, releases of hazardous substances occurring on or emanating from current or formerly owned or operated properties or any associated offsite disposal location, or for newly-discovered contamination at any of our properties from activities conducted by previous occupants. Certain environmental laws impose strict, and under certain circumstances joint and several, liability for the cost of addressing releases of hazardous substances upon certain classes of persons, including site owners or operators and persons that disposed or arranged for the disposal of hazardous substances at contaminated sites. Under the stock purchase agreement governing the Acquisition, our former parent, Nortek, has agreed to indemnify us for any such liabilities arising from our former ownership or operation of subsidiaries or properties where such ownership or operation ceased prior to the completion of the Acquisition and for certain other properties. Our ability to seek indemnification from Nortek is however limited by the strength of Nortek’s own financial condition. For details on the indemnification provisions of the stock purchase agreement relating to the Acquisition, see “The Transactions — The Acquisition.”

Changes in environmental laws and regulations or in their enforcement, the discovery of previously unknown contamination or other liabilities relating to our properties and operations or the inability to enforce the Nortek indemnification obligation could result in significant environmental liabilities which could make it difficult to pay the interest or principal amount of the notes when due. In addition, we might incur significant capital and other costs to comply with increasingly stringent U.S. or Canadian environmental laws or enforcement policies which would decrease our cash flow available to service our indebtedness.

We continually review our manufacturing and assembly operations and sourcing capabilities. Effects of periodic manufacturing realignments and cost savings programs could result in a decrease in our near-term earnings until the expected cost reductions are achieved. Such programs may include the consolidation and integration of facilities, functions, systems and procedures. Such actions may not be accomplished as quickly as anticipated and the expected cost reductions may not be achieved or sustained.

As a company that manufactures and markets branded products, we rely heavily on trademark and service mark protection to protect our brands. We have a significant number of issued patents and rely on copyright protection for certain of our technologies. These protections may not adequately safeguard our intellectual property and we may incur significant costs to defend our intellectual property rights, which may harm our operating results. There is a risk that third parties, including our current competitors, will infringe on our intellectual property rights, in which case we would have to defend these rights. There is also a risk that third parties, including our current competitors, will claim that our products infringe on their intellectual property rights. These third parties may bring infringement claims against us or our customers.

Affiliates of and companies managed by Caxton-Iseman Capital, including Caxton-Iseman (Ply Gem) L.P. and Frederick Iseman, control our affairs and policies. Circumstances may occur in which the interests of these equity holders could be in conflict with the interests of the holders of the notes. In addition, these equity holders may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to holders of the notes. See “Management,” “Security ownership of certain beneficial owners and management” and “Certain relationships and related transactions.”

Payment on the exchange notes will be subordinated in right of payment to all of our senior debt, including our new senior credit facilities. As a result, upon any distribution to our creditors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or our property, the holders of senior debt will be entitled to be paid in full in cash before any payment may be made on the notes. In these cases, we may not have sufficient funds to pay all of our creditors, and holders of notes may receive less, ratably, than the holders of senior debt and, due to the turnover provisions in the indenture, less, ratably, than the holders of unsubordinated obligations, including trade payables. In addition, all payments on the notes will be blocked in the event of a payment default on designated senior debt and may be blocked for up to 179 consecutive days in the event of certain non-payment defaults on designated senior debt.

As of December 31, 2003, on a pro forma basis, the notes would have been subordinated to approximately $222.6 million of senior debt and approximately $32.5 million ($65.0 million new revolving credit facility net of (i) approximately $3.0 million drawn at closing and (ii) approximately $29.5 million of undrawn letters of credit relating to our assumed indebtedness) would have been available for borrowing as additional senior debt under the revolving portion of our new senior credit facilities. We will be permitted to incur additional indebtedness, including senior debt, in the future under the terms of the indenture.

Our Canadian subsidiary, CWD Windows and Doors, Inc., is not a guarantor. This non-guarantor subsidiary generated approximately 9.2% of our net sales, 32.4% of our net earnings and 11.7% of our EBITDA, on a pro forma basis, for the fiscal year ended December 31, 2003. In addition, it held approximately 4.3% of our consolidated assets as of December 31, 2003, on a pro forma basis. Any right of ours to receive the assets of any of our non-guarantor subsidiaries upon their bankruptcy, liquidation or reorganization (and the consequent right of the holders of the notes to participate in those assets) will be subject to the claims of that subsidiary’s creditors, including trade creditors. To the extent that we are recognized as a creditor of that subsidiary, we may have such claim, but we would still be subordinate to any security interests in the assets of that subsidiary and any indebtedness and other liabilities of that subsidiary senior to that held by us. As of December 31, 2003, on a pro forma basis, these notes would have been effectively junior to approximately $31.5 million of liabilities (including trade payables) of our non-guarantor subsidiary, including term loans of $30.0 million under our new senior credit facilities, which are guaranteed by Ply Gem and therefore constitute senior debt under the indenture.

Upon the occurrence of a “change of control,” as defined in the indenture, each holder of the exchange notes will have the right to require us to purchase the notes at a price equal to 101% of the principal amount, together with any accrued and unpaid interest. A change of control will be deemed not to have occurred so long as the Permitted Holders (as defined in the indenture) have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of Ply Gem. Our failure to purchase, or give notice of purchase of, the notes would be a default under the indenture, which would in turn

If a change of control occurs, we may not have enough assets to satisfy all obligations under our new senior credit facilities and the indenture related to the notes. Upon the occurrence of a change of control we could seek to refinance the indebtedness under our new senior credit facilities and the notes or obtain a waiver from the lenders or you as a holder of the notes. We cannot assure you, however, that we would be able to obtain a waiver or refinance our indebtedness on commercially reasonable terms, if at all.

The exchange notes are a new issue of securities and there is no established trading market for the notes. We do not intend to apply for the notes or any exchange notes to be listed on any securities exchange or to arrange for quotation on any automated dealer quotation systems. As a result, we cannot assure you as to the liquidity of any trading market for the notes or the exchange notes.

We also cannot assure you that you will be able to sell your exchange notes at a particular time or that the prices that you receive when you sell will be favorable. We also cannot assure you as to the level of liquidity of the trading market for the exchange notes or, in the case of any holders of notes that do not exchange them, the trading market for the notes following the offer to exchange the notes for exchange notes. Future trading prices of the notes and exchange notes will depend on many factors, including:


	•	our operating performance and financial condition;

	•	the interest of securities dealers in making a market; and

	•	the market for similar securities.

Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in prices. It is possible that the market for the notes and, if issued, the exchange notes will be subject to disruptions. Any disruptions may have a negative effect on the value of the notes, regardless of our prospects and financial performance.

Under federal and foreign bankruptcy laws and comparable provisions of state and foreign fraudulent transfer laws, a guarantee of the notes by a subsidiary guarantor could be voided, if, among other things, at the time the subsidiary guarantor issued its guarantee, the applicable subsidiary guarantor:


	•	intended to hinder, delay or defraud any present or future creditor; or

	•	received less than reasonably equivalent value or fair consideration for the incurrence of such indebtedness and:

	•	was insolvent or rendered insolvent by reason of such incurrence;

	•	was engaged in a business or transaction for which such subsidiary guarantor’s remaining assets constituted unreasonably small capital; or

	•	intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, a subsidiary guarantor in the United States would be considered insolvent if:


	•	the sum of its debts, including contingent liabilities, was greater than the saleable value of all of its assets;

	•	the present fair saleable value of its assets was less than the amount that would be required to pay its probable liabilities on its existing debts, including contingent liabilities, as they become absolute and mature; or

	•	it could not pay its debts as they become due.

To the extent the initial notes are tendered and accepted in the exchange offer, the trading market for the untendered and tendered but unaccepted initial notes could be adversely affected. Because we anticipate that most holders of the initial notes will elect to exchange their initial notes for exchange notes due to the absence of restrictions on the resale of exchange notes under the Securities Act, we anticipate that the liquidity of the market for any initial notes remaining after the completion of this exchange offer may be substantially limited. Please refer to the section in this prospectus entitled “The Exchange Offer — Your Failure to Participate in the Exchange Offer Will Have Adverse Consequences.”

Based on interpretations of the staff of the Commission contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983), we believe that you may offer for resale, resell or otherwise transfer the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under “Plan of Distribution,” you will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer your exchange notes. In these cases, if you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your exchange notes under the Securities Act, you may incur liability under this act. We do not and will not assume, or indemnify you against, this liability.

The initial notes were not registered under the Securities Act or under the securities laws of any state and you may not resell them, offer them for resale or otherwise transfer them unless they are subsequently registered or resold under an exemption from the registration requirements of the Securities Act and applicable state securities laws. If you do not exchange your initial notes for exchange notes in accordance with this exchange offer, or if you do not properly tender your initial notes in this exchange offer, you will not be able to resell, offer to resell or otherwise transfer the initial notes unless they are registered under the Securities Act or unless you resell them, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act.

In addition, except as set forth in this paragraph, you will not be able to obligate us to register the initial notes under the Securities Act. You will not be able to require us to register your initial notes under the Securities Act unless:


	•	changes in law or the applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer,


	•	for any reason the exchange offer is not consummated within 210 days of the date of the issuance of the initial notes,

	•	any holder notifies us prior to the 30th day following consummation of this exchange offer that it is prohibited by law or applicable interpretations of the staff of the Commission from participating in the exchange offer,

	•	in the case of any holder who participates in the exchange offer, such holder notifies us prior to the 30th day following the consummation of the exchange offer that it did not receive exchange notes that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours within the meaning of the Securities Act), or

	•	any initial purchaser so requests with respect to initial notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution.


	•	as promptly as practicable, file the Shelf Registration Statement covering resales of the notes;

	•	use our commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 180th day after the occurrence of one of the events described above; and

	•	use our commercially reasonable efforts to keep the Shelf Registration Statement effective for the lesser of two years after the date of issuance of the initial notes or such time as all of the applicable notes have been sold thereunder.

We do not currently anticipate that we will register under the Securities Act any initial notes that remain outstanding after completion of the exchange offer.

On February 12, 2004, Ply Gem Holdings, Inc., our direct parent, acquired all of our outstanding common stock for aggregate consideration of $560.0 million, subject to any adjustments based on our working capital (as defined in the stock purchase agreement), less the aggregate principal amount of net assumed indebtedness of $29.6 million, and less the aggregate value of options to purchase stock of Nortek Holdings held by certain members of our management cancelled or forfeited in connection with the Acquisition, pursuant to a stock purchase agreement between Ply Gem Investment Holdings, formerly known as CI Investment Holdings, Inc., an entity formed by Caxton-Iseman Capital and its affiliates, and Nortek, our former indirect parent, and WDS LLC, our former parent and collectively with Nortek, the “Sellers.” In accordance with the terms of the stock purchase agreement, at the closing, Ply Gem Investment Holdings assigned its rights to purchase all our shares under the stock purchase agreement to its wholly-owned subsidiary, Ply Gem Holdings. We refer to this stock purchase as the “Acquisition.” Prior to the Acquisition, we were known as the Windows, Doors and Siding division of Nortek.

In addition to customary indemnification for breaches of representations, warranties and covenants, the Sellers have agreed to fully indemnify Ply Gem Investment Holdings for any losses it sustains relating to: (a) the operations of Nortek, its subsidiaries or affiliates and former subsidiaries or affiliates other than us; (b) operations we sold or otherwise discontinued prior to the Acquisition; (c) certain of our and our discontinued operations’ employee benefit plans; (d) certain leases under which we are a guarantor, co-tenant or other obligor that relate to our sold or discontinued operations; (e) certain pending litigation proceedings; (f) environmental liabilities incurred prior to the Acquisition in connection with the operations of Thermal-Gard, Inc., a subsidiary the operations of which we intend to discontinue in the first half of 2004; and (g) certain potential environmental liabilities arising in connection with our Calgary, Alberta operations.

The Sellers have covenanted to use their reasonable commercial efforts to novate certain sale and lease contracts relating to discontinued operations, thereby removing us and our affiliates from certain indemnification obligations thereunder, which obligations we retained in connection with the sales of certain of our businesses.

In addition, the Sellers will indemnify Ply Gem Investment Holdings for certain losses relating to tax liabilities.

Ply Gem Investment Holdings will indemnify the Sellers for any breach by it of representations, warranties, covenants and agreements it made under the stock purchase agreement.

Under the terms of the stock purchase agreement, Ply Gem Investment Holdings, Nortek and WDS LLC each paid their own expenses relating to the Acquisition.

Under the terms of the stock purchase agreement, we entered into a Transition Services Agreement with Nortek, pursuant to which Nortek will continue to provide to us and our subsidiaries a number of support services it had provided to us prior to the Acquisition, for up to six months following the closing of the Acquisition. We will pay Nortek for specified costs and expenses it incurs in providing these transitional services to us.

Prior to the consummation of the Acquisition, an investor group led by Caxton-Iseman Capital and its affiliates, together with certain members of our management, including Messrs. Meyer, Wayne, Poe, Watson, Sveinson, and McCready made an aggregate investment of approximately $141.0 million (in cash, including from management, and the value of management equity awards) in Ply Gem Investment Holdings, which in turn made an equity contribution to Ply Gem Holdings. See “Certain relationships and related transactions.”

Simultaneously with the offering of initial notes and the Acquisition, we entered into $255.0 million of new senior credit facilities, consisting of a $65.0 million revolving credit facility and $190.0 million of new term loan facilities. We borrowed the full amounts under the term loan facilities and approximately $3.0 million under the revolving credit facility, to fund the Acquisition and pay related transaction costs and expenses.

We will not receive any cash proceeds from the issuance of the exchange notes in exchange for the outstanding initial notes. We are making this exchange solely to satisfy our obligations under the registration rights agreement entered into in connection with the offering of the initial notes. In consideration for issuing the exchange notes, we will receive initial notes in like aggregate principal amount.

The gross proceeds from the offering of initial notes were $225.0 million. Concurrently with the consummation of the offering of initial notes, we entered into new senior credit facilities. We used the proceeds from the offering of initial notes and borrowings under the new senior credit facilities to fund the Acquisition and pay related transaction costs and expenses. See “The Transactions” and “Description of Other Indebtedness.”

The following table summarizes the estimated sources and uses of funds for the Transactions, assuming the closing occurred as of December 31, 2003.


(1)	Represents the $65.0 million revolving credit facility, $3.0 million of which was drawn at closing. Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to reduce our revolving credit facility from $65.0 million to $55.0 million.

(2)	Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to increase our U.S. term loan facility from $160.0 million to $170.0 million.

(3)	Consists of outstanding principal and accrued interest under municipal loan agreements that remain outstanding following the Acquisition. This amount is net of restricted cash and cash equivalents of approximately $0.5 million relating to this indebtedness on our balance sheet.

(4)	Includes cash contributions and the value of management equity awards granted in connection with the Acquisition.

(5)	Consists of $560.0 million less assumed indebtedness of $29.1 million and $4.3 million aggregate value of options to purchase stock of Nortek Holdings held by certain members of our management cancelled or forfeited in connection with the Acquisition.

(6)	Includes amounts related to cancellation/forfeiture of options to purchase stock of Nortek Holdings held by certain members of our management in connection with the Acquisition.

(7)	Transaction costs include estimated commitment, placement, financial advisory and other transaction fees and legal, accounting and other costs payable in connection with the Transactions.

The following table sets forth our capitalization as of December 31, 2003, on a historical basis and on a pro forma basis. This table should be read in conjunction with the information contained in “Use of proceeds,” “Selected historical financial information,” “Unaudited pro forma financial information,” “Management’s discussion and analysis of financial condition and results of operations,” and our financial statements and notes thereto included elsewhere in this prospectus.


(1)	Represents the $65.0 million revolving credit facility, $3.0 million of which was drawn at closing. Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to reduce our revolving credit facility from $65.0 million to $55.0 million.

(2)	Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to increase our U.S. term loan facility from $160.0 million to $170.0 million.

(3)	Consists of outstanding principal and accrued interest on secured indebtedness under municipal loan agreements that remained outstanding following the Acquisition.

The following unaudited pro forma financial statements have been derived from our historical financial statements, adjusted to give pro forma effect to the Transactions.

The unaudited pro forma statements of operations data presented herein give pro forma effect as if the Transactions occurred on January 1, 2003. The unaudited balance sheet data at December 31, 2003 gives pro forma effect as if the Transactions occurred on December 31, 2003.

The unaudited statement of operations data for the full year ended December 31, 2003 includes the Pre-Recapitalization period from January 1, 2003 through January 9, 2003 and the Post-Recapitalization period from January 10, 2003 through December 31, 2003. Any references to fiscal 2003 refer to such full year.

The pro forma adjustments are based on preliminary estimates, available information and certain assumptions that we believe are reasonable and may be revised as additional information becomes available. The pro forma adjustments and certain assumptions are described in the accompanying notes. The Acquisition has been accounted for using the purchase method of accounting.

The unaudited pro forma financial data set forth below should be read in conjunction with our financial statements, the notes thereto and “Management’s discussion and analysis of financial condition and results of operations” included elsewhere in this prospectus.


(1)	Reflects direct acquisition cost funded with acquired cash.

(2)	Reflects the adjustment to goodwill as a result of the acquisition of Ply Gem by Ply Gem Holdings. The fair values of our assets and liabilities have not been determined, and accordingly, the estimated purchase price in excess of the net book value of our assets and liabilities has been fully allocated to goodwill as follows:


(3)	Reflects (i) capitalized deferred financing costs related to the new senior credit facilities and the offering of the senior subordinated notes, (ii) the establishment of a receivable from Nortek to Ply Gem in an amount equal to certain liabilities for which Nortek will indemnify us as part of the Stock Purchase Agreement. The table that follows presents the pro forma adjustments in other assets.


(4)	Represents the change in our capital structure in connection with the Transactions.


(5)	Represents the elimination of intercompany notes payable to other Nortek subsidiaries that were eliminated in connection with the Transactions.

(6)	Represents the change in equity as a result of the Transactions. The total of common stock and additional paid-in capital represents the amount contributed to effect the Transactions.


(1)	Represents the following adjustments to selling, general and administrative expense to reflect the net change from Nortek’s historical management fee and other allocated corporate expenses offset by stand-alone costs estimated to be incurred by us to replicate the services covered by Nortek’s management fee and allocated expenses.

The table that follows presents the adjustments to selling, general and administrative expense.

(2)

The adjustments to interest expense, net reflect the elimination of interest incurred on $394,700 of intercompany notes that were eliminated as a result of the Acquisition and $61 of intercompany interest income in our Canadian window subsidiary also related to intercompany balances that no longer exist following the Transactions. These eliminations are offset by estimated interest expense on the senior subordinated notes and estimated interest expense on our senior secured credit facilities as well as the amortization of capitalized deferred financing charges. In addition, we retained various other existing mortgage notes and other related indebtedness payable in installments. The table that follows presents the adjustment to interest expense, net.


(3)	Represents the estimated tax effect of the pro forma adjustments items at an effective rate of 38.0%.

The selected historical financial information presented below under the captions “Statement of operations data,” and “Other financial data” for the period from January 10, 2003 through December 31, 2003, the period from January 1, 2003 through January 9, 2003, and for each of the two years in the period ended December 31, 2002, and the “Balance sheet data” as of December 31, 2003, 2002 and 2001 are derived from our audited financial statements, which are included elsewhere in this prospectus together with the report thereon. The selected historical financial information presented below under the caption “Statement of operations data” and “Other financial data” for the fiscal year ended December 31, 2000 is derived from our audited financial statements, not included in this prospectus. The selected historical financial information presented below under the captions “Statement of Operations data” and “Other financial data” for the fiscal year ended December 31, 1999, and the “Balance sheet data” as of December 31, 1999 and 2000 is derived from our unaudited financial statements not included in this prospectus.

On January 9, 2003, our former indirect parent, Nortek Holdings, was acquired in a recapitalization transaction by certain affiliates and designees of Kelso & Company L.P. and certain members of management of our former parent, Nortek. The Nortek Recapitalization was accounted for as a purchase and resulted in a new valuation of the assets and liabilities of Nortek Holdings and its subsidiaries, including us. The results of operations for these periods are not necessarily indicative of the results for the full fiscal year.

The unaudited statement of operations data for the full year ended December 31, 2003, which includes the Pre-Recapitalization period from January 1, 2003 through January 9, 2003 and the Post-Recapitalization period from January 10, 2003 through December 31, 2003, has been compared to the historical fiscal year ended December 31, 2002 for purposes of comparison and management’s discussion and analysis of the results of operations. Any references to fiscal 2003 refer to such full year.

This selected historical financial information is qualified in its entirety by the more detailed information appearing in our financial statements and related notes and “Management’s discussion and analysis of financial condition and results of operations” and other financial information included elsewhere in this prospectus.

(1)

On January 9, 2003, our former indirect parent, Nortek Holdings was acquired in a recapitalization transaction by certain affiliates and designees of Kelso & Company L.P. and certain members of management of our former parent, Nortek. The Nortek Recapitalization was accounted for as a purchase and resulted in a new valuation of the assets and liabilities of Nortek Holdings and its subsidiaries, including us. See note 1 of the notes to our combined financial statements included elsewhere in this prospectus.


(2)	Amortization of goodwill and intangible assets reflects the adoption of SFAS No. 142 “Goodwill and Other Intangible Assets” on January 1, 2002. Amortization of goodwill included in 2001 was $7.6 million with no impairment or amortization in 2002 or 2003.

(3)	Discontinued operations consist of our subsidiaries, Peachtree Doors and Windows, Inc. and SNE Enterprises, Inc. (sold in September 2001), Hoover Treated Wood Products, Inc. (sold in April 2002) and Richwood Building Products, Inc. (sold in November 2002).

(4)	EBITDA represents net earnings (loss) plus earnings (loss) from discontinued operations, interest expense (net of investment income), provisions (benefit) for income taxes, and depreciation and amortization. Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Management believes that the presentation of EBITDA included in this prospectus provides useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA included in this prospectus should be considered in addition to, and not as a substitute for, net earnings in accordance with GAAP as a measure of performance in accordance with GAAP. You are cautioned not to place undue reliance on EBITDA. The following sets forth the reconciliation of EBITDA to net earnings (loss):


	(a)	Net earnings (loss) for historical periods have not been adjusted to eliminate Nortek’s historical allocations to Ply Gem for Nortek’s management fees and Nortek’s historical allocation to Ply Gem of corporate expenses, which will be replaced with our stand-alone costs following consummation of the Acquisition. Historical management fees were $4.5 million, $4.9 million, $5.4 million, $10.2 million, and $7.2 million for the fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003, respectively. Historical allocations for corporate expenses were $3.5 million, $3.9 million, $(0.3) million, $3.5 million, and $3.4 million for the fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003, respectively.


(5)	For the purposes of calculating the ratio of earnings to fixed charges, earnings represent earnings (loss) from continuing operations before provision for income taxes plus fixed charges. Fixed charges consist of interest expense plus amortization of deferred financing expense and our estimate of the interest within rental expense. Earnings for the period January 1, 2003 to January 9, 2003 were inadequate to cover fixed charges by $2.4 million.

(6)	Working capital is defined as current assets (excluding cash and cash equivalents, restricted cash and cash equivalents and unrestricted marketable securities available for sale, at fair value, and assets from discontinued operations) less current liabilities (excluding the current portion of long-term debt and liabilities from discontinued operations).

The following discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. The following discussion should be read in conjunction with “Selected historical financial information,” “Unaudited pro forma financial information” and our financial statements and the accompanying notes thereto included elsewhere in this prospectus.

We are a leading manufacturer of residential exterior building products in North America. We offer a comprehensive product line of vinyl siding and skirting, vinyl windows and doors, and vinyl and composite fencing, railing and decking that serves both the home repair and remodeling and new home construction sectors in all 50 states and Western Canada. We also manufacture vinyl and aluminum soffit and siding accessories, aluminum trim coil, wood windows and steel and fiberglass doors, enabling us to bundle complementary and color-matched products and accessories with our core vinyl products. We believe our broad product offering and geographically diverse manufacturing base allow us to better serve our customers and provide us with a competitive advantage over other vinyl building products suppliers. For the fiscal year ended December 31, 2003, on a pro forma basis, we had net sales of $531.4 million, net earnings of $16.4 million and EBITDA of $75.4 million.

As a result of the Acquisition, we are no longer a division of Nortek, but have become a stand-alone company. Prior to the Acquisition, we had a fee arrangement with our former parent, Nortek, under which we reimbursed Nortek for certain parent company corporate charges and have accounted for these charges in accordance with SEC Staff Accounting Bulletin No. 55. For the fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003, our fees to Nortek for these corporate charges were $4.5 million, $4.9 million, $5.4 million, $10.2 million, and $7.2 million, respectively. This fee arrangement was terminated in connection with the Acquisition. In addition, prior to the Acquisition, we paid an allocation of corporate expenses to Nortek based upon the specific identification method. For the fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003, Nortek’s allocations of these corporate expenses were $3.5 million, $3.9 million, $(0.3) million, $3.5 million, and $3.4 million, respectively. We estimate that in our first year as a stand-alone company, we will incur approximately $2.4 million of incremental operating expenses to pay for services, including accounting, tax, legal, insurance and treasury, which we previously received from Nortek under these arrangements. These incremental operating expenses are included in our pro forma unaudited statements of operations for the fiscal year ended December 31, 2003 included elsewhere in this prospectus, but are not reflected in any of our historical results or the results of operations discussion as set forth below. Incremental operating expenses may increase in subsequent years. See “Unaudited pro forma financial information” and note 1 to the notes to our consolidated financial statements included elsewhere in this prospectus.

We will in the future pay Caxton-Iseman Capital an annual advisory fee based on our EBITDA, as defined in our General Advisory Agreement. With respect to 2004 only, this fee is contingent upon achievement of certain financial performance metrics. See “Certain Relationships and Related Transactions — Caxton-Iseman Arrangements.”

In order to finance the Acquisition, our parent, Ply Gem Holdings, received an equity contribution from Ply Gem Investment Holdings, and we entered into new senior credit facilities and issued the initial notes. See “The Transactions.”

On November 22, 2002, we sold the capital stock of our Richwood Building Products, Inc. subsidiary for approximately $8.5 million of net cash proceeds and recorded a pre-tax loss of approximately $3.0 million in the fourth quarter of 2002. In accordance with SFAS No. 142, we allocated $4.2 million of goodwill to Richwood in connection with the determination of the loss on sale based upon the relative fair value of Richwood to our total fair value. The related goodwill amortization prior to January 1, 2002 and goodwill has been included in the results of discontinued operations and assets of discontinued operations, respectively, for all periods presented.

On April 2, 2002, we sold the capital stock of our Hoover Treated Woods Products, Inc. subsidiary for approximately $20.0 million of net cash proceeds and recorded a pre-tax gain of approximately $5.4 million in the second quarter of 2002. Approximately $8.5 million of the cash proceeds were used to pay down outstanding debt under our then existing credit facility in the second quarter of 2002, which was later terminated.

On September 21, 2001, we sold the capital stock of our subsidiaries, Peachtree Doors and Windows, Inc. and SNE Enterprises, Inc. for approximately $45.0 million in the aggregate in cash, and recorded a pre-tax loss on the sale of approximately $34.0 million in the third quarter of 2001, including the write-off of approximately $11.7 million of unamortized intangible assets. A portion of the cash proceeds was used to pay down approximately $20.5 million of outstanding debt under our then existing credit facility.

In 2004, we intend to close the operations and sell the assets of our Thermal-Gard, Inc. subsidiary in Punxatawney, Pennsylvania. The closure is not expected to have a material impact on our financial statements.

On January 9, 2003, Nortek Holdings, our former indirect parent, was acquired by certain affiliates and designees of Kelso & Company L.P. and certain members of management of our former parent, Nortek. Our company, Ply Gem Industries, Inc., our subsidiaries and CWD Windows and Doors, a division of Broan-Nutone CanadaInc., Nortek and Nortek Holdings accounted for the Nortek Recapitalization as a purchase in accordance with the provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations,” which resulted in a new valuation for the assets and liabilities of Nortek Holdings and its subsidiaries (including us) based upon fair values as of the date of the Recapitalization. As permitted under SEC Staff Accounting Bulletin No. 54, “Push Down Basis of Accounting Required in Certain Limited Circumstances,” we have reflected all applicable purchase accounting adjustments recorded by Nortek Holdings in our combined financial statements for all future financial statements covering periods subsequent to the Nortek Recapitalization. See note 1 of the notes to our combined financial statements included elsewhere in this prospectus.

Net Sales. Net sales represent the selling price of our products plus certain shipping charges less applicable provisions for discounts and allowances. Allowances include cash discounts, volume rebates and gross returns among others.

Cost of Products Sold. Cost of products sold includes direct material and manufacturing costs, manufacturing depreciation, third-party and in-house delivery costs and product warranty expense.

Selling, General and Administrative Expense. Selling, general and administrative expense, or “SG&A expense,” includes all non-product related operating expenses, including selling, marketing, research and development costs, information technology and other general and administrative expenses.

Operating Earnings. Operating earnings represents net sales less cost of products sold, SG&A expense and amortization of goodwill and intangible assets.

Comparability. The unaudited data for the full year ended December 31, 2003, which includes the Pre-Recapitalization period from January 1, 2003 through January 9, 2003 and the Post-Recapitalization period

Our principal raw materials, PVC resin and aluminum, have historically been subject to rapid price changes. We have in the past been able to substantially pass on significant cost increases through price increases to our customers. Our results of operations for individual quarters can and have been impacted by a delay between the time of PVC resin and aluminum cost increases and decreases and related price changes that we implement in our products.

Since our building products are intended for exterior use, our sales and operating earnings tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year historically result in that quarter producing significantly less sales revenue than in any other period of the year. As a result, we have historically had lower profits or losses in the first quarter, and reduced profits in the fourth quarter of each calendar year due to the weather. Our results of operations for individual quarters in the future may be impacted by adverse weather conditions.

The following discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain of our accounting policies require the application of judgments in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We periodically evaluate the judgments and estimates used for our critical accounting policies to ensure that such judgments and estimates are reasonable for our interim and year-end reporting requirements. These judgments and estimates are based on our historical experience, current trends and information available from other sources, as appropriate. If different conditions result from those assumptions used in our judgments, the results could be materially different from our estimates. While all significant policies are important to our consolidated financial statements, some of these policies may be viewed as being critical. Our critical accounting policies include the following:

Revenue Recognition. We generally recognize sales based upon shipment of products to our customers and have procedures in place at each of our subsidiaries to ensure that an accurate cut-off is obtained for each reporting period. Revenue includes selling price of the product and all shipping costs paid by the customer. Revenue is reduced at the time of sale for estimated sales returns and all applicable allowances and discounts based on historical experience. We also provide for estimates of warranty, bad debts, shipping costs and certain sales-related customer programs at the time of sale. Shipping and warranty costs are included in cost of products sold. Bad debt expense and sales-related marketing programs are included in selling, general and administrative expense. We believe that our procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are reconciled to the actual amounts.

Accounts Receivable. We maintain an allowance for doubtful accounts for estimated losses from the inability of our customers to make required payments, which is provided for in bad debt expense. We determine the adequacy of this allowance by regularly reviewing our accounts receivable aging and evaluating individual customers’ receivables, considering customers’ financial condition, credit history and other current economic conditions. If a customer’s financial condition were to deteriorate which might impact its ability to make payment, then additional allowances may be required.

Inventories. Inventories in the accompanying combined balance sheets are valued at the lower of cost or market. At December 31, 2003, 2002 and 2001, approximately $10,097,000, $13,282,000 and $13,090,000 of total inventories, respectively, were valued on the last-in, first-out method, or “LIFO.” Under the first-in, first-out method, or “FIFO,” of accounting, such inventories would have been approximately $402,000 higher

Asset Impairment. In the third quarter of 2001, we adopted SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” or “SFAS No. 144,” which addressed financial accounting and reporting for the impairment or disposal of long-lived assets. Adoption of this accounting standard did not result in any material changes in net earnings (loss) from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation of all periods presented has been reclassified to conform to the new standard. In accordance with SFAS No. 144, we evaluate the realizability of certain long-lived assets, which primarily consist of property and equipment and intangible assets, based on expectations of non-discounted future cash flows for each subsidiary having a material amount of SFAS No. 144 long-lived assets. If the sum of the expected non-discounted future cash flow is less than the carrying amount of all assets including SFAS No. 144 long-lived assets, we would recognize an impairment loss. Based upon our most recent analysis, we believe that no material impairment of SFAS No. 144 long-lived assets existed at December 31, 2003.

Insurance Liabilities. We record insurance liabilities and related expense for health, workers’ compensation, product and general liability losses and other insurance reserves and expenses in accordance with either the contractual terms of their policies or, if self-insured, the total liabilities that are estimable and probable as of the reporting date. Insurance liabilities are recorded as current liabilities to the extent they are expected to be paid in the succeeding year with the remaining requirements classified as long-term liabilities. The accounting for self-insured plans requires that significant judgments and estimates be made both with respect to the future liabilities to be paid for known claims and incurred but not reported claims as of the reporting date. We rely heavily on historical trends and, in certain cases, the advice and calculations of third-party actuarial consultants when determining the appropriate insurance reserves to record in our combined balance sheet for a substantial portion of our workers’ compensation and general and product liability losses.

Income Taxes. Federal income taxes have been recorded in our combined financial statements based upon our pro rata share of Nortek’s consolidated federal tax provision. We account for deferred income taxes using the liability method in accordance with SFAS No. 109 “Accounting for Income Taxes,” or “SFAS No. 109,” which requires that the deferred tax consequences of temporary differences between the amounts recorded in our financial statements and the amount included in our federal and state income tax returns be recognized in the balance sheet. The amount recorded in our financial statements at December 31 of each year reflects estimates of final amounts due to timing of completion and filing of actual income tax returns. Estimates are required with respect to, among other things, the appropriate state income tax rates to use in the various states that we and our subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realized in the future.

The following table sets forth our results of operations based on the amounts and the percentage relationship of the items listed to net sales for the periods indicated. However, our results of operations set forth below and elsewhere in the prospectus may not necessarily reflect what would have occurred if we had been a separate, stand-alone entity during the periods presented or what will occur in the future. Our results of operations in future periods may differ from our historical performance due to changes in our business as discussed above under “— General.”

The unaudited statement of operations data for the full year ended December 31, 2003, which includes the Pre-Recapitalization period from January 1, 2003 through January 9, 2003 and the Post-Recapitalization period from January 10, 2003 through December 31, 2003, has been compared to the historical fiscal year ended December 31, 2002 for purposes of comparison and management’s discussion and analysis of the results of operations. Any references to fiscal 2003 refer to such full year.

Net Sales. Net sales for the full year ended December 31, 2003 increased by $22.4 million, or 4.4%, from $509.0 million for the fiscal year ended December 31, 2002, to $531.4 million for the full year ended December 31, 2003. The increase in net sales occurred across all of our primary product categories through unit volume growth with both existing and new customers. In addition, our increased sales reflected the positive impact of price increases that were launched in the first half of the year in our siding and fencing products in response to rising PVC resin material costs.

Cost of Products Sold. Cost of products sold increased as a percentage of net sales from approximately 72.5% for the fiscal year ended December 31, 2002 to approximately 75.5% for the full year ended December 31, 2003. The increased percentage was largely driven by the increased cost of certain purchased materials, in particular, PVC resin, and certain costs we incurred totaling approximately $1.9 million in connection with the start-up of a new fabrication process for a new large retail customer of our fencing products. These costs were partially offset in the period by increased selling price and specific cost improvement actions, including the renegotiation of our PVC resin pricing effective July 1, 2003. Additionally, we estimate that we realized $1.9 million in savings in the manufacture of our siding products during the full year ended December 31, 2003 from the closure of our Butler, Pennsylvania manufacturing facility in May 2003.

Selling, General and Administrative Expense. Our SG&A expense in the full and fiscal years ended December 31, 2003 and December 31, 2002 included the Nortek management fee of $7.2 million and $10.2 million, respectively, and an allocation of corporate expenses of $3.4 million and $3.5 million, respectively, referred to above in “— General — Impact of the Transactions.” SG&A expense for the full year ended December 31, 2003 was $75.5 million, which represents a $4.1 million decrease, or 5.2%, from $79.6 million for the fiscal year ended December 31, 2002. The decline in SG&A expense was primarily driven by decreased bad debt expense relating to our Thermal-Gard window products (compared to the higher than normal bad debt expense incurred in 2002) and lower selling and marketing expense in our siding products that resulted from management’s restructuring of certain selling programs. The decrease in SG&A expense was partially offset by $0.6 million of severance and relocation costs associated with management changes in our domestic windows operations and approximately $0.8 million of costs associated with the closure of our Butler, Pennsylvania manufacturing facility in May 2003.

Operating Earnings. Operating earnings decreased $6.7 million from $57.4 million for the fiscal year ended December 31, 2002 to $50.7 million for the full year ended December 31, 2003. As discussed above, the decrease in operating earnings was principally due to higher cost of purchased materials, particularly PVC resin, costs related to the start-up of a new fabrication process for a new large retail customer, the closure of our Butler, Pennsylvania facility and severance and relocation costs associated with management changes in our domestic windows operation. The cost increases were partially offset by increased selling price, specific cost improvement actions, lower selling, general and administrative expense and higher sales volume. Operating earnings were reduced by depreciation expense and amortization of intangible assets, which were approximately $14.1 million and $16.4 million for the fiscal years ended December 31, 2002 and December 31, 2003, respectively.

Net Sales. Net sales increased approximately $24.0 million, or 4.9%, from $485.0 million in 2001, to $509.0 million in 2002. The increase in net sales was principally due to (a) strong new construction and remodeling activity, as well as favorable weather conditions, which created increased volume for vinyl siding, (b) growing demand for vinyl fencing and decking products, (c) increased volume by our Canadian window operations and (d) increased sales prices of certain window product lines, partially offset by lower sales volume of vinyl window product lines to domestic customers primarily due to outdated products at our Thermal-Gard business.

Cost of Products Sold. Cost of products sold, as a percentage of net sales, decreased from 74.9% for the year ended 2001 to 72.5% for the year ended 2002. The decrease in the percentage principally resulted from reductions realized in the cost of certain purchased materials and component parts, in part, due to lower prices and the effect of lower costs from cost reduction measures implemented in 2001, particularly PVC resin for vinyl siding products. Although PVC resin costs decreased overall, PVC resin costs in the second half of 2002 were higher than the second half of 2001 and continued at a higher level through the first half of 2003. In addition, increased sales volume of vinyl siding products without a proportionate increase in cost was also a favorable factor in improving cost of products sold, as a percentage of net sales. These decreases were partially offset by material and conversion cost increases related to certain of our window product lines. In 2001, we acquired a 200,000 square foot manufacturing facility for our fencing, railing and decking product lines and incurred additional cost of products sold related to direct start-up costs and unabsorbed fixed overhead.

Selling, General and Administrative Expense. Our SG&A expense in 2002 and 2001 included the Nortek management fee of $10.2 million and $5.4 million, and an allocation of corporate expenses of $3.5 million and $(0.3) million, respectively, referred to above in “— General — Impact of the Transactions.” SG&A expense increased from approximately $71.9 million, or approximately 14.8% as a percentage of net sales, in 2001 to approximately $79.6 million, or approximately 15.6% as a percentage of net sales in 2002. In 2001, SG&A expense included approximately $1.6 million of litigation expense related to our domestic window products.

Operating Earnings. Operating earnings increased $18.2 million from $39.2 million in 2001, to approximately $57.4 million in 2002. The increase in operating earnings was principally due, as discussed above, to an increase in earnings from vinyl siding and related products, which benefited in 2002 from reduced material costs as a result of price and cost improvements associated with strategic sourcing activities and higher sales volume as compared to 2001. Consolidated operating earnings were reduced by depreciation expense and amortization of intangible assets of approximately $21.0 million and $14.1 million for 2001 and 2002, respectively.

Our primary cash needs are for working capital, capital expenditures and debt service. We have historically financed these cash requirements through internally generated cash flow and funds borrowed under our former credit facility (which was terminated in July 2002) and from our former parent, Nortek.

Net cash provided by operating activities for the fiscal years ended December 31, 2003, 2002 and 2001 was $26.1 million, $24.1 million and $43.9 million, respectively. The $2.0 million increase in net cash from operating activities that occurred from 2002 to 2003 was primarily driven by the $2.6 million impact of discontinued operations in 2002 and improved working capital, which was partially offset by reduced earnings from continuing operations. The $19.8 million decrease in net cash from operating activities that occurred from 2001 to 2002 was driven by an $8.9 million impact from discontinued operations and increased accrued expenses, which included among other things, $1.2 million of accrued expenses for the sale of discontinued operations of Peachtree Doors and Windows, Inc. and SNE Enterprises, Inc., and $1.8 million in higher accrued management incentives as compared to 2000. Management incentive expenses in 2000 were lower due to lower earnings performance in 2000, as well as other normal working capital fluctuations.

Net cash used in investing activities was $8.3 million for the fiscal year ended December 31, 2003 and was essentially all related to capital expenditures. Net cash provided by investing activities was $67.1 million for the fiscal year ended December 31, 2002 and included $29.5 million from the sale of discontinued operations and $47.4 million net proceeds from the sale and purchase of investments and marketable securities. Net cash used in investing activities was $15.7 million in 2001 and was primarily driven by capital spending of $13.8 million. In addition, 2001 included $45.0 million from the sale of discontinued operations and $47.4 million from the net purchases of investments and marketable securities.

Net cash used in financing activities for the fiscal years ended December 31, 2003, 2002 and 2001 was $16.1 million, $145.0 million, and $28.4 million, respectively. The increase in net cash used in 2002 resulted from net transfers to Nortek, our former parent, consisting of interest on intercompany loans, and included the transfer of net proceeds from the sale and purchase of investments and marketable securities. All other intercompany loans owed to Nortek and its other subsidiaries at the time of the Transactions were repaid in full in conjunction with the Acquisition.

Our capital expenditures for the fiscal years ended December 31, 2003, 2002 and 2001 were $8.0 million, $9.4 million and $13.8 million, respectively. We expect our capital expenditures in the near future to remain consistent with our expenditures in past periods.

We had no business acquisition expenditures in the years ended December 31, 2001, 2002 and 2003.

We intend to fund our ongoing capital and working capital requirements, including our internal growth, through a combination of cash flows from operations and, if necessary, from borrowings under the revolving credit portion of our new senior credit facilities. On a pro forma basis, we would have had $447.6 million of indebtedness and $32.5 million of availability under our new revolving credit facility. Concurrently with the Acquisition, we issued the initial notes and entered into $255.0 million of new senior credit facilities. Our new senior credit facilities consist of a $65.0 million revolving credit facility and $190.0 million of term loan facilities. We borrowed the full amounts under the term loan facilities, and approximately $3.0 million under

The borrowings under the revolving credit facility will be available until its maturity to fund our working capital requirements, capital expenditures and other general corporate needs. The revolving credit facility will mature five years after the closing and will have no scheduled amortization or commitment reductions. The term loan facilities will mature seven years after the closing and will have quarterly scheduled amortization of $500,000 beginning in the quarter ending June 30, 2004 and for the next 23 calendar quarters thereafter, and $47,000,000 on June 30, 2010, September 30, 2010, December 31, 2010 and on the maturity date. Interest payments on the senior subordinated notes and required principal and interest payments on borrowings under our new senior credit facilities will substantially increase our cash requirements. Our significant debt service obligations following the Acquisition could, under certain circumstances, have material consequences to you. See “Risk factors — Risks associated with our business — Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations on the notes.”

Our new senior credit facilities and the indenture for the senior subordinated notes impose certain restrictions on us, including restrictions on our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities. The terms of our new senior credit facilities and the terms of the senior subordinated notes also significantly restrict our ability to pay dividends and otherwise distribute assets to our parent, Ply Gem Holdings. In addition, our new senior credit facilities require us to comply with certain financial ratios. Indebtedness under our new senior credit facilities is secured by substantially all of our assets, including our real and personal property, inventory, accounts receivable, intellectual property and other intangibles. In addition, our new senior credit facilities are guaranteed by our direct parent and secured by its assets (including our equity interests), as well as guaranteed and secured by the equity interests and substantially all of the assets of our current and, if any, future subsidiaries, subject to exceptions. See “Description of other indebtedness — Our new senior credit facilities.”

We anticipate that the funds generated by operations and funds available under our new senior credit facilities will be adequate to finance our ongoing operational cash flow needs and debt service obligations for the foreseeable future.

The following table summarizes our contractual cash obligations under financing arrangements and lease commitments, on a pro forma basis as of December 31, 2003, excluding interest amounts:

Our performance is dependent to a significant extent upon the levels of home repair and remodeling and new home construction spending, all of which are affected by such factors as interest rates, inflation, consumer confidence and unemployment.

The demand for our products is seasonal, particularly in the Northeast and Midwest regions of the United States and Western Canada where inclement weather during the winter months usually reduces the level of building and remodeling activity in both the home repair and remodeling and new home construction sectors. Our sales are usually lower during the first and fourth quarters. Since a portion of our manufacturing overhead and operating expenses are relatively fixed throughout the year, operating income and net earnings tend to be lower in quarters with lower sales levels. In addition, the demand for cash to fund our working capital is greater from late in the fourth quarter through the first quarter.

Our principal interest rate exposure relates to the term loans outstanding under our new senior credit facilities. We have $190.0 million of term loans outstanding, bearing interest at a variable rate, based on an adjusted LIBOR rate plus an applicable interest margin or the base rate plus an applicable interest margin. Each quarter point increase or decrease in the interest rate on the term loans would change our interest expense by approximately $0.5 million per year. We also have a new revolving credit facility which will provide for borrowings of up to $65.0 million, which will also bear interest at variable rates in the same manner as the term loan facilities. Assuming the new revolving credit facility is fully drawn, each quarter point increase or decrease in the applicable interest rate would change our interest expense by approximately $0.2 million per year. We are also party to several municipal loan agreements, some of which accrue interest at a variable rate. The aggregate net amount of principal outstanding on the municipal loans that is subject to a variable rate of interest is $26.7 million, as of December 31, 2003. Each quarter point increase or decrease in the interest rate on the municipal loans subject to variable rates of interest would change our interest expense by approximately $0.1 million per year. In the future we may enter into interest rate swaps, involving exchange of floating or fixed rate interest payments, to reduce our exposure to interest rate volatility.

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. We adopted SFAS No. 143 on January 1, 2003. Adoption of this accounting standard was not material to our financial statements included elsewhere herein.

SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (“SFAS No. 145”), was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No. 145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of APB 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The provisions of this statement related to the extinguishment of debt are effective for financial statements issued in fiscal years beginning after May 15, 2002 with early application encouraged. We adopted SFAS No. 145 on January 1, 2003 and adoption of this accounting standard was not material to the results presented in the financial statements included elsewhere herein.

Effective January 1, 2003, we adopted SFAS No. 146, “Accounting for Costs Associated with Exit of Disposal Activities” (“SFAS No. 146”), which addresses the accounting and reporting for costs associated with exit or disposal activities, nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability

In the fourth quarter 2003, we adopted the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123. We adopted SFAS No. 123 using the prospective method of transition in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation — Transaction and Disclosure” (“SFAS No. 148”). The prospective method under SFAS No. 148 required us to adopt SFAS No. 123 effective January 1, 2003 for all stock options issued during 2003. Prior to January 1, 2003, we accounted for options granted to employees using the intrinsic value method pursuant to the provisions of APB 25, under which no compensation cost was recognized since the options were granted with exercise prices equal to the fair market value of the common stock at the date of grant. The adoption of this accounting standard was not material to the results presented in the financial statements included elsewhere herein.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). Along with new disclosure requirements, FIN 45 requires guarantors to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. This differs from the prior practice to record a liability only when a loss is probable and reasonably estimable. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. We adopted the disclosure provisions of FIN 45 as of December 31, 2002 and adopted the entire interpretation on January 1, 2003. Adoption of FIN 45 was not material to our financial statements included elsewhere herein.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply to us immediately for variable interest entities created after January 31, 2003 and for existing variable interest entities no later than the end of the first annual reporting period beginning after December 15, 2003. We do not expect any material impact on our financial statements as a result.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”), which clarifies the financial accounting and reporting proscribed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) for derivative instruments, including certain derivative instruments embedded in other contracts. Certain provisions of SFAS No. 149 related to implementation issues of SFAS No. 133 are already effective and other provisions related to forward purchases or sales are effective for both existing contracts and new contracts entered into after June 30, 2003. We had previously adopted SFAS No. 133, including the implementation issues addressed in SFAS No. 149, and the adoption of the new provisions of SFAS No. 149 on July 1, 2003 did not have a material impact on our financial statements included elsewhere herein.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”), which addresses the accounting and reporting for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and for all existing financial instruments beginning in the first interim period after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. We adopted SFAS

In December 2003, the FASB issued the revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“SFAS No. 132”) to require additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The revised SFAS No. 132 provides only for additional disclosures and does not change the accounting for pension and postretirement plans.

Since the early 1990s, demand for home repair and remodeling has remained robust as a result of strong economic growth, low interest rates and favorable demographic trends. According to the U.S. Census Bureau, expenditures for maintenance, repairs and improvements increased from $120.0 billion in 1992 to $138.3 billion in 1997 and $175.7 billion in 2002, representing a five and ten-year compound annual growth rate of 2.9% and 3.9%, respectively.

Leading drivers of home repair and remodeling expenditures include the age and size of the housing stock, the rate of existing home sales, home size and homeownership rates. According to the Census Bureau, the median age of the U.S. housing stock increased to approximately 29 years in 2000, up 16% from 25 years in 1990. Additionally, over the past fifteen years, the size of a typical new home has increased, with the current average of over 2,300 square feet. Home ownership has also been rising steadily over the past decade from 64.4% in 1992 to 68.3% in 2002.

New home construction has experienced strong growth since the early 1990s. Since 1991, housing starts have increased at a compound annual growth rate of 4.9%. With steady growth in new housing starts, the stock of U.S. housing has also increased from approximately 107.0 million at the end of 1991 to 119.9 million at the end of 2002. Mortgage rates, another key driver of home sales and general home improvement work, are currently near 30-year lows. Growth continues to be supported by a favorable interest rate environment and strong demographic trends, as increasing immigration drives demand for starter homes, and maturing baby boomers seek second homes and trade-up properties.

Vinyl has taken share and continues to take share from certain alternative materials within exterior residential building products due to its low maintenance, high durability, high performance, ease of installation, energy efficiency, lower price and superior aesthetics.

U.S. siding sales have grown steadily over the past fifteen years, reaching an estimated $8.2 billion in 2002. Vinyl currently represents approximately 45% of U.S. residential siding sales by volume. According to the Freedonia Group, vinyl is expected to grow to approximately 47% of residential siding sales by volume by 2007. Vinyl siding has grown to represent nearly two-thirds of home repair and remodeling siding sales by volume, and has more than tripled sales by volume to account for approximately 30% of siding used in new home construction between 1992 and 2002.

The growing demand for vinyl siding is driven by several factors relating to product characteristics and application benefits that provide advantages relative to alternative siding materials. Vinyl’s advantages include low installed cost, high durability, low maintenance, ease of installation, and resistance to rot, mildew and insect infestations. Consumer demand for product style and diversity will support growing demand for accessories and accents such as shakes, scallops and finish trims.

While manufactured housing currently represents only 5% of vinyl siding applications, vinyl is well positioned to benefit from an expected rebound in shipments of manufactured homes. According to a 2003

The U.S. windows and doors demand has grown rapidly over the past ten years and was estimated in 2002 to be $24.5 billion. The primary drivers have been growth in remodeling and an increasing trend towards larger homes that require more windows and doors with more amenities. Unlike many other building products that are commodity-like in nature, windows and doors are decorative-type products with high levels of differentiation and corresponding variations in pricing. Since replacement windows in particular need to fit into pre-existing openings in a house, producers of replacement windows require significant manufacturing flexibility to produce a wide variety of custom sizes.

As with siding, vinyl has grown to become the preferred material for replacement windows, and in recent years has also achieved increased acceptance in new construction. The Freedonia Group estimates that vinyl window and door shipments will grow at a compound annual rate of 5.0% from $3.6 billion in 2002 to $5.9 billion in 2012. In 2002, vinyl windows accounted for 48.4% of the total demand for windows in the United States. Vinyl accounted for over 54% of the replacement window units sold in 2002, and 38% of the new window units sold in 2002. Vinyl demand is projected to benefit from an increase in sales by volume of replacement windows as a percent of total residential window sales. Replacement windows are estimated to grow to 59% of total window demand in 2008, and further grow to represent 62% of total window demand in 2012.

Within new home construction, builders are increasingly accepting vinyl as a viable alternative to wood in new windows, and enhancements in material aesthetics have, and are expected to continue to, support demand for new windows made from plastic materials. According to the Freedonia Group, vinyl is expected to overtake wood as the leading material in windows for new home construction by 2007.

Demand for patio doors has increased from 3.7 million units in 1999 to an estimated 4.0 million units in 2003. Vinyl accounted for approximately 36% of patio door usage in 2002 and is expected to become the leading material used for patio doors by 2004.

Demand for windows and doors in Canada, as in the U.S., is driven by repair and remodeling of existing homes and construction of new homes. Economic drivers specific to Western Canada include oil and natural gas exploration and production, agriculture and population inflow. Housing starts in Western Canada for 2002 grew approximately 29% from 2001 levels, driven by growth in Western Canada’s population. As of 2001, approximately 21% of all homes were built between 1971 and 1980, while only 15% were built between 1991 and 2001. Among all occupied homes, 67% were more than 20 years old.

Demand for U.S. fencing and decking products is estimated to be $5.4 billion in 2003. Vinyl and composite materials represent 18.0% of fencing demand and 10.4% of decking sales by volume. The lasting aesthetic appeal and the low maintenance attributes of vinyl and composite fencing and decking have increased demand for the products. Demand for vinyl and composite fencing has grown by over 37% per year from 1997 to 2003, while sales by volume of vinyl and composite decking have grown by approximately 35% annually from 1998 to 2003. Demand for fencing products is expected to grow at an annual rate of 16.8% for the period 2003 to 2008, and sales by volume of vinyl and composite decking products are expected to grow at an annual rate of 17.1% for the same period. Management estimates that U.S. railing sales are approximately $1.1 billion in size and that vinyl and composite represent approximately $100.0 million, or 9.1%, of railing sales.

We are a leading manufacturer of residential exterior building products in North America. We offer a comprehensive product line of vinyl siding and skirting, vinyl windows and doors, and vinyl and composite fencing, railing and decking that serves both the home repair and remodeling and new home construction sectors in all 50 states and Western Canada. Vinyl products, which represented approximately 88.3% of our 2003 net sales on a pro forma basis, have the leading and increasing share of sales by volume in siding and windows, and the fastest growing share of sales by volume in fencing in the U.S. We also manufacture vinyl and aluminum soffit and siding accessories, aluminum trim coil, wood windows and steel and fiberglass doors, enabling us to bundle complementary and color-matched products and accessories with our core vinyl products. We believe our broad product offering and geographically diverse manufacturing base allow us to better serve our customers and provide us with a competitive advantage over other vinyl building products suppliers. For the fiscal year ended December 31, 2003, on a pro forma basis, we had net sales of $531.4 million, net earnings of $16.4 million, and EBITDA of $75.4 million.

We market our products using several leading brands across multiple price points, which enables us to diversify our sales across distribution channels with minimal channel conflict. We believe this strategy allows us to reach the greatest number of end customers and provide nationwide service. Additionally, we have developed a proprietary vendor managed inventory, or “VMI,” program for our siding and accessories customers, which enables us to track, forecast and place purchase orders on behalf of those customers. Customers who have implemented our VMI program have experienced higher service levels, more accurate fill rates, higher inventory turns and lower selling, general and administrative expenses. We believe we are able to compete on favorable terms and maintain our strong customer base as a result of our extensive distribution coverage, high quality, innovative and comprehensive product line, proprietary VMI program and production efficiency.

Siding and accessories accounted for approximately 58.6% of our pro forma net sales for the fiscal year ended December 31, 2003. We sell our siding and accessories to specialty distributors (one-step distribution) and to wholesale distributors (two-step distribution). Our specialty distributors sell directly to remodeling contractors and builders. Our wholesale distributors sell to retail home centers and lumberyards who, in turn, sell to remodeling contractors, builders and consumers. In the wholesale channel, we are the sole supplier of vinyl siding and accessories to Georgia-Pacific Corporation, the largest building products distributor in the U.S. Through Georgia-Pacific and our Georgia-Pacific dedicated, 22 person sales force, our vinyl siding and accessories are sold to major retail home centers, lumberyards and manufactured housing manufacturers. A portion of our siding and accessories is also sold directly to Lowe’s Home Improvement Centers under our Durabuilt brand.

Windows and doors accounted for approximately 30.4%, and fencing, railing and decking products accounted for approximately 11.0%, of our pro forma net sales for the fiscal year ended December 31, 2003. We market our windows and doors through wholesale, millwork and specialty distributors and contractors, and we market our fencing, railing and decking primarily through a nationwide network of fabricators.

We operate a total of nine manufacturing facilities, excluding our Thermal-Gard facility in Punxsutawney, PA, which will be closed in 2004, across all our product categories, strategically located near our customers. We are a low-cost manufacturer of high-quality vinyl siding. We have adopted and implemented a strategy and deployed related technologies in our siding operations which we call “virtual plant,” which provides us with the flexibility to quickly move production between plants based on capacity utilization in order to maximize our manufacturing efficiency. We believe our strategically located facilities and virtual plant strategy enable us to control manufacturing and transportation costs and provide customers with reliable service and product delivery times.

We believe we are well positioned in our industry and that our key competitive strengths are:


	•	Leading Sector Positions. We believe we are the No. 3 supplier of vinyl siding in the U.S. overall, and hold the No. 1 position in the retail and manufactured housing channels. We continue to gain volume in the one-step distribution channel of siding and accessories and have increased our unit sales within this channel by 19.0% from 2000 to 2003, which exceeds the channel growth rate. We believe we are the largest domestic manufacturer of vinyl skirting and the fourth largest manufacturer of metal accessories. We are recognized as a leader and innovator in the growing fencing, railing and decking product category and believe we currently hold the No. 2 position in vinyl fencing. We have established ourselves as a leading window and door manufacturer in Western Canada.

	•	High Quality Products with Strong Brand Names. Our brands are well recognized for innovation and quality in the building trade, and we believe that they are a distinguishing factor in customer selection. We sell our high-quality products under several brand names, including: American Splendor, Camden Pointe, CWD, Durabuilt, Great Lakes Gold, Kroy, Monitor, Napco, Ply Gem, Regency, Timberlast, Timber Oak, Uniframe and Variform, among others, and through Georgia-Pacific. During the last three years, we have introduced a number of new brands, including American Splendor premium vinyl siding, which has received critical praise from a leading consumer rating organization. We believe there are significant opportunities to leverage our existing brands by targeting cross-selling opportunities.

	•	Multi-Channel Distribution Network. We have a multi-channel distribution network that serves both the home repair and remodeling and new home construction sectors, which exhibit different, but often counter-balancing, demand characteristics. Our multiple brand and multi-channel distribution strategy has increased our sales and penetration within these sectors. We have also grown our sales by establishing new distribution points. We believe our strategy minimizes channel conflict and reduces our reliance on any one channel, which provides us with greater ability to sustain our financial performance through economic fluctuations.

	•	Diversified Sales Base. We offer a comprehensive product line marketed to a diverse customer base in all 50 states and Western Canada. Our customer base includes distributors, retail home centers, lumberyards, remodeling contractors and builders. We have long-standing relationships with Georgia-Pacific and Lowe’s, have been the sole supplier of vinyl siding and accessories to Georgia-Pacific since 1988 and currently are the sole supplier to Lowe’s. In addition to our broad product offering and strong customer base, our sales base is also broadened by our ability to provide a complete product package by bundling our core vinyl siding products with our color-matched line of vinyl and metal soffit and accessories and other complimentary products.

	•	Efficient Manufacturing. We are a low-cost manufacturer of high-quality vinyl siding. We continue to achieve manufacturing efficiencies across our product categories through strategic sourcing, process-based reductions in material, production and warranty costs, and control of selling, general and administrative expense. Our production efficiency and quality processes have historically resulted in warranty claim rates that are below the industry average, and our productivity initiatives have helped reduce our vinyl siding manufacturing cost per pound by approximately 16.2% from 2000 to 2003. We are committed to continuous improvement across product categories, and have made approximately $31.3 million in capital expenditures, including upgrades to equipment, facilities and technology, over the three years ended December 31, 2003.

	•	Strong Management Team with Significant Ownership. We are led by an experienced and committed senior management team with an average of approximately 20 years of relevant industry experience. Under our CEO, Lee Meyer, we have successfully gained share of sales by volume within the residential exterior building products industry and have continuously improved our manufacturing operations to develop a low-cost manufacturing platform. As a result, we have significantly improved our operating earnings as a percentage of net sales, from 3.1% in 2000 to 11.1% on a pro forma basis in 2003. In connection with the Acquisition, Mr. Meyer and our management team made significant


		investments in the equity of Ply Gem Investment Holdings, our indirect parent. They acquired stock and received phantom stock awards representing approximately 14.5% of the common stock and 1.9% of the preferred stock of Ply Gem Investment Holdings on a fully diluted basis.

We seek to distinguish ourselves from other manufacturers of residential exterior building products and to sustain our profitability through the following key strategies:


	•	Continue Share Gains. We intend to increase our share of total sales in each of our product categories. We have successfully expanded geographic coverage, increased sales and gained relative volume in several key sectors, including vinyl siding and fencing in the U.S., by establishing new distribution points. For example, in vinyl siding we have increased the number of Variform and Napco distribution points from 231 in 1999 to 418 in 2003. We will target several additional geographic areas by adding brands and distributors. We will also pursue opportunities for cross-selling and bundling our products within existing sectors to further leverage our channel partners and exclusive industry partnerships. In our fencing product category, we acquired an additional plant in 2001 and we will continue to expand our fencing and decking product line and geographic coverage.

	•	Expand Brand Coverage and Product Innovation. We intend to leverage the reputation of our brands for innovation and quality to fill in our product offerings and price points. In addition, we plan to maximize the value of our new product innovations and technologies by deploying best practices and manufacturing techniques across our product categories. For example, we believe our recent innovations and expertise in manufacturing composite materials for railing and decking have favorably positioned our siding and accessories products as the siding sector prepares for the introduction of composite materials. We currently employ 15 research and development professionals dedicated to new product development, reformulation, product redesign and other manufacturing and product improvements.

	•	Further Improve Manufacturing Efficiencies. While we have significantly improved our vinyl siding manufacturing cost structure over the last several years, we believe that there are further opportunities for improvement. In addition, we intend to introduce similar manufacturing improvements and best practices in our other product categories, including, for example, expansion of our virtual plant strategy to our windows manufacturing facilities. We also plan to optimize product development, sales and marketing, materials procurement, operations and administrative functions across all of our product categories. A significant opportunity involves leveraging total raw material expenditures to obtain volume discounts and minimize costs. In addition, integration of our sales and marketing efforts across our product categories provides an ongoing opportunity to significantly improve sector penetration while lowering overall selling, general and administrative expense as a percentage of sales.

Our principal product categories are siding and accessories, windows and doors and fencing, railing and decking, with vinyl products representing approximately 88.3% of our 2003 net sales. Our siding and accessories products, which accounted for approximately 58.6% of our 2003 net sales, include vinyl siding, vinyl skirting, vinyl and aluminum soffit, aluminum trim coil, J-channels, wide crown molding, window and door trim, F-channels, H-molds, fascia, undersill trims and outside/inside corner posts. We sell our siding and accessories under our Variform and Napco brand names and under the Georgia-Pacific brand name through a private label program. We also sell our Olde Providence line of vinyl siding and accessories to Lowe’s under our Durabuilt private label brand name.

Our windows and doors products, which accounted for approximately 30.4% of our 2003 net sales, include vinyl and wood windows and steel and fiberglass doors. We sell our windows and doors under our Great Lakes, Ply Gem, Uniframe, Napco and CWD brand names. Our vinyl and vinyl-composite fencing, railing and decking products, which accounted for approximately 11% of our 2003 net sales, are sold under our Kroy brand name and under the Georgia-Pacific and Lowe’s Fusion Fence brand names through our private label program.

A summary of our siding and accessories and windows and doors product lines is presented in the table below according to price point.

The breadth of our product lines and our multiple brand and price point strategy enable us to target all areas of the siding and accessories, windows and doors and fencing, railing and decking sectors, including multiple distribution channels (wholesale, retail and manufactured housing) and end sectors (home repair and remodeling and new home construction), with minimal channel conflict.

We have a multi-channel distribution network that serves both the home repair and remodeling and new home construction sectors, which exhibit different, often counter-balancing, demand characteristics. In conjunction with our multiple brand and price point strategy, we believe our multi-channel distribution strategy enables us to increase our sales and sector penetration while minimizing channel conflict. We believe our strategy reduces our reliance on any one channel, which provides us with a greater ability to sustain our financial performance through economic fluctuations.

We sell our siding and accessories to specialty distributors (one-step distribution) and to wholesale distributors (two-step distribution). Our specialty distributors sell directly to remodeling contractors and builders. Our wholesale distributors sell to retail home centers and lumberyards who, in turn, sell to remodeling contractors, builders and consumers. In the wholesale channel we are the sole supplier of vinyl siding and accessories to Georgia-Pacific Corporation, the largest building products distributor in the U.S. Through Georgia-Pacific and our Georgia-Pacific dedicated, 22 person sales force, our vinyl siding and accessories are sold to major retail home centers, lumberyards and manufactured housing manufacturers. A portion of our siding and accessories is also sold directly to Lowe’s Home Improvement Centers under our Durabuilt brand name.

Our domestic windows and doors product lines are sold for use in home repair and remodeling and new home construction primarily through our diversified customer base of dealers and distributors. Dealers typically market directly to homeowners or contractors in connection with remodeling requirements while distributors concentrate on local independent retailers. Our Canadian windows and doors product lines are primarily sold to buying groups formed by builders (mostly for new home construction) and lumberyards through six distribution centers. We believe we have established relationships with all the key regional buying groups representing large, reputable builders and lumberyards in Canada.

Our growing customer base for fencing, railing and decking consists of fabricators, retail home centers and lumberyards (including through fabricating original equipment manufacturers, or “OEMs”). Fabricators customize our fencing, railing and decking to the specific needs of a customer site, including routing posts, cutting rails and final product assembly, while fabricating OEMs combine our lineals with the products of other manufacturers to create their own uniquely branded product offering.

Our top ten customers, including all the channels through which we sell our products to them, together accounted for approximately 42.4% of our 2003 net sales. We expect a small number of customers may continue to account for a substantial portion of our net sales for the foreseeable future.

We are the sole supplier of vinyl siding and accessories to Georgia-Pacific. This relationship, established in the early 1980s and made exclusive in 1988, has expanded over the years to include a broad line of products, including vinyl siding, skirting, soffit and railing and vinyl and metal accessories. The product portfolio is marketed under the Georgia-Pacific brand name for distribution through all of Georgia-Pacific’s channels, including retail home centers such as Lowe’s, lumberyards and manufactured housing manufacturers. Georgia-Pacific, through its numerous distribution channels, accounted for approximately 28.4% of our 2003 net sales.

The relationship provides us with access to the largest building products distributor in the U.S. with national distribution and logistics capability, and access to a strong brand name with a leading position in the retail home center, lumberyard and manufactured housing channels. A portion of the products we sell to Georgia-Pacific are shipped directly to Georgia-Pacific’s customers.

Georgia-Pacific in turn receives substantial benefits from our unique capabilities including: a comprehensive product line; our VMI program (which allows us to track, forecast and place purchase orders based on Georgia-Pacific’s inventory on hand and existing orders); a low cost manufacturing base (allowing for a substantial share of the highly competitive manufactured housing sector); and a Georgia-Pacific-dedicated sales organization (which maintains strong, direct relationships with Georgia-Pacific’s customers).

In order to meet the unique needs of each of the sectors for our various product categories, we maintain sales teams for each of our product categories and some of our brands. We employ 158 sales and marketing personnel. We maintain a 22 person sales team that caters exclusively to the needs of Georgia-Pacific, maintaining strong direct relationships with Georgia-Pacific’s existing customers and establishing new customers for Georgia-Pacific. We have also created a national account manager position and a national distribution sales manager position to support our growing Lowe’s business and other retail accounts for fencing products.

Our product sales teams are headed up by sales managers, who manage our distinct, strategically positioned teams of territory sales representatives. We have developed a broad suite of support capabilities to service our customers’ needs, including teams of field service technicians and inside-technical service representatives who field issues and provide technical service support as needed.

We employ a variety of marketing and promotional materials to promote our products generally, including product sample cases, point-of-sale displays, color selection samples and product literature. Marketing materials are provided by distributors and contractors, however they are generally aimed at the end

We operate nine manufacturing facilities across the U.S. and in Calgary, Canada.

Vinyl siding, skirting, soffit and accessories are manufactured in our Kearney, Missouri, Martinsburg, West Virginia, and Jasper, Tennessee facilities, while all metal products are produced in our Valencia, Pennsylvania facility. Without further investment to increase capacity, our three vinyl siding plants have the necessary capacity to support our planned sales growth in vinyl siding until 2006, when we expect that we will add one new extruder for approximately $1.5 million. The metal plant has sufficient capacity to support planned levels of sales growth for the foreseeable future.

Our windows and doors manufacturing facilities have benefited from our continued investment and commitment to product development and product quality combined with increasing integration of best practices across our product offerings. These initiatives have allowed us to lower production costs, shorten lead times and improve product quality. We currently have sufficient capacity to provide for expected growth in windows and doors sales through 2006. The facilities can further expand capacity in a cost effective manner by expanding production shifts. Ongoing capital investments will focus upon new product development and equipment maintenance and improvement.

Due to anticipated increased demand for fencing, railing and decking products, we expect additional capacity will be required in each year through 2006. We expect our capital expenditures in the near future to remain consistent with our expenditures in past periods.

We believe we will benefit from our continued efforts to leverage product development, manufacturing capacity and manufacturing capabilities across our different vinyl products. For example, we have invested in the manufacturing of new composite fencing products that are of better quality, improved aesthetics and can be manufactured at a lower cost than competitive products, and are now applying those techniques in the research and development of composite siding products.

PVC resin and aluminum are major components in the production of our products, and changes in PVC resin and aluminum pricing have a direct impact on our cost of products sold. We have historically been able to pass on price increases to our customers. The results of operations for individual quarters can be negatively impacted by a delay between the time of PVC resin and aluminum price increases and price increases that we implement in our products, or conversely can be positively impacted by a delay between the time of PVC resin and aluminum price decreases and competitive pricing moves that we implement. No assurances can be given that we will be able to pass on price increases in the future. We believe that we have improved our cost structure to mitigate the impact of PVC resin and aluminum pricing on our operating results. Initiatives we have undertaken to improve our cost structure include: improving efficiency in vinyl material usage through process improvements and scrap reduction, identifying alternative materials and/or material sources in product development, improving product design to facilitate reductions in manufacturing and materials costs and increasing overall efficiency, and optimizing product formulation to reduce input costs while maintaining or improving overall product quality.

We have made significant efforts to establish mutually beneficial long-term relationships with suppliers. As such, we have sought to secure partnerships with only those suppliers that are prepared to provide us with high quality raw materials and that are prepared to help us maximize the value that we provide to customers.

We compete with other national and regional manufacturers of exterior building products. We are one of the largest vinyl siding manufacturers, alongside CertainTeed, Owens Corning, Alcoa and Alside. We also compete with numerous other vinyl siding manufacturers. The vinyl windows and patio doors sector in the

We rely on patent, trademark, trade secret and other intellectual property law and protective measures to protect our proprietary rights. We have a significant number of trademarks registered in the United States covering our material brands. To date, we have been granted 41 patents in the United States and abroad and have a significant number of U.S. and international patent applications pending.

Although we employ a variety of intellectual property in the development and manufacturing of our products, we believe that none of that intellectual property is individually critical to our current operations. Taken as a whole, however, we believe our intellectual property rights are significant. We cannot assure you that our intellectual property protection measures will be sufficient to prevent misappropriation of our technology. In addition, the laws of many foreign countries do not protect our intellectual property to the same extent as the laws of the United States. From time to time, third parties have or may assert infringement claims against us or against our customers in connection with the use of our products.

Our corporate headquarters are located in Kearney, Missouri. We own and operate the following facilities, except as indicated. We also own and lease several additional properties in the U.S. and Canada.


(1)	The lease for this facility expires on February 1, 2017.

(2)	The lease for this facility is currently on a monthly basis, and we have entered into a lease that will expire January 31, 2005.

(3)	We are purchasing this property pursuant to an installment sales contract, under which we will make payments through 2011.

Over the past two years, we have made a significant investment to upgrade our operating software to a common, centralized MIS platform for our siding, fencing, railing and decking products. We believe that significant potential opportunities remain for us to enhance communications and reduce administrative costs across our businesses while improving response times to potential market opportunities.

We are subject to Canadian and U.S. federal, state, provincial and local environmental laws and regulations that relate to the presence of hazardous materials, pollution and the protection of the environment, including those governing emissions to air, discharges to water, use, storage and transport of hazardous materials, storage, treatment and disposal of waste, remediation of contaminated sites, and protection of worker health and safety. From time to time, our facilities are subject to investigation by environmental regulators. We believe that our current operations are in substantial compliance with all applicable environmental laws and that we maintain all material permits required to operate our business.

Based on available information, we do not believe that any known compliance obligations, claims, releases or investigations will have a material adverse effect on its results of operations, cash flows or financial position. However, there can be no guarantee that these or newly discovered matters or any inability to enforce available indemnification agreements will not result in material costs.

We voluntarily comply with the Vinyl Siding Institute, or “VSI,” Certification Program with respect to our vinyl siding and accessories. Prior to 1998, there was no commonly-adopted industry certification process for vinyl siding products. Uniform minimum standards were available, but uniform compliance was not assured. In 1998, the VSI, under the leadership of our President and Chief Executive Officer, Lee Meyer, at that time the Chairman of the VSI, instituted a new industry-wide program to assure compliance with minimum product standards. All major vinyl siding manufacturers, representing over 90% of all products, now comply with these guidelines.

Under the VSI Certification Program, third party verification and certification, provided by Architectural Testing, Inc., or “ATI,” is used to ensure uniform compliance with the minimum standards set by the American Society for Testing and Materials, or “ASTM.” Those products compliant with ASTM specifications for vinyl siding will perform satisfactorily in virtually any environment. ATI initially inspects all qualifying products for compliance and inspects plants to assure effective quality control programs. In addition, compliance with advertised specifications is verified. All manufacturing plants are inspected bi-annually during unannounced visits to monitor compliance. Upon certification, products are added to the official VSI list of certified products and are eligible to bear the official VSI certification logo.

Currently we have approximately 2,200 employees. Employees at our Valencia and Sarver, Pennsylvania metal plants are our only employees with whom we have a collective bargaining agreement. Approximately 8.5% of our employees are represented by the United Steelworkers of America, AFL-CIO-CLC, pursuant to an agreement that expires on November 30, 2006. We believe our relationships with our employees are good. We have a number of programs in place which we designed to retain, incentivize and reward our employees for performance.

In the ordinary course of our business, we are a party to a number of legal actions, none of which are expected to have a material impact on us.

The Boards of Directors of Ply Gem Investment Holdings, Ply Gem Holdings and Ply Gem are identical.

Set forth below is a brief description of the business experience of each of the members of our board of directors and our executive officers.

Since the Acquisition, Frederick Iseman has served as our chairman of the Board of Directors. Mr. Iseman is currently Chairman and Managing Partner of Caxton-Iseman Capital, a private equity firm which was founded by Mr. Iseman in 1993. Prior to establishing Caxton-Iseman Capital, Mr. Iseman founded Hambro-Iseman Capital Partners, a merchant banking firm. From 1988 to 1990, Mr. Iseman was a member of the Hambro International Venture Fund. Mr. Iseman is Chairman of the Board of Anteon International Corporation, Chairman of the Board of Buffets Holdings, Inc., and a member of the Advisory Board of Duke Street Capital and the Advisory Board of STAR Capital Partners Limited.

Lee D. Meyer was appointed President and Chief Executive Officer of our company in January 2002. Since the Acquisition, Mr. Meyer has served as a director. Mr. Meyer previously had been the President of Variform, one of our siding and accessories subsidiaries. Mr. Meyer joined Variform in 1993 as the Vice President of Manufacturing, and held successive positions as Vice President of Operations, Senior Vice President and General Manager, before he became President of Variform in 1998. Prior to joining Variform, Mr. Meyer held positions at GE Plastics, Borg Warner Chemicals and the Chemicals Division of Quaker Oats. Mr. Meyer graduated from the University of Nebraska in 1971 with a BS in Chemical Engineering and an MBA in Finance and Economics in 1979. He also received his license as a Registered Professional Engineer in 1979. Mr. Meyer has been a member of the Vinyl Siding Institute, or the “VSI,” since 1994 and is currently a member of the Executive Committee and is the Chairman of the VSI Certification Oversight Committee, which oversees voluntary minimum standards for vinyl siding products. In June 2003, Mr. Meyer completed a tenure of approximately five years as Chairman of the Vinyl Siding Institute. Mr. Meyer is also the VSI representative to the Society of Plastics Industry and a member of the Windows and Doors Manufacturers Association.

Mr. Wayne was appointed President of our siding and accessories subsidiaries in January 2002. Mr. Wayne joined our company in 1998, and prior to his appointment to President had been Vice President of Sales and Marketing for our Variform and Napco siding and accessories subsidiaries. Prior to joining us, Mr. Wayne worked for Armstrong World Industries, Inc. from 1985 to 1998, holding a variety of sales

Since the Acquisition, Mr. Poe has served as our Vice President and Chief Financial Officer. Mr. Poe was appointed Vice President of Finance of our siding and accessories subsidiaries in March 2000. Prior to joining our company, Mr. Poe held the position of Corporate Controller and various other accounting positions at Nordyne, Inc., joining the company in 1990. In addition, Mr. Poe held various accounting positions with Federal Mogul Corporation from 1984 to 1990. Mr. Poe graduated from Southeast Missouri State University in 1984 with a BBS in Accounting. Mr. Poe graduated from Font Bonne College in 1994 with an MBA.

Mr. Watson was appointed President of our Great Lakes Window Group in January 2003. Prior to becoming President, Mr. Watson was the Vice President of Sales and Marketing for our siding and accessories subsidiaries. Mr. Watson originally joined our company in 1996 as National Sales Manager of the Georgia-Pacific product line. Prior to joining us, Mr. Watson held the position of National Marketing manager with Norco Windows. Mr. Watson graduated from Western Michigan University in 1985 with a BBA in Marketing. He is also an active participant in the activities and various committees of the Window and Door Manufacturers Association.

Mr. Sveinson joined CWD Windows & Doors in 1993 as Controller, and has held successive positions as Vice President of Finance, Vice President of Business Development, and is currently the President. Prior to joining CWD Windows & Doors, Mr. Sveinson held senior finance positions with a commercial printing company and a soft drink manufacturing and distribution company. Mr. Sveinson received a Bachelor of Management Degree from the University of Calgary in 1981 and is a professional accountant, having achieved a Certified Management Accountant designation in 1991. Mr. Sveinson is also a director of the Canadian Window and Door Manufacturing Association.

Mr. McCready was appointed President of our fencing, railing and decking subsidiary on January 5, 2004, after more than 20 years of experience in the building products industry. Prior to joining our company, Mr. McCready held the position of General Manager, Architectural Products at The Building Solutions division of Boise Cascade Corporation, joining the company in 2001. In addition to that, Mr. McCready held various marketing and sales positions with Armstrong World Industries, Inc., where he was employed from 1983 to 2000. Mr. McCready received a BS in Business Administration from the University of Delaware in 1983.

Since the Acquisition, Robert A. Ferris has served as Chairman of our Executive Committee and director. Mr. Ferris is a Managing Director of Caxton-Iseman Capital, and has been employed by Caxton-Iseman Capital since March 1998. From 1981 to February 1998, Mr. Ferris was a General Partner of Sequoia Associates (a private investment firm headquartered in Menlo Park, California). Prior to founding Sequoia Associates, Mr. Ferris was a Vice President of Arcata Corporation, a New York Stock Exchange-listed company. Mr. Ferris is a director of Anteon International Corporation and Buffets Holdings, Inc.

Since the Acquisition, Steven M. Lefkowitz has served as a director. Mr. Lefkowitz is a Managing Director of Caxton-Iseman Capital and has been employed by Caxton-Iseman Capital since 1993. From 1988 to 1993, Mr. Lefkowitz was employed by Mancuso & Company, a private investment firm, and served in several positions including as Vice President and as a Partner of Mancuso Equity Partners. Mr. Lefkowitz is a director of Anteon International Corporation and Buffets Holdings, Inc.

Since the Acquisition, Mr. Roach has served as a director. Mr. Roach is Chairman of the Board and Chief Executive Officer of Stonegate International, a private investment and advisory services company, and has been employed by Stonegate International since 2001. Mr. Roach served as Chairman of the Board, President and Chief Executive Officer of Builders FirstSource, Inc. from 1998 to 2001; and as Chairman of the Board, President and Chief Executive Officer of Fibreboard Corporation from 1991 to 1997. Mr. Roach is also Executive Chairman of the Board of Unidare US Inc., a leading wholesale supplier of products to the industrial, welding and safety markets, a director of Kaiser Aluminum Corporation and its subsidiary, Kaiser Aluminum & Chemical Corporation, a director of Material Sciences Corp., a provider of materials-based solutions, a director of URS Corporation, an engineering firm, and a director of PMI Group, Inc., a provider of credit enhancement products and lender services.

The following table sets forth information on the compensation awarded to, earned by or paid to our President and Chief Executive Officer, Lee D. Meyer, and our four other most highly compensated executive officers whose individual compensation exceeded $100,000 during the twelve months ended December 31, 2003 for services rendered in all capacities to us.


(1)	Includes a dividend payment of $1,004,788 in respect of stock options held by Mr. Meyer in connection with the Nortek Recapitalization.

(2)	Includes a $7,000 profit sharing contribution and a $6,000 matching contribution to Mr. Meyer’s account under the Variform, Inc. 401(k) Savings Plan.

(3)	Includes a $7,000 profit sharing contribution and a $6,000 matching contribution to Mr. Wayne’s account under the Variform, Inc. 401(k) Savings Plan.

(4)	Mr. Forbis, formerly President and Chief Executive Officer of our fencing, railing and decking products subsidiary, left his position with us effective January 5, 2004, and is now a paid consultant to us.


(5)	Includes a payment of a $1,000,000 retention bonus earned by Mr. Forbis by remaining employed by us through September 9, 2003 pursuant to his Retention Bonus Letter Agreement dated September 9, 1999.

(6)	Includes a dividend payment of $277,500 in respect of stock options held by Mr. Forbis in connection with the Nortek Recapitalization.

(7)	Includes a $3,000 profit sharing contribution and a $6,000 matching contribution to Mr. Forbis’ account under the Kroy Building Products 401(k) Profit Sharing Plan.

(8)	Includes a $73,070 payment in respect of Mr. Watson’s relocation.

(9)	Includes a $6,201 profit sharing contribution and a $6,373 matching contribution to Mr. Watson’s account under the Great Lakes Window, Inc. 401(k) Savings Plan.


(10)	Includes a $6,180 profit sharing contribution and a $5,730 matching contribution to Mr. Poe’s account under the Variform, Inc. 401(k) Savings Plan.

The table below sets forth certain options to purchase stock of Nortek Holdings, our former indirect parent, granted to our named executive officers by Nortek Holdings in 2003.


(1)	Includes 16,667 Class A options and 33,333 Class B options which were granted to Mr. Meyer on January 9, 2003 pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan. Mr. Meyer’s Class A options initially vested quarterly over the three-year period following grant and his Class B options vest upon the satisfaction of certain performance criteria set forth in the Plan. The exercise price of these options was reduced to $11.00 per share in connection with a dividend declared by Nortek Holdings, effective November 26, 2003. Nortek Holdings determined that Mr. Meyer’s Class A options fully vested in connection with the Acquisition and that his Class B options will survive, subject to performance criteria, as if Mr. Meyer’s employment with Nortek Holdings did not terminate upon the Acquisition. Mr. Meyer’s Class A options were cancelled in connection with, and at the closing of, the Acquisition.

(2)	Includes 6,667 Class A options and 13,333 Class B options which were granted to Mr. Wayne on January 9, 2003 pursuant to the Nortek Holdings 2002 Stock Option Plan. Mr. Wayne’s Class A options initially vested quarterly over the three-year period following grant and his Class B options vest upon the satisfaction of certain performance criteria set forth in the Plan. The exercise price of these options was reduced to $11.00 per share in connection with a dividend declared by Nortek Holdings, effective November 26, 2003. Nortek Holdings has determined that Mr. Wayne’s Class A options will fully vest in connection with the Acquisition and that his Class B options will survive, subject to performance criteria, as if Mr. Wayne’s employment with Nortek Holdings did not terminate upon the Acquisition. Mr. Wayne’s Class A options were cancelled in connection with, and at the closing of, the Acquisition.

(3)	Mr. Forbis, formerly President and Chief Executive Officer of our fencing, railing and decking products subsidiary, left his position with us effective January 5, 2004, and is now a paid consultant to us.

(4)	Includes 11,667 Class A options and 23,333 Class B options which were granted to Mr. Forbis on January 9, 2003 pursuant to the Nortek Holdings Inc. 2002 Stock Option Plan. Mr. Forbis’ Class A options initially vested quarterly over the three-year period following grant and his Class B options vest upon the satisfaction of certain performance criteria set forth in the Plan. The exercise price of these

options was reduced to $11.00 per share in connection with a dividend declared by Nortek Holdings, effective November 26, 2003. Nortek Holdings has determined that Mr. Forbis’ Class A options will fully vest in connection with the Acquisition and that his Class B options will survive, subject to performance criteria, as if Mr. Forbis’ employment with Nortek Holdings did not terminate upon the Acquisition.


(5)	Includes 2,333 Class A options and 4,667 Class B options which were granted to Mr. Watson on January 9, 2003 pursuant to the Nortek Holdings Inc. 2002 Stock Option Plan. Mr. Watson’s Class A options initially vested quarterly over the three-year period following grant and his Class B options vest upon the satisfaction of certain performance criteria set forth in the Plan. The exercise price of these options was reduced to $11.00 per share in connection with a dividend declared by Nortek Holdings, effective November 26, 2003. Nortek Holdings has determined that Mr. Watson’s Class A options will fully vest in connection with the Acquisition and that his Class B options will survive, subject to performance criteria, as if Mr. Watson’s employment with Nortek Holdings did not terminate upon the Acquisition. Mr. Watson’s Class A options were cancelled in connection with, and at the closing of, the Acquisition.

(6)	Includes 2,333 Class A options and 4,667 Class B options which were granted to Mr. Poe on January 9, 2003 pursuant to the Nortek Holdings Inc. 2002 Stock Option Plan. Mr. Poe’s Class A options initially vested quarterly over the three-year period following grant and his Class B options vest upon the satisfaction of certain performance criteria set forth in the Plan. The exercise price of these options was reduced to $11.00 per share in connection with a dividend declared by Nortek Holdings, effective November 26, 2003. Nortek Holdings has determined that Mr. Poe’s Class A options will fully vest in connection with the Acquisition and that his Class B options will survive, subject to performance criteria, as if Mr. Poe’s employment with Nortek Holdings did not terminate upon the Acquisition. Mr. Poe’s Class A options were cancelled in connection with, and at the closing of, the Acquisition.

The following table sets forth certain information with respect to options to purchase stock of Nortek Holdings, our former indirect parent, held at the end of fiscal 2003 by each of our named executive officers:


(1)	The value of Nortek Holdings common stock as of December 31, 2003 used for this chart is $69.25, the value attributed to the Nortek Holdings common stock in connection with the Acquisition.

(2)	Mr. Forbis, formerly President and Chief Executive Officer of our fencing, railing and decking products subsidiary, left his position with us effective January 5, 2004, and is now a paid consultant to us.

Upon completion of the Acquisition, each of Messrs. Meyer, Wayne, Watson and Poe were granted awards under the Ply Gem Investment Holdings Phantom Stock Plan. This Plan is generally designed to provide non-qualified deferred compensation to participants. Each participant’s interest in the plan is recorded in a bookkeeping account and these accounts are deemed invested in Ply Gem Investment Holdings’ stock. No stock will initially be issued under the plan, but, upon liquidation and payment of a participant’s account under the plan, the value of the account generally may be paid to the participant either in shares of Ply Gem

Investment Holdings’ stock having a market value equal to the account balance or in cash, in the discretion of Ply Gem Investment Holdings. When valuing a participant’s account for payment purposes, the following rules generally apply: if Ply Gem Investment Holdings’ stock becomes publicly traded through an initial public offering, the stock market will dictate the value of the account; if an event which triggers either “tag-along” or “drag-along” rights under the stockholders’ agreement to which the stockholders of Ply Gem Investment Holdings are parties occurs, or a “Triggering Event,” the amount paid to shareholders will dictate the value of the account; and in the event that a participant’s employment with us terminates and if neither a Triggering Event nor an initial public offering occurs prior to the time the participant is paid the value of his or her account, certain formulas described in the plan dictate the value of the account (which value differs depending upon the length of time a participant has been employed with us, the circumstances surrounding the termination of employment, and our performance). Following an initial public offering, each participant will generally be paid out five years thereafter, subject to further deferral opportunities and the right of Ply Gem Investment Holdings to accelerate such payment, with earlier payment upon a Triggering Event or a termination of employment.

Messrs. Meyer, Wayne, Watson and Poe were granted 112,800, 38,835, 13,590 and 13,590 Phantom Incentive Units (as defined in the plan) under the plan, respectively, and Mr. Meyer was granted 44,472 Phantom Additional Units (as defined in the plan) under the plan. Each Phantom Incentive Unit represents one share of Ply Gem Investment Holdings common stock, and each Phantom Additional Unit represents one share of Ply Gem Investment Holdings common stock and 0.4591 shares of Ply Gem Investment Holdings senior preferred stock.

In connection with the Acquisition, we adopted and obtained shareholder approval of the Ply Gem Investment Holdings 2004 Stock Option Plan, which provides for the grant of incentive and non-qualified stock options to our management and key employees. Stock options may be granted under the plan in respect of up to 1,410,000 common shares of Ply Gem Investment Holdings. Options awarded under the plan may have vesting conditions based on either an optionee’s continuing provision of services to us or the achievement of performance goals, in each case, as set forth in the applicable grant agreement.

Each of Messrs. Meyer, Wayne, Watson and Poe and certain other members of our management team, participates in our Change in Control Severance Benefit Plan. This plan generally provides that if, during the 24 months following a Change in Control (as defined in the plan) in respect of Messrs. Wayne, Watson and Poe, or during the 36 months following a Change in Control in respect of Mr. Meyer, we terminate a participant’s employment without “Cause” (as defined in the plan) or there is a “material adverse change” (as defined in the plan) in the terms of the participant’s employment with us, the participant will be entitled to certain severance benefits. The Acquisition constituted a Change in Control under the plan. The plan provides for severance payments during the 24-month period following a termination described above at an annual rate equal to the sum of the participant’s 2003 base salary and performance incentive bonus. In addition, a participant entitled to severance payments will also receive continuing medical and dental insurance coverage during the severance period, subject to the participant’s payment of any contributions required of active employees.

Pursuant to an October 31, 2003 letter agreement with Nortek, each of Messrs. Meyer, Wayne, Forbis, Watson and Poe received a payment of $1,000,000, $400,000, $400,000, $300,000 and $200,000 respectively for their continued employment, or, in the case of Mr. Forbis, provision of consulting services, through the Acquisition. These payments were made simultaneously with the completion of the Acquisition.

On January 5, 2004, John Forbis entered into a Separation, Consulting and Noncompetition Agreement with Kroy Building Products, Inc., our fencing, railing and decking products subsidiary. Pursuant to this agreement, Mr. Forbis will provide consulting services to us through December 31, 2005, earning a consulting fee of $21,500 per month. Pursuant to this agreement, Mr. Forbis agreed not to compete with us for three years after the earlier of December 31, 2005 or termination of the consulting period and released us from any claims he may have had against us as of January 19, 2004.

Ply Gem Holdings is the sole holder of all 100 issued and outstanding shares of our common stock. Ply Gem Investment Holdings is the sole holder of all 100 issued and outstanding shares of common stock of Ply Gem Holdings.

The following table sets forth the number and percentage of the outstanding shares of common stock of Ply Gem Investment Holdings beneficially owned by:


	•	each named executive officer;

	•	each of our directors;

	•	each person known to us to be the beneficial owner of more than 5% of the common stock of Ply Gem Investment Holdings; and

	•	all of our executive officers and directors as a group.

Unless otherwise noted below, the address of each beneficial owner listed on the table below is c/o Ply Gem Industries, Inc., 303 West Major Street, Kearney, Missouri 64060.


(1)	Determined in accordance with Rule 13d-3 under the Exchange Act.

(2)	Ply Gem Investment Holdings also has a series of non-voting senior preferred stock.

(3)	Address is c/o Caxton-Iseman Capital, Inc., 667 Madison Avenue, New York, New York 10021.

(4)	In connection with the Acquisition, Caxton-Iseman (Ply Gem), L.P. entered into an option agreement with Mr. McCready entitling him, subject to certain conditions, to purchase 30,000 of the shares of common stock held by Caxton-Iseman (Ply Gem), L.P. This number of shares is included in the number of shares shown in this table to be beneficially owned by Caxton-Iseman (Ply Gem) L.P. and Mr. McCready.

(5)	By virtue of his indirect control of Caxton-Iseman (Ply Gem) L.P., Mr. Iseman is deemed to beneficially own the 2,437,841 shares of common stock held by that entity.

(6)	In connection with the Acquisition, Mr. Meyer received phantom incentive stock units representing 157,272 shares of common stock, and 20,419 shares of senior preferred stock.

(7)	In connection with the Acquisition, Mr. Wayne received phantom incentive stock units representing 38,835 shares of common stock.


(8)	In connection with the Acquisition, Mr. Poe received phantom incentive stock units representing 13,590 shares of common stock.

(9)	In connection with the Acquisition, Mr. Watson received phantom incentive stock units representing 13,590 shares of common stock.


(10)	Address is c/o Stonegate International, 100 Crescent Court, Dallas, Texas 75201.

In connection with the Acquisition, certain members of our management, including Messrs. Poe, Wayne, Watson, Sveinson and McCready contributed cash to Ply Gem Investment Holdings, and in return received shares of common stock of Ply Gem Investment Holdings. In addition, Messrs. Meyer, Poe, Wayne and Watson were awarded phantom stock units of Ply Gem Investment Holdings. Members of our management who received shares or phantom units also entered into a stockholders’ agreement with Ply Gem Investment Holdings and affiliates of Caxton-Iseman Capital, under the terms of which their shares of common stock are subject to customary transfer restrictions, including rights of first refusal, tag-along and drag-along rights, and put and call provisions. Their shares are also subject to certain pre-emptive rights, and they are subject to non-compete and non-solicit provisions. See “The Acquisition” and “Management — Phantom Stock Unit Plan.”

Upon the completion of the Transactions, our management and an investor group led by Caxton-Iseman Capital and its affiliates, through Ply Gem Investment Holdings, acquired all of our outstanding shares which they hold through our parent, Ply Gem Holdings.

Ply Gem Investment Holdings obtained the funds required for the acquisition of our shares by issuing shares of common and preferred stock and subordinated notes to affiliates of Caxton-Iseman Capital and by issuing common stock to certain members of our management. The boards of directors of Ply Gem Investment Holdings and Ply Gem Holdings are identical to ours, and include, among others, affiliates of Caxton-Iseman Capital, Mr. Frederick Iseman, Mr. Robert Ferris and Mr. Steven Lefkowitz. As a result, Caxton-Iseman Capital and its affiliates control Ply Gem Holdings and our company.

Upon consummation of the Transactions, we entered into two advisory agreements with one of Caxton-Iseman Capital’s affiliates, or the “Caxton-Iseman Party,” which we refer to as the “Debt Financing Advisory Agreement” and the “General Advisory Agreement.”

In accordance with the Debt Financing Advisory Agreement, we paid the Caxton-Iseman Party a debt financing arrangement and advisory fee upon the successful consummation of the Bank Financing and the offering of initial notes, equal to 2.375% of the aggregate amount of such financing ($11.4 million).

Under the General Advisory Agreement, the Caxton-Iseman Party will provide us with acquisition and financial advisory services as our Board of Directors shall reasonably request. In consideration of these services, we will pay the Caxton-Iseman Party (1) an annual fee equal to 2% of our EBITDA, as defined in such agreement, (2) a transaction fee, payable upon the completion by us of any acquisitions, of 2% of the sale price, (3) a transaction fee, payable upon the completion by us of any divestitures, of 1% of the sale price, and (4) a transaction fee, payable upon the completion of the sale of our company, of 1% of the sale price.

The Caxton-Iseman Party will not be entitled to the annual fee for 2004 unless (i) our debt-to-EBITDA ratio for the last twelve months then ended is less than 5.2:1 or (ii) our EBITDA for the last twelve months then ended is at least $85.7 million. In addition, the annual fee payable in any year may not exceed the amounts permitted under our new senior credit facilities or the indenture governing the notes, and the Caxton-Iseman Party will be obligated to return any portion of the annual fee that has been prepaid if an event of default has occurred and is continuing under either our new senior credit facilities or the indenture governing the notes.

The initial term of the General Advisory Agreement is 10 years, and will be automatically renewable for consecutive one-year extensions, unless we or the Caxton-Iseman Party provide notice of termination. In addition, the General Advisory Agreement may be terminated by the Caxton-Iseman Party at any time, upon

As a result of the Acquisition, Ply Gem Investment Holdings is the common parent of an affiliated group of corporations that includes Ply Gem Holdings, Ply Gem Industries and their subsidiaries. Ply Gem Investment Holdings will elect to file consolidated federal income tax returns on behalf of the group. Accordingly, Ply Gem Investment Holdings, Ply Gem Industries and Ply Gem Holdings have entered into a Tax Sharing Agreement, under which Ply Gem Industries and Ply Gem Holdings will make payments to Ply Gem Investment Holdings. These payments will not be in excess of the tax liabilities of Ply Gem Industries, Ply Gem Holdings, and their respective subsidiaries, if such tax liabilities had been computed on a stand-alone basis.

As a result of the Acquisition, we are no longer a division of Nortek, but have become a stand-alone company. Prior to the Acquisition, we had a fee arrangement with our former parent, Nortek, under which we reimbursed Nortek for certain parent company corporate charges and have accounted for those charges in accordance with SEC Staff Accounting Bulletin No. 55. For the fiscal years ended December 31, 2001, 2002 and 2003, our fees to Nortek for these corporate charges were $5.4 million, $10.2 million and $7.2 million, respectively. This fee arrangement was terminated in connection with the Acquisition. In addition, prior to the Acquisition, we paid an allocation of corporate expenses to Nortek based upon the specific identification method. For the fiscal years ended December 31, 2001, 2002, and 2003, Nortek’s allocations of these corporate expenses were $(0.3) million, $3.5 million, and $3.4 million, respectively. We estimate that in our first year as a stand-alone company, we will incur approximately $2.4 million of incremental operating expenses to pay for services, including accounting, tax, legal, insurance and treasury, which we previously received from Nortek under these arrangements. These incremental operating expenses are included in our pro forma unaudited statements of operations included elsewhere in this prospectus, but are not reflected in any of our historical results or the results of operations discussion as set forth below. Incremental operating expenses may differ from our estimates, and increase, in subsequent years. See “Unaudited pro forma financial information” and note 1 to the notes to our combined financial statements included elsewhere in this prospectus.

As of December 31, 2003, we had approximately $394.7 million of outstanding intercompany debt, owed to our former parent, Nortek, and its wholly-owned subsidiaries. This debt consisted of notes, mortgage notes and obligations payable, and included notes payable to a subsidiary of Nortek, relating to dividends payable to Nortek declared during prior years of approximately $360.8 million, and borrowings related to our acquisition of our subsidiary, Kroy Building Products, Inc., in 1999 of approximately $33.9 million. These notes were payable on demand and carried interest rates of 8% for a $280 million note and 9% for the other notes totaling $114.7 million. Pursuant to the terms of the Stock Purchase Agreement, all such intercompany loans to which we were a party were cancelled prior to the Acquisition.

In connection with the Transactions, we entered into new senior credit facilities with a syndicate of financial institutions and institutional lenders. Set forth below is a summary of the terms of our new senior credit facilities.

Our new senior credit facilities provide for senior secured financing of up to $255.0 million, consisting of $190.0 million of term loan facilities with a maturity of seven years that were drawn in full in connection with the consummation of the Acquisition and a $65.0 million revolving loan facility, including a letter of credit subfacility and a $10.0 million swingline subfacility, with a maturity of five years. The term loan facilities have two tranches, a $160.0 million tranche under which Ply Gem is the borrower, and a $30.0 million tranche under which our Canadian subsidiary, CWD Windows and Doors, Inc., is the borrower. The new senior credit facilities permit us to incur up to $50.0 million in additional term loans under the term loan facilities (including through additional tranches of term loans) which will have the benefit of the guarantees, and the collateral, described below. Such an increase in the term loan facilities will occur at our option if certain conditions are satisfied, including meeting our financial covenants, a senior leverage ratio on a pro forma basis and receipt of commitments from lenders for such additional amount.

All borrowings under our new senior credit facilities are subject to the satisfaction of customary conditions, including absence of a default and material accuracy of representations and warranties.

Proceeds of the term loans, together with $3.0 million of the revolving loan facility and the other sources of funds described under “Use of proceeds,” were used to finance the Acquisition and pay related fees and expenses. Proceeds of revolving loans will be used after the closing date of the Acquisition to provide financing for working capital and general corporate purposes, potentially including acquisitions.

Subsequent to the Transactions, we amended and restated our new senior credit facilities on March 3, 2004, to increase our U.S. term loan facility from $160.0 million to $170.0 million and reduce our revolving credit facility from $65.0 million to $55.0 million. We intend to use the additional $10.0 million to pay down a like amount of existing indebtedness under our municipal loan agreements.

The interest rates per annum applicable to loans under our new senior credit facilities will be, at our option, equal to either a base rate plus an applicable interest margin, or an adjusted LIBOR rate plus an applicable interest margin.

The base rate will be the greater of the (1) federal funds effective rate as published by the Federal Reserve Bank of New York plus 0.5% and (2) corporate base rate of UBS AG, as established from time to time at its Stamford Branch. The adjusted LIBOR rate will be determined by reference to the London Interbank Offered Rate for corresponding deposits of U.S. dollars at the start of each interest period and will be fixed through each period. The applicable margin percentage will initially be a percentage per annum equal to (1) no more than 1.50% for base rate term loans, (2) no more than 2.50% for adjusted LIBOR rate term loans, (3) 1.50% for base rate revolving loans and (4) 2.50% for adjusted LIBOR rate revolving loans. Commencing with the delivery of our quarterly financial statements for the first fiscal quarter ending at least six months after the Acquisition, the applicable interest margins for the revolving loan facility will be determined pursuant to a grid based on our total leverage ratio.

On the last business day of each calendar quarter and on the date the revolving commitments terminate, we will be required to pay each lender a 0.50% per annum commitment fee in respect of the average daily unused commitments of such lender under the revolving loan facility, subject to adjustment based on our total leverage ratio, commencing with the delivery of our quarterly financial statements for the first fiscal quarter ending at least six months after the Acquisition.

We are also required to pay participation and fronting fees in connection with letters of credit as well as a yearly fee to the Administrative Agent.

Subject to exceptions, our new senior credit facilities require mandatory prepayments of the term loan in amounts equal to: (1) 100% of the net cash proceeds from asset sales by our parent or any of its subsidiaries, (2) 100% of the net cash proceeds from the issuance of debt or preferred equity securities by our parent or any of its subsidiaries, (3) 50% of the net cash proceeds from the issuance of common equity securities by, or equity contributions to, our parent or Ply Gem Investment Holdings, (4) 100% of all casualty and condemnation net cash proceeds received by our parent or any of its subsidiaries in excess of amounts reinvested within specific periods, and (5) 50% of our excess cash flow. There are certain limits on the amount of its term loans the Canadian Borrower is required to prepay in the first 5 years from the closing date. If the term loan facilities have been repaid in full, any additional repayments shall be applied to reduce commitments under the revolving credit facility. Asset sale, debt issuance and casualty and condemnation proceeds received by the Canadian borrower or its subsidiaries will first be used to prepay loans to such borrower and such proceeds received by us or our other subsidiaries will first be used to prepay loans of the U.S. borrower.

Voluntary prepayments of loans under our new senior credit facilities and voluntary reductions of revolving loan commitments are permitted, in whole or in part, with prior notice but without premium or penalty (except LIBOR breakage costs) and including accrued and unpaid interest in minimum amounts as set forth in the credit agreement.

Our new senior credit facilities (following their amendment and restatement) require scheduled quarterly payments on the term loan facilities of $500,000 beginning in the quarter ending June 30, 2004 and for the next 23 calendar quarters thereafter, and payments of $47,000,000 on June 30, 2010, September 30, 2010, December 30, 2010 and on the maturity date, allocated pro rata between the two tranches.

The indebtedness of the U.S. borrower under our new senior credit facilities is guaranteed by our parent, Ply Gem Holdings, and all of our existing and future direct and indirect subsidiaries, subject to exceptions for foreign subsidiary guarantees of the U.S. borrower’s obligations to the extent such guarantees are prohibited by applicable law or would result in materially adverse tax consequences and other exceptions. The indebtedness of the Canadian borrower under our new senior credit facilities is guaranteed by Ply Gem Holdings, the U.S. borrower and all of the Canadian borrower’s future direct and indirect subsidiaries and is effectively guaranteed by all subsidiaries guaranteeing the U.S. borrower’s obligations under our new senior credit facilities. All indebtedness under our new senior credit facilities is secured, subject to certain exceptions, by a perfected first priority pledge of all of our equity interests and those of our direct and indirect subsidiaries, and, subject to certain exceptions, perfected first priority security interests in, and mortgages on, all tangible and intangible assets (including, without limitation, accounts receivable, inventory, equipment, general intangibles, intercompany notes, insurance policies, investment property, intellectual property, certain real property, cash and proceeds of the foregoing); provided that all tangible and intangible assets of the Canadian borrower and its subsidiaries are pledged to secure debt only of the Canadian borrower.

Our new senior credit facilities require that we comply on a quarterly basis with certain financial covenants, including a minimum interest coverage ratio test, a maximum leverage ratio test and a maximum capital expenditures level. In addition, our new senior credit facilities include negative covenants, subject to exceptions, restricting or limiting our ability and the ability of our parent and our subsidiaries, to, among other things: sell assets, alter the business that we conduct, engage in mergers, acquisitions and other business

Our new senior credit facilities contain certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy and insolvency, certain events under ERISA, material judgments, invalidity of any guaranty or security document supporting our new senior credit facilities and change of control. If such an event of default occurs, the lenders under our new senior credit facilities would be entitled to take various actions, including the acceleration of amounts due under our new senior credit facilities and all actions commonly permitted to be taken by a secured creditor.

We are party to several municipal loan agreements used to finance the development of some of our project facilities. We have entered into most of these municipal loan agreements pursuant to industrial/ economic revenue bond, or “IRB,” arrangements where a municipality issued IRBs and, pursuant to a loan agreement, loaned us the proceeds from such issuance. Our loan agreements provide for variable interest rates or interest rates that are currently fixed at various rates between 2.90% to 7.71%. The loan agreements typically allow us to prepay the outstanding principal amount at any time, and are secured by the fixed assets, real estate or facilities from the particular projects financed. As of December 31, 2003, we had approximately $29.6 million of principal and accrued interest outstanding under such loan agreements which will be due at various times from 2005 to 2025.

We are offering to exchange our exchange notes for a like aggregate principal amount of our initial notes.

The exchange notes that we propose to issue in this exchange offer will be substantially identical to our initial notes except that, unlike our initial notes, the exchange notes will have no transfer restrictions or registration rights. You should read the description of the exchange notes in the section in this prospectus entitled “Description of the Notes.”

We reserve the right in our sole discretion to purchase or make offers for any initial notes that remain outstanding following the expiration or termination of this exchange offer and, to the extent permitted by applicable law, to purchase initial notes in the open market or privately negotiated transactions, one or more additional tender or exchange offers or otherwise. The terms and prices of these purchases or offers could differ significantly from the terms of this exchange offer.

This exchange offer will expire at 5:00 p.m., New York City time, on , 2004, unless we extend it in our reasonable discretion. The expiration date of this exchange offer will be at least 20 business days after the commencement of the exchange offer in accordance with Rule 14e-1(a) under the Exchange Act.

We expressly reserve the right to delay acceptance of any initial notes, extend or terminate this exchange offer and not accept any initial notes that we have not previously accepted if any of the conditions described below under ” — Conditions to the Exchange Offer” have not been satisfied or waived by us. We will notify the exchange agent of any extension by oral notice promptly confirmed in writing or by written notice. We will also notify the holders of the initial notes by a press release or other public announcement communicated before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date unless applicable laws require us to do otherwise.

We also expressly reserve the right to amend the terms of this exchange offer in any manner. If we make any material change, we will promptly disclose this change in a manner reasonably calculated to inform the holders of our initial notes of the change including providing public announcement or giving oral or written notice to these holders. A material change in the terms of this exchange offer could include a change in the timing of the exchange offer, a change in the exchange agent and other similar changes in the terms of this exchange offer. If we make any material change to this exchange offer, we will disclose this change by means of a post-effective amendment to the registration statement which includes this prospectus and will distribute an amended or supplemented prospectus to each registered holder of initial notes. In addition, we will extend this exchange offer for an additional five to ten business days as required by the Exchange Act, depending on the significance of the amendment, if the exchange offer would otherwise expire during that period. We will promptly notify the exchange agent by oral notice, promptly confirmed in writing, or written notice of any delay in acceptance, extension, termination or amendment of this exchange offer.

To tender your initial notes in this exchange offer, you must use one of the three alternative procedures described below:

(1) Regular Delivery Procedure: Complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal. Have the signatures on the letter of transmittal guaranteed if required by the letter of transmittal. Mail or otherwise deliver the letter of transmittal or the facsimile together with the certificates representing the initial notes being tendered and any other required documents to the exchange agent on or before 5:00 p.m., New York City time, on the expiration date.


	(2) Book-entry Delivery Procedure: Send a timely confirmation of a book-entry transfer of your initial notes, if this procedure is available, into the exchange agent’s account at The Depository Trust Company in accordance with the procedures for book-entry transfer described under “— Book-Entry Delivery Procedure” below, on or before 5:00 p.m., New York City time, on the expiration date.

	(3) Guaranteed delivery procedure: If time will not permit you to complete your tender by using the procedures described in (1) or (2) above before the expiration date and this procedure is available, comply with the guaranteed delivery procedures described under “— Guaranteed Delivery Procedure” below.

The method of delivery of the initial notes, the letter of transmittal and all other required documents is at your election and risk. Instead of delivery by mail, we recommend that you use an overnight or hand-delivery service. If you choose the mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. You should not send any letters of transmittal or initial notes to us. You must deliver all documents to the exchange agent at its address provided below. You may also request your broker, dealer, commercial bank, trust company or nominee to tender your initial notes on your behalf.

Only a holder of initial notes may tender initial notes in this exchange offer. A holder is any person in whose name initial notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder.

If you are the beneficial owner of initial notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your notes, you must contact that registered holder promptly and instruct that registered holder to tender your notes on your behalf. If you wish to tender your initial notes on your own behalf, you must, before completing and executing the letter of transmittal and delivering your initial notes, either make appropriate arrangements to register the ownership of these notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.

You must have any signatures on a letter of transmittal or a notice of withdrawal guaranteed by:


	(1) a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.,

	(2) a commercial bank or trust company having an office or correspondent in the United States, or

	(3) an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Exchange Act, unless the initial notes are tendered:


	(1) by a registered holder or by a participant in The Depository Trust Company whose name appears on a security position listing as the owner, who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal and only if the exchange notes are being issued directly to this registered holder or deposited into this participant’s account at The Depository Trust Company, or

	(2) for the account of a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934.


	(1) the recordholder(s) of the initial notes tendered: the signature must correspond with the name(s) written on the face of the initial notes without alteration, enlargement or any change whatsoever.

	(2) a participant in The Depository Trust Company: the signature must correspond with the name as it appears on the security position listing as the holder of the initial notes.


	(3) a person other than the registered holder of any initial notes: these initial notes must be endorsed or accompanied by bond powers and a proxy that authorize this person to tender the initial notes on behalf of the registered holder, in satisfactory form to us as determined in our sole discretion, in each case, as the name of the registered holder or holders appears on the initial notes.

	(4) trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity: these persons should so indicate when signing. Unless waived by us, evidence satisfactory to us of their authority to so act must also be submitted with the letter of transmittal.

To tender your initial notes in this exchange offer, you must make the following representations:


	(1) you are authorized to tender, sell, assign and transfer the initial notes tendered and to acquire exchange notes issuable upon the exchange of such tendered initial notes, and that we 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 accepted by us,

	(2) any exchange notes acquired by you pursuant to the exchange offer are being acquired in the ordinary course of business, whether or not you are the holder,

	(3) you or any other person who receives exchange notes, whether or not such person is the holder of the exchange notes, has no arrangement or understanding with any person to participate in a distribution of such exchange notes within the meaning of the Securities Act and is not participating in, and does not intend to participate in, the distribution of such exchange notes within the meaning of the Securities Act,

	(4) you or such other person who receives exchange notes, whether or not such person is the holder of the exchange notes, is not an “affiliate,” as defined in Rule 405 of the Securities Act, of ours, or if you or such other person is an affiliate, you or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable,

	(5) if you are not a broker-dealer, you represent that you are not engaging in, and do not intend to engage in, a distribution of exchange notes, and

	(6) if you are a broker-dealer that will receive exchange notes for your own account in exchange for initial notes, you represent that the initial notes to be exchanged for the exchange notes were acquired by you as a result of market-making or other trading activities and acknowledge that you will deliver a prospectus in connection with any resale, offer to resell or other transfer of such exchange notes.

You must also warrant that the acceptance of any tendered initial notes by the issuers and the issuance of exchange notes in exchange therefor shall constitute performance in full by the issuers of its obligations under the registration rights agreement relating to the initial notes.

To effectively tender notes through The Depository Trust Company, the financial institution that is a participant in The Depository Trust Company will electronically transmit its acceptance through the Automatic Tender Offer Program. The Depository Trust Company will then edit and verify the acceptance and send an agent’s message to the exchange agent for its acceptance. An agent’s message is a message transmitted by The Depository Trust Company to the exchange agent stating that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the notes that this participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce this agreement against this participant.

Any financial institution that is a participant in The Depository Trust Company’s systems may make book-entry deliveries of initial notes by causing The Depository Trust Company to transfer these initial notes into the exchange agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedures for transfer. To effectively tender notes through The Depository Trust Company, the

A delivery of initial notes through a book-entry transfer into the exchange agent’s account at The Depository Trust Company will only be effective if an agent’s message or the letter of transmittal or a facsimile of the letter of transmittal with any required signature guarantees and any other required documents is transmitted to and received by the exchange agent at the address indicated below under “— Exchange Agent” on or before the expiration date unless the guaranteed delivery procedures described below are complied with. Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange agent.

If you are a registered holder of initial notes and desire to tender your notes, and (1) these notes are not immediately available, (2) time will not permit your notes or other required documents to reach the exchange agent before the expiration date or (3) the procedures for book-entry transfer cannot be completed on a timely basis and an agent’s message delivered, you may still tender in this exchange offer if:


	(1) you tender through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Exchange Act,

	(2) on or before the expiration date, the exchange agent receives a properly completed and duly executed letter of transmittal or facsimile of the letter of transmittal, and a notice of guaranteed delivery, substantially in the form provided by us, with your name and address as holder of the initial notes and the amount of notes tendered, stating that the tender is being made by that letter and notice and guaranteeing that within three New York Stock Exchange trading days after the expiration date the certificates for all the initial notes tendered, in proper form for transfer, or a book-entry confirmation with an agent’s message, as the case may be, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent, and

	(3) the certificates for all your tendered initial notes in proper form for transfer or a book-entry confirmation as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within three New York Stock Exchange trading days after the expiration date.

Your tender of initial notes will constitute an agreement between you and us governed by the terms and conditions provided in this prospectus and in the related letter of transmittal.

We will be deemed to have received your tender as of the date when your duly signed letter of transmittal accompanied by your initial notes tendered, or a timely confirmation of a book-entry transfer of these notes into the exchange agent’s account at The Depository Trust Company with an agent’s message, or a notice of guaranteed delivery from an eligible institution is received by the exchange agent.

All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tenders will be determined by us in our sole discretion. Our determination will be final and binding.

We reserve the absolute right to reject any and all initial notes not properly tendered or any initial notes which, if accepted, would, in our opinion or our counsel’s opinion, be unlawful. We also reserve the absolute right to waive any conditions of this exchange offer or irregularities or defects in tender as to particular notes. If we waive a condition to this exchange offer, the waiver will be applied equally to all note holders. Our interpretation of the terms and conditions of this 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 initial notes must be cured within such time as we shall determine. We, the exchange agent or any other person will be under no duty to give notification of defects or irregularities with respect to tenders of initial notes. We and the exchange agent or any other person will incur no liability for any failure to give notification of these defects or irregularities. Tenders of initial notes will not be deemed to have been made until such irregularities have been cured or waived. The exchange agent will return without cost to their holders any initial notes that are not properly tendered and as to which the defects or irregularities have not been cured or waived promptly following the expiration date.

If all the conditions to the exchange offer are satisfied or waived on the expiration date, we will accept all initial notes properly tendered and will issue the exchange notes promptly thereafter. Please refer to the section of this prospectus entitled “— Conditions to the Exchange Offer” below. For purposes of this exchange offer, initial notes will be deemed to have been accepted as validly tendered for exchange when, as and if we give oral or written notice of acceptance to the exchange agent.

We will issue the exchange notes in exchange for the initial notes tendered pursuant to a notice of guaranteed delivery by an eligible institution only against delivery to the exchange agent of the letter of transmittal, the tendered initial notes and any other required documents, or the receipt by the exchange agent of a timely confirmation of a book-entry transfer of initial notes into the exchange agent’s account at The Depository Trust Company with an agent’s message, in each case, in form satisfactory to us and the exchange agent.

If any tendered initial notes are not accepted for any reason provided by the terms and conditions of this exchange offer or if initial notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged initial notes will be returned without expense to the tendering holder, or, in the case of initial notes tendered by book-entry transfer procedures described above, will be credited to an account maintained with the book-entry transfer facility, promptly after withdrawal, rejection of tender or the expiration or termination of the exchange offer.

By tendering into this exchange offer, you will irrevocably appoint our designees as your attorney-in-fact and proxy with full power of substitution and resubstitution to the full extent of your rights on the notes tendered. This proxy will be considered coupled with an interest in the tendered notes. This appointment will be effective only when, and to the extent that we accept your notes in this exchange offer. All prior proxies on these notes will then be revoked and you will not be entitled to give any subsequent proxy. Any proxy that you may give subsequently will not be deemed effective. Our designees will be empowered to exercise all voting and other rights of the holders as they may deem proper at any meeting of note holders or otherwise. The initial notes will be validly tendered only if we are able to exercise full voting rights on the notes, including voting at any meeting of the note holders, and full rights to consent to any action taken by the note holders.

Except as otherwise provided in this prospectus, you may withdraw tenders of initial notes at any time before 5:00 p.m., New York City time, on the expiration date.

For a withdrawal to be effective, you must send a written or facsimile transmission notice of withdrawal to the exchange agent before 5:00 p.m., New York City time, on the expiration date at the address provided below under “— Exchange Agent” and before acceptance of your tendered notes for exchange by us.


	(1) specify the name of the person having tendered the initial notes to be withdrawn,

	(2) identify the notes to be withdrawn, including, if applicable, the registration number or numbers and total principal amount of these notes,

	(3) be signed by the person having tendered the initial notes to be withdrawn in the same manner as the original signature on the letter of transmittal by which these notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to permit the trustee for the initial notes to register the transfer of these notes into the name of the person having made the original tender and withdrawing the tender,

	(4) specify the name in which any of these initial notes are to be registered, if this name is different from that of the person having tendered the initial notes to be withdrawn, and

	(5) if applicable because the initial notes have been tendered through the book-entry procedure, specify the name and number of the participant’s account at The Depository Trust Company to be credited, if different than that of the person having tendered the initial notes to be withdrawn.

We will determine all questions as to the validity, form and eligibility, including time of receipt, of all notices of withdrawal and our determination will be final and binding on all parties. Initial notes that are withdrawn will be deemed not to have been validly tendered for exchange in this exchange offer.

The exchange agent will return without cost to their holders all initial notes that have been tendered for exchange and are not exchanged for any reason, promptly withdrawal, rejection of tender or expiration or termination of this exchange offer.

You may retender properly withdrawn initial notes in this exchange offer by following one of the procedures described under “— Procedures for Tendering Initial Notes” above at any time on or before the expiration date.


	•	the exchange offer does not violate applicable law or any applicable interpretation of the staff of the Commission,

	•	no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair our ability to proceed with the exchange offer, and no material adverse development shall have occurred in any existing action or proceeding with respect to us, and

	•	all governmental approvals shall have been obtained, which approvals we deem necessary for the consummation of the exchange offer.

These conditions are for our sole benefit. We may assert any one of these conditions regardless of the circumstances giving rise to it and may also waive any one of them, in whole or in part, at any time and from time to time, if we determine in our reasonable discretion that it has not been satisfied, subject to applicable law. Notwithstanding the foregoing, all conditions to the exchange offer must be satisfied or waived before the expiration of this exchange offer. If we waive a condition to this exchange offer, the waiver will be applied equally to all note holders. We will not be deemed to have waived our rights to assert or waive these conditions if we fail at any time to exercise any of them. Each of these rights will be deemed an ongoing right which we may assert at any time and from time to time.

If we determine that we may terminate this exchange offer because any of these conditions is not satisfied, we may:


	•	refuse to accept and return to their holders any initial notes that have been tendered,

	•	extend the exchange offer and retain all notes tendered before the expiration date, subject to the rights of the holders of these notes to withdraw their tenders, or

	•	waive any condition that has not been satisfied and accept all properly tendered notes that have not been withdrawn or otherwise amend the terms of this exchange offer in any respect as provided under the section in this prospectus entitled “— Expiration Date; Extensions; Amendments; Termination.”

We will record the exchange notes at the same carrying value as the initial notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will amortize the costs of the exchange offer and the unamortized expenses related to the issuance of the exchange notes over the term of the exchange notes.

We have appointed U.S. Bank National Association as exchange agent for this exchange offer. You should direct all questions and requests for assistance on the procedures for tendering and all requests for additional copies of this prospectus or the letter of transmittal to the exchange agent as follows:


	By mail or hand/overnight delivery:

	U.S. Bank National Association
	EP-MN-WS2N
	60 Livingston Avenue
	St. Paul, MN 55107

	Facsimile Transmission:

	U.S. Bank National Association
	(651) 495-8158

	Confirm by Telephone: (800) 934-6802

	Attention: Specialized Finance Department

We will bear the expenses of soliciting tenders in this exchange offer, including fees and expenses of the exchange agent and trustee and accounting, legal, printing and related fees and expenses.

We will not make any payments to brokers, dealers or other persons soliciting acceptances of this exchange offer. However, we 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 with this exchange offer. We will also pay brokerage houses and other custodians, nominees and fiduciaries their reasonable out-of-pocket expenses for forwarding copies of the prospectus, letters of transmittal and related documents to the beneficial owners of the initial notes and for handling or forwarding tenders for exchange to their customers.

We will pay all transfer taxes, if any, applicable to the exchange of initial notes in accordance with this exchange offer. However, tendering holders will pay the amount of any transfer taxes, whether imposed on the registered holder or any other persons, if:


	•	certificates representing exchange notes or initial 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 notes tendered,

	•	tendered initial notes are registered in the name of any person other than the person signing the letter of transmittal, or

	•	a transfer tax is payable for any reason other than the exchange of the initial notes in this exchange offer.

If you do not submit satisfactory evidence of the payment of any of these taxes or of any exemption from this payment with the letter of transmittal, we will bill you directly the amount of these transfer taxes.

Your Failure to Participate in the Exchange Offer Will Have Adverse Consequences


	(1) changes in law or the applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer,

	(2) for any reason the exchange offer is not consummated within 210 days of the date of the issuance of the initial notes,

	(3) any holder notifies us prior to the 30th day following consummation of this exchange offer that it is prohibited by law or applicable interpretations of the staff of the Commission from participating in the exchange offer,

	(4) in the case of any holder who participates in the exchange offer, such holder notifies us prior to the 30th day following the consummation of the exchange offer that it did not receive exchange notes that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours within the meaning of the Securities Act), or

	(5) any initial purchaser so requests with respect to initial notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution.

in which case the registration rights agreement requires us to file a registration statement for a continuous offer in accordance with Rule 415 under the Securities Act for the benefit of the holders of the initial notes described in this sentence. We do not currently anticipate that we will register under the Securities Act any notes that remain outstanding after completion of the exchange offer.

Each broker-dealer that receives exchange notes for its own account in exchange for initial notes, where such initial notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.”

The initial notes were issued and the exchange notes will be issued under the indenture, dated as of February 12, 2004, among us, our parent, Ply Gem Holdings, our domestic subsidiaries and U.S. Bank National Association, as trustee (the “Indenture”). When we refer to the notes in this “Description of Notes,” we mean the initial notes and the exchange notes.

The following summary does not purport to be complete, and is subject to, and is qualified in its entirety by reference to, all of the provisions of the notes and the Indenture. We urge you to read the Indenture and the form of the notes, which you may obtain from us upon request. As used in this description, all references to “our company,” “we,” “us” or “our” mean Ply Gem Industries, Inc., excluding, unless otherwise expressly stated or the context otherwise requires, its subsidiaries.

The Notes will mature on February 15, 2012. The Notes will bear interest at the rate shown on the cover page of this prospectus, payable on February 15 and August 15 of each year, commencing on August 15, 2004, to Holders of record at the close of business on February 1 or August 1, as the case may be, immediately preceding the relevant interest payment date. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months.

The Notes will be issued in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000.

An aggregate principal amount of Notes equal to $225.0 million is being issued in this offering. The Issuer may issue additional Notes having identical terms and conditions to the Notes being issued in this offering, except for issue date, issue price and first interest payment date, in an unlimited aggregate principal amount (the “Additional Notes”), subject to compliance with the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness.” Any Additional Notes will be part of the same issue as the Notes being issued in this offering and will be treated as one class with the Notes being issued in this offering, including for purposes of voting, redemptions and offers to purchase. For purposes of this “Description of the Notes,” except for the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness,” references to the Notes include Additional Notes, if any.

If a Holder has given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will make all payments on such Holder’s Notes by wire transfer of immediately available funds to the account specified in those instructions. Otherwise, payments on the Notes will be made at the office or agency of the paying agent (the “Paying Agent”) and registrar (the “Registrar”) for the Notes within the City and State of New York unless the Issuer elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders.

The payment of all Obligations on or relating to the Notes will be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Obligations due in respect of Senior Debt of the Issuer, including all Obligations with respect to the Credit Facilities, whether outstanding on the Issue Date or incurred after that date.

The holders of Senior Debt will be entitled to receive payment in full in cash or cash equivalents of all Obligations due in respect of Senior Debt before the Holders of Notes will be entitled to receive any payment


	•	in a total or partial liquidation, dissolution or winding up of the Issuer;

	•	in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Issuer or its assets;

	•	in an assignment for the benefit of creditors; or

	•	in any marshalling of the Issuer’s assets and liabilities.

In addition, the Issuer may not make any payment or distribution of any kind or character with respect to any Obligations on or relating to the Notes or acquire any Notes for cash or assets or otherwise (other than, in either case, Permitted Junior Securities), if:


	•	a payment default on any Senior Debt occurs and is continuing; or

	•	any other default occurs and is continuing on any Designated Senior Debt that permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a “Payment Blockage Notice”) from the Representative of such Designated Senior Debt.

Payments on and distributions with respect to any Obligations on or with respect to the Notes may and shall be resumed:


	•	in the case of a payment default, upon the date on which all payment defaults are cured or waived; and

	•	in case of a nonpayment default, the earliest of (1) the date on which all such nonpayment defaults are cured or waived, (2) 179 days after the date on which the applicable Payment Blockage Notice is received or (3) the date on which the Trustee receives notice from the Representative for such Designated Senior Debt rescinding the Payment Blockage Notice, unless the maturity of any Designated Senior Debt has been accelerated.

No new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice.

No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days. Any subsequent action or any breach of any financial covenants for a period ending after the date of delivery of the initial Payment Blockage Notice that in either case would give rise to a default pursuant to any provisions under which a default previously existed or was continuing will constitute a new default for this purpose.

Notwithstanding anything to the contrary, payments and distributions made from the trusts established pursuant to the provisions described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge” will be permitted and will not be subordinated so long as the payments into the trusts were made in accordance with the requirements described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge” and did not violate the subordination provisions when they were made.

The Issuer must promptly notify the Representative of the Designated Senior Debt if payment of the Notes is accelerated because of an Event of Default.

As a result of the subordination provisions described above in the event of a bankruptcy, liquidation or reorganization of the Issuer, Holders of the Notes may recover less ratably than creditors of the Issuer who are holders of Senior Debt. See “Risk Factors — Risks Associated with the Offering — Your right to receive payment on the notes and guarantees is subordinated to our and the guarantors’ senior debt.”

As of December 31, 2003, on a pro forma basis, the Issuer would have had approximately $222.6 million aggregate principal amount of Senior Debt and approximately $32.5 million would have been available for borrowing as additional Senior Debt under the revolving portion of the Credit Agreement.

Each Guarantee will be subordinated to Guarantor Senior Debt on the same basis as the Notes are subordinated to Senior Debt.

The Issuer’s obligations under the Notes and the Indenture will be jointly and severally guaranteed on a senior subordinated basis (the “Note Guarantees”) by (1) Parent, (2) each Restricted Subsidiary that guarantees any Indebtedness under any Credit Facility (other than any Foreign Subsidiary that guarantees Indebtedness of only other Foreign Subsidiaries under any such Credit Facility) and (3) each other Restricted Subsidiary that the Issuer shall otherwise cause to become a Guarantor pursuant to the terms of the Indenture.

Not all of our Subsidiaries will guarantee the Notes. Unrestricted Subsidiaries and Foreign Subsidiaries will not be Guarantors. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, these non-guarantor Subsidiaries will pay the holders of their debts and their trade creditors before they will be able to distribute any of their assets to us. For the twelve months ended December 31, 2003, on a pro forma basis, our Canadian subsidiary represented approximately 9.2% of our net sales, 32.4% of our net earnings and 11.7% of our EBITDA. In addition, as of December 31, 2003, on a pro forma basis, it would have held 4.3% of our combined assets and had $31.5 million of liabilities (including trade payables), to which the Notes would have been effectively subordinated, including term loans of $30.0 million under the Credit Agreement, which are guaranteed by the Issuer and therefore constitute Senior Debt.

As of the date of the Indenture, all of our Subsidiaries will be “Restricted Subsidiaries.” However, under the circumstances described below under the subheading “— Certain Covenants — Designation of Unrestricted Subsidiaries,” the Issuer will be permitted to designate some of our Subsidiaries as “Unrestricted Subsidiaries.” The effect of designating a Subsidiary as an “Unrestricted Subsidiary” will be:


	•	an Unrestricted Subsidiary will not be subject to many of the restrictive covenants in the Indenture;

	•	a Subsidiary that has previously been a Guarantor and that is designated an Unrestricted Subsidiary will be released from its Note Guarantee; and

	•	the assets, income, cash flow and other financial results of an Unrestricted Subsidiary will not be consolidated with those of the Issuer for purposes of calculating compliance with the restrictive covenants contained in the Indenture.

The obligations of each Subsidiary Guarantor under its Note Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including, without limitation, any guarantees under the Credit Agreement permitted under clause (1) of “— Certain Covenants — Limitations on Additional Indebtedness”) and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Note Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under its Note Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment for distribution under its Note Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on adjusted net assets of each Subsidiary Guarantor.

A Subsidiary Guarantor shall be released from its obligations under its Note Guarantee:


	(1) in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Equity Interests of such Subsidiary Guarantor then held by the Issuer and the Restricted Subsidiaries;


	(2) if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of the Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or

	(3) if such Subsidiary Guarantor shall not guarantee any Indebtedness under any Credit Facility (other than if such Subsidiary Guarantor no longer guarantees any Indebtedness under any Credit Facility as a result of payment under any guarantee of any such Indebtedness by any Subsidiary Guarantor); provided that a Subsidiary Guarantor shall not be permitted to be released from its Note Guarantee if it is an obligor with respect to Indebtedness that would not, under “— Certain Covenants — Limitations on Additional Indebtedness,” be permitted to be incurred by a Restricted Subsidiary that is not a Guarantor.

Except as set forth below, the Notes may not be redeemed prior to February 15, 2008 (the “First Call Date”). At any time on or after the First Call Date, the Issuer, at its option, may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning February 15 of the years indicated:

At any time prior to February 15, 2007, the Issuer may redeem at its option on any one or more occasions up to 35% of the aggregate principal amount of the Notes issued under the Indenture with the net cash proceeds of one or more Qualified Equity Offerings at a redemption price equal to 109% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption and (2) the redemption occurs within 90 days of the date of the closing of any such Qualified Equity Offering.

At any time prior to First Call Date, the Notes may also be redeemed, in whole but not in part, at the Issuer’s option, upon the occurrence of a Change of Control, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such redemption may be made upon notice mailed by first-class mail to each Holder’s registered address, not less than 30 nor more than 60 days prior to the date of redemption (but in no event more than 90 days after the occurrence of such Change of Control). The Issuer may provide in such notice that payment of such price and performance of the Issuer’s obligations with respect to such redemption may be performed by another Person. Any such notice may be given prior to the occurrence of the related Change of Control, and any such redemption or notice may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of the related Change of Control.

“Applicable Premium” means, with respect to a Note at any redemption date, the greater of:


	(a) the present value at such redemption date of (1) the redemption price of such Note on the First Call Date (such redemption price being that described in the first paragraph of this “Optional Redemption” section) plus (2) all required remaining scheduled interest payments due on such Note through the First Call Date, other than accrued interest to such redemption date, computed using a discount rate equal to the Treasury Rate plus 75 basis points per annum, discounted on a semi-annual bond equivalent basis, over

	(b) the principal amount of such Note on such redemption date.

Calculation of the Applicable Premium will be made by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate; provided, however, that such calculation shall not be a duty or obligation of the Trustee.

“Treasury Rate” means, with respect to a redemption date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such redemption date to the First Call Date; provided, however, that if the period from such redemption date to the First Call Date is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such redemption date to the First Call Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

At any time prior to the First Call Date, after the completion of a Change of Control Offer that was accepted by Holders of not less than 75% of the aggregate principal amount of Notes then outstanding, the Issuer may redeem all, but not less than all, of the Notes not validly tendered in the Change of Control Offer, at a redemption price equal to 101% of the principal amount, and accrued and unpaid interest, if any, to the date of redemption; provided that such redemption occurs within 90 days after the completion of such Change of Control Offer.

The Issuer may acquire Notes by means other than a redemption, whether pursuant to an issuer tender offer, open market purchase or otherwise, so long as the acquisition does not otherwise violate the terms of the Indenture.

In the event that less than all of the Notes are to be redeemed at any time pursuant to an optional redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national security exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part. In addition, if a partial redemption is made pursuant to the provisions described under “— Optional Redemption — Redemption with Proceeds from Equity Offerings,” selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of The Depository Trust Company), unless that method is otherwise prohibited.

Notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the date of redemption to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a satisfaction and discharge of the Indenture. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of the Note to be redeemed. A new Note in a principal amount equal to the unredeemed portion of the Note will be issued in the name of the Holder of the Note upon cancellation of the original Note. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Issuer has deposited with the paying agent for the Notes funds in satisfaction of the redemption price (including accrued and unpaid interest on the Notes to be redeemed) pursuant to the Indenture.

Upon the occurrence of any Change of Control, each Holder will have the right to require that the Issuer purchase that Holder’s Notes for a cash price (the “Change of Control Purchase Price”) equal to 101% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase.

Within 30 days following any Change of Control, the Issuer will mail, or caused to be mailed, to the Holders a notice:


	(1) describing the transaction or transactions that constitute the Change of Control;

	(2) offering to purchase, pursuant to the procedures required by the Indenture and described in the notice (a “Change of Control Offer”), on a date specified in the notice (which shall be a Business Day not earlier than 30 days nor later than 60 days from the date the notice is mailed) and for the Change of Control Purchase Price, all Notes properly tendered by such Holder pursuant to such Change of Control Offer; and

	(3) describing the procedures that Holders must follow to accept the Change of Control Offer. The Change of Control Offer is required to remain open for at least 20 Business Days or for such longer period as is required by law.

The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the date of purchase.

The agreements governing our outstanding Senior Debt currently prohibit us from purchasing any Notes, and also provide that some change of control events with respect to us would constitute a default under these agreements. Any future credit agreements or other agreements relating to Senior Debt to which the Issuer becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing Notes, the Issuer could seek the consent of our senior lenders to the purchase of Notes or could attempt to refinance the borrowings that contain the prohibition. If the Issuer does not obtain a consent or repay the borrowings, the Issuer will remain prohibited from purchasing Notes. In that case, our failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the Senior Debt. In these circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes.

If a Change of Control Offer is made, there can be no assurance that the Issuer will have available funds sufficient to pay for all or any of the Notes that might be delivered by Holders seeking to accept the Change of Control Offer.

The provisions described above that require us to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Issuer purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

The Issuer’s obligation to make a Change of Control Offer will be satisfied if a third party makes the Change of Control Offer in the manner and at the times and otherwise in compliance with the requirements applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

With respect to any disposition of assets, the phrase “all or substantially all” as used in the Indenture (including as set forth under “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.” below) varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under New York law (which governs the Indenture) and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Issuer, and therefore it may be unclear as to whether a Change of Control has occurred and whether the Holders have the right to require the Issuer to purchase Notes.

The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-l under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Change of Control” provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the “Change of Control” provisions of the Indenture by virtue of this compliance.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the Issuer or any Guarantor may incur additional Indebtedness, and any Restricted Subsidiary may incur Acquired Indebtedness, in each case, if, after giving effect thereto, the Consolidated Interest Coverage Ratio would be at least 2.00 to 1.00 (the “Coverage Ratio Exception”).

Notwithstanding the above, each of the following shall be permitted (the “Permitted Indebtedness”):


	(1) Indebtedness of the Issuer or any Guarantor under the Credit Facilities in an aggregate amount at any time outstanding not to exceed the greater of (a) $250.0 million less, to the extent a permanent repayment and/or commitment reduction is required thereunder as a result of such application, the aggregate amount of Net Available Proceeds applied to repayments under the Credit Facilities in accordance with the covenant described under “— Limitations on Asset Sales” (provided that the amount under this clause (a) shall in no event be reduced to below $65.0 million) and (b) the amount that is 2.5 times Consolidated Cash Flow for the Four-Quarter Period;

	(2) the Notes issued on the Issue Date and the Note Guarantees and the Exchange Notes and the Note Guarantees in respect thereof to be issued pursuant to the Registration Rights Agreement;

	(3) Indebtedness of the Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (1) and (2) above, and after giving effect to the intended use of proceeds of the Notes);

	(4) Indebtedness under Hedging Obligations of the Company or any Restricted Subsidiary not for the purpose of speculation; provided that if such Hedging Obligations are of the type described in clause (1) of the definition thereof, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this covenant, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

	(5) Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that upon any such


	Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (5);

	(6) Indebtedness in respect of bid, performance, surety bonds and workers’ compensation claims, self-insurance obligations and bankers acceptances issued for the account of the Issuer or any Restricted Subsidiary in the ordinary course of business, including guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance, surety bonds and workers’ compensation claims, self-insurance obligations and bankers acceptances;

	(7) Purchase Money Indebtedness incurred by the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed at any time outstanding $25.0 million;

	(8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;

	(9) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

	(10) Refinancing Indebtedness with respect to Indebtedness incurred pursuant to the Coverage Ratio Exception, clause (2), (3), (11)(B) or (13)(B) of this paragraph or this clause (10);

	(11) (A) Acquired Indebtedness of the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed $20.0 million at any time outstanding and (B) Acquired Indebtedness of the Issuer or any Restricted Subsidiary assumed or acquired in connection with a transaction governed by, and effected in accordance with, the first paragraph of the covenant described under “— Limitations on Mergers, Consolidations, Etc.”;

	(12) indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets of the Issuer or any Restricted Subsidiary or Equity Interests of a Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Capital Stock for the purpose of financing any such acquisition; provided that the maximum aggregate liability in respect of all such obligations outstanding under this clause (12) shall at no time exceed (a) in the case of an acquisition, $10.0 million (provided that the amount of such liability shall be deemed to be the amount thereof, if any, reflected on the balance sheet of the Issuer or any Restricted Subsidiary (e.g., the amount of such liability shall be deemed to be zero if no amount is reflected on such balance sheet)) and (b) in the case of a disposition, the gross proceeds actually received by the Issuer and the Restricted Subsidiaries in connection with such disposition;

	(13) (A) Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $30.0 million at any time outstanding and (B) Indebtedness of Foreign Subsidiaries if, after giving effect thereto the Consolidated Interest Coverage Ratio (with the references to the Issuer and the Restricted Subsidiaries in the definitions used in the calculation thereof being to Foreign Subsidiaries (other than Unrestricted Subsidiaries)) of all Foreign Subsidiaries would be at least 2.00 to 1.00; provided that Indebtedness under this clause (13) may be incurred under any Credit Facility;

	(14) Indebtedness of the Issuer or any Restricted Subsidiary incurred in the ordinary course of business under guarantees of Indebtedness of suppliers, licensees, franchisees or customers in an aggregate amount, together with the aggregate amount of Investments under clause (13) of the definition of “Permitted Investments,” not to exceed $5.0 million at any time outstanding; and

	(15) Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $25.0 million at any time outstanding.

For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (15) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall classify and may reclassify, in its sole discretion, such item of Indebtedness and may divide, classify and reclassify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Credit Facilities on the Issue Date shall be deemed to have been incurred under clause (1) above. In addition, for purposes of determining any particular amount of Indebtedness under this covenant, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur or suffer to exist any Indebtedness that is or purports to be by its terms (or by the terms of any agreement governing such Indebtedness) senior in right of payment to the Notes or the Note Guarantee of such Restricted Subsidiary and subordinated in right of payment to any other Indebtedness of the Issuer or of such Restricted Subsidiary, as the case may be.

For purposes of the foregoing, no Indebtedness will be deemed to be subordinated in right of payment to any other Indebtedness of the Issuer or any Restricted Subsidiary solely by virtue of being unsecured or secured by a junior priority lien or by virtue of the fact that the holders of such Indebtedness have entered into intercreditor agreements or other arrangements giving one or more of such holders priority over the other holders in the collateral held by them.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment:


	(1) a Default shall have occurred and be continuing or shall occur as a consequence thereof;

	(2) the Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or

	(3) the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date (other than Restricted Payments made pursuant to clause (2), (3), (4), (5), (6), (7), (8) or (9) of the next paragraph), exceeds the sum (the “Restricted Payments Basket”) of (without duplication):


	(a) 50% of Consolidated Net Income for the period (taken as one accounting period) commencing on the first day of the fiscal quarter in which the Issue Date occurs to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus

	(b) 100% of the aggregate net cash proceeds received by the Issuer and 100% of the Fair Market Value at the time of receipt of assets other than cash, if any, received by the Issuer, either (x) as contributions to the common equity of the Issuer after the Issue Date or (y) from the issuance and sale of Qualified Equity Interests after the Issue Date, other than (A) any such proceeds which are used to redeem Notes in accordance with the second paragraph under “— Optional Redemption — Redemption with Proceeds from Equity Offerings” or (B) any such proceeds or assets received from a Subsidiary of the Issuer, plus

	(c) the aggregate amount by which Indebtedness (other than any Subordinated Indebtedness) incurred by the Issuer or any Restricted Subsidiary subsequent to the Issue Date is reduced on the Issuer’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Issuer)


	into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer or any Restricted Subsidiary upon such conversion or exchange), plus

	(d) in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) 100% of the aggregate amount received by the Issuer or any Restricted Subsidiary in cash or other property (valued at the Fair Market Value thereof) as the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, plus

	(e) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer’s Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced.


	(1) the payment by the Issuer or any Restricted Subsidiary of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of the Indenture;

	(2) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests;

	(3) the redemption of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests, (b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under the “Limitations on Additional Indebtedness” covenant and the other terms of the Indenture or (c) upon a Change of Control or in connection with an Asset Sale to the extent required by the agreement governing such Subordinated Indebtedness but only if the Issuer shall have complied with the covenants described under “— Change of Control” and “— Limitations on Asset Sales” and purchased all Notes validly tendered pursuant to the relevant offer prior to redeeming such Subordinated Indebtedness;

	(4) payments by the Issuer or to Parent to permit Parent or Holdings, and which are used by Parent or Holdings, to redeem Equity Interests of the Issuer, Parent or Holdings held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; provided that the aggregate cash consideration paid for all such redemptions shall not exceed the sum of (A) $5.0 million during any calendar year (with unused amounts being available to be used in the following calendar year, but not in any succeeding calendar year) plus (B) the amount of any net cash proceeds received by or contributed to the Issuer from the issuance and sale after the Issue Date of Qualified Equity Interests of Holdings, Parent or the Issuer to its officers, directors or employees that have not been applied to the payment of Restricted Payments pursuant to this clause (4), plus (C) the net cash proceeds of any “key-man” life insurance policies that have not been applied to the payment of Restricted Payments pursuant to this clause (4);

	(5) payments to Parent permitted pursuant to clauses (3) and (4) of the covenant described under “— Limitations on Transactions with Affiliates”;

	(6) repurchases of Equity Interests deemed to occur upon the exercise of stock options if the Equity Interests represent a portion of the exercise price thereof;

	(7) to the extent that the Net Available Proceeds (without duplication of any amount that increased the Restricted Payments Basket) of any Permitted Sale and Leaseback Transaction exceed the Permitted Sale and Leaseback Transaction Amount, payments of such excess amount to Parent to permit Parent or Holdings, and the subsequent use of such payments by Parent or Holdings, to pay a dividend to


	the holders of Equity Interests of Parent or Holdings or a distribution to the holders of Indebtedness of Parent or Holdings;

	(8) distributions to Parent in order to enable Parent or Holdings to pay customary and reasonable costs and expenses of an offering of securities of Parent or Holdings that is not consummated; or

	(9) additional Restricted Payments of $20.0 million;

provided that (a) in the case of any Restricted Payment pursuant to clause (3)(c) or (7) above, no Default shall have occurred and be continuing or occur as a consequence thereof and (b) no issuance and sale of Qualified Equity Interests pursuant to clause (2), (3) or (4)(B) above shall increase the Restricted Payments Basket.


		*Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries*

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:


	(a) pay dividends or make any other distributions on or in respect of its Equity Interests;

	(b) make loans or advances or pay any Indebtedness or other obligation owed to the Issuer or any other Restricted Subsidiary; or

	(c) transfer any of its assets to the Issuer or any other Restricted Subsidiary;


	(1) encumbrances or restrictions existing under or by reason of applicable law, regulation or order;

	(2) encumbrances or restrictions existing under the Indenture, the Notes and the Note Guarantees;

	(3) non-assignment provisions of any contract or any lease entered into in the ordinary course of business;

	(4) encumbrances or restrictions existing under agreements existing on the date of the Indenture (including, without limitation, the Credit Facilities) as in effect on that date;

	(5) restrictions relating to any Lien permitted under the Indenture imposed by the holder of such Lien;

	(6) restrictions imposed under any agreement to sell assets permitted under the Indenture to any Person pending the closing of such sale;

	(7) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

	(8) any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date;

	(9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture, asset sale and stock sale agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person;


	(10) Purchase Money Indebtedness incurred in compliance with the covenant described under “— Limitations on Additional Indebtedness” that impose restrictions of the nature described in clause (c) above on the assets acquired;

	(11) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business;

	(12) encumbrances or restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrances or restrictions restrict the transfer of assets subject to such security agreements or mortgages;

	(13) encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries, or municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds, permitted to be incurred under the Indenture; provided that any such encumbrances or restrictions are ordinary and customary with respect to the type of Indebtedness being incurred under the relevant circumstances and do not, in the good faith judgment of the Board of Directors of the Issuer, materially impair the Issuer’s ability to make payment on the Notes when due; and

	(14) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (13) above; provided that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an “Affiliate Transaction”), unless:


	(1) such Affiliate Transaction is on terms that are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm’s-length basis by the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer or that Restricted Subsidiary; and

	(2) the Issuer delivers to the Trustee:


	(a) with respect to any Affiliate Transaction involving aggregate value in excess of $5.0 million, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above and (x) a Secretary’s Certificate which sets forth and authenticates a resolution that has been adopted by a majority of the directors of the Issuer who are disinterested with respect to such Affiliate Transaction, approving such Affiliate Transaction or (y) if there are no such disinterested directors, a written opinion described in clause (b) below; and

	(b) with respect to any Affiliate Transaction involving aggregate value of $20.0 million or more, the certificates described in the preceding clause (a) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor to the Board of Directors of the Issuer.


	(1) transactions exclusively between or among (a) the Issuer and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; provided, in each case, that no Affiliate of the Issuer (other than another Restricted Subsidiary) owns Equity Interests of any such Restricted Subsidiary;

	(2) reasonable director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans), indemnification arrangements, compensation, employment and severance agreements, in each case approved by the Board of Directors;


	(3) the entering into of a tax sharing agreement, or payments pursuant thereto, between the Issuer and/or one or more Subsidiaries, on the one hand, and any other Person with which the Issuer or such Subsidiaries are required or permitted to file a consolidated tax return or with which the Issuer or such Subsidiaries are part of a consolidated group for tax purposes, on the other hand, which payments by the Issuer and the Restricted Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis;

	(4) payments by the Issuer to or on behalf of Parent in an amount sufficient to pay out-of-pocket legal, accounting and filing and other general corporate overhead costs of Parent actually incurred by Parent, in any case in an aggregate amount not to exceed $500,000 in any calendar year;

	(5) loans and advances permitted by clause (3) of the definition of “Permitted Investments”;

	(6) payments to Sponsor or an Affiliate or Related Party thereof in respect of management and consulting services rendered to the Issuer and the Restricted Subsidiaries in the amounts and at the times specified or permitted in the Advisory Agreement, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Holders in any material respect than such agreement as it was in effect on the Issue Date; provided that no Default described in clause (1), (2), (3), (7) or (8) of the definition of “Event of Default” shall have occurred and be continuing or occur as a consequence thereof;

	(7) any Restricted Payments which are made in accordance with the covenant described under “— Limitations on Restricted Payments”;

	(8) entering into an agreement that provides registration rights to the shareholders of the Issuer, Parent or Holdings or amending any such agreement with shareholders of the Issuer, Parent or Holdings and the performance of such agreements;

	(9) any transaction with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Issuer or a Restricted Subsidiary owns an equity interest in or otherwise controls such joint venture or similar entity; provided that no Affiliate of the Issuer or any of its Subsidiaries other than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such joint venture or similar entity;

	(10) any merger, consolidation or reorganization of the Issuer with an Affiliate, solely for the purposes of (a) reorganizing to facilitate an initial public offering of securities of the Issuer, Parent, Holdings or other holding company, (b) forming a holding company or (c) reincorporating the Issuer in a new jurisdiction;

	(11) (a) any transaction with an Affiliate where the only consideration paid by the Issuer or any Restricted Subsidiary is Qualified Equity Interests or (b) the issuance or sale of any Qualified Equity Interests;

	(12) (a) any agreement in effect on the Issue Date (other than the Advisory Agreement) and disclosed in this prospectus, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Holders in any material respect than such agreement as it was in effect on the Issue Date or (b) any transaction pursuant to any agreement referred to in the immediately preceding clause (a); or

	(13) any Investment in an Unrestricted Subsidiary; provided that no Affiliate of the Issuer or any of its Subsidiaries other than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such Unrestricted Subsidiary.

The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any assets of the Issuer or any Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue


	(1) in the case of any Lien securing an obligation that ranks pari passu with the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, at least equally and ratably with or prior to such obligation with a Lien on the same collateral; and

	(2) in the case of any Lien securing an obligation that is subordinated in right of payment to the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such subordinated obligation,

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale (other than a Permitted Sale and Leaseback Transaction) unless:


	(1) the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; and

	(2) either (x) at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents or (y) the cash or Cash Equivalents portion (without giving effect to clause (c) of the next paragraph) of the total consideration received in such Asset Sale shall be no less than an amount equal to the product of (A) 5.25 and (B) the portion of Consolidated Cash Flow for the Four-Quarter Period directly attributable to the assets included in such Asset Sale.


	(a) the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness,

	(b) the amount of any obligations received from such transferee that are within 90 days converted by the Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and

	(c) the Fair Market Value of (i) any assets (other than securities) received by the Issuer or any Restricted Subsidiary to be used by it in the Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or (iii) a combination of (i) and (ii).

If at any time any non-cash consideration received by the Issuer or any Restricted Subsidiary, as the case may be, pursuant to clause (b) above in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this covenant.

If the Issuer or any Restricted Subsidiary engages in an Asset Sale (other than a Permitted Sale and Leaseback Transaction), the Issuer or such Restricted Subsidiary shall, by no later than 12 months following the later of the consummation thereof and the Issuer’s or Restricted Subsidiary’s receipt of the Net Available Proceeds, have applied all or any of the Net Available Proceeds therefrom to:


	(1) repay Senior Debt or Guarantor Senior Debt, and in the case of any such repayment under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility;


	(2) repay any Indebtedness which was secured by the assets sold in such Asset Sale; and/or

	(3) (A) invest in the purchase of assets (other than securities) to be used by the Issuer or any Restricted Subsidiary in the Permitted Business, (B) acquire Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (C) a combination of (A) and (B); provided that the Issuer or such Restricted Subsidiary shall be deemed to have applied Net Available Proceeds in accordance with this clause (3) within such 12-month period if, within such 12-month period, it has entered into a binding commitment or agreement to invest such Net Available Proceeds and continues to use all reasonable efforts to so apply such Net Available Proceeds as soon as practicable thereafter; provided, further, that upon any abandonment or termination of such commitment or agreement, the Net Available Proceeds not applied will constitute Excess Proceeds (as defined below). In addition, following the entering into of a binding agreement with respect to an Asset Sale and prior to the consummation thereof, cash (whether or not actual Net Available Proceeds of such Asset Sale) used for the purposes described in subclause (A), (B) and (C) of this clause (3) that are designated as uses in accordance with this clause (3), and not previously or subsequently so designated in respect of any other Asset Sale, shall be deemed to be Net Available Proceeds applied in accordance with this clause (3).

The amount of Net Available Proceeds not applied or invested as provided in this paragraph will constitute “Excess Proceeds.”

When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows:


	(1) the Issuer will (a) make an offer to purchase (a “Net Proceeds Offer”) to all Holders in accordance with the procedures set forth in the Indenture, and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment Amount”) of such Excess Proceeds;

	(2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the “Offered Price”), in accordance with the procedures set forth in the Indenture and the redemption price for such Pari Passu Indebtedness (the “Pari Passu Indebtedness Price”) shall be as set forth in the related documentation governing such Indebtedness;

	(3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis; and

	(4) upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero.

To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a “Net Proceeds Deficiency”), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of the Indenture.

In the event of the transfer of substantially all (but not all) of the assets of the Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with the

The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Limitations on Asset Sales” provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the “Limitations on Asset Sales” provisions of the Indenture by virtue of this compliance.

The Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer as an “Unrestricted Subsidiary” under the Indenture (a “Designation”) only if:


	(1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and

	(2) either (A) the Subsidiary to be so Designated has total assets of $1,000 or less; or (B) the Issuer would be permitted to make, at the time of such Designation, (x) a Permitted Investment or (y) an Investment pursuant to the first paragraph of “— Limitations on Restricted Payments” above, in either case, in an amount (the “Designation Amount”) equal to the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary on such date.

No Subsidiary shall be Designated as an “Unrestricted Subsidiary” if such Subsidiary or any of its Subsidiaries owns (i) any Equity Interests (other than Qualified Equity Interests) of the Issuer or (ii) any Equity Interests of any Restricted Subsidiary that is not a Subsidiary of the Subsidiary to be so Designated.

If, at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under the covenant described under “— Limitations on Additional Indebtedness” or the Lien is not permitted under the covenant described under “— Limitations on Liens,” the Issuer shall be in default of the applicable covenant.

The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) only if:


	(1) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and

	(2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, have been permitted to be incurred or made for all purposes of the Indenture.

All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee, certifying compliance with the foregoing provisions.

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, sell or issue any shares of Equity Interests of any Restricted Subsidiary except (1) to the Issuer, a Restricted Subsidiary or the minority stockholders of any Restricted Subsidiary, on a pro rata basis, (2) to the extent such shares represent directors’ qualifying shares or shares required by applicable law to be held by a Person other than the

Issuer or a Wholly-Owned Restricted Subsidiary, or (3) if immediately after giving effect to such sale or issuance, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. The sale of all the Equity Interests of any Restricted Subsidiary is permitted by this covenant but is subject to the covenant described under “— Limitations on Asset Sales.” Notwithstanding the foregoing, this covenant shall not prohibit the issuance or sale of Equity Interests of any Restricted Subsidiary in connection with (a) the formation or capitalization of a Restricted Subsidiary or (b) a single transaction or a series of substantially contemporaneous transactions whereby such Restricted Subsidiary becomes a Restricted Subsidiary of the Issuer by reason of acquisition of securities or assets from another Person; provided that following the consummation of any transaction or transactions contemplated by clause (a) or (b), the ownership of the Equity Interests of the relevant Restricted Subsidiary or Restricted Subsidiaries shall be as if this covenant had been complied with at all times.

The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person (other than a merger with an Affiliate solely for the purpose of and with the effect of changing the Issuer’s jurisdiction of incorporation to another State of the United States or forming a holding company for the Issuer), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer or the Issuer and the Restricted Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in either case:


	(a) the Issuer will be the surviving or continuing Person; or

	(b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the “Successor”) is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer under the Notes, the Indenture and the Registration Rights Agreement;


	(2) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default shall have occurred and be continuing; and

	(3) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (a) the Issuer or the Successor, as the case may be, could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception or (b) the Consolidated Interest Coverage Ratio of the Issuer or the Successor, as the case may be, would be not less than the Consolidated Coverage Ratio of the Issuer immediately prior to such transaction.

For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.

Parent will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or


	(a) Parent will be the surviving or continuing Person; or

	(b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the “Parent Successor”) is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Parent Successor (unless the Parent Successor is the Issuer) expressly assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of Parent under the Notes, the Indenture and the Registration Rights Agreement; and


	(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing.

Except as provided in the fifth paragraph under the caption “— Note Guarantees,” no Guarantor (other than Parent) may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, unless:


	(a) such Guarantor will be the surviving or continuing Person; or

	(b) the Person formed by or surviving any such consolidation or merger assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, the Indenture and the Registration Rights Agreement, and, in the case of a consolidation or merger with Parent, is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia; and


	(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer or Parent, as the case may be.

Upon any consolidation, combination or merger of the Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer or Parent in accordance with the foregoing, in which the Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer or such Guarantor is merged or the Person to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer or such Guarantor under the Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Issuer or such Guarantor and, except in the case of a lease, the Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer’s or such Guarantor’s other obligations and covenants under the Notes, the Indenture and its Note Guarantee, if applicable.

Notwithstanding the foregoing, any Restricted Subsidiary may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to the Issuer or another Restricted Subsidiary.

If, after the Issue Date, (a) any Restricted Subsidiary (including any newly formed, newly acquired or newly Designated Restricted Subsidiary) guarantees any Indebtedness under any Credit Facility (other than any Foreign Subsidiary that guarantees Indebtedness of only other Foreign Subsidiaries under any such Credit Facility) or (b) the Issuer otherwise elects to have any Restricted Subsidiary become a Guarantor, then, in each such case, the Issuer shall cause such Restricted Subsidiary to:


	(1) execute and deliver to the Trustee (a) a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer’s obligations under the Notes and the Indenture and (b) a notation of guarantee in respect of its Note Guarantee; and

	(2) deliver to the Trustee one or more opinions of counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms.

Whether or not required by the SEC, so long as any Notes are outstanding, the Issuer will furnish to the Holders of Notes, or file electronically with the SEC through the SEC’s Electronic Data Gathering, Analysis and Retrieval System (or any successor system), within the time periods that would be applicable to the Issuer if it were subject to Section 13(a) or 15(d) of the Exchange Act:


	(1) all quarterly and annual financial and other information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuer were required to file these Forms; and

	(2) all current reports that would be required to be filed with the SEC on Form 8-K if the Issuer were required to file these reports.

In addition, whether or not required by the SEC, the Issuer will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept the filing) and make the information available to securities analysts and prospective investors upon request.

Notwithstanding anything to the contrary, the Issuer will be deemed to have complied with its obligations in the preceding two paragraphs following the filing of the Exchange Offer Registration Statement and prior to the effectiveness thereof if the Exchange Offer Registration Statement includes the information specified in clause (1) above at the times it would otherwise be required to file such Forms. If Parent has complied with the reporting requirements of Section 13 or 15(d) of the Exchange Act, if applicable, and has furnished the Holders of Notes, or filed electronically with the SEC’s Electronic Data Gathering, Analysis and Retrieval System (or any successor system), the reports described herein with respect to Parent (including any financial information required by Regulation S-X relating to the Issuer and the Subsidiary Guarantors), the Issuer shall be deemed to be in compliance with the provisions of this covenant.

The Issuer and the Guarantors have agreed that, for so long as any Notes remain outstanding, the Issuer will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.


	(1) failure by the Issuer to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days (whether or not such payment is prohibited by the subordination provisions of the Indenture);


	(2) failure by the Issuer to pay the principal on any of the Notes when it becomes due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise (whether or not such payment is prohibited by the subordination provisions of the Indenture);

	(3) failure by the Issuer to comply with any of its agreements or covenants described above under “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.,” or in respect of its obligations to make a Change of Control Offer as described above under “— Change of Control” (whether or not such compliance is prohibited by the subordination provisions of the Indenture);

	(4) failure by the Issuer to comply with any other agreement or covenant in the Indenture and continuance of this failure for 60 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;

	(5) default under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of the Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date, which default:


	(a) is caused by a failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) principal on such Indebtedness within the applicable express grace period,

	(b) results in the acceleration of such Indebtedness prior to its express final maturity or

	(c) results in the judicial authorization to foreclose upon, or to exercise remedies under applicable law or applicable security documents to take ownership of, the assets securing such Indebtedness, and

in each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (a), (b) or (c) has occurred and is continuing, aggregates $20.0 million or more;


	(6) one or more judgments or orders that exceed $20.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered;

	(7) the Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:


	(a) commences a voluntary case,

	(b) consents to the entry of an order for relief against it in an involuntary case,

	(c) consents to the appointment of a Custodian of it or for all or substantially all of its assets, or

	(d) makes a general assignment for the benefit of its creditors;


	(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:


	(a) is for relief against the Issuer or any Significant Subsidiary as debtor in an involuntary case,

	(b) appoints a Custodian of the Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer or any Significant Subsidiary, or

	(c) orders the liquidation of the Issuer or any Significant Subsidiary,


	(9) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the Indenture) or is declared null and void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guaran-


	tee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of the Indenture and the Note Guarantee).

If an Event of Default (other than an Event of Default specified in clause (7) or (8) above with respect to the Issuer) shall have occurred and be continuing under the Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may declare (an “acceleration declaration”) all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall become due and payable (a) if there is no Indebtedness outstanding under any Credit Facility at such time, immediately and (b) if otherwise, upon the earlier of (x) the final maturity (after giving effect to any applicable grace period or extensions thereof) or an acceleration of any Indebtedness under any Credit Facility prior to the express final stated maturity thereof and (y) five business days after the Representative under each Credit Facility receives the acceleration declaration, but, in the case of this clause (b) only, if such Event of Default is then continuing; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of such outstanding Notes may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal and interest, have been cured or waived as provided in the Indenture. If an Event of Default specified in clause (7) or (8) with respect to the Issuer occurs, all outstanding Notes shall become due and payable without any further action or notice.

The Trustee shall, within 30 days after the occurrence of any Default with respect to the Notes, give the Holders notice of all uncured Defaults thereunder known to it; provided, however, that, except in the case of an Event of Default in payment with respect to the Notes or a Default in complying with “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.,” the Trustee shall be protected in withholding such notice if and so long as a committee of its trust officers in good faith determines that the withholding of such notice is in the interest of the Holders.

No Holder will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless the Trustee:


	(1) has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding;

	(2) has been offered indemnity satisfactory to it in its reasonable judgment; and

	(3) has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request.

However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date therefor (after giving effect to the grace period specified in clause (1) of the first paragraph of this “— Events of Default” section).

The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, upon any Officer of the Issuer becoming aware of any Default, a statement specifying such Default and what action the Issuer is taking or proposes to take with respect thereto.

The Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes (“Legal Defeasance”). Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and the Note Guarantees, and the Indenture shall cease to be of further effect as to all outstanding Notes and Note Guarantees, except as to


	(1) rights of Holders to receive payments in respect of the principal of and interest on the Notes when such payments are due from the trust funds referred to below,


	(2) the Issuer’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and money for security payments held in trust,

	(3) the rights, powers, trust, duties, and immunities of the Trustee, and the Issuer’s obligation in connection therewith, and

	(4) the Legal Defeasance provisions of the Indenture.

In addition, the Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors released with respect to most of the covenants under the Indenture, except as described otherwise in the Indenture (“Covenant Defeasance”), and thereafter any omission to comply with such obligations shall not constitute a Default. In the event Covenant Defeasance occurs, certain Events of Default (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) will no longer apply. The Issuer may exercise its Legal Defeasance option regardless of whether it previously exercised Covenant Defeasance.


	(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. legal tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment) in the opinion of a nationally recognized firm of independent public accountants selected by the Issuer, to pay the principal of and interest on the Notes on the stated date for payment or on the redemption date of the principal or installment of principal of or interest on the Notes,

	(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States confirming that:


	(a) the Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or

	(b) since the date of the Indenture, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon this opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred,


	(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred,

	(4) no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit),

	(5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under the Indenture or a default under any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound (other than any such Default or default resulting solely from the borrowing of funds to be applied to such deposit),

	(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by it with the intent of preferring the Holders over any other of its creditors or with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, and

	(7) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that the conditions provided for in, in the case of the Officers’ Certificate, clauses (1)


	through (6) and, in the case of the opinion of counsel, clauses (2) and/or (3) and (5) of this paragraph have been complied with.

If the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to pay the principal of and interest on the Notes when due, then our obligations and the obligations of Guarantors under the Indenture will be revived and no such defeasance will be deemed to have occurred.

The Indenture will be discharged and will cease to be of further effect (except as to rights of registration of transfer or exchange of Notes which shall survive until all Notes have been canceled) as to all outstanding Notes when either


	(1) all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or

	(2) (a) all Notes not delivered to the Trustee for cancellation otherwise have become due and payable, will become due and payable, or may be called for redemption, within one year or have been called for redemption pursuant to the provisions described under “— Optional Redemption,” and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in trust sufficient to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation,


	(b) the Issuer has paid all sums payable by it under the Indenture, and

	(c) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be.

In addition, the Issuer must deliver an Officers’ Certificate and an opinion of counsel stating that all conditions precedent to satisfaction and discharge have been complied with.

A Holder will be able to register the transfer of or exchange Notes only in accordance with the provisions of 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. Without the prior consent of the Issuer, the Registrar is not required (1) to register the transfer of or exchange any Note selected for redemption, (2) to register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed or (3) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date.

The Notes will be issued in registered form and the registered Holder will be treated as the owner of such Note for all purposes.

Subject to certain exceptions, the Indenture or the Notes may be amended with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing Default under, or compliance with any provision of, the Indenture may be waived (other than any continuing Default in the payment of the principal or interest on the Notes) with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of a majority in principal amount of


	(1) reduce, or change the maturity, of the principal of any Note;

	(2) reduce the rate of or extend the time for payment of interest on any Note;

	(3) reduce any premium payable upon optional redemption of the Notes or change the date on, or the circumstances under, which any Notes are subject to redemption (other than provisions relating to the purchase of Notes described above under “— Change of Control” and “— Certain Covenants — Limitations on Asset Sales,” except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected);

	(4) make any Note payable in money or currency other than that stated in the Notes;

	(5) modify or change any provision of the Indenture or the related definitions affecting the subordination of the Notes or any Note Guarantee in a manner that adversely affects the Holders;

	(6) reduce the percentage of Holders necessary to consent to an amendment or waiver to the Indenture or the Notes;

	(7) waive a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the Holders thereof as provided in the Indenture and a waiver of the payment default that resulted from such acceleration);

	(8) impair the rights of Holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement of any such payment on the Notes;

	(9) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or the Indenture, except as permitted by the Indenture; or

	(10) make any change in these amendment and waiver provisions.

Notwithstanding the foregoing, the Issuer and the Trustee may amend the Indenture, the Note Guarantees or the Notes without the consent of any Holder, to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuer’s obligations to the Holders in the case of a merger, consolidation or sale of all or substantially all of the assets in accordance with “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.,” to add any Subsidiary of the Issuer as a Guarantor, to release any Guarantor from any of its obligations under its Note Guarantee or the Indenture (to the extent permitted by the Indenture), to make any change that does not materially adversely affect the rights of any Holder or, in the case of the Indenture, to maintain the qualification of the Indenture under the Trust Indenture Act.

No amendment of, or supplement or waiver to, the Indenture shall adversely affect the rights of any holder of Senior Debt or Guarantor Senior Debt under the subordination provisions of the Indenture, without the consent of such holder or, in accordance with the terms of such Senior Debt or Guarantor Senior Debt, the consent of the agent or representative of such holder or the requisite holders of such Senior Debt or Designated Senior Debt.

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor will have any liability for any obligations of the Issuer under the Notes or the Indenture or of any Guarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. The waiver may not be effective to waive liabilities under the federal securities laws. It is the view of the SEC that this type of waiver is against public policy.

U.S. Bank National Association is the Trustee under the Indenture and has been appointed by the Issuer as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain assets 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 (as defined in the Indenture), it must eliminate such conflict or resign.

The Holders of 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 occurs and is not cured, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in similar circumstances 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 Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee.

The Indenture, the Notes and the Note Guarantees will be governed by, and construed in accordance with, the laws of the State of New York.

Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms.

“Acquired Indebtedness” means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition.

“Acquisition” means the acquisition on the Issue Date of all of the outstanding Equity Interests of the Issuer by Parent pursuant to the Stock Purchase Agreement, dated as of December 19, 2003, as amended on January 23, 2004, by and among Holdings, Nortek, Inc. and WDS LLC.

“Additional Interest” has the meaning set forth in the Registration Rights Agreement.

“Advisory Agreement” means the advisory agreement to be entered into between the Issuer and Sponsor or an Affiliate or Related Party thereof in connection with the Acquisition.

“Affiliate” of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of the covenant described under “— Certain Covenants — Limitations on Transactions with Affiliates” only, Affiliates shall be deemed to include, with respect to any Person, any other Person (1) which beneficially owns 10% or more of any class of the Voting Stock of the referent Person or (2) of which 10% or more of the Voting Stock is beneficially owned by the referenced Person. For purposes of this definition and the definition of “Permitted Holder”, “control” of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

“amend” means to amend, supplement, restate, amend and restate or otherwise modify; and “amendment” shall have a correlative meaning.


	(1) an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer or any Restricted Subsidiary of the Issuer, or

	(2) the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person.

“Asset Sale” means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer or any Restricted Subsidiary to any Person other than the Issuer or any Restricted Subsidiary (including by means of a sale and leaseback transaction or a merger or consolidation) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of related transactions, of any assets of the Issuer or any of its Restricted Subsidiaries other than in the ordinary course of business. For purposes of this definition, the term “Asset Sale” shall not include:


	(1) transfers of cash or Cash Equivalents;

	(2) transfers of assets (including Equity Interests) that are governed by, and made in accordance with, the covenant described under “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.”;

	(3) Permitted Investments and Restricted Payments permitted under the covenant described under “— Certain Covenants — Limitations on Restricted Payments”;

	(4) the creation or realization of any Lien permitted under the Indenture;

	(5) transfers of damaged, worn-out or obsolete equipment or assets that, in the Issuer’s reasonable judgment, are no longer used or useful in the business of the Issuer or its Restricted Subsidiaries;

	(6) sales or grants of licenses or sublicenses to use the patents, trade secrets, know-how and other intellectual property, and licenses, leases or subleases of other assets, of the Issuer or any Restricted Subsidiary to the extent not materially interfering with the business of Issuer and the Restricted Subsidiaries; and

	(7) any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $2.5 million.

“Bank Financing” means the Issuer’s entry into the Credit Agreement on or about the Issue Date and its initial borrowings thereunder in connection with the funding of the Acquisition.

“Bankruptcy Law” means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

“Board of Directors” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing or, in each case, other than for purposes of the definition of “Change of Control,” any duly authorized committee of such body.

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close.

“Capitalized Lease” means a lease required to be capitalized for financial reporting purposes in accordance with GAAP.

“Capitalized Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.


	(1) marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), maturing within 360 days of the date of acquisition thereof;

	(2) demand and time deposits and certificates of deposit or acceptances, maturing within 360 days of the date of acquisition thereof, of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million and is assigned at least a “B” rating by Thomson Financial BankWatch;

	(3) commercial paper maturing no more than 180 days from the date of creation thereof issued by a corporation that is not the Issuer or an Affiliate of the Issuer, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody’s;

	(4) repurchase obligations with a term of not more than ten days for underlying securities of the types described in clause (1) above entered into with any commercial bank meeting the specifications of clause (2) above; and

	(5) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (1) through (4) above.

“Change of Control” means the occurrence of any of the following events:


	(1) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, except that in no event shall the parties to the Stockholders’ Agreement be deemed a “group” solely by virtue of being parties to the Stockholders’ Agreement), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause that person or group shall be deemed to have “beneficial ownership” of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing 50% or more of the voting power of the total outstanding Voting Stock of the Issuer; provided, however, that such event shall not be deemed to be a Change of Control so long as one or more of the Permitted Holders have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Issuer;

	(2) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors or whose nomination for election by the stockholders of the Issuer was approved by a vote of the majority of the directors of the Issuer 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 Issuer;

	(3) (a) all or substantially all of the assets of the Issuer and the Restricted Subsidiaries are sold or otherwise transferred to any Person other than a Wholly-Owned Restricted Subsidiary or one or more Permitted Holders or (b) the Issuer consolidates or merges with or into another Person or any Person consolidates or merges with or into the Issuer, in either case under this clause (3), in one transaction or a series of related transactions in which immediately after the consummation thereof Persons beneficially owning (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing in the aggregate a majority of the total voting power of the Voting Stock of the Issuer immediately prior to such consummation do not beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing a majority of the total voting


	power of the Voting Stock of the Issuer or the surviving or transferee Person; provided that it shall not constitute a Change of Control under this clause (3)(b) if, after giving effect to such transaction, one or more of the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing (i) 35% or more of the total voting power of the Voting Stock of the Issuer or the surviving or transferee Person in such transaction immediately after such transaction and (ii) a greater percentage of the total voting power of the Voting Stock of the Issuer than any other “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act); or

	(4) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer.

For purposes of this definition, (i) a Person shall not be deemed to have beneficial ownership of securities subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement and (ii) any holding company whose only significant asset is Equity Interests of Parent or the Issuer shall not itself be considered a “person” or “group” for purposes of clause (1) or (3) above.

“Consolidated Amortization Expense” for any period means the amortization expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

“Consolidated Cash Flow” for any period means, without duplication, the sum of the amounts for such period of


	(1) Consolidated Net Income, plus

	(2) in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to any Restricted Subsidiary (other than any Foreign Subsidiary) only if a corresponding amount would be permitted at the date of determination to be distributed to the Issuer by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds), instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders,


	(a) Consolidated Income Tax Expense,

	(b) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense),

	(c) Consolidated Depreciation Expense,

	(d) Consolidated Interest Expense,

	(e) Restructuring Expenses,

	(f) payments pursuant to the Advisory Agreement, and

	(g) all other non-cash items reducing the Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period,

in each case determined on a consolidated basis in accordance with GAAP, minus


	(3) the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period, plus or minus

	(4) without duplication of amounts included as Restructuring Expenses, with respect to any part of a Four-Quarter Period covered by the section “Summary historical and pro forma financial information” in this prospectus, the pro forma adjustments to net earnings and the adjustments to “EBITDA” to derive “Adjusted EBITDA” set forth in such section.

“Consolidated Depreciation Expense” for any period means the depreciation expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

“Consolidated Income Tax Expense” for any period means the provision for taxes of the Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP.

“Consolidated Interest Coverage Ratio” means the ratio of Consolidated Cash Flow during the most recent four consecutive full fiscal quarters for which financial statements are available (the “Four-Quarter Period”) ending on or prior to the date of determination (the “Transaction Date”) to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to:


	(1) the incurrence of any Indebtedness or the issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and

	(2) any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated Cash Flow (including any Pro Forma Cost Savings) associated with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period.

In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio:


	(1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on this Indebtedness in effect on the Transaction Date;

	(2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and

	(3) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements.

“Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense (less interest income) of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including without duplication,


	(1) imputed interest on Capitalized Lease Obligations,

	(2) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings,

	(3) the net costs associated with Hedging Obligations,

	(4) the interest portion of any deferred payment obligations,


	(5) all other non-cash interest expense,

	(6) capitalized interest,

	(7) the product of (a) all dividend payments on any series of Disqualified Equity Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the Issuer and the Restricted Subsidiaries, expressed as a decimal,

	(8) all interest payable with respect to discontinued operations, and

	(9) all interest on any Indebtedness described in clause (7) or (8) of the definition of “Indebtedness”; provided that such interest shall be included in Consolidated Interest Expense only to the extent that the amount of the related Indebtedness is reflected on the balance sheet of the Issuer or any Restricted Subsidiary,

less, to the extent included in such total interest expense, (A) the amortization during such period of capitalized financing costs associated with the Transactions and (B) the amortization during such period of other capitalized financing costs; provided, however, that, in the case of clause (B), the aggregate amount of amortization relating to such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5% of the aggregate amount of the financing giving rise thereto.

Consolidated Interest Expense shall be calculated excluding unrealized gains and losses with respect to Hedging Obligations.

“Consolidated Net Income” for any period means the net income (or loss) of the Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (or loss) (to the extent otherwise included therein), without duplication:


	(1) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer or any of its Wholly-Owned Restricted Subsidiaries during such period;

	(2) except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer or any Restricted Subsidiary;

	(3) the net income of any Restricted Subsidiary (other than any Foreign Subsidiary) during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not permitted by operation of the terms of its charter or any agreement (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds), instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income;

	(4) for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;

	(5) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer or any Restricted Subsidiary upon


	(a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary or (b) any Asset Sale by the Issuer or any Restricted Subsidiary;

	(6) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;

	(7) unrealized gains and losses with respect to Hedging Obligations;

	(8) the cumulative effect of any change in accounting principles;

	(9) any amortization or write-offs of debt issuance or deferred financing costs, premiums and prepayment penalties, and other costs and expenses, in each case, paid during such period to the extent attributable to the Transactions and the Exchange Offer pursuant to the Registration Rights Agreement;

	(10) gains and losses realized upon the refinancing of any Indebtedness of the Issuer or any Restricted Subsidiary;

	(11) any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such extraordinary or nonrecurring gain (or the tax effect of any such extraordinary or nonrecurring loss), realized by the Issuer or any Restricted Subsidiary during such period;

	(12) non-cash compensation charges or other non-cash expenses or charges arising from the grant of or issuance or repricing of Equity Interests or other equity-based awards or any amendment or substitution of any such Equity Interests or other equity-based awards;

	(13) any non-cash goodwill or non-cash asset impairment charges subsequent to the Issue Date;

	(14) any expenses or reserves for liabilities to the extent that the Issuer or any Restricted Subsidiary is entitled to indemnification therefor under binding agreements; provided that any liabilities for which the Issuer or such Restricted Subsidiary is not actually indemnified shall reduce Consolidated Net Income in the period in which it is determined that the Issuer or such Restricted Subsidiary will not be indemnified; and

	(15) so long as the Issuer and the Restricted Subsidiaries file a consolidated tax return, or are part of a consolidated group for tax purposes, with Parent, Holdings or any other holding company, the excess of (a) the Consolidated Income Tax Expense for such period over (b) all tax payments payable for such period by the Issuer and the Restricted Subsidiaries to Parent, Holdings or such other holding company under a tax sharing agreement or arrangement.


	(a) Consolidated Net Income shall be reduced by the amount of any payments to or on behalf of Parent made pursuant to clause (4) of the last paragraph of the covenant described under “— Certain Covenants — Limitations on Transactions with Affiliates”; and

	(b) any return of capital with respect to an Investment that increased the Restricted Payments Basket pursuant to clause (3)(d) of the first paragraph under “— Certain Covenants — Limitations on Restricted Payments” or decreased the amount of Investments outstanding pursuant to clause (17), (18) or (19) of the definition of “Permitted Investments” shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket.

For purposes of this definition of “Consolidated Net Income,” “nonrecurring” means, with respect to any cash gain or loss, any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; provided that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring.

“Consolidated Net Tangible Assets” means the aggregate amount of assets of the Issuer (less applicable reserves and other properly deductible items) after deducting therefrom (to the extent otherwise included therein) (a) all current liabilities (other than the obligations under the Indenture or cur rent maturities of

“Coverage Ratio Exception” has the meaning set forth in the proviso in the first paragraph of the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness.”

“Credit Agreement” means the Credit Agreement dated on or about the Issue Date by and among the Issuer, as Borrower, UBS AG, Stamford Branch, as administrative and collateral agent, UBS Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, CIBC World Markets Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-arrangers, Deutsche Bank AG Cayman Islands Branch, as syndication agent, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation, as co-documentation agents, the lenders named therein and the guarantors party thereto, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Indebtedness incurred thereunder), and in each case as amended or refinanced from time to time.

“Credit Facilities” means one or more debt facilities (which may be outstanding at the same time and including, without limitation, the Credit Agreement) providing for revolving credit loans, term loans, letters of credit, receivables financing, commercial paper or any other form of senior debt securities and, in each case, as such agreements may be amended, amended and restated, supplemented, modified, extended, refinanced, replaced or otherwise restructured, in whole or in part from time to time (including increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder) with respect to all or any portion of the Indebtedness under such agreement or agreements or any successor or replacement agreement or agreements and whether by the same or any other agent, lender or group of lenders.

“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

“Default” means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default.

“Designated Senior Debt” means (1) Senior Debt and Guarantor Senior Debt under or in respect of the Credit Facilities and (2) any other Indebtedness constituting Senior Debt or Guarantor Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as “Designated Senior Debt.”

“Designation” has the meaning given to this term in the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries.”

“Designation Amount” has the meaning given to this term in the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries.”

“Disqualified Equity Interests” of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, however, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving

“Equity Contribution” means the contribution of approximately $141.0 million (in cash and management equity awards) by Sponsor, its affiliates and Related Parties, certain other Persons and certain members of the Issuer’s management to Holdings in return for Equity Interests in Holdings, and the contribution of cash by Holdings to Parent in connection with the funding of the Acquisition.

“Equity Interests” of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Exchange Offer Registration Statement” has the meaning given to such term in the Registration Rights Agreement.

“Fair Market Value” means, with respect to any asset, the price (after taking into account any liabilities relating to such asset) that would be negotiated in an arm’s-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction. Fair Market Value (other than of any asset with a public trading market) in excess of $5.0 million shall be determined by the Board of Directors of the Issuer acting reasonably and in good faith and shall be evidenced by a board resolution delivered to the Trustee. Fair Market Value (other than of any asset with a public trading market) in excess of $20.0 million shall be determined by an Independent Financial Advisor, which determination shall be evidenced by an opinion addressed to the Board of Directors of the Issuer and delivered to the Trustee.

“Foreign Subsidiary” means any Restricted Subsidiary of the Issuer which (i) is not organized under the laws of (x) the United States or any state thereof or (y) the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America.

“Four-Quarter Period” has the meaning given to such term in the definition of “Consolidated Interest Coverage Ratio.”

“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 may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date.

“guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); “guarantee,” when used as a verb, and “guaranteed” have correlative meanings.

“Guarantor Senior Debt” means, with respect to any Guarantor, the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on and all Obligations of any Indebtedness of such Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes.

Without limiting the generality of the foregoing, “Guarantor Senior Debt” shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of:


	(1) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and

	(2) all Hedging Obligations in respect of the Credit Facilities;


	(1) any Indebtedness of such Guarantor to Parent or any of its Subsidiaries;

	(2) obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services;

	(3) Indebtedness represented by Disqualified Equity Interests;

	(4) any liability for taxes owed or owing by such Guarantor;

	(5) that portion of any Indebtedness incurred in violation of the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness” (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (5) if the holder(s) of such obligation or their representative shall have received an officers’ certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture);

	(6) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to such Guarantor; and

	(7) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor.

“Guarantors” means (1) Parent, (2) each Restricted Subsidiary of the Issuer on the Issue Date (other than CWD Windows and Doors, Inc., a Canadian corporation) and (3) each other Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of the Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of the Indenture.

“Hedging Obligations” of any Person means the obligations of such Person under swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies.

“Holdings” means Ply Gem Investment Holdings, Inc., a Delaware corporation, and its successors and assigns.

“incur” means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or, indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) the accrual of interest, the accretion of original issue discount or the accretion or accumulation of dividends on any Equity Interests shall not be deemed to be an incurrence of Indebtedness.


	(1) all liabilities, contingent or otherwise, of such Person for 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);

	(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

	(3) all reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers’ acceptances and similar credit transactions;

	(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services;

	(5) the amount of all Disqualified Equity Interests of such Person calculated in accordance with GAAP (whether classified as debt, equity or mezzanine);

	(6) all Capitalized Lease Obligations of such Person;

	(7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person;

	(8) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the Issuer or the Issuer’s Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer and its Subsidiaries on a consolidated basis;

	(9) to the extent not otherwise included in this definition, Hedging Obligations of such Person; and

	(10) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person, except trade payables incurred by such Person in the ordinary course of business.

The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured.

Notwithstanding the foregoing, Indebtedness shall not include any liability for Federal, state, local or other taxes owed or owing to any governmental entity

“Independent Financial Advisor” means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer’s Board of Directors, disinterested and independent with respect to the Issuer and its Affiliates.

“interest” means, with respect to the Notes, interest and Additional Interest, if any, on the Notes.


	(1) all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;

	(2) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof);

	(3) all other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP; and

	(4) the Designation of any Subsidiary as an Unrestricted Subsidiary.

Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries.” If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary, or any Restricted Subsidiary issues any Equity Interests, in either case, such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Restricted Subsidiary retained. Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the Issuer, Parent or Holdings shall be deemed not to be Investments.

“Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement.

“Net Available Proceeds” means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of


	(1) brokerage commissions and other fees and expenses (including fees, discounts and expenses of legal counsel, accountants, investment banks, consultants and placement agents) of such Asset Sale;

	(2) provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements);

	(3) amounts required to be paid to any Person (other than the Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon;

	(4) payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale; and

	(5) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers’ Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds.

“Obligation” means any principal, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary.

“Offering” means the offering of the Notes by the Issuer pursuant to this prospectus in connection with the funding of the Acquisition.

“Parent” means Ply Gem Holdings, Inc., a Delaware corporation, and its successors and assigns.

“Pari Passu Indebtedness” means any Indebtedness of the Issuer or any Guarantor that ranks pari passu in right of payment with the Notes or the Note Guarantees, as applicable.

“Permitted Business” means the businesses engaged in by the Issuer and its Subsidiaries on the Issue Date as described in this prospectus and businesses that are reasonably related thereto, reasonable extensions thereof or necessary or desirable to facilitate any such business, and any unrelated business to the extent that it is not material in size as compared with the Issuer’s business as a whole.

“Permitted Holders” means (1) Sponsor, Caxton Associates, LLC, Caxton-Iseman (Ply Gem) L.P., Frederick J. Iseman, Lee D. Meyer, John Wayne, Shawn Poe, Mark Watson, Bryan Sveinson, David S. McCready, Robert A. Ferris, Steven M. Lefkowitz and any other Person that is a controlled Affiliate of any of the foregoing and (2) any Related Party of any of the foregoing; provided that in no event shall any operating portfolio company or any holding company for any operating portfolio company (other than the Issuer) shall be a Permitted Holder.


	(1) (i) Investments by the Issuer or any Subsidiary Guarantor in (a) any Restricted Subsidiary that is a Subsidiary Guarantor or (b) any Person that will become immediately after such Investment a Restricted Subsidiary that is a Subsidiary Guarantor or that will merge or consolidate into the Issuer or any Restricted Subsidiary that is a Subsidiary Guarantor and (ii) Investments by any Restricted Subsidiary that is not a Subsidiary Guarantor in any other Restricted Subsidiary;

	(2) Investments in the Issuer by any Restricted Subsidiary;

	(3) loans and advances to directors, employees and officers of the Issuer and the Restricted Subsidiaries for bona fide business purposes and to purchase Equity Interests of the Issuer, Parent or Holdings not in excess of $5.0 million at any one time outstanding;

	(4) Hedging Obligations incurred pursuant to the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness”;

	(5) cash and Cash Equivalents;

	(6) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;

	(7) Investments in securities of trade creditors or customers received upon foreclosure or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

	(8) Investments made by the Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with the covenant described under “— Certain Covenants — Limitations on Asset Sales”;


	(9) lease, utility and other similar deposits in the ordinary course of business;

	(10) Investments made by the Issuer or a Restricted Subsidiary for consideration consisting only of Qualified Equity Interests;

	(11) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments;

	(12) guarantees of Indebtedness permitted to be incurred under the Indenture;

	(13) loans and advances to suppliers, licensees, franchisees or customers of the Issuer or any Restricted Subsidiary made in the ordinary course of business in an aggregate amount, together with the aggregate amount of Indebtedness under clause (14) of the definition of “Permitted Indebtedness,” not to exceed $5.0 million at any time outstanding;

	(14) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as operating expenses for accounting purposes and that are made in the ordinary course of business;

	(15) Investments in existence on the Issue Date;

	(16) prepaid expenses, negotiable instruments held for collection and workers’ compensation, performance and other similar deposits in the ordinary course of business;

	(17) Investments in an aggregate amount not to exceed, at any one time outstanding, the greater of (a) $20.0 million and (b) 7.0% of Consolidated Net Tangible Assets at such time (with each Investment being valued as of the date made and without regard to subsequent changes in value);

	(18) Investments in Subsidiaries that are not Guarantors or Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value); and

	(19) Investments in Foreign Subsidiaries in an aggregate amount not to exceed, at any one time outstanding, the greater of (a) $10.0 million and (b) 3.5% of Consolidated Net Tangible Assets at such time (with each Investment being valued as of the date made and without regard to subsequent changes in value).

The amount of Investments outstanding at any time pursuant to clause (17), (18) or (19) above shall be deemed to be reduced:


	(a) upon the disposition or repayment of or return on any Investment made pursuant to clause (17), (18) or (19) above, as the case may be, by an amount equal to the return of capital with respect to such Investment to the Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income); and

	(b) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clause (17), (18) or (19) above, as the case may be.


	(1) Equity Interests in the Issuer or any Guarantor; or

	(2) debt securities issued pursuant to a confirmed plan of reorganization that are subordinated in right of payment to (a) all Senior Debt and Guarantor Senior Debt and (b) any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt and Guarantor Senior Debt under the Indenture.


	(1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;

	(2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;

	(3) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

	(4) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

	(5) judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired;

	(6) easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole;

	(7) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;

	(8) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer or any Restricted Subsidiary, including rights of offset and setoff;

	(9) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

	(10) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer or any Restricted Subsidiary;

	(11) Liens arising from filing Uniform Commercial Code financing statements regarding leases;

	(12) Liens securing all of the Notes and Liens securing any Note Guarantee;

	(13) Liens securing Senior Debt or Guarantor Senior Debt;

	(14) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date;

	(15) Liens in favor of the Issuer or a Guarantor;

	(16) Liens securing Indebtedness under the Credit Facilities;


	(17) Liens securing Purchase Money Indebtedness and Capitalized Lease Obligations; provided that such Liens shall not extend to any asset other than the specified asset being financed and additions and improvements thereon;

	(18) Liens securing Acquired Indebtedness permitted to be incurred under the Indenture; provided that the Liens do not extend to assets not subject to such Lien at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than those securing such Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary;

	(19) Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Issuer or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof);

	(20) Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (12), (14), (16), (17), (18) and (19); provided that in the case of Liens securing Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (14), (17), (18) and (19), such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof);

	(21) Liens securing Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor permitted to be incurred under the Indenture; provided that such Lien extends only to the assets and Equity Interests of such Restricted Subsidiary;

	(22) 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; and

	(23) Liens with respect to obligations that do not in the aggregate exceed $5.0 million at any one time outstanding.

“Permitted Sale and Leaseback Transaction” means a refinancing by the Issuer or one of its Subsidiaries following the date of the Indenture of all or a portion of the Indebtedness outstanding on the Issue Date in an aggregate principal amount of up to $29.8 million with respect to municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds, with the proceeds of one or more Sale and Leaseback Transactions effected as operating leases involving the applicable properties securing such debt; provided that (i) the Issuer or such Subsidiary receives consideration at the time of such Permitted Sale and Leaseback Transaction at least equal to the Fair Market Value of the applicable property included in such Permitted Sale and Leaseback Transaction; (ii) at the time of and immediately after giving effect to such Permitted Sale and Leaseback Transaction and the application of the proceeds thereof, no Default shall have occurred and be continuing and (iii) the proceeds of at least 525% of the aggregate operating lease payments in respect of such Permitted Sale and Leaseback Transaction (such amount, the “Permitted Sale and Leaseback Transaction Amount”) are received in the form of cash or Cash Equivalents and used to repay Senior Debt or Guarantor Senior Debt.

“Permitted Sale and Leaseback Transaction Amount” shall have the meaning assigned to such term in the definition of “Permitted Sale and Leaseback Transaction.”

“Person” means any individual, corporation, partnership, limited liability company, 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.

“Plan of Liquidation” with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person.

“Preferred Stock” means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date.

“principal” means, with respect to the Notes, the principal of, and premium, if any, on the Notes.

“Pro Forma Cost Savings” means, with respect to any period, the reductions in costs that occurred during the Four-Quarter Period that are (1) directly attributable to an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act or (2) implemented, committed to be implemented or the commencement of implementation of which has begun in good faith by the business that was the subject of any such asset acquisition within six months of the date of the asset acquisition and that are supportable and quantifiable by the underlying records of such business, as if, in the case of each of clauses (1) and (2), all such reductions in costs had been effected as of the beginning of such period, decreased by any incremental expenses incurred or to be incurred during the Four-Quarter Period in order to achieve such reduction in costs.

“Purchase Money Indebtedness” means Indebtedness, including Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof, and the payment of any sales or other taxes associated therewith; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost and payment and (2) such Indebtedness shall be incurred within one year after such acquisition of such asset by the Issuer or such Restricted Subsidiary or such installation, construction or improvement.

“Qualified Equity Interests” means Equity Interests of the Issuer other than Disqualified Equity Interests; provided that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of the Issuer or financed, directly or indirectly, using funds (1) borrowed from the Issuer or any Subsidiary of the Issuer until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Issuer or any Subsidiary of the Issuer (including, without limitation, in respect of any employee stock ownership or benefit plan).

“Qualified Equity Offering” means the issuance and sale of Qualified Equity Interests by the Issuer or Equity Interests by Parent or Holdings; provided, however, that in the case of an issuance or sale of Equity Interests of Parent or Holdings, cash proceeds therefrom equal to not less than 100% of the aggregate principal amount of any Notes to be redeemed are received by the Issuer as a capital contribution or consideration for the issuance and sale of Qualified Equity Interests immediately prior to such redemption.

“redeem” means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and “redemption” shall have a correlative meaning; provided that this definition shall not apply for purposes of “— Optional Redemption.”

“Redesignation” has the meaning given to such term in the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries.”

“refinance” means to refinance, repay, prepay, replace, renew, refund, redeem, defease or retire.

“Refinancing Indebtedness” means Indebtedness of the Issuer or a Restricted Subsidiary issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to redeem or refinance in whole or in part, any Indebtedness of the Issuer or any Restricted Subsidiary (the “Refinanced Indebtedness”); provided that:


	(1) the principal amount (or accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (or accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any premium paid to the holders of the Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness;

	(2) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness;


	(3) if the Refinanced Indebtedness was subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is subordinate in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness, and if the Refinanced Indebtedness was pari passu with the Notes or the Note Guarantees, as the case may be, then the Refinancing Indebtedness ranks pari passu with, or is subordinated in right of payment to, the Notes or the Note Guarantees, as the case may be;

	(4) the Refinancing Indebtedness has a final stated maturity either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) after the maturity date of the Notes; and

	(5) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes.

“Registration Rights Agreement” means (i) the Registration Rights Agreement dated as of the Issue Date among the Issuer, the Guarantors and UBS Securities LLC, Deutsche Bank Securities Inc., CIBC World Markets Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and (ii) any other registration rights agreement entered into in connection with an issuance of Additional Notes in a private offering after the Issue Date.

“Related Party” means, with respect to any Person, (1) any controlling stockholder, controlling member, general partner, Subsidiary, or spouse or immediate family member (in the case of an individual), of such Person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of any Person referred to in the immediately preceding clause (2), acting solely in such capacity.

“Representative” means any agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt.


	(1) the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding (a) dividends or distributions payable solely in Qualified Equity Interests or through accretion or accumulation of such dividends on such Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer or to a Restricted Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary;

	(2) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary, or any equity holder of the Issuer, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary;

	(3) any Investment other than a Permitted Investment; or

	(4) any redemption prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness.

“Restricted Payments Basket” has the meaning given to such term in the first paragraph of the covenant described under “— Certain Covenants — Limitations on Restricted Payments.”

“Restricted Subsidiary” means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.

“Restructuring Expenses” means losses, expenses and charges incurred in connection with restructuring within the Issuer and/or one or more Restricted Subsidiaries, including in connection with integration of acquired businesses or Persons, disposition of one or more Subsidiaries or businesses, exiting of one or more lines of businesses and relocation or consolidation of facilities, including severance, lease termination and other non-ordinary-course, non-operating costs and expenses in connection therewith.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.

“Sale and Leaseback Transactions” means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset.

“Secretary’s Certificate” means a certificate signed by the Secretary of the Issuer.

“Senior Debt” means the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on and all Obligations of any Indebtedness of the Issuer, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes.

Without limiting the generality of the foregoing, “Senior Debt” shall include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of:


	(1) all monetary obligations of every nature under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and

	(2) all Hedging Obligations in respect of the Credit Facilities;


	(1) any Indebtedness of the Issuer to Parent or any of its Subsidiaries;

	(2) obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services;

	(3) Indebtedness represented by Disqualified Equity Interests;

	(4) any liability for taxes owed or owing by the Issuer;

	(5) that portion of any Indebtedness incurred in violation of the “Limitations on Additional Indebtedness” covenant (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers’ Certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at


	the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture);

	(6) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Issuer; and

	(7) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Issuer.

“Significant Subsidiary” means (1) any Restricted Subsidiary that would be a “significant subsidiary” as defined in Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in clause (7) or (8) under “— Events of Default” has occurred and is continuing, or which are being released from their Note Guarantees (in the case of clause (9) > of the provisions described under “Amendment, Supplement and Waiver”), would constitute a Significant Subsidiary under clause (1) of this definition.

“Stockholders’ Agreement” means the Stockholders’ Agreement, dated as of the Issue Date, by and among Ply Gem Investment Holdings, Inc., Caxton-Iseman (Ply Gem), L.P. and certain members of our management and other parties thereto.

“Subordinated Indebtedness” means Indebtedness of the Issuer or any Restricted Subsidiary that is expressly subordinated in right of payment to the Notes or the Note Guarantees, respectively.


	(1) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

	(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).

Unless otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.

“Transactions” means (i) the Acquisition; (ii) the Equity Contribution; (iii) the Bank Financing; and (iv) the Offering.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

“Unrestricted Subsidiary” means (1) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries” and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Government Obligations” means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.

“Voting Stock” with respect to any Person, means securities of any class of Equity Interests of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person.

“Weighted Average Life to Maturity” when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Restricted Subsidiary” means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors’ qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) are owned directly by the Issuer or through one or more Wholly-Owned Restricted Subsidiaries.

The Notes will be represented by one or more global notes (the “Global Notes”) in definitive form. The Global Notes will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC (such nominee being referred to herein as the “Global Note Holder”). The Global Notes will be subject to certain restrictions on transfer and will bear the legend regarding these restrictions set forth under the heading “Notice to Investors.” DTC will maintain the Notes in denominations of $1,000 and integral multiples thereof through its book-entry facilities.

DTC is a limited-purpose trust company that was created to hold securities for its participating organizations, including Euroclear and Clearstream (collectively, the “Participants” or the “Depositary’s Participants”), and to facilitate the clearance and settlement of transactions in these 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 purchaser), banks and trust companies, clearing corporations and certain other organizations. Access to DTC’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 DTC only through the Depositary’s Participants or the Depositary’s Indirect Participants. Pursuant to procedures established by DTC, ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of the Depositary’s Participants) and the records of the Depositary’s Participants (with respect to the interests of the Depositary’s Indirect Participants).

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 the Notes will be limited to such extent.

So long as the Global Note Holder is the registered owner of any Notes, the Global Note Holder will be considered the sole Holder of outstanding Notes represented by such Global Notes under the Indenture. Except as provided below, owners of Notes will not be entitled to have Notes registered in their names and 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. None of the Issuer, the Guarantors or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such Notes.

Payments in respect of the principal of, premium, if any, and interest on 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 Issuer, any Guarantor and the Trustee may treat the persons in whose names any Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments

Subject to certain conditions, any person having a beneficial interest in the Global Notes may, upon request to the Trustee and confirmation of such beneficial interest by the Depositary or its Participants or Indirect Participants, exchange such beneficial interest for Notes in definitive form. Upon any such issuance, the Trustee is required to register such Notes in the name of and cause the same to be delivered to, such person or persons (or the nominee of any thereof). Such Notes would be issued in fully registered form and would be subject to the legal requirements described in this prospectus under the caption “Notice to Investors.” In addition, if (1) the Depositary notifies the Issuer in writing that DTC is no longer willing or able to act as a depositary and the Issuer is unable to locate a qualified successor within 90 days or (2) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by the relevant Global Note Holder of its Global Note, Notes in such form will be issued to each person that such Global Note Holder and DTC identifies as being the beneficial owner of the related Notes.

Neither the Issuer, any Guarantor nor the Trustee will be liable for any delay by the Global Note Holder or DTC in identifying the beneficial owners of Notes and the Issuer, any Guarantor and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or DTC for all purposes.

The following discussion presents the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP regarding certain material U.S. federal income tax consequences of the exchange of initial notes for exchange notes pursuant to the exchange offer, as well as the ownership and disposition of the exchange notes by U.S. holders and non-U.S. holders (each as defined below) who acquire exchange notes in the exchange offer. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions, existing and proposed Treasury Regulations, and interpretations of the foregoing, all as of the date hereof. All of the foregoing authorities are subject to change (possibly with retroactive effect) and any such change may result in U.S. federal income tax consequences to a holder that are materially different from those described herein. We have not obtained and do not intend to obtain a ruling from the U.S. Internal Revenue Service (“IRS”) regarding the classification of the initial notes or the exchange notes for U.S. federal income tax purposes or for any other aspect of the tax consequences described below. We cannot assure you that the IRS will not disagree with any of the tax consequences described in this summary.

The following discussion does not purport to deal with all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of such holder’s particular circumstances, nor does it discuss U.S. federal tax laws applicable to special classes of taxpayers (such as insurance companies, dealers in securities or currencies, tax exempt organizations, banks or other financial institutions, persons that hold notes as part of a “straddle,” “hedge,” “integrated transaction,” or “conversion transaction,” persons that have a functional currency other than the U.S. dollar, persons that own notes through a partnership or other pass through entity, U.S. expatriates and, except to the extent indicated under “Non-U.S. holders” below, foreign corporations, non-resident alien individuals and other persons not subject to U.S. federal income tax on their worldwide income). In addition, the discussion does not consider the effect of any foreign, state, local, or other tax laws that may be applicable to a particular holder. This discussion assumes that holders will (except as otherwise indicated) hold the exchange notes as capital assets within the meaning of Section 1221 of the Code.

As used in this section, a “U.S. holder” means a beneficial owner of an exchange note who is, for U.S. federal income tax purposes: (i) a citizen or resident of the U.S., (ii) a corporation created or organized under the laws of the U.S. or any political subdivision thereof, (iii) an estate or trust the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust that (a) is subject to the primary supervision of a court within the U.S. and one or more U.S. persons has the authority to control all substantial decisions of the trust or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. As used in this section, the term “non-U.S. holder” means a beneficial owner of an exchange note who is not a U.S. holder. Holders that are partnerships or who would hold exchange notes through a partnership or similar pass-through entity should consult their tax advisors regarding the U.S. federal income tax consequences to them of holding such notes.

BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, PERSONS CONSIDERING THE ACQUISITION OF EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF U.S. FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY TAX TREATY.

The exchange of initial notes for exchange notes pursuant to the exchange offer will not be treated as an exchange or otherwise as a taxable event to U.S. holders. Consequently, (1) a U.S. holder should not recognize a taxable gain or loss as a result of exchanging such holder’s initial notes for exchange notes; (2) the holding period of the exchange notes will include the holding period of the initial notes; and (3) the adjusted tax basis of exchange notes will be the same as the adjusted tax basis of the initial notes exchanged therefor

Stated interest on a note will generally be taxable to a U.S. holder as ordinary interest income at the time it accrues or is received, in accordance with such U.S. holder’s method of accounting for U.S. federal income tax purposes. In certain circumstances we may be obligated to pay amounts in excess of stated interest or principal on the notes. According to Treasury Regulations, the possibility that any such payments in excess of stated interest or principal will be made will not affect the amount of interest income a U.S. holder recognizes if there is only a remote chance as of the date the notes were issued that such payments will be made. We believe that the likelihood that we will be obligated to make any such payments is remote. Therefore, we do not intend to treat the potential payment of additional interest pursuant to the registration rights provisions or the potential payment of a premium pursuant to the optional redemption or change of control provisions as part of the yield to maturity of any notes. Our determination that these contingencies are remote is binding on a U.S. holder unless such holder discloses its contrary position in the manner required by applicable Treasury Regulations. Our determination is not, however, binding on the IRS and if the IRS were to challenge this determination, a U.S. holder might be required to accrue income on its notes in excess of stated interest and to treat as ordinary income rather than capital gain any income realized on the taxable disposition of a note before the resolution of the contingencies. In the event a contingency occurs, it would affect the amount and timing of the income recognized by a U.S. holder. If we pay additional interest on the notes pursuant to the registration rights provisions or a premium pursuant to the optional redemption or change of control provisions, U.S. holders will be required to recognize such amounts as income.

If a U.S. holder purchased an initial note prior to this exchange offer for an amount that is less than its principal amount, then, subject to a statutory de minimis rule, the difference generally will be treated as market discount. If a U.S. holder exchanges an initial note, with respect to which there is market discount, for an exchange note pursuant to the exchange offer, the market discount applicable to the initial note should carry over to the exchange note so received. In that case, any partial principal payment on, or any gain realized on the sale, exchange, retirement or other disposition of (including dispositions which are nonrecognition transactions under certain provisions of the Code), the exchange note will be included in gross income and characterized as ordinary income to the extent of the market discount that (1) has not previously been included in income and (2) is treated as having accrued on the exchange note prior to the payment or disposition. Market discount generally accrues on a straight-line basis over the remaining term of the exchange note. Upon an irrevocable election, however, market discount will accrue on a constant yield basis. A U.S. holder might be required to defer all or a portion of the interest expense on indebtedness incurred or continued to purchase or carry an exchange note. A U.S. holder may elect to include market discount in gross income currently as it accrues. If such an election is made, the preceding rules relating to the recognition of market discount and deferral of interest expense will not apply. An election made to include market discount in gross income as it accrues will apply to all debt instruments acquired by the U.S. holder on or after the first day of the taxable year to which the election applies and may be revoked only with the consent of the IRS.

If a U.S. holder purchased an initial note prior to this exchange offer for an amount that is in excess of all amounts payable on the initial note after the purchase date, other than payments of qualified stated interest, the excess will be treated as bond premium. If a U.S. holder exchanges an initial note, with respect to which there is a bond premium, for an exchange note pursuant to the exchange offer, the bond premium applicable to the initial note should carry over to the exchange note so received. In general, a U.S. holder may elect to amortize bond premium over the remaining term of the exchange note on a constant yield method. The amount of bond premium allocable to any accrual period is offset against the qualified stated interest allocable to the accrual period. If, following the offset determination described in the immediately preceding sentence, there is an excess allocable bond premium remaining, that excess may, in some circumstances, be deducted.

Upon the sale, redemption, exchange or other taxable disposition of a note, a U.S. holder generally will recognize gain or loss equal to the difference between the amount realized from such sale, redemption, exchange or other taxable disposition (other than amounts attributable to accrued interest, which amounts would be taxed as interest) and its adjusted basis in such note. Such gain or loss will be long term capital gain or loss if at the time of sale, redemption, exchange or other disposition, the note has been held for more than one year. Otherwise, such gain or loss will be short term capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitation.

In general, information reporting requirements will apply to payments of interest on, and the proceeds of disposition of, an exchange note made to U.S. holders other than certain exempt recipients such as corporations. In general, backup withholding, at the then applicable rate, will be applicable to a U.S. holder that is not an exempt recipient if such U.S. holder: (1) fails to furnish its taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number, furnishes an incorrect TIN, (2) is notified by the IRS that it has failed to properly report payments of interest or dividends, or (3) fails to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the U.S. holder that it is subject to backup withholding. Any amount withheld from payment to a holder under the backup withholding rules will be allowed as a credit against the holder’s federal income tax liability and may entitle the holder to a refund, provided the required information is furnished to the IRS. U.S. holders should consult their personal tax advisor regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if applicable.

The exchange of initial notes for exchange notes pursuant to the exchange offer by a non-U.S. holder will not be treated as an exchange or otherwise as a taxable event.

Interest paid to a non-U.S. holder will not be subject to U.S. federal withholding tax of 30% (or, if applicable, a lower treaty rate), provided that: (1) such holder does not directly or indirectly, actually or constructively, own a 10% or greater capital or profit interest in us or 10% or more of the total combined voting power of all of our classes of stock, (2) such holder is not a controlled foreign corporation that is related to us through stock ownership, (3)such holder is not a bank that received such notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business, and either (a) the non-U.S. holder certifies in a statement provided to us or our paying agent, under penalties of perjury, that it is not a “United States person” within the meaning of the Code and provides its name and address (generally on IRS Form W-8 BEN), (b) a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business and holds the notes on behalf of the non-U.S. holder certifies to us or our paying agent under penalties of perjury that it has received from the non-U.S. holder a statement, under penalties of perjury, that such holder is not a “United States person” and provides us or our paying agent with a copy of such statement or (c) the non-U.S. holder holds its notes through a “qualified intermediary” and certain conditions are satisfied.

Even if the above conditions are not met, a non-U.S. holder may be entitled to a reduction in, or exemption from, withholding tax on interest under a tax treaty between the U.S. and the non-U.S. holder’s

If a non-U.S. holder is engaged in a trade or business in the U.S. and if interest on an exchange note or gain realized on the disposition of an exchange note is effectively connected with the conduct of the trade or business, the non-U.S. holder usually will be subject to regular U.S. federal income tax on the interest or gain in the same manner as if it were a U.S. holder, unless an applicable treaty provides otherwise. In addition, if the non-U.S. holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% on its earnings and profits for the taxable year, subject to certain adjustments unless reduced or eliminated by an applicable tax treaty.

Subject to the discussion below concerning backup withholding, a non-U.S. holder of an exchange note generally will not be subject to U.S. federal income tax on gain realized on the sale, exchange or other taxable disposition of such note unless such holder is an individual who is present in the U.S. for 183 days or more in the taxable year of disposition, and certain other conditions are met, the holder is subject to the special rules applicable to certain former citizens or former residents of the U.S., or such gain is effectively connected to a U.S. trade or business, in which case such holder may have to pay a U.S. federal income tax of 30% (or, if applicable, a lower treaty rate) on such gain.

Backup withholding and information reporting generally will not apply to payments made by us or our paying agent on an exchange note to a non-U.S. holder if the non-U.S. holder has provided the required certification that it is not a U.S. person as described above. However, certain information reporting may still apply with respect to interest payments even if certification is provided.

Payments of the proceeds from a disposition by a non-U.S. holder of a note made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that information reporting (but generally not backup withholding) may apply to those payments if the broker is: (1) a U.S. person, (2) a controlled foreign corporation for U.S. federal income tax purposes, (3) a foreign person 50% or more of whose gross income is effectively connected with a U.S. trade or business for a specified three-year period, (4) or a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons, as defined in Treasury Regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, the foreign partnership is engaged in a U.S. trade or business. Backup withholding may apply to any payment that such broker is required to report if the broker has actual knowledge that the payee is a U.S. person.

Payments to or through the U.S. office of a broker will be subject to information reporting and possible backup withholding unless the holder certifies, under penalties of perjury, that it is not a U.S. holder or otherwise establishes an exemption, provided that the broker does not have actual knowledge that the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied.

The Treasury Regulations provide certain presumptions under which a non-U.S. holder will be subject to information reporting and backup withholding unless such holder certifies as to its non-U.S. status or otherwise establishes an exemption. Non-U.S. holders of exchange notes should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situation, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a non-U.S. holder under the backup withholding rules will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle the holder to a refund if the required information is furnished to the IRS.

THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO YOU OF OWNING, HOLDING, AND DISPOSING OF AN EXCHANGE NOTE, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for initial notes acquired by such broker-dealer as a result of market making or other trading activities may be deemed to be an “underwriter” within the meaning of the Securities Act and, therefore, must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales, offers to resell or other transfers of the exchange notes received by it in connection with the exchange offer. Accordingly, each such broker-dealer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for initial notes where such initial notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of this exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by 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 broker-dealer and/or the purchasers of any such exchange notes. Any 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 of any such resale of exchange notes and any commissions 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 broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

Certain legal matters in connection with this exchange offer will be passed upon for us by Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York. Paul, Weiss, Rifkind, Wharton & Garrison LLP has represented Caxton-Iseman Capital and its related parties from time to time. Certain members of Paul, Weiss, Rifkind, Wharton & Garrison LLP have made investments in Ply Gem Investment Holdings.

The combined financial statements of Ply Gem Industries, Inc. and subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada, Inc., as of December 31, 2003 and 2002 and for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002 as well as the balance sheet of Ply Gem Holdings, Inc. as of January 23, 2004 (inception) appearing in this prospectus and registration statement have been audited by Ernst & Young, LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and file reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-4 to register the exchange notes. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information about us and the exchange notes offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these reports, proxy statements and information may be obtained at prescribed rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. In addition, the SEC maintains a web site that contains reports, proxy statements and other information regarding registrants, such as us, that file electronically with the SEC. The address of this web site is http://www.sec.gov.

Anyone who receives a copy of this prospectus may obtain a copy of the indenture without charge by writing to Ply Gem Industries Inc., 303 West Major Street, Kearney, Missouri 64060 Attn: Chief Financial Officer, (800) 800-2244.

We have audited the accompanying combined balance sheets of Ply Gem Industries, Inc. and subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada Inc., all subsidiaries of Nortek, Inc., as of December 31, 2003 and 2002 and the related combined statements of operations, parent company (deficit) investment, and cash flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002. These financial statements are the responsibility of the management of Nortek, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Ply Gem Industries, Inc. and subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada Inc., all subsidiaries of Nortek, Inc., at December 31, 2003 and 2002 and the combined results of their operations and their cash flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the combined financial statements, in 2003 the Company changed its method of accounting for stock-based compensation, pursuant to the adoption of Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure an Amendment of FASB statement No. 123. As discussed in Note 1 to the consolidated financial statements, in 2002 the Company changed its method of accounting for goodwill and other intangible assets, pursuant to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

The accompanying notes are an integral part of these combined financial statements.

The accompanying combined financial statements include the financial position and results of operations for Ply Gem Industries, Inc. and Subsidiaries (“Ply Gem”) and CWD Windows & Doors (“CWD Windows”), a division of Broan-Nutone Canada Inc. (“BNC”) as of December 31, 2003 and 2002 and for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. Ply Gem and CWD Windows (collectively, the “Combined Companies”) are diversified manufacturers of residential and commercial building products, which sell, primarily in the United States and Canada, a wide variety of products for the residential and commercial construction, the do-it-yourself and the professional remodeling and renovation markets. Ply Gem is a wholly owned subsidiary of WDS LLC, which is a wholly owned subsidiary of Nortek, Inc. (collectively with subsidiaries “Nortek”). Nortek is a wholly owned subsidiary of Nortek Holdings, Inc. (collectively with subsidiaries “Nortek Holdings”). As of December 31, 2003, CWD Windows was a division of BNC, which is a wholly owned subsidiary of Nortek. In 2004, BNC transferred ownership of CWD Canada to a wholly owned subsidiary of Ply Gem.

On February 12, 2004, Nortek sold Ply Gem to Ply Gem Investment Holdings, Inc., an affiliate of Caxton-Iseman Capital, Inc., pursuant to the terms of the Stock Purchase Agreement among Ply Gem Investment Holdings, Inc. and Nortek, Inc. and WDS LLC dated as of December 19, 2003, as amended (the “Purchase Agreement”) in a transaction valued at approximately $560,000,000 (the “Acquisition”), including approximately $29.5 million of outstanding debt assumed by Ply Gem Investment Holdings, Inc. and approximately $4.3 million representing the aggregate value of certain management stock options of Nortek held by Ply Gem management that were cancelled or forfeited in connection with the Acquisition.

On January 9, 2003, Nortek Holdings was acquired by certain affiliates and designees of Kelso & Company L.P. and certain members of Nortek management in accordance with the Agreement and Plan of Recapitalization by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. dated as of June 20, 2002, as amended, in a transaction valued at approximately $1.6 billion, including the assumption of certain indebtedness (the “Recapitalization”).

The Combined Companies, Nortek and Nortek Holdings have accounted for the Recapitalization as a purchase in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS No. 141”), which resulted in a new valuation for the assets and liabilities of Nortek Holdings and its subsidiaries based upon fair values as of the date of the Recapitalization. As allowed under SEC Staff Accounting Bulletin No. 54, “Push Down Basis of Accounting Required in Certain Limited Circumstances”, the Combined Companies have reflected certain applicable purchase accounting adjustments recorded by Nortek Holdings in the Combined Companies’ financial statements as of and for all periods subsequent to the date of the Recapitalization (“Push Down Accounting”) (see Note 2).

In 2002, Ply Gem sold its subsidiaries, Hoover Treated Wood Products, Inc. (“Hoover”) and Richwood Building Products, Inc. (“Richwood”) and in 2001, Ply Gem sold its subsidiaries, Peachtree Doors and Windows, Inc. (“Peachtree”) and SNE Enterprises, Inc. (“SNE”). The sale of these subsidiaries and their related operating results have been excluded from earnings (loss) from continuing operations and are classified as discontinued operations for all periods presented (see Note 3).

The combined financial statements include the accounts of the Combined Companies and all of their subsidiaries, all of which are wholly owned, after elimination of intercompany accounts and transactions.

The preparation of these combined financial statements in conformity with accounting principles generally accepted in the United States involves estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expense during the reporting periods. Certain of the Combined Companies’ accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Combined Companies periodically evaluate the judgments and estimates used for their critical accounting policies to ensure that such judgments and estimates are reasonable for their interim and year-end reporting requirements. These judgments are based on the Combined Companies’ historical experience, current trends and information available from other sources, as appropriate. If different conditions result from those assumptions used in the Combined Companies’ judgments, the results could be materially different from the Combined Companies’ estimates.

The Combined Companies recognize sales upon the shipment of their products net of applicable provisions for discounts and allowances. Allowances for cash discounts, volume rebates and other customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages agreed to with the Combined Companies’ various customers, which are typically earned by the customer over an annual period. The Combined Companies record periodic estimates for these amounts based upon the historical results to date, estimated future results through the end of the contract period and the contractual provisions of the customer agreements. For calendar year customer agreements, the Combined Companies are able to adjust their periodic estimates to actual amounts as of December 31 each year based upon the contractual provisions of the customer agreements. For those customers who have agreements that are not on a calendar year cycle, the Combined Companies record estimates at December 31 consistent with the methodology described above. Customer returns are recorded on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Combined Companies generally estimate customer returns based upon the time lag that historically occurs between the date of the sale and the date of the return while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. The Combined Companies also provide for estimates of warranty, bad debts and shipping costs at the time of sale. Shipping and warranty costs are included in cost of products sold. Bad debt provisions are included in selling, general and administrative expense. The amounts recorded are generally based upon historically derived percentages while also factoring in any new business conditions that might impact the historical analysis such as new product introduction for warranty and bankruptcies of particular customers for bad debts.

Cash equivalents consist of short-term highly liquid investments with original maturities of three months or less which are readily convertible into cash.

The Combined Companies have classified as restricted cash and cash equivalents in the accompanying combined balance sheets certain investments and marketable securities that are not fully available for use in their operations.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents — The carrying amount approximates fair value because of the short maturity of those instruments.

Long-Term Debt — At December 31, 2003, the fair value of long-term indebtedness approximated the amounts included in the accompanying combined balance sheet (see Note 6).

Inventories in the accompanying combined balance sheet are valued at the lower of cost or market. At December 31, 2003, 2002 and 2001, approximately $10,097,000, $13,282,000 and $13,090,000 of total inventories, respectively, were valued on the last-in, first-out method (“LIFO”). Under the first-in, first-out method (“FIFO”) of accounting, such inventories would have been approximately $402,000 higher at December 31, 2003 and approximately $770,000 and $936,000 lower at December 31, 2002 and 2001, respectively. All other inventories were valued under the FIFO method. In connection with both LIFO and FIFO inventories, the Combined Companies record provisions, as appropriate, to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires the Combined Companies to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potential may cause the actual results to differ from the estimates at the time such inventory is disposed or sold.

Depreciation and amortization of property and equipment are provided on a straight-line basis over estimated useful lives, which are generally as follows:

Expenditures for maintenance and repairs are expensed when incurred. Expenditures for renewals and betterments are capitalized. When assets are sold, or otherwise disposed, the cost and related accumulated depreciation are eliminated and the resulting gain or loss is recognized.

Acquisitions are accounted for as purchases and, accordingly, have been included in the Combined Companies’ combined results of operations since the acquisition date. Purchase price allocations are subject to refinement until all pertinent information regarding the acquisition is obtained.

In the third quarter of 2001, the Combined Companies adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets but does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets and, as required by the standard, applied this accounting standard as of January 1, 2001. Adoption of this accounting standard did not result in any material

changes in net earnings (loss) from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation of all periods presented has been reclassified to conform to SFAS No. 144 (see Note 3).

Subsequent to June 30, 2001, the Combined Companies account for acquired goodwill and intangible assets in accordance with SFAS No. 141. Prior to July 1, 2001, the Combined Companies accounted for acquired goodwill and intangible assets in accordance with APB No. 16, “Business Combinations” (“APB No. 16”). Purchase accounting required by SFAS No. 141 and APB No. 16 involves judgment with respect to the valuation of the acquired assets and liabilities in order to determine the final amount of goodwill. For significant acquisitions, the Combined Companies value items such as property, plant and equipment and acquired intangibles based upon appraisals and determine the value of assets and liabilities associated with pension, supplemental executive retirement and post retirement benefit plans based upon actuarial studies. The Combined Companies believe that the estimates that have been used to record prior acquisitions were reasonable and in accordance with SFAS No. 141 and APB No. 16.

On January 1, 2002, the Combined Companies adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). This statement applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired. Under this statement, goodwill and intangible assets determined to have an indefinite useful life are no longer amortized, instead these assets are evaluated for impairment on an annual basis and whenever events or business conditions warrant. All other intangible assets will continue to be amortized over their remaining estimated useful lives and are evaluated for impairment in accordance with the provisions of SFAS No. 144. The adoption of SFAS No. 142 did not result in any material changes to the Combined Companies’ accounting for intangible assets. The Combined Companies evaluated the carrying value of goodwill and determined that no impairment existed and therefore no impairment loss was required to be recorded in the Combined Companies’ combined financial statements as a result of adopting SFAS No. 142.

In accordance with SFAS No. 144, as of December 31, 2003, the Combined Companies have evaluated the realizability of non-goodwill long-lived assets, which primarily consist of property, plant and equipment and intangible assets (the “SFAS No. 144 Long-Lived Assets”) based on expectations of non-discounted future cash flows for each subsidiary or division having a material amount of SFAS No. 144 Long-Lived Assets. If the sum of the expected non-discounted future cash flows is less than the carrying amount of all assets including SFAS No. 144 Long-Lived Assets, the Combined Companies would recognize an impairment loss. The Combined Companies’ cash flow estimates are based upon historical cash flows, as well as future projected cash flows received from subsidiary or division management in connection with the annual Company wide planning process, and include a terminal valuation for the applicable subsidiary or division based upon a multiple of earnings before interest expense, net, depreciation and amortization expense and income taxes (“EBITDA”). The Combined Companies estimate the EBITDA multiple by reviewing comparable company information and other industry data. The Combined Companies believe that their procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with market conditions at the time of the valuation. Based on their most recent analysis, the Combined Companies believe that no material impairment of SFAS No. 144 Long-Lived Assets exists at December 31, 2003. Prior to the adoption of SFAS No. 144 and SFAS No. 142, the Combined Companies accounted for the impairment of long-lived assets, including goodwill, in accordance with the then existing accounting standards, which did not result in any impairment losses in prior years.

Subsequent to the Recapitalization, intangible assets consist principally of patents, trademarks and customer relationships, which are being amortized on a straight-line basis over a weighted average remaining estimated useful life of approximately 13 years (see Note 2). Prior to the Recapitalization, intangible assets

consisted principally of patents and trademarks, which were amortized on a straight-line basis over a weighted average remaining estimated useful life of approximately 21 years. Amortization of intangible assets charged to operations amounted to approximately $3,837,000, $70,000, $3,118,000 and $3,091,000 for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. The table that follows presents the major components of intangible assets as of December 31, 2003 and 2002:

As of December 31, 2003, the estimated annual intangible asset amortization expense for each of the succeeding five years aggregates approximately $19,740 as follows:

The Combined Companies have classified as goodwill the cost in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions (see Note 2). Prior to January 1, 2002, goodwill was amortized on a straight-line basis over 40 years through December 31, 2001. Goodwill amortization was approximately $7,557,000 for the year ended December 31, 2001, as determined under the then applicable accounting principles generally accepted in the United States.

The table that follows presents earnings from continuing operations and net loss for the year ended December 31, 2001, as adjusted to reflect the elimination of goodwill amortization expense and the related income tax impact:

The table that follows presents a summary of the activity in goodwill, prior to the impact of the Push Down Accounting (see Note 2 for a summary of the activity subsequent to the Recapitalization), for the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001:

Purchase accounting adjustments relate principally to adjustments to deferred income taxes that impact goodwill. Other relates primarily to foreign currency translation adjustments.

The Combined Companies account for pension, including supplemental executive retirement plans, and post retirement health benefit liabilities under SFAS No. 87 “Employers’ Accounting for Pensions” (“SFAS No. 87”) and SFAS No. 106, “Employers’ Accounting for Post Retirement Benefits Other Than Pensions” (“SFAS No. 106”). SFAS No. 87 and SFAS No. 106 require the estimating of such items as the long-term average return on plan assets, the discount rate, the rate of compensation increase and the assumed medical cost inflation rate. Such estimates require a significant amount of judgment. As a result, the Combined Companies obtain actuarial calculations of the amounts for pension and post retirement health benefit assets, liabilities, expense and other comprehensive income (loss) required to be recorded in the Combined Companies’ combined financial statements as of year-end in accordance with accounting principles generally accepted in the United States (see Notes 2 and 7).

The Combined Companies record insurance liabilities and related expenses for health, workers’ compensation, product and general liability losses and other insurance reserves and expenses in accordance with either the contractual terms of their policies or, if self-insured, the total liabilities that are estimable and

probable as of the reporting date. Insurance liabilities are recorded as current liabilities to the extent they are expected to be paid in the succeeding year with the remaining requirements classified as long-term liabilities. The accounting for self-insured plans requires that significant judgments and estimates be made both with respect to the future liabilities to be paid for known claims and incurred but not reported claims as of the reporting date. The Combined Companies rely heavily on historical trends and, in certain cases, actuarial calculations when determining the appropriate insurance reserves to record in the combined balance sheet for a substantial portion of their workers compensation and general and product liability losses. In certain cases where partial insurance coverage exists, the Combined Companies must estimate the portion of the liability that will be covered by existing insurance policies to arrive at the net expected liability to the Combined Companies.

Nortek is responsible for the preparation and filing of all income tax returns and the remittances of federal and state payments on behalf of the Combined Companies and their subsidiaries. Accordingly, for U.S. federal income tax purposes, the Combined Companies’ results of operations are included in the consolidated federal income tax returns of Nortek. The U.S. Combined Companies file unitary, combined and separate state income tax returns. CWD Windows is included in the Canadian income tax return of BNC and transfers to BNC their share of the Canadian income tax due and payable. Federal income taxes are recorded in the Combined Companies’ combined financial statements based upon the Combined Companies’ pro rata share of Nortek’s consolidated federal tax provision determined based upon a ratio of the Combined Companies’ book income on a taxable basis to Nortek’s consolidated book income on a taxable basis. State taxes and foreign taxes are recorded on a separate standalone basis for the Combined Companies.

The Combined Companies account for deferred income taxes using the liability method in accordance with SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”), which requires that the deferred tax consequences of temporary differences between the amounts recorded in the Combined Companies’ combined financial statements and the amounts included in the Combined Companies’ federal and state income tax returns be recognized in the balance sheet. As the Combined Companies generally do not file their income tax returns until well after the closing process for the December 31 financial statements is complete, the amounts recorded at December 31 reflect estimates of what the final amounts will be when the actual federal, state and foreign income tax returns are filed for that fiscal year. Estimates are required with respect to, among other things, the appropriate state income tax rates to use in the various states that the Combined Companies and their subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realizable in the future. SFAS No. 109 requires balance sheet classification of current and long-term deferred income tax assets and liabilities based upon the classification of the underlying asset or liability that gives rise to a temporary difference (see Note 5).

The Combined Companies provide accruals for all direct costs associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. Costs accrued have been estimated based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and outcomes (see Note 8).

Included in the combined statement of operations in selling, general and administrative expense are parent company corporate charges of approximately $7,100,000, $100,000, $10,200,000 and $5,400,000 for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively, related to accounting, legal, insurance, treasury and other management services provided by Nortek, which have been allocated based upon a combination of the specific identification method and as a percentage of the Combined Companies’ net sales to Nortek’s consolidated net sales. In the opinion of the Combined Companies’ management, this method of allocating such costs is reasonable. The Combined Companies’ management estimates that, on a pro forma basis, the Combined Companies would have incurred approximately $2.4 million (unaudited) of expenses per year to replace services provided and costs allocated by Nortek for the combined periods from January 10, 2003 to December 31, 2003 and January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, if the Combined Companies had operated as a standalone company. Included in interest expense is approximately $31,784,000, $942,000, $32,707,000 and $21,507,000 for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively, related to interest owed to a subsidiary which is wholly owned by Nortek.

Parent company investment in the accompanying combined balance sheet includes the combined equity, advance accounts with Nortek and its wholly owned subsidiaries and accumulated other comprehensive loss of Ply Gem and CWD Windows. Debt with Nortek and its wholly owned subsidiaries is included in notes, mortgage notes and obligations payable in the accompanying combined balance sheet (see Note 6).

Comprehensive income (loss) includes net earnings (loss) and unrealized gains and losses from marketable securities available for sale and minimum pension liability adjustments, net of tax attributes. The components of the Combined Companies’ comprehensive income (loss) and the effect on net earnings (loss) for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001 are detailed in the accompanying combined statement of parent company (deficit) investment.

The balances of each classification, net of tax attributes, within accumulated other comprehensive income (loss) for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001 are as follows:

The financial statements of entities outside the United States are generally measured using the foreign entity’s local currency as the functional currency. The Combined Companies translate the assets and liabilities of their foreign entities at the exchange rates in effect at year-end. Net sales and expenses are translated using average exchange rates in effect during the year. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss in the accompanying combined balance sheet. Transaction gains and losses are recorded in selling, general and administrative expense and have not been material during any of the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001.

The Combined Companies account for derivative instruments and hedging activities in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, amended in 1999 by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of SFAS No. 133 — Amendment of SFAS No. 133”, amended in June 2000 by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities — an amendment to SFAS No. 133” and amended in April 2003 by SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (combined “SFAS No. 133”). SFAS No. 133 requires that every derivative instrument (including certain derivative instruments embedded in other contracts) issued, acquired, or substantially modified after December 31, 1997 be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the

income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

In the first quarter of 2001, the Combined Companies adopted SFAS No. 133 by recording a liability of approximately $800,000 in their unaudited combined balance sheet at March 31, 2001, representing the fair value of Ply Gem’s former interest rate collar agreement at March 31, 2001. The cumulative effect of adopting this accounting method as of January 1, 2001 was not material. Interest expense in the accompanying combined statement of operations for the years ended December 31, 2002 and 2001 includes a non-cash reduction of expense of approximately $1,200,000 and a non-cash charge of approximately $1,200,000, respectively, related to Ply Gem’s former interest rate collar agreement, which was terminated in August 2002 (see Note 6).

In the fourth quarter of 2003, the Combined Companies adopted the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123 and recorded a pre-tax charge of approximately $96,000. The Combined Companies had previously accounted for stock-based compensation in accordance with APB Opinion No. 25 (“APB 25”) and followed the disclosure only provisions of SFAS No. 123. The Company adopted SFAS No. 123 using the prospective method of transition in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS No. 148”). The prospective method under SFAS No. 148 required the Company to adopt SFAS No. 123 effective January 1, 2003 for all options issued during 2003. Prior to January 1, 2003, the Combined Companies accounted for stock options granted to employees using the intrinsic value method pursuant to the provisions of APB 25, under which no compensation cost was recognized since the options were granted with exercise prices equal to the fair market value of the common stock at the date of grant. The Company estimates the fair value of each option grant as of the date of the grant using the Black-Scholes option-pricing model.

The table that follows summarizes the Combined Companies common and special common stock option transactions through the Recapitalization, which were options for shares in Nortek, Inc and Nortek Holdings (“Options”), for the years ended December 31, 2002 and 2001, respectively:

At December 31, 2002, 2001 and 2000, 71,995, 57,841 and 55,735, respectively, of Options to acquire shares of common and special common stock were exercisable.

Upon completion of the Recapitalization on January 9, 2003, all options became fully vested. 18,250 of Options with option prices ranging from $20.44 to $22.94 were exercised and tendered in connection with the Recapitalization. 60,000 of the Options with option prices ranging from $21.63 to $27.00 were rolled-over and

exchanged for stock options to purchase an equal number of shares of Class A Common Stock of Nortek Holdings at the same price per share. Such rolled-over options were to expire on January 9, 2013. On January 9, 2003, employees of the Combined Companies were issued approximately 41,000 Class A Common Stock options of Nortek Holdings at $46 per share, which vest ratably over a three-year period and approximately 83,000 of Class B Common Stock options of Nortek Holdings at $46 per share, which vest upon the attainment of certain performance measures, as defined.

The $96,000 of employee stock compensation expense for the period from January 10, 2003 to December, 2003 represents the amortization of the fair value of the approximately 41,000 Class A Common Stock options in accordance with the minimum value requirements of FASB 123, which exclude a volatility assumption for non-public companies. The fair value for these options was determined to be $6.86 per share based upon an interest rate of 3.23% and an expected dividend yield of 0%. No employee stock compensation expense has been recognized for the approximately 83,000 of Class B Common Stock options as the vesting is performance-based and it is uncertain when, if ever, these options will vest. Employee stock compensation expense relates only to options issued to employees of the Combined Companies and does not include amortization related to options issued to certain Nortek or Nortek Holdings employees who have provided management services to the Combined Companies.

No pro-forma information for the period from January 10, 2003 to December 31, 2003 is required under SFAS No. 148 as all options issued prior to January 1, 2003 were fully vested as of January 9, 2003 and the consolidated statement of operations for the period includes the actual stock-based employee compensation for options issued subsequent to January 1, 2003.

The table that follows presents the pro forma impact for the historical outstanding options issued prior to January 1, 2003 in accordance with the disclosure only requirements of SFAS No. 123. The period from January 1, 2003 to January 9, 2003 reflects the pro forma employee stock compensation expense, net of tax, associated with the accelerated vesting of all of the existing unvested options, which were issued prior to January 1, 2003, in connection with the Recapitalization. The pro forma amortization of stock compensation relates only to options issued to employees of the Combined Companies and does not include amortization related to options issued to certain Nortek or Nortek Holdings employees who have provided management services to the Combined Companies.

In connection with the Acquisition, all of the outstanding Class A Common Stock options were cancelled in exchange for an aggregate payment to the option holders of approximately $4.3 million (see Note 1) and all of the Class B Common Stock options were forfeited.

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Combined Companies adopted SFAS No. 143 on January 1, 2003. Adoption of this accounting standard was not material to the results presented in the combined financial statements.

SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (“SFAS No. 145”), was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No. 145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of APB 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The provisions of this statement related to the extinguishment of debt are effective for financial statements issued in fiscal years beginning after May 15, 2002 with early application encouraged. The Combined Companies adopted SFAS No. 145 on January 1, 2003 and adoption of this accounting standard was not material to the results presented in the combined financial statements.

Effective January 1, 2003, the Combined Companies adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”), which addresses the accounting and reporting for costs associated with exit or disposal activities, nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”) and substantially nullifies EITF Issue No. 88-10, “Costs Associated with Lease Modification or Termination” (“EITF 88-10”). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Combined Companies’ combined financial statements (see Note 10).

In November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). Along with new disclosure requirements, FIN 45 requires guarantors to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. This differs from the current practice to record a liability only when a loss is probable and reasonably estimable. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Combined Companies adopted the disclosure provisions of FIN 45 as of December 31, 2002 and adopted the entire interpretation on January 1, 2003. Adoption of FIN 45 was not material to the Combined Companies’ combined financial statements (see Note 8).

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements”, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and for existing variable interest entities no later than the end of the first annual reporting period beginning after December 15, 2003. The Combined Companies do not expect the adoption of FIN 46 to have a material impact on their combined financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”), which clarifies the financial accounting and reporting proscribed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) for derivative instruments, including certain derivative instruments embedded in other contracts. Certain provisions of SFAS No. 149 related to implementation issues of SFAS No. 133 are already effective and other provisions related to forward purchases or sales are effective for both existing contracts and new contracts entered into after June 30, 2003. The Combined Companies have previously adopted SFAS No. 133, including the implementation issues addressed in SFAS No. 149, and the adoption of the new provisions of SFAS No. 149 on July 1, 2003 did not have an impact on the Combined Companies’ combined financial statements.

provisions for the first fiscal period beginning after December 15, 2003. The Combined Companies adopted SFAS No. 150 on July 1, 2003. Adoption of this accounting standard did not have an impact on the combined financial statements.

In connection with the Recapitalization and the application of Push Down Accounting, the Combined Companies have reflected certain fair value adjustments, including the deferred tax consequences, to certain assets and liabilities based upon amounts derived from Nortek Holdings’ final purchase price allocations as of December 31, 2003. The following table shows a comparison of the initial allocation of purchase price reflected in the quarter ended April 5, 2003 and the final allocation of purchase price for the year ended December 31, 2003:

The following is a summary of the material adjustments made to the initial allocation of purchase price in the final allocation of purchase price:


	•	The change in the allocations to property, plant and equipment and intangible assets reflect adjustments recorded based upon the finalization of the Combined Companies’ asset appraisals for each of the Combined Companies’ significant locations in the fourth quarter of 2003.

	•	The change in the allocation to prepaid and deferred income taxes principally reflects the deferred tax consequences of the adjustments made to property, plant and equipment, and intangible assets discussed above.

	•	The increase in the reduction to goodwill principally reflects the impact of Nortek Holdings’ allocation of goodwill to its reporting segments based upon their relative fair values as of January 9, 2003, which


		resulted in a reduction to the Combined Companies’ goodwill of approximately $53,940,000. This reduction was partially offset by the net impact of the changes to property, plant and equipment, intangible assets, prepaid and deferred income taxes and other accounts, which increased goodwill by approximately $24,886,000. Goodwill associated with the Recapitalization will not be deductible for federal, state or foreign income tax purposes.

The reduction of goodwill of approximately $53,940,000 associated with Nortek’s allocation of goodwill by reporting segment is the principal component of the reduction to parent company (deficit) investment, which is included in the Recapitalization line in the accompanying combined statement of parent company (deficit) investment.

In the 4th quarter of 2003, Nortek Holdings’ realized the benefit of certain pre-Recapitalization deferred tax assets, which were not recorded as of the Recapitalization due to uncertainty of realization. The increase in the deferred tax assets resulted in a reduction to goodwill, which was allocated to Nortek Holdings’ reportable segments based upon their relative fair values as of January 9, 2003. Accordingly, the Combined Companies recorded a reduction to goodwill of $4,195,000 through an intercompany transfer in the parent company accounts, which is reflected as a separate item in the accompanying combined statement of parent company (deficit) investment.

During the period from January 10, 2003 to December 31, 2003, the Combined Companies reflected amortization of purchase price allocated to inventory of approximately $1,387,000 in cost of sales related to inventory acquired as part of the Recapitalization. No similar adjustment was required for such inventory in 2002 under the Company’s historical basis of accounting.

In connection with both the initial and final allocations of purchase price to property, plant and equipment acquired as part of the Recapitalization, the Combined Companies assigned new useful lives based upon the initial estimated and then the final appraised remaining useful lives from the date of the Recapitalization, respectively, in order to determine depreciation expense for all periods subsequent to the Recapitalization. For the period from January 10, 2003 to December 31, 2003, the Combined Companies reflected approximately $500,000 of lower depreciation expense in continuing operations in cost of sales as compared to the Combined Companies’ historical basis of accounting prior to the Recapitalization. The lower depreciation expense reflects the favorable impact of approximately $1,700,000 related to revisions to the remaining useful lives, which was partially offset by the unfavorable impact of approximately $1,200,000 related to the increase in property, plant and equipment related to the allocation of purchase price. Depreciation expense related to property, plant and equipment acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and initial estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and appraised useful lives for the period from October 5, 2003 to December 31, 2003. Depreciation expense would have been approximately $1,800,000 higher for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and appraised remaining useful lives had been used to record depreciation expense for the period from January 10, 2003 to October 4, 2003, primarily due to the appraised remaining useful lives being shorter than the initial estimates, which was partially offset by the reduction in the final purchase price allocation.

In connection with both the initial and final allocations of purchase price to intangible assets acquired as part of the Recapitalization, the Combined Companies assigned new useful lives based upon the initial estimated and then the final appraised remaining useful lives from the date of the Recapitalization, respectively, in order to determine amortization expense for all periods subsequent to the Recapitalization. For the period from January 10, 2003 to December 31, 2003, the Combined Companies reflected in continuing operations approximately $800,000 of higher amortization of intangible assets as compared to the Combined Companies’ historical basis of accounting prior to the Recapitalization. The higher amortization reflects the

combination of the unfavorable impact of approximately $1,500,000 related to revisions to the remaining useful lives and the favorable impact of approximately $700,000 related to the decrease in intangible assets as a result of the allocation of purchase price. Amortization expense related to intangible assets acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and appraised useful lives for the period from October 5, 2003 to December 31, 2003. Amortization expense would have been approximately $100,000 lower for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and appraised remaining useful lives had been used to record amortization expense for the period from January 10, 2003 to October 4, 2003, primarily due to the reduction in the allocation of purchase price, which was partially offset by the appraised remaining useful lives being shorter than the initial estimates.

A summary of the rollforward of goodwill from January 9, 2003 to December 31, 2003 is presented in the table below:

A summary of acquired intangible assets as of January 9, 2003 after reflecting the impact of Push Down Accounting is as follows:

The following reflects the pro forma effect of the Recapitalization for the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002:

The unaudited pro forma condensed consolidated summary of operations for the period from January 1, 2003 to January 9, 2003 reflect the actual results for the period as adjusted to give effect to the Recapitalization as if it had occurred on January 1, 2003. The unaudited pro forma condensed consolidated summary of operations for the year ended December 31, 2002 reflect the actual results for the year as adjusted to give effect to the Recapitalization as if it had occurred on January 1, 2002.

On November 22, 2002, Ply Gem sold the capital stock of its Richwood subsidiary for approximately $8,500,000 of net cash proceeds and recorded a pre-tax loss of approximately $3,000,000 in the fourth quarter of 2002. As required by SFAS No. 142, Ply Gem allocated $4,200,000 of goodwill to Richwood in connection with the determination of the loss on sale based upon the relative fair value of Richwood to the total fair value of Ply Gem. The related goodwill amortization prior to January 1, 2002 and goodwill have been included in the results of discontinued operations and assets of discontinued operations, respectively, for all periods presented below, as required.

On April 2, 2002, Ply Gem sold the capital stock of its Hoover subsidiary for approximately $20,000,000 of net cash proceeds and recorded a pre-tax gain of approximately $5,400,000 in the second quarter of 2002. Approximately $8,500,000 of the cash proceeds was used to pay down outstanding debt under Ply Gem’s then existing credit facility in the second quarter of 2002 (see Note 6).

On September 21, 2001, Ply Gem sold the capital stock of its subsidiaries, Peachtree and SNE for approximately $45,000,000 in cash, and recorded a pre-tax loss on the sale of approximately $34,000,000 in the third quarter of 2001, including the write-off of approximately $11,700,000 of unamortized intangible assets. A portion of the cash proceeds was used to pay down approximately $20,500,000 of outstanding debt under Ply Gem’s then existing credit facility (see Note 6).

The Combined Companies allocate interest to dispositions that qualify as a discontinued operation for debt instruments, which are entered into specifically and solely with the entity disposed of and from debt, which is paid down with proceeds received from the disposition. Interest allocated to discontinued operations was approximately $100,000 and $700,000 (net of taxes of approximately $500,000) for the years ended December 31, 2002 and 2001, respectively.

The table that follows presents a summary of the results of discontinued operations for the Combined Companies for the years ended December 31, 2002 and 2001:

Interest paid, excluding parent company charges, was $1,272,000, $16,000, $3,253,000 and $5,205,000 for the period from January 10, 2003 to December 31, 2003, the period January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively.

Certain non-cash financing and investing activities have been excluded from the accompanying combined statement of cash flows and include decreases of approximately $306,000 and $91,000 in the fair market value of marketable securities available for the years ended December 31, 2002 and 2001, respectively and dividends paid to Nortek, in the form of notes payable, of $280,000,000 during the year ended December 31, 2001.

The table that follows is a summary of domestic and foreign earnings (loss) from continuing operations before provision (benefit) for income taxes included in the accompanying combined statement of operations for the periods indicated:

The table that follows is a summary of the provision (benefit) for income taxes from continuing operations included in the accompanying combined statement of operations for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001:

As indicated in Note 1, the Combined Companies have recorded federal income taxes using the pro rata allocation method. If federal income taxes were computed assuming the Combined Companies filed a separate federal income tax return, the federal tax provision for the period from January 10, 2003 to December 31, 2003 would have been approximately $200,000 lower and net earnings would have been approximately $200,000 higher and would have been approximately the same for the period from January 1, 2003 to January 9, 2003.

Income tax payments (refunds), net, were approximately $703,000, $(6,000), $442,000 and $575,000 for the period from January 10, 2003 to December 31, 2003, the period January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. In addition, CWD Windows transferred to BNC approximately $3,748,000, $1,091,000 and $891,000 during the period from January 10, 2003 to December 31, 2003 and the years ended December 31, 2002 and 2001, respectively, for their share of the amounts due under

BNC’s Canadian income tax returns. No amounts were transferred during the period from January 1, 2003 to January 9, 2003.

The table that follows reconciles the provision for income taxes from continuing operations at the federal statutory income tax rate of 35% to the provision for income taxes from continuing operations for the periods indicated:

The tax effect of temporary differences, which gave rise to significant portions of deferred income tax assets and liabilities as of December 31, 2003 and 2002 are as follows:

The Combined Companies have established valuation allowances related to certain capital loss carry-forwards. At December 31, 2003, Ply Gem has approximately $8.4 million of capital loss carry-forwards, which can be utilized to offset capital gains, if any, in future periods, which expire between 2004 and 2006.

Notes, mortgage notes and obligations payable in the accompanying combined balance sheet at December 31, 2003 and 2002 consist of the following:

Ply Gem had a credit facility with a syndicate of banks, which provided Ply Gem with a term loan and a letter of credit facility, which was repaid in full on July 25, 2002 for the remaining amount of approximately $42,742,000. Nortek made the final payment of $42,742,000 on Ply Gem’s behalf utilizing proceeds from the Nortek debt facility described below. Ply Gem subsequently reimbursed Nortek the $42,742,000 through an intercompany cash transfer and the amount is included in net transfers to Nortek, Inc. in the accompanying combined statement of cash flows. Interest on borrowings were at varying rates based, at Ply Gem’s option, on (a) the London Interbank Offered Rate (LIBOR) plus a spread, or (b) the higher of (i) .50% above the federal funds rate or (ii) the bank’s prime rate. PLY GEM paid a facility fee quarterly, which fluctuated between .20% and .30% of the aggregate principal amount available under the facility. The weighted average interest rates on the credit facility for the period from January 1, 2002 through July 25, 2002 and the year ended December 31, 2001 were 2.4% and 4.8%, respectively. The credit facility included customary covenants, including covenants limiting Ply Gem’s ability to pledge assets or incur liens on assets and required Ply Gem to maintain certain financial covenants. Borrowings under this credit facility were collateralized by the common stock, inventory and accounts receivable of Ply Gem’s principal subsidiaries. Average outstanding borrowings under the credit facility for the period from January 1, 2002 through July 25, 2002 and the year ended December 31, 2001 were approximately $50,906,000 and $68,887,000, respectively. Prior to July 25, 2002, Ply Gem made mandatory principal payments of approximately $10,680,000 during 2002. In 2001, Ply Gem made mandatory principal payments of approximately $20,704,000.

During 1999, Ply Gem entered into a $45,000,000 interest rate collar agreement to lock in the interest rate on a portion of the credit facility between a floor of 5.76% and a cap of 7.00%. The interest rate collar agreement was terminated on August 27, 2002. To the extent that the one-month US Dollar Libor rate was below the collar floor, payment was due from Ply Gem for the difference. To the extent the one-month US Dollar Libor rate was above the collar cap, Ply Gem was entitled to receive the difference.

During 2002, Nortek entered into a $200,000,000 Senior Secured Credit Facility (the “Nortek Senior Secured Credit Facility”), which was syndicated among several banks. The Nortek Senior Secured Credit Facility is secured by substantially all of Nortek’s accounts receivable and inventory, as well as certain intellectual property rights, including those of the Combined Companies as subsidiaries and divisions of Nortek.

Notes payable to a subsidiary, which is wholly owned by Nortek, relate to dividends payable to Nortek declared during prior years of approximately $360,797,000 and borrowings related to the acquisition of Kroy Building Products, Inc. during 1999 of approximately $33,938,000. These notes are payable on demand and carry interest rates of 8% for a $280,000,000 note and 9.0% per annum for the other notes totaling

$114,735,000. Nortek has provided the Combined Companies with assurances that it will not demand repayment in the foreseeable future; therefore, the notes have been classified as long term.

Mortgage notes payable of approximately $22,503,000 outstanding at December 31, 2003 include various mortgage notes and other related indebtedness payable in installments through 2025. These notes bear interest at rates ranging from approximately 1.14% to 10.47% and are collateralized by property and equipment with an aggregate net book value of approximately $20,977,000 at December 31, 2003.

Other obligations of approximately $7,059,000 outstanding at December 31, 2003 principally include borrowings relating to capital leases and other borrowings bearing interest at rates ranging from approximately 1.25% to 8.5%, which mature at various dates through 2017 and are collateralized by property and equipment with an aggregate net book value of approximately $10,701,000 at December 31, 2003.

The table that follows is a summary of maturities of all of the Combined Companies’ debt obligations due after December 31, 2003:

Approximately $27,800,000 of letters of credit have been issued under the Nortek Senior Secured Credit Facility and other facilities as additional security for approximately $27,137,000 of industrial revenue bonds and capital leases outstanding (included in mortgage notes payable and other in the table of notes, mortgage notes and obligations payable above) at December 31, 2003 relating to several of the Combined Companies’ manufacturing facilities.

CWD Windows was allocated interest expense of approximately $89,000 and $401,000 for the years ended December 31, 2002 and 2001, respectively, for its proportionate share of the amounts borrowed under BNC’s then existing credit facilities, which were fully repaid in 2002.

The Combined Companies and their subsidiaries have various pension plans, supplemental retirement plans for certain officers and profit sharing plans requiring contributions to qualified trusts and union administered funds.

Pension and profit sharing expense charged to operations aggregated approximately $2,082,000, $62,000, $2,069,000 and $1,167,000 for the period from January 10, 2003 to December 31, 2003, the period January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. The Combined Companies’ policy is to fund currently the actuarially determined annual contribution of their various qualified defined benefit plans. The Combined Companies expect to contribute approximately $2,200,000 to their defined benefit pension plan during 2004.

The table that follows provides a reconciliation of benefit obligations, plan assets and funded status of the plans included in the Combined Companies’ combined balance sheet as of December 31, 2003 and 2002:

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $14,562,000, $14,562,000 and $9,248,000, respectively, as of December 31, 2003 and $14,320,000, $14,320,000 and $9,037,000, respectively, as of December 31, 2002.

As a result of the Recapitalization, purchase accounting adjustments were made for all defined benefit plans as of the January 10, 2003 transaction date. The purchase accounting adjustments reflect the immediate recognition of all unrecognized actuarial losses and unrecognized prior service costs as well as the reversal of the accumulated other comprehensive loss before tax benefit.

Plan assets consist of cash and cash equivalents, common stock, U.S. Government securities, corporate debt and mutual funds, as well as other investments, and include certain commingled funds with some of Nortek’s defined benefit plans. The weighted average rate assumptions used in determining pension costs and the projected benefit obligation for the periods indicated are as follows:

The Combined Companies’ net periodic benefit expense (income) for their defined benefit plans for the periods indicated consists of the following components:

The Company’s pension plan weighted-average asset allocations at December 31, 2003 and 2002, by asset category are as follows:

Ply Gem’s domestic qualified defined benefit pension plan assets are invested to maximize returns without undue exposure to risk. The investment objectives are also to produce a total return exceeding the median of a universe of portfolios with similar average asset allocation and investment style objectives, and to earn a return, net of fees, greater or equal to the long-term rate of return used in the actuarial computations.

Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment managers. The plans’ asset allocation policies are consistent with the established investment objectives and risk tolerances. The asset allocation policies are developed by examining the historical relationships of risk and return among asset classes, and are designed to provide the highest

probability of meeting or exceeding the return objectives at the lowest possible risk. For 2004, the target allocation is 57% for equity securities, 41% for fixed income securities and 2% for cash.

At December 31, 2003, the Combined Companies and their subsidiaries are obligated under lease agreements for the rental of certain real estate and machinery and equipment used in their operations. Future minimum rental obligations aggregate approximately $9,469,000 at December 31, 2003. The obligations are payable as follows:

Certain of these lease agreements provide for increased payments based on changes in the consumer price index and may include renewal options. Rental expense charged to operations in the accompanying combined statement of operations was approximately $6,630,000, $143,000, $6,017,000 and $5,365,000 for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. Under certain of these lease agreements, the Combined Companies or their subsidiaries are also obligated to pay insurance and taxes.

Ply Gem has indemnified third parties in certain transactions involving dispositions of former subsidiaries. As of December 31, 2003 and 2002, Ply Gem has recorded liabilities in relation to these indemnifications of approximately $18,200,000 and $23,900,000, respectively consisting of the following:

The product claim liabilities of approximately $6,602,000 and $8,440,000 at December 31, 2003 and 2002, respectively, represent the estimated costs to resolve the outstanding matters related to a former subsidiary of Ply Gem, which is a defendant in a number of lawsuits alleging damage caused by alleged defects in certain pressure treated wood products. Ply Gem has indemnified the buyer of the former subsidiary for all known liabilities and future claims relating to such matters and retained the rights to all potential reimbursements related to insurance coverage. Many of the suits have been resolved by dismissal or settlement with amounts being paid out of insurance proceeds or other third party recoveries. Ply Gem and the former subsidiary continue to vigorously defend the remaining suits. Certain defense and indemnity costs are being paid out of insurance proceeds and proceeds from a settlement with suppliers of material used in the

production of the treated wood products. Ply Gem and the former subsidiary have engaged in coverage litigation with certain insurers and have settled coverage claims with several of the insurers. The Combined Companies believe that the remaining coverage disputes will be resolved on a satisfactory basis and additional coverage will be available. In reaching this belief, the Combined Companies analyzed insurance coverage and the status of the coverage litigation, considered the history of settlements with primary and excess insurers and consulted with counsel. The Combined Companies have recorded receivables at December 31, 2003 and 2002 of approximately $2,385,000 and $5,011,000, respectively, for the estimated recoveries, which are deemed probable of collection related to insurance litigation matters discussed above. During 2003, the Combined Companies settled certain of the insurance litigation matters and received approximately $4,113,000.

The long-term lease liabilities of approximately $6,226,000 and $8,427,000 at December 31, 2003 and 2002, respectively relate to the estimated amounts to be paid, net of any estimated recoveries where subleases are in place, primarily in connection with various facility leases where Ply Gem has retained the liability for the lease agreement in connection with the sale of certain former subsidiaries that utilized the facilities. Accrued costs include base rent, additional rent for consumer price index increases as defined in the leases, taxes, utilities, insurance, repairs and maintenance and, if applicable, the estimated settlement costs to terminate the leases prior to the end of their scheduled term. Consistent with generally accepted accounting provisions in the United States prior to December 31, 2002, the Combined Companies have recorded all long-term lease liabilities at the undiscounted gross amount expected to be paid to settle the liabilities in the future. Approximately $2,125,000 of these long-term lease liabilities were settled and paid during fiscal 2003.

The multiemployer pension liability of approximately $4,337,000 and $4,478,000 at December 31, 2003 and 2002, respectively, relates to liabilities assumed by Ply Gem in 1998 when its former subsidiary, Studley Products, Inc. (“Studley”) was sold. In connection with the sale, Studley ceased making contributions to the Production Service and Sales District Council Pension Fund (the “Pension Fund”) and Ply Gem assumed responsibility for all withdrawal liabilities to be assessed by the Pension Fund. Accordingly, Ply Gem is making quarterly payments of $89,747 to the Pension Fund through 2018 based upon the assessment of withdrawal liability received from the Pension Fund. The multiemployer pension liability represents the present value of the quarterly payment stream using a 6% discount rate as well as an estimate of additional amounts that may be assessed in the future by the Pension Fund under the contractual provisions of the Pension Fund.

Other indemnification liabilities of approximately $1,035,000 and $2,555,000 at December 31, 2003 and 2002, respectively, principally relate to the estimated amounts of various potential liabilities related to legal, environmental and other matters that may arise in connection with indemnification agreements provided in conjunction with the purchase and sale agreements for various subsidiaries, which Ply Gem has sold over the past several years.

Ply Gem has guaranteed certain obligations of various third parties that aggregate approximately $27,700,000 at December 31, 2003 related to Ply Gem’s guarantee of rental payments through June 30, 2016 under a facility leased by SNE Enterprises, Inc. (“SNE”), which was sold on September 21, 2001. The buyer of SNE has provided certain indemnifications and other rights to Ply Gem for any payments that it might be required to make pursuant to this guarantee. Should the buyer of SNE cease making payments then Ply Gem may be required to make payments on its guarantees. Ply Gem does not anticipate incurring any loss under these guarantees and accordingly has not recorded any liabilities at December 31, 2003 in the accompanying combined balance sheet in accordance with accounting principles generally accepted in the United States.

The Combined Companies sell a number of products and offer a number of warranties. The specific terms and conditions of these warranties vary depending on the product sold and country in which the product is sold. The Combined Companies estimate the costs that may be incurred under their warranties and record a liability for such costs at the time of sale. Factors that affect the Combined Companies’ warranty liabilities

include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Combined Companies periodically assess the adequacy of the recorded warranty claims and adjust the amounts as necessary.

Changes in the Combined Companies’ combined short-term and long-term warranty liabilities during the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002 are as follows:

The Combined Companies are subject to other contingencies, including legal proceedings and claims arising out of their businesses that cover a wide range of matters, including, among others, environmental matters, contract and employment claims, product liability, warranty and modification, adjustment or replacement of component parts of units sold, which may include product recalls. Product liability, environmental and other legal proceedings also include matters with respect to businesses previously owned. The Combined Companies have used various substances in their products and manufacturing operations, which have been or may be deemed to be hazardous or dangerous, and the extent of their potential liability, if any, under environmental, product liability and workers’ compensation statutes, rules, regulations and case law is unclear. Further, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no range of potential exposure may be reasonably estimated.

As of December 31, 2003, the Combined Companies have accrued approximately $1,800,000 to cover the estimated costs of known litigation claims, including the estimated cost of legal services, that the Combined Companies are contesting including certain employment and shareholder litigation related to Ply Gem.

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Combined Companies believe that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the combined financial position or results of operations of the Combined Companies. It is possible, however, that future results of operations for any particular future period could be materially affected by changes in the assumptions or strategies related to these contingencies or changes out of the Combined Companies’ control.

In connection with the Acquisition, Nortek has indemnified Ply Gem for certain liabilities as defined in the Purchase Agreement. In the event, Nortek were unable to satisfy amounts due under the indemnifications then Ply Gem would be liable. Ply Gem believes that Nortek has the financial capacity to honor the indemnifications and therefore does not anticipate incurring any losses related to liabilities indemnified under the Purchase Agreement.

Accrued expenses and taxes, net, consist of the following at December 31, 2003 and 2002:

Other long-term liabilities consist of the following at December 31, 2003 and 2002:

Effective January 1, 2003, the Combined Companies adopted SFAS No. 146 which addresses the accounting and reporting for costs associated with exit or disposal activities, nullifies EITF 94-3 and substantially nullifies EITF 88-10. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Combined Companies’ combined financial statements.

The Combined Companies incurred approximately $600,000 during the period from January 10, 2003 to December 31, 2003 of severance and other costs associated with the closure of a certain manufacturing facility and expect to incur additional future restructuring costs of less than $100,000 related to restructuring plans, which began to be implemented in the first quarter of 2003. The facility to be closed is owned by a subsidiary of the Combined Companies and is expected to be sold in 2004. The facility, which has an estimated fair value of approximately $2.6 million, was transferred to Nortek in the 4th quarter of 2003.

The following table sets forth restructuring activity in the accompanying combined balance sheet and combined statement of operations for the period from January 10, 2003 to December 31, 2003. There was no

material restructuring activity for the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001. The provisions for these costs are included primarily in selling, general and administrative expense, net in the accompanying combined statement of operations.

Employee separation expenses are comprised of severance, vacation, outplacement and retention bonus payments.

The Combined Companies operate in one segment and one customer accounted for approximately 28% of net sales for the combined periods from January 1, 2003 to January 9, 2003 and from January 10, 2003 to December 31, 2003 and 27% and 28% of the Combined Companies’ net sales for the years ended December 31, 2002 and 2001, respectively. The accounts receivable balance related to this customer was approximately $6,324,000 and $3,950,000 at December 31, 2003 and December 31, 2002, respectively.

For the year ended December 31, 2001, the Combined Companies recorded a non-taxable gain of approximately $3,200,000 from net death benefit insurance proceeds relating to life insurance maintained on former managers as a reduction of selling, general and administrative expense in the accompanying combined statement of operations.

For the year ended December 31, 2001, the Combined Companies charged approximately $600,000 of fees and expenses associated with Nortek’s material procurement strategy to selling, general and administrative expense in the accompanying combined statement of operations. Costs incurred in 2002 and 2003 were allocated through the management charge.

Financial instruments, which potentially subject the Combined Companies to concentrations of credit risk, consist principally of temporary cash investments and trade receivables. The Combined Companies place their temporary cash investments with high credit quality financial institutions and limit the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables, with the exception of the significant customer, are limited due to the large number of customers comprising the Combined Companies’ customer base and their dispersion across many different geographical regions.

The tables that follow summarize unaudited quarterly financial data for the years ended December 31, 2003 and December 31, 2002:


(1)	The first quarter ended April 5, 2003 represents the combined pre- and post-Recapitalization periods of January 1, 2003 to January 9, 2003 and January 10, 2003 to April 5, 2003, respectively.

In 2004, Ply Gem closed its Thermal-Gard, Inc. facilities in Punxatawney, Pennsylvania. The impact of the closure is not expected to have a material impact on the financial statements of the Combined Companies in 2004.

In connection with the financing of the Acquisition, Ply Gem sold $225 million of 9% Senior Subordinated Notes due 2012 (the “Notes”) and entered into a $255 million of new senior credit facilities consisting of a $65 million revolving credit facility and a $190 million term loan facility. The Notes are secured by guarantees from certain of Ply Gem’s subsidiaries. Accordingly, the following combining financial information is presented as of December 31, 2003 and 2002 and for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001:

We have audited the accompanying balance sheet of Ply Gem Holdings, Inc. as of January 23, 2004 (Inception). This balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on this balance sheet based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Ply Gem Holdings, Inc. as of January 23, 2004 (Inception), in conformity with accounting principles generally accepted in the United States.

Ply Gem Holdings, Inc. (Holdings) is a wholly owned subsidiary of Ply Gem Investment Holdings, Inc. Holdings was incorporated on January 23, 2004 to act as a holding company and for the purpose of acquiring Ply Gem Industries, Inc. Holdings has no other operations.

The preparation of a balance sheet in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51” (FIN 46). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements”, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and for existing variable interest entities no later than the end of the first annual reporting period beginning after December 15, 2003.

The adoption of FIN 46 is not expected to have a material impact on the Company’s results of operations or financial condition.

Holdings is authorized to issue up to 200 shares of capital stock, 100 shares each, of preferred and common stock. The board of directors is vested with the authority to designate the rights and limitations of the capital stock, including the dividend rate, the conversion rights, the redemption price, or liquidation preferences of the preferred shares at the time of their issuance. At January 23, 2004, no shares of preferred stock had been issued.

Shares of common stock are subordinated to shares of the preferred stock with respect to distributions upon liquidation.

On February 12, 2004, Holdings acquired all of the outstanding interests of Ply Gem Industries, Inc. in accordance with a stock purchase agreement entered into among Holdings, Nortek, and WDS LLC for an aggregate consideration of cash and assumed indebtedness of approximately $560 million. Transaction costs and expenses were approximately $30 million. In connection with the financing of the acquisition, Ply Gem Industries, Inc. sold $225 million of 9% Senior Subordinated Notes (Notes) due 2012 and entered into $255 million of new senior credit facilities consisting of a $65 million revolving credit facility and a $190 million term loan facility. The Notes are secured by guarantees from certain of Ply Gem Industries, Inc.’s subsidiaries and Holdings.

No person has been authorized to give any information or to make any representation other than those contained in this prospectus, and, if given or made, any information or representations must not be relied upon as having been authorized. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy these securities in any circumstances in which this offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made under this prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of Interline since the date of this prospectus or that the information contained in this prospectus is correct as of any time subsequent to its date.

Until , 2004, broker-dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the broker-dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Section 145 of the Delaware General Corporation Law (the “DGCL”) grants a Delaware corporation the power to indemnify any director, officer, employee or agent against reasonable expenses (including attorneys’ fees) incurred by him in connection with any proceeding brought by or on behalf of the corporation and against judgments, fines, settlements and reasonable expenses (including attorneys’ fees) incurred by him in connection with any other proceeding, if (a) 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 (b) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. Except as ordered by a court, however, no indemnification is to be made in connection with any proceeding brought by or in the right of the corporation where the person involved is adjudged to be liable to the corporation.

Article 7 of our amended and restated certificate of incorporation provides that we shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the corporation or, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person. Notwithstanding the preceding sentence, we shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the commencement of such proceeding (or part thereof) was authorized by our board of directors.

Section 102 of the DGCL permits the limitation of directors’ personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director except for (i) any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) breaches under section 174 of the DGCL, which relates to unlawful payments of dividends or unlawful stock repurchase or redemptions, and (iv) any transaction from which the director derived an improper personal benefit.

Article 7 of our amended and restated certificate of incorporation limits the personal liability of our directors to the fullest extent permitted by the DGCL.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

We maintain directors’ and officers’ liability insurance for our officers and directors.


	(a)	The following exhibits are being filed with this Registration Statement on Form S-4:

We have audited the combined financial statements of Ply Gem Industries, Inc. and subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada Inc. as of December 31, 2003 and 2002, and for the period January 10, 2003 to December 31, 2003, January 1, 2003 to January 9, 2003, and for each of the two years in the period ended December 31, 2002, and have issued our report thereon dated March 26, 2004 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 21b of this Registration Statement. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

(a) The undersigned registrants hereby undertake to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement.

(b) The undersigned registrants hereby undertake 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 Exchange Act of 1934 (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.

(c) The undersigned registrants hereby undertake 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.

(d) The undersigned registrants hereby undertake 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.

(e) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, the registrant duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kearney, State of Missouri, on March 30, 2004.


	By:	/s/ LEE D. MEYER



	Name: Lee D. Meyer
	Title: President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Lee D. Meyer or Shawn K. Poe or either of them his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate in connection therewith, granting unto such agent, proxy and attorney-in-fact full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact or any of their substitutes may lawfully do or cause to be done by virtue thereof.

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.


	By:	/s/ LEE D. MEYER



	Name: Lee D. Meyer
	Title: President and Chief Executive Officer

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.


*	To be filed by amendment.

EX-2.1 3 y95660exv2w1.txt STOCK PURCHASE AGREEMENT EXHIBIT 2.1 ----------- EXECUTION COPY -------------- ================================================================================ STOCK PURCHASE AGREEMENT AMONG CI INVESTMENT HOLDINGS, INC. AND NORTEK, INC. AND WDS LLC AS OF DECEMBER 19, 2003 ================================================================================ TABLE OF CONTENTS 1. PURCHASE AND SALE OF THE SHARES.......................................4 1.1. THE SHARES...................................................4 1.2. CONSIDERATION................................................4 1.3. THE CLOSING..................................................4 1.4. PURCHASE PRICE ADJUSTMENT....................................5 2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................7 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.................7 2.2. CHARTER DOCUMENTS............................................7 2.3. CAPITALIZATION...............................................8 2.4. AUTHORITY RELATIVE TO THIS AGREEMENT.........................8 2.5. TITLE TO SHARES..............................................8 2.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...................8 2.7. COMPLIANCE WITH LAW; PERMITS.................................9 2.8. FINANCIAL STATEMENTS........................................10 2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS........................10 2.10. NO UNDISCLOSED LIABILITIES..................................11 2.11. LITIGATION..................................................12 2.12. EMPLOYEE BENEFIT PLANS......................................12 2.13. EMPLOYER RELATIONS..........................................14 2.14. MATERIAL CONTRACTS..........................................15 2.15. SUFFICIENCY OF ASSETS.......................................16 2.16. TITLE TO PROPERTIES.........................................16 2.17. INSURANCE...................................................17 2.18. WARRANTY CLAIMS.............................................17 2.19. TRANSACTIONS WITH AFFILIATES................................17 2.20. TAXES.......................................................18 2.21. ENVIRONMENTAL MATTERS.......................................19 2.22. REAL ESTATE.................................................19 2.23. INTELLECTUAL PROPERTY.......................................20 2.24. BROKERS.....................................................21 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER..........................21 3.1. ORGANIZATION................................................21 3.2. AUTHORIZATION...............................................21 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS..................22 3.4. LITIGATION..................................................22 3.5. INVESTMENT REPRESENTATION...................................22 3.6. FINANCING...................................................23 3.7. BROKERS.....................................................23 4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER.................23 4.1. REPRESENTATIONS AND WARRANTIES..............................24 4.2. PERFORMANCE OF OBLIGATIONS..................................24 -i- 4.3. SELLERS' CERTIFICATE........................................24 4.4. NO MATERIAL ADVERSE EFFECT..................................24 4.5. INJUNCTIONS.................................................24 4.6. GOVERNMENTAL APPROVALS......................................24 4.7. FUNDING.....................................................24 4.8. RELEASE OF TRANSFERRED COMPANIES............................24 4.9. NO PROCEEDINGS..............................................25 4.10. TRANSITION SERVICES AGREEMENT...............................25 4.11. OPINION.....................................................25 4.12. TRANSFER OF CWD.............................................25 4.13. GENERAL.....................................................25 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS...................25 5.1. REPRESENTATIONS AND WARRANTIES..............................25 5.2. PERFORMANCE OF OBLIGATIONS..................................26 5.3. BUYER'S CERTIFICATE.........................................26 5.4. INJUNCTIONS.................................................26 5.5. GOVERNMENTAL APPROVALS......................................26 5.6. OPINION.....................................................26 5.7. GENERAL.....................................................26 6. COVENANTS OF THE PARTIES.............................................27 6.1. ACCESS TO PREMISES AND INFORMATION..........................27 6.2. CONDUCT OF BUSINESS PRIOR TO CLOSING........................27 6.3. REASONABLE EFFORTS..........................................28 6.4. CONFIDENTIALITY.............................................28 6.5. BUSINESS RECORDS............................................29 6.6. REGULATORY AUTHORIZATIONS AND CONSENTS; FILINGS UNDER HSR ACT; THIRD PARTY CONSENTS...............................29 6.7. NO SECTION 338 ELECTION.....................................30 6.8. WARN........................................................30 6.9. FURTHER ASSURANCES..........................................30 6.10. NOTIFICATION; SUPPLEMENTS TO DISCLOSURE LETTER..............30 6.11. CONFLICTS OF INTEREST.......................................31 6.12. TAX MATTERS.................................................31 6.13. TAX INDEMNIFICATION.........................................34 6.14. ACTIONS WITH RESPECT TO FINANCING...........................35 6.15. CLAIMS UNDER SELLER INSURANCE POLICIES......................37 6.16. RELEASE OF PARTIES AND THEIR AFFILIATES.....................37 6.17. PAYMENT IN FULL OF CERTAIN TRANSFERRED COMPANY INDEBTEDNESS.38 6.18. NO SOLICITATION OF ACQUISITION PROPOSALS....................38 6.19. NON-COMPETITION; NON-SOLICITATION...........................38 6.20. POST-CLOSING LIMITATIONS....................................40 6.21. PAYMENT OF YEAR END BONUSES.................................41 6.22. TRANSFER OF CWD.............................................41 6.23. POST-CLOSING ENVIRONMENTAL SAMPLING.........................41 -ii- 7. TERMINATION; EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.42 7.1. TERMINATION.................................................42 7.2. EFFECT OF TERMINATION.......................................43 8. SURVIVAL; GENERAL INDEMNIFICATION....................................43 8.1. SURVIVAL....................................................43 8.2. OBLIGATION OF THE SELLERS TO INDEMNIFY......................43 8.3. LIMITATIONS ON INDEMNIFICATION BY SELLERS...................45 8.4. OBLIGATION OF THE BUYER TO INDEMNIFY........................46 8.5. LIMITATIONS ON INDEMNIFICATION BY BUYER.....................46 8.6. PROCEDURE FOR INDEMNIFICATION...............................47 8.7. SOLE AND EXCLUSIVE REMEDY...................................49 8.8. TREATMENT OF INDEMNIFICATION PAYMENTS.......................50 9. DEFINITIONS..........................................................50 10. MISCELLANEOUS........................................................58 10.1. NOTICES.....................................................58 10.2. EXPENSES OF TRANSACTION.....................................59 10.3. ENTIRE AGREEMENT............................................59 10.4. SEVERABILITY................................................59 10.5. AMENDMENT; WAIVER...........................................59 10.6. PARTIES IN INTEREST.........................................59 10.7. ASSIGNMENT..................................................60 10.8. GOVERNING LAW...............................................60 10.9. CONSENT TO JURISDICTION.....................................60 10.10. WAIVER OF JURY TRIAL........................................60 10.11. RELIANCE....................................................61 10.12. SPECIFIC ENFORCEMENT........................................61 10.13. NO WAIVER...................................................61 10.14. INVESTIGATION; NO ADDITIONAL REPRESENTATIONS................61 10.15. NEGOTIATION OF AGREEMENT....................................61 10.16. CONSTRUCTION................................................61 10.17. HEADINGS....................................................62 10.18. COUNTERPARTS................................................62 10.19. USAGE.......................................................62 -iii- STOCK PURCHASE AGREEMENT ------------------------ THIS AGREEMENT (this "AGREEMENT") is made as of December 19, 2003 among CI INVESTMENT HOLDINGS, INC., a Delaware corporation (the "BUYER"), NORTEK, INC., a Delaware corporation ("NORTEK"), and WDS LLC, a Delaware limited liability company and a wholly-owned subsidiary of Nortek ("WDS" and, together with Nortek, the "Sellers"). WHEREAS, WDS owns all of the outstanding shares (the "SHARES") of capital stock of PLY GEM INDUSTRIES, INC., a Delaware corporation ("PLY GEM" and, together with its Subsidiaries listed in Section 2.1 of the Disclosure Letter as of the Closing Date, the "TRANSFERRED COMPANIES"); and WHEREAS, this Agreement contemplates a transaction in which the Buyer will purchase from WDS, and WDS will sell to the Buyer, all of the Shares in exchange for the Purchase Price (as defined below); NOW, THEREFORE, in consideration of these premises, the respective covenants of the Buyer and the Sellers set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. PURCHASE AND SALE OF THE SHARES. 1.1. THE SHARES. Subject to compliance with all the terms and conditions of this Agreement and in reliance on the representations and warranties set forth herein, WDS agrees to sell to the Buyer, and the Buyer agrees to purchase from WDS, at the Closing (as defined below) all of the Shares for the Purchase Price. 1.2. CONSIDERATION. Subject to any increase under Section 6.2 hereof, the consideration to be paid by the Buyer to WDS for the Shares shall be cash in the total amount (the "PURCHASE PRICE") of $560,000,000 MINUS the aggregate principal amount of the Indebtedness listed in EXHIBIT 6.17 outstanding at the Closing MINUS the aggregate of the Stock Option Adjustment Amounts for all Class A Stock Options cancelled in connection with the transactions contemplated hereby. 1.3. THE CLOSING. Subject to the terms and conditions of this Agreement (including without limitation the provisions of Sections 4 and 5 hereof), the closing of the transactions contemplated hereby (the "CLOSING") shall be held at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York, as soon as practicable following the satisfaction or waiver by the applicable party of all of the conditions to the Closing set forth in Sections 4 and 5, including without limitation the termination or expiration of the waiting period (including any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and in any event within three business days following such satisfaction or waiver (the actual day on which the Closing takes place being referred to herein as the "CLOSING DATE"). The Closing shall take place at 10:00 a.m. local time on the Closing Date. Subject to the terms and conditions of this Agreement, at the Closing the following transactions will take place: -4- (a) WDS will deliver to the Buyer a stock certificate or certificates representing all of the Shares, together with a separate stock power or powers duly executed in blank, in proper form for transfer, and with all appropriate stock transfer stamps affixed; (b) The Buyer will deliver to WDS the Purchase Price by wire transfer of immediately available funds to an account specified by the Sellers at least two business days prior to the Closing; and (c) Each party will deliver to the other such certificates and other documents as are contemplated hereby or as may reasonably be requested by the other party to evidence compliance with the terms hereof. 1.4. PURCHASE PRICE ADJUSTMENT. (a) As soon as practicable and in any event not later than sixty (60) days after the Closing Date, the Sellers shall cause Ernst & Young LLP, or such other nationally recognized independent accounting firm chosen by the Sellers, at the expense of the Transferred Companies, to prepare and deliver to the Sellers and the Buyer a balance sheet for Ply Gem as of immediately prior to the Closing (the "CLOSING BALANCE SHEET"), together with a statement (the "STATEMENT") setting forth in reasonable detail the determination of the Net Working Capital of Ply Gem based upon amounts set forth on the Closing Balance Sheet (the "CLOSING NET WORKING CAPITAL"). The Buyer shall cause the Transferred Companies to give the Sellers and their authorized representatives reasonable access to all books, records, personnel, offices and other facilities and properties of the Transferred Companies and their accountants as the Sellers may require to prepare the Closing Balance Sheet and the Statement. The Closing Balance Sheet and the Statement shall be prepared in accordance with GAAP, applied in a manner consistent with the preparation of the Financial Statements. The Closing Balance Sheet and the Statement shall be final and binding on the Buyer and the Sellers, subject to the process of objection provided in this Section 1.4 below. (b) The Buyer may dispute the amounts reflected on the Closing Balance Sheet and Statement, but only on the basis that (1) the Closing Balance Sheet and the Statement have not been prepared in accordance with the provisions of Section 1.4(a) or (2) there has been an error in mathematical calculation relating to the Statement. If the Buyer disagrees with the amount of the Closing Net Working Capital on such basis, the Buyer may, within thirty (30) days after the deliveries of the Closing Balance Sheet and the Statement, deliver a notice to the Sellers (the "DISPUTE NOTICE") setting forth the Buyer's calculation of the Closing Net Working Capital and specifying, in reasonable detail, those items or amounts in the Closing Balance Sheet and Statement affecting the calculation of the Closing Net Working Capital as to which it disagrees and the reasons for such disagreement. If prior to the conclusion of such 30-day period the Buyer notifies the Sellers in writing that it will not provide any Dispute Notice or if no Dispute Notice is delivered within such 30-day period, the Closing Net Working Capital, as set forth on the Statement, shall become final, conclusive and binding on the parties hereto for all purposes of this Section 1.4. -5- (c) If the Buyer delivers a Dispute Notice to the Sellers within the 30-day period described above, the parties shall use reasonable efforts to reach agreement on the disputed items or amounts in order to determine the Closing Net Working Capital. If the Sellers and the Buyer do not resolve all disputed items or amounts set forth in the Dispute Notice within fifteen (15) days after delivery of a Dispute Notice, the remaining disputed items and amounts will be submitted to a nationally recognized independent accounting firm in the U.S. mutually agreed to by the Buyer and the Sellers (the "INDEPENDENT ACCOUNTANTS") for resolution of such disputed items and amounts. The parties will have the opportunity to present their positions with respect to such disputed items and amounts to the Independent Accountants, and such disputed items and amounts shall be resolved by the Independent Accountants in accordance with the requirements of Section 1.4(a). The Independent Accountants shall prepare a written report setting forth the resolution of such disputed items and amounts and calculating the revised amount of Closing Net Working Capital, which shall be delivered to each of the Sellers and the Buyer promptly, but in no event later than thirty (30) days after such disputed items and amounts are submitted to the Independent Accountants. Such revised amount of Closing Net Working Capital shall not reflect any difference from the amount of Closing Net Working Capital set forth on the Statement other than differences required to reflect the resolution of such disputed items and amounts by the Independent Accountants. The revised amount of Closing Net Working Capital set forth on the Independent Accountants' written report shall be final, conclusive and binding upon the Sellers and the Buyer. The procedures set forth in this Agreement for resolution of disputes concerning the Closing Net Working Capital shall be final and binding on all of the parties, and shall not be subject to appeal of any kind. The fees and disbursements of the Independent Accountants shall be allocated between the Buyer, on the one hand, and the Sellers, on the other hand, such that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of the disputed items and amounts submitted by the Buyer to the Independent Accountants that are unsuccessfully disputed by the Buyer (as finally determined by the Independent Accountants) bears to the total amount of such disputed items and amounts so submitted by the Buyer to the Independent Accountants. Each of the Sellers and the Buyer shall execute a reasonably acceptable engagement letter, if requested to do so by the Independent Accountants, and shall provide reasonable access to their respective employees who are responsible for financial matters and in the case of the Buyer, to the books and records of the Transferred Companies. (d) If the Closing Net Working Capital, as finally determined in accordance with this Section 1.4, is less than $47,668,000 (the "TARGET NET WORKING CAPITAL"), the Sellers shall pay, within five (5) business days after the final determination of the Closing Net Working Capital, an amount to the Buyer equal to such difference. If the Closing Net Working Capital, as finally determined in accordance with this Section 1.4, is more than the Target Net Working Capital, the Buyer shall pay, within five (5) business days after the final determination of the Closing Net Working Capital, an amount to WDS equal to such difference. Any payment made pursuant to this Section 1.4 shall be made by wire transfer of immediately available funds to an account designated by the payee, and shall be deemed by the parties to be an adjustment to the Purchase Price. The amount of any such payment due under this Section 1.4(d) shall bear interest at the rate of 6% per annum from and including the Closing Date through the date of payment. -6- 2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. In order to induce the Buyer to enter into and perform this Agreement and to consummate the transactions contemplated hereby, the Sellers jointly and severally represent and warrant to the Buyer that: 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the Transferred Companies and Nortek is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all corporate power and authority necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. WDS is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all limited liability company power and authority necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. Each of the Transferred Companies is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties and assets owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for any such failure to be so duly qualified or licensed and in good standing that has not had a Material Adverse Effect. A true and complete list of all Subsidiaries of Ply Gem, together with the jurisdiction of incorporation and the authorized capitalization of each such Subsidiary, and the percentage of each such Subsidiary's outstanding capital stock owned by Ply Gem or another such Subsidiary, is set forth in Section 2.1 of the disclosure letter delivered simultaneously with the execution and delivery of this Agreement (the "DISCLOSURE LETTER"). All of the outstanding shares of capital stock of each of the Subsidiaries of Ply Gem are duly authorized, validly issued, fully paid and nonassessable, and were issued in compliance with the registration and qualification requirements of all applicable securities Laws and all applicable Contracts, and all of such shares owned by Ply Gem or another such Subsidiary are owned free and clear of all Liens. Except for the Subsidiaries of Ply Gem set forth in Section 2.1 of the Disclosure Letter, none of the Transferred Companies owns any equity interest in, or any security which by its terms is convertible into or exchangeable or exercisable for, or any option, warrant or other right to purchase, or is a party to any agreement, arrangement or commitment to purchase, any equity interest in, any corporation, partnership, joint venture or other business association or entity, and there are no commitments, arrangements, undertakings or obligations of any of the Transferred Companies to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Person that is not a Subsidiary set forth in Section 2.1 of the Disclosure Letter. 2.2. CHARTER DOCUMENTS. The Sellers have heretofore made available to the Buyer a complete and correct copy of the Charter of each of the Transferred Companies as in effect on the date of this Agreement. The Charters of each of the Transferred Companies are in full force and effect and no Transferred Company is in violation of any of the provisions of its Charter. The minute books (or comparable records) of each of the -7- Transferred Companies have heretofore been made available to the Buyer, have been maintained in the Ordinary Course of Business, and accurately reflect in all material respects all transactions and actions referred to in such minutes and consents in lieu of meetings. The stock books (or comparable records) of each of the Transferred Companies have heretofore been made available to the Buyer and are true and complete in all material respects. 2.3. CAPITALIZATION. The authorized capital stock of Ply Gem consists of 3,000 shares of common stock, $0.01 par value. As of the date hereof, 100 shares of common stock of Ply Gem are issued and outstanding, all of which are validly issued, fully paid and nonassessable, and were issued in compliance with the registration and qualification requirements of all applicable securities Laws and all applicable Contracts. Except as set forth in the preceding sentence, no shares of capital stock or other voting securities of Ply Gem are issued, reserved for issuance or outstanding. There are no options, warrants or other rights, securities, agreements, arrangements or commitments of any character obligating the Sellers or any Transferred Company to issue, transfer, grant or sell any shares of capital stock of, or other equity interests in, any Transferred Company. There are no bonds, debentures, notes or other indebtedness of any Transferred Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of any Transferred Company are required to vote. 2.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Sellers have all necessary power and authority (corporate or otherwise) to execute and deliver this Agreement and to perform their respective obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate or limited liability company action on the part of the Sellers. This Agreement has been duly and validly executed and delivered by the Sellers, and assuming the due authorization, execution and delivery by the Buyer, constitutes a legal, valid and binding obligation of the Sellers, enforceable against the Sellers in accordance with its terms. 2.5. TITLE TO SHARES. WDS is the sole record and beneficial owner of, and has good and valid title to, the Shares free and clear of any Lien, except for restrictions on transfer imposed by applicable securities Laws. Upon delivery to the Buyer of the stock certificates representing the Shares and payment for the Shares at the Closing as provided in this Agreement, WDS will convey to the Buyer good and valid title to the Shares, free and clear of any Lien, other than those created by the Buyer and restrictions on transfer imposed by applicable securities Laws. 2.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except as set forth in Section 2.6(a) of the Disclosure Letter, the execution and delivery of this Agreement by the Sellers do not, and the performance of this Agreement by the Sellers and the consummation of the transactions contemplated hereby will not, (i) violate the Charter of either Seller, (ii) violate the Charter of any Transferred Company, (iii) contravene, conflict with or result in a violation of, or constitute a failure to comply with, any Laws or Orders applicable to the Shares or any Transferred Company or the Sellers or by which any properties or assets owned or used by any Transferred Company are bound or affected, (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify any Permit that is held by -8- any Transferred Company or that otherwise relates to the business of, or any of the properties or assets owned or used by, any Transferred Company, or (v) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to third parties any rights of consent, termination, amendment, modification, acceleration or cancellation of, or result in the loss of any property, rights or benefits under, or result in the imposition of any additional obligations under, or result in the creation of a Lien on the Shares or any of the properties or assets owned or used by any Transferred Company pursuant to any Contract to which any Transferred Company or Seller is a party or by which the Shares or any Transferred Company or Seller or any properties or assets owned or used by any Transferred Company or Seller are bound or affected, except as to clauses (iii), (iv) and (v) above for any such violation, breach, default, right, alteration or other occurrence that would not reasonably be expected to have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Sellers do not, and the performance of this Agreement by the Sellers and the consummation of the transactions contemplated hereby will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority to be obtained or made by the Sellers or any Transferred Company except (i) for compliance with applicable disclosure requirements, if any, under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE ACT"), and compliance with the pre-merger notification requirements of the HSR Act and any similar foreign Laws listed in Section 2.6(b) of the Disclosure Letter and (ii) where the failure to obtain any such consent, approval, authorization or permit, or to make any such filing or notification, would not reasonably be expected to have a material adverse effect on the ability of the Sellers to perform their obligations under this Agreement and would not reasonably be expected to have a Material Adverse Effect. 2.7. COMPLIANCE WITH LAW; PERMITS. Except as set forth in Section 2.7 of the Disclosure Letter: (a) Since January 1, 2001, each Transferred Company has been in compliance with all Laws and Orders applicable to the Shares or any Transferred Company or by which any properties or assets owned or used by any Transferred Company is bound or affected, except for any failures to comply which would not reasonably be expected to have a Material Adverse Effect. Since January 1, 2001, no Transferred Company and no Seller has received any written notice from any Governmental Authority regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any Law or Order applicable to the Shares or any Transferred Company or by which any properties or assets owned or used by any Transferred Company are bound or affected, or (B) any actual, alleged, possible or potential obligation on the part of any Transferred Company to undertake, or to bear all or any portion of the cost of, any remedial action, which, in the case of either clause (A) or clause (B), if such violation, failure to comply or obligation were determined to be valid and enforceable, would reasonably be expected to have a Material Adverse Effect. -9- (b) The Transferred Companies hold all of the Permits necessary to permit each Transferred Company to lawfully conduct and operate its business in the manner in which such business is currently conducted and to own and use its properties and assets in which such properties and assets are currently owned and used, except for any failure to hold any Permit which would not reasonably be expected to have a Material Adverse Effect (the Permits so held being collectively referred to herein as the "TRANSFERRED COMPANY MATERIAL PERMITS"). Section 2.7 of the Disclosure Letter sets forth a true and complete list of each Transferred Company Material Permit. Each Transferred Company Material Permit is valid and in full force and effect and, since January 1, 2001, except as would not reasonably be expected to have a Material Adverse Effect, (i) each Transferred Company has been in compliance with all of the terms and requirements of each Transferred Company Material Permit, and (ii) no Transferred Company and no Seller has received any written notice from any Governmental Authority regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with any term or requirement of any Transferred Company Material Permit, or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Transferred Company Material Permit. Except as would not reasonably be expected to have a Material Adverse Effect, all applications required to have been filed for the renewal of any Transferred Company Material Permit have been duly filed on a timely basis with the appropriate Governmental Authorities, and all other material filings required to have been made with respect to the Transferred Company Material Permits have been duly made on a timely basis with the appropriate Governmental Authorities. 2.8. FINANCIAL STATEMENTS. The Sellers have furnished the Buyer with copies of the following financial statements of Ply Gem and its Subsidiaries and CWD Windows & Doors, a division of Broan-Nutone Canada Inc.: (a) the audited balance sheets as of December 31, 2002 and 2001 (the "AUDITED BALANCE SHEETS") and the statements of operations and cash flow for the fiscal years ended December 31, 2002, 2001 and 2000, including the accompanying notes, which contain the unqualified report of Ernst & Young LLP (collectively the "AUDITED FINANCIAL STATEMENTS"); and (b) the unaudited balance sheet as of October 4, 2003 (the "MOST RECENT BALANCE Sheet") and the related statement of operations, and cash flow for the nine-month period ended on such date, including the accompanying notes (collectively, the "INTERIM FINANCIAL STATEMENTS" and, together with the Audited Financial Statements, the "FINANCIAL STATEMENTS"). The Financial Statements (i) present fairly in all material respects the financial position of the Transferred Companies and the results of operations of the Transferred Companies as of the respective dates thereof and for the periods covered thereby and (ii) were prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby (except as disclosed therein). The Interim Financial Statements have been prepared on a basis consistent with that of the Audited Financial Statements (except as disclosed in the Interim Financial Statements) and have been reviewed by Ernst & Young LLP in accordance with Statement on Auditing Standards No. 100. 2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section 2.9 of the Disclosure Letter, since the date of the Most Recent Balance Sheet, each Transferred Company has conducted its business in the Ordinary Course of Business and there has not occurred: -10- (a) any Material Adverse Effect or any event or circumstance that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (b) any change by any of the Transferred Companies in accounting methods, principles or practices, except as may be required by GAAP and as disclosed in the Interim Financial Statements; (c) any sale of or grant or other creation of any Lien (other than Liens that will be discharged at Closing) on any property or assets owned or used by any Transferred Company with a value in excess of $500,000, except in the Ordinary Course of Business; (d) any (i) increase in the salary or other compensation payable to any of the employees, directors, officers or consultants of any Transferred Company, other than customary compensation increases awarded in the Ordinary Course of Business, (ii) payment or commitment to pay any bonus, or other additional salary or compensation to any of the employees, directors, officers or consultants of any Transferred Company, other than the payment or commitment to pay bonuses or other additional salary or compensation in the Ordinary Course of Business, (iii) grant of any severance or termination pay to any of the employees, directors, officers or consultants of any Transferred Company, other than pursuant to Transferred Company Plans, or (iv) increase of any benefits payable under any existing severance or termination pay policies or employment agreements with any of the employees, directors, officers or consultants of any Transferred Company, other than pursuant to Transferred Company Plans; (e) any one or more related capital expenditures by any Transferred Company involving more than $500,000 in the aggregate; (f) any payment of any material Liabilities of any Transferred Company otherwise than in the Ordinary Course of Business; (g) any cancellation or waiver by any Transferred Company of any claim or right which is material to the Transferred Companies considered as a whole or any cancellation or waiver outside the Ordinary Course of Business by any Transferred Company of any claim or right with a value to any Transferred Company in excess of $500,000; (h) any termination (other than by expiration in accordance with its terms), amendment or modification of any Contract which would have been required to be listed on Section 2.14 of the Disclosure Letter if the date of this Agreement was the date of the Most Recent Balance Sheet; (i) any damage resulting from a single event to any properties or assets owned or used by any Transferred Company with a value in excess of $500,000; (j) any abandonment or cancellation of any Intellectual Property Rights which are material to the Transferred Companies considered as a whole; (k) any incurrence, assumption or guaranty by any Transferred Company of any Indebtedness of any kind, other than Indebtedness which is incurred in the Ordinary Course of Business, (l) any amendment of the Charter of any of the Transferred Companies; (m) any split, combination, reclassification, or other modification of the terms of the capital stock of any Transferred Company; (n) any issuance or sale of any shares of capital stock of any Transferred Company or any security or obligation which by its terms is convertible into or exchangeable for, or any option, warrant or other right to purchase any such capital stock; (o) any merger or consolidation with any Person or any acquisition of any capital stock or business of any Person, or any consummation of any other business combination transaction, in each case, whether in a single transaction or series of related transactions; or (p) any agreement by any of the Transferred Companies to do any of the foregoing. 2.10. NO UNDISCLOSED LIABILITIES. The Transferred Companies do not have any liabilities, whether absolute, accrued, known, choate, contingent or otherwise, except: (a) liabilities fully and adequately reflected or reserved against on the face of the Most Recent Balance Sheet, (b) liabilities incurred since the date of the Most Recent Balance Sheet in the -11- Ordinary Course of Business, (c) liabilities that are the subject of another representation or warranty set forth in this Section 2 and are disclosed pursuant to such other representation or warranty or are not required to be so disclosed, whether because such other representation or warranty is limited or qualified with respect to time, dollar amount, Knowledge of the Sellers, materiality, Material Adverse Effect or any similar qualification, (d) liabilities disclosed in Section 2.10 of the Disclosure Letter, (e) liabilities under, or incurred in connection with, this Agreement, and (f) liabilities which would not reasonably be expected to have a Material Adverse Effect. 2.11. LITIGATION. Except as set forth in Section 2.11 of the Disclosure Letter, there are no Proceedings pending or, to the Knowledge of the Sellers, threatened against any of the Transferred Companies, by or before any Governmental Authority, other than any Proceedings which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, to the Knowledge of the Sellers, there are no outstanding Orders of any Governmental Authority (a) against or involving any Transferred Company or any of their respective businesses or any of their respective properties or assets, owned, leased or operated, which Orders have continuing obligations that have not to date been fully satisfied or (b) against or involving any officer or director of any Transferred Company that prohibit such officer or director from engaging in or continuing any material conduct, activity or practice relating to the business of any Transferred Company. 2.12. EMPLOYEE BENEFIT PLANS. (a) Section 2.12(a) of the Disclosure Letter contains a list of all material "employee pension benefit plans" (as defined in Section 3(2) of ERISA), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and each other material severance or termination pay, incentive or deferred compensation, bonus, stock purchase or option, phantom stock or other equity-based compensation or change-in control plan, policy, arrangement or agreement, whether written or oral (each, a "PLAN"), maintained or contributed to by any Transferred Company for the benefit of any United States employee or former employee of any Transferred Company (all such Plans being referred to herein as "TRANSFERRED COMPANY PLANS"). The Sellers have made available to the Buyer copies of (i) each written Transferred Company Plan, (ii) for each Transferred Company Plan, to the extent applicable, the most recent (A) annual report on Form 5500 filed with the Internal Revenue Service, (B) audited financial statements, and (C) actuarial reports, (iii) the most recent summary plan description and summary of material modification for each Transferred Company Plan for which such summary plan description or summary of material modifications is required and (iv) each trust agreement, group annuity contract or other funding instrument relating to any Transferred Company Plan, if any. No Transferred Company has any liability for any Plan other than a Transferred Company Plan, except as would not reasonably be expected to have a Material Adverse Effect. No Transferred Company has made any legally enforceable agreement to modify the terms of any Transferred Company Plan, other than such changes or amendments as may be required by applicable Law or are made in the Ordinary Course of Business. -12- (b) All Transferred Company Plans are in compliance in all respects with their terms and applicable Law (including, where applicable, the Code and ERISA), except where the failure to be in compliance has not had or would not reasonably be expected to have a Material Adverse Effect. Each Transferred Company Plan that is intended to be tax-qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS to the effect that the Transferred Company Plan satisfies the requirements of Section 401(a) of the Code and that its related trust is exempt from taxation under Section 501(a) of the Code and, to the Knowledge of the Sellers, there are no facts or circumstances that would reasonably be expected to cause the loss of such qualification, except such facts and circumstances that may be corrected pursuant to Rev. Proc. 2003-44 without liability that would have or would reasonably be expected to have a Material Adverse Effect. There is no pending or, to the Knowledge of the Sellers, threatened lawsuit, material claim, lien or other material claim or controversy relating to any Transferred Company Plan, other than claims for benefits in the normal course. (c) Except as set forth in Section 2.12(c) of the Disclosure Letter, neither any Transferred Company nor any corporation, trust, partnership or other entity that would be considered as a single employer with a Transferred Company under Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m), or (o) of the Code (such corporation, trusts, partnerships or other entities being referred to as "ERISA AFFILIATES") maintains or contributes to, or within the preceding six years has maintained or contributed to or had any obligation to maintain or contribute to, any employee benefit plan subject to Title IV of ERISA or Section 412 of the Code (any such plan, a "COMPANY PENSION PLAN"). No Transferred Company, officer of any Transferred Company or any of the Transferred Company Plans which are subject to ERISA, including the Company Pension Plans, any trusts created thereunder or any trustee or administrator thereof, has engaged in a nonexempt "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that could subject any Transferred Company or any officer of any Transferred Company to any material tax or penalty on prohibited transactions imposed by such Section 4975 or to any material liability under Section 502(i) or 502(1) of ERISA. (d) Except as set forth in Section 2.12(d) of the Disclosure Letter, neither any Transferred Company nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any material liability under Title IV of ERISA that has not been satisfied in full and for which a Transferred Company would, or would reasonably be expected to, incur any material liability, other than liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC"). The PBGC has not instituted proceedings to terminate any Company Pension Plan (except multi-employer plans, as such term is defined in Section 3(37) of ERISA, each a "MULTIEMPLOYER PLAN") and, to the Knowledge of the Sellers, no condition exists that presents a material risk that such proceedings will be instituted. (e) Except as set forth in Section 2.12(e) of the Disclosure Letter, neither any Transferred Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability that has not been satisfied in full in connection a Multiemployer Plan on account of a "complete withdrawal" or "partial withdrawal" as such terms are respectively defined in sections 4203 and 4205 of ERISA. -13- (f) With respect to any Transferred Company Plans that are "employee welfare benefit plans" within the meaning of ERISA Section 3(1), (i) all such Transferred Company Plans are unfunded and no such Transferred Company Plan is funded through a "welfare benefits fund" (as such term is defined in Section 419(e) of the Code) and (ii) each such Transferred Company Plan that is a "group health plan" (as such term is defined in Section 5000(b)(1) of the Code), complies in all material respects with the applicable requirements of Section 4980B(f) of the Code. (g) Except as set forth in Section 2.12(g) of the Disclosure Letter, no Transferred Company has any obligation to provide retiree medical or other post-employment welfare benefits to any person (other than health care continuation coverage as required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). (h) Except as set forth in Section 2.12(h) of the Disclosure Letter, the consummation of the transactions contemplated by this Agreement will not entitle any current or former employee of the Transferred Company to severance benefits or any other payment (including, without limitation, "excess parachute payments" as such term is defined in Section 280G of the Code) or cause the acceleration or vesting of any payment or benefits under any Transferred Company Plan. (i) Except as set forth in Section 2.12(i) of the Disclosure Letter, with respect to any plan, policy, arrangement or agreement that would be a Transferred Company Plan but for the fact that it is not for the benefit of any United States employee or former employee (the "FOREIGN PLANS"): (i) each such plan has been administered in accordance with its terms and complies with the requirements prescribed by any and all laws, except such failure to do so as would not reasonably be expected to have a Material Adverse Effect. The Sellers have made available to the Buyer true and complete copies of the material documents relating to the Foreign Plans. There is no pending or, to the Knowledge of the Sellers, threatened lawsuit, material claim or other material controversy relating to any Foreign Plan, other than claims for benefits in the normal course; and (ii) all employer and employee contributions to each Foreign Plan required by law or by the terms of such Foreign Plan have been made, or, if applicable, accrued in accordance with normal accounting practices, except such failures to contribute or accrue as would not have a Material Adverse Effect. 2.13. EMPLOYER RELATIONS. Except as disclosed in the Section 2.13 of the Disclosure Letter, no employee of any Transferred Company is represented by a union, and, to the Knowledge of the Sellers, no union organizing efforts have been conducted since January 1, 2001 or are now being conducted. Except as disclosed in Section 2.13 of the Disclosure Letter, no Transferred Company has at any time since January 1, 2001 had, nor to the Knowledge of the Sellers is there now threatened, any material strike, picket, work stoppage, work slowdown or similar labor dispute involving the operations of employees of any Transferred Company. -14- 2.14. MATERIAL CONTRACTS. (a) Section 2.14 of the Disclosure Letter includes a true and complete list of all of the following Contracts to which any Transferred Company is a party or by which any Transferred Company or any properties or assets owned or used by any Transferred Company are bound or affected (each of the Contracts listed on Section 2.14 of the Disclosure Letter shall be referred to herein collectively as the "TRANSFERRED COMPANY MATERIAL CONTRACTS"): (i) Any and all Contracts (other than the Transferred Company Plans) with any current or former officer, director, shareholder, employee, consultant or other agent of any Transferred Company or any Affiliate of any of the foregoing, in each case which are likely to involve payments by or on behalf of the Transferred Companies in excess of $250,000 in any year; (ii) Any and all other Contracts (other than the Transferred Company Plans) with any current or former officer, director, shareholder, employee, consultant or other agent of any Transferred Company or any Affiliate of any of the foregoing, which are subject, upon consummation of the sale of the Shares, to acceleration of benefits having a cost to the Transferred Companies in excess of $250,000 with respect to such Person; (iii) All Contracts entered into on or after January 1, 1998 to sell or otherwise dispose of any assets having a fair market value in excess of $2,000,000, except sales of inventory in the Ordinary Course of Business; (iv) All Contracts pursuant to which any Transferred Company has any obligation for Indebtedness (including any guarantee thereof); (v) All Contracts pursuant to which any Transferred Company may be expected to perform services or deliver goods with a value in excess of $2,500,000 in any year, except for customer purchase orders issued or received in the Ordinary Course of Business; (vi) All Contracts pursuant to which the Transferred Companies may be obligated to pay for goods and services to be delivered or performed in excess of $2,500,000 in any year, except for purchase orders issued in the Ordinary Course of Business; (vii) Each joint venture agreement, partnership agreement, and limited liability company agreement and each other Contract (however named) involving a sharing of profits, losses, costs or liabilities with any other Person, if such agreement or Contract is material to the Transferred Companies considered as a whole; (viii) Each Contract (or series of related Contracts with Affiliated Persons) requiring capital expenditures from and after the date of this Agreement by any Transferred Company in excess of $500,000 in any year; -15- (ix) Each Contract which contains a restriction on any Transferred Company involving competing with a third party in the business of any Transferred Company; (x) Each Contract not otherwise described in this Section 2.14(a) that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of any Transferred Company in excess of $500,000; (xi) Each Contract with any labor union or other employee representative of a group of employees relating to wages, hours and other conditions of employment; and (xii) Each amendment, supplement and modification (whether oral or written) in respect of any of the foregoing. (b) Since January 1, 2001, except as would not reasonably be expected to have a Material Adverse Effect, (i) each Transferred Company has been in compliance with all applicable terms and requirements of each Transferred Company Material Contract, (ii) to the Knowledge of the Sellers, each other Person that is a party to any Transferred Company Material Contract has been in compliance with all applicable terms and requirements to such Contract and (iii) no Transferred Company has given to or received from any other Person any written notice regarding any actual, alleged, possible or potential violation or breach of, or default under, or any threat to terminate, any Transferred Company Material Contract. 2.15. SUFFICIENCY OF ASSETS. The facilities, machinery, equipment, furniture, fixtures, vehicles, any related capitalized items and other property of every sort and kind which the Transferred Companies own or have valid rights to use are sufficient for the continued conduct and operation of the businesses of the Transferred Companies considered as a whole after the Closing in the same manner in all material respects as conducted and operated prior to the Closing (assuming for this purpose receipt of any consents or waivers required under any Contracts as a result of the transactions contemplated hereby). 2.16. TITLE TO PROPERTIES. The Transferred Companies own outright and have good, valid and marketable title to all the properties and assets (whether real, personal or mixed and whether tangible or intangible) which are material to the Transferred Companies, considered as a whole, that they purport to own, including all of the properties and assets reflected on the Most Recent Balance Sheet and all of the properties and assets purchased or otherwise acquired by any Transferred Company since the date of the Most Recent Balance Sheet (but not including, however, property sold since the date of the Most Recent Balance Sheet in the Ordinary Course of Business), in each case free and clear of any Lien, except for (a) mortgages or security interests shown on the Audited Balance Sheets or the Most Recent Balance Sheet as securing specified liabilities with respect to which no material default (or event or circumstance that, with or without notice or lapse of time or both, would constitute a material default) exists; (b) mortgages or security interests incurred in connection with the purchase of property or assets in the Ordinary Course of Business after the date of the Most Recent Balance Sheet with respect to which no material default (or event or circumstance that, with or without notice or lapse of -16- time or both, would constitute a material default) exists (such mortgages and security interests being limited to the property or assets so acquired); (c) Liens securing Taxes, assessments, governmental charges or levies, all of which are not yet due and payable or are being contested in good faith, so long as such contest does not involve any substantial danger of the sale, forfeiture or loss of any assets; (d) inchoate workmen's, warehousemen's and similar Liens arising or incurred in the Ordinary Course of Business that, except to the extent reserved against on the Closing Balance Sheet, secure amounts that are either (i) not past due and payable or (ii) are being contested in good faith; (e) Liens that will be discharged in accordance with Section 4.8; and (f) Liens set forth on Section 2.16 of the Disclosure Letter. 2.17. INSURANCE. Section 2.17 of the Disclosure Letter contains a summary of the coverage provided under all policies or binders of fire, liability, product liability, umbrella liability, real and personal property, worker's compensation, vehicular, directors and officers liability, fiduciary liability and other insurance covering occurrences after January 1, 2001 to which any Transferred Company is a party or under which any Transferred Company, or any director or other fiduciary of any Transferred Company, is or has been covered at any time since January 1, 2001, and true and complete copies of such policies or binders have been made available to the Buyer. Such policies and binders are valid and binding in accordance with their terms and are in full force and effect. Neither the Sellers nor any Transferred Company is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such policy or binder. Except as would not reasonably be expected to have a Material Adverse Effect, neither the Sellers nor any Transferred Company has failed to give any notice or present any claim under any such policy or binder in due and timely fashion. Except as set forth in Section 2.17 of the Disclosure Letter, neither the Sellers nor any Transferred Company has received (x) any refusal of coverage or (y) any notice of cancellation or non-renewal of any such policy or binder. 2.18. WARRANTY CLAIMS. Since January 1, 2001, there have been no (a) citations or decisions by any Governmental Authority specifically stating that any product manufactured, marketed or distributed at any time by any Transferred Company (collectively, "TRANSFERRED COMPANY PRODUCTS") is defective or unsafe or fails to meet any safety standards promulgated by such Governmental Authority or (b) recalls ordered by any Governmental Authority with respect to any Transferred Company Product. Except as would not reasonably be expected to have a Material Adverse Effect or except pursuant to any Transferred Company's standard merchandise return policies, which provide for the replacement or return for credit of defective or damaged products or other returns for credit at the request of the customer other than for the replacement or return for credit of defective or damaged products, there are no pending or, to the Knowledge of the Sellers, threatened warranty claims, against any Transferred Company which would, in the aggregate, exceed the reserve for such claims reflected in the Most Recent Balance Sheet, as such reserve has been adjusted in the Ordinary Course of Business since the date of the Most Recent Balance Sheet. 2.19. TRANSACTIONS WITH AFFILIATES. Neither the Sellers nor any of their respective Affiliates (other than the Transferred Companies) are a party to any Contract with any of the Transferred Companies other than Contracts entered into in the Ordinary Course of Business and -17- upon terms no less favorable to such Transferred Company than the terms that would result from arms-length negotiations between unrelated parties. 2.20. TAXES. Except as set forth in Section 2.20 of the Disclosure Letter: (a) All Tax Returns required to be filed by, or which include, any Transferred Company (for such periods as such Transferred Company was owned directly or indirectly by Nortek) have been timely filed (giving effect to extensions), all Taxes shown as due thereon have been paid, and all such Tax Returns are true, complete and correct in all respects, except as would not have a Material Adverse Effect. The Transferred Companies have fully and timely paid all Taxes owed by such companies (whether or not shown on any Tax Return). The Sellers and the Transferred Companies have given or otherwise made available to the Buyer copies of all Tax Returns, examination reports and statements of deficiencies for taxable periods, or transactions consummated, for which the applicable statutory periods of limitations have not expired. (b) There are no outstanding liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of any Transferred Company. (c) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection or assessment or reassessment of, Taxes due from any of the Transferred Companies for any taxable period and no request for any such waiver or extension is currently pending. No audit or other Proceeding by any Governmental Authority is pending or, to the Knowledge of the Sellers, threatened with respect to any Taxes due from or with respect to any of the Transferred Companies, no Governmental Authority has delivered to a Transferred Company or to either of the Sellers written notice of any intention to assert any deficiency or claim for additional Taxes against any of the Transferred Companies, and no written claim has been delivered to a Transferred Company or to either of the Sellers by any Governmental Authority in a jurisdiction where none of the Transferred Companies file Tax Returns that a Transferred Company is or may be subject to taxation by that jurisdiction, and all such deficiencies of which written notice has been delivered to a Transferred Company or to either of the Sellers for Taxes asserted or assessed against any of the Transferred Companies have been fully and timely paid, settled or properly reflected in the Financial Statements. (d) None of the Transferred Companies is a party to any Contract relating to the sharing, allocation or indemnification of Taxes, or any similar Contract (collectively, "TAX SHARING AGREEMENTS"), or has any liability for Taxes of any Person (other than members of the affiliated group, within the meaning of Section 1504(a) of the Code, filing consolidated federal income tax returns of which Nortek Holdings, Inc. is the common parent) under Treasury Regulation ss. 1.1502-6, Treasury Regulation ss. 1.1502-78 or similar provision of state, local or foreign Law, as a transferee or successor, by Contract, or otherwise. (e) None of the Transferred Companies has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local, -18- or foreign Tax Law, and none of the Transferred Companies is subject to any private letter ruling of the IRS or comparable ruling of any other Governmental Authority pertaining to Taxes. (f) None of the transactions contemplated hereby, individually or collectively, will give rise to the payment of any amount that would not be deductible by the Buyer or the Transferred Companies by reason of Section 280G of the Code. (g) None of the Transferred Companies has any (i) "excess loss accounts" or (ii) "deferred gains" with respect to any "deferred intercompany transactions," within the meaning of Treasury Regulation ss.ss. 1.1502-19 and 1.1502-13, respectively. 2.21. ENVIRONMENTAL MATTERS. (a) Except in connection with the matters set forth in Section 2.21(b) of the Disclosure Letter or as would not reasonably be expected to have a Material Adverse Effect, each Transferred Company has obtained all Permits that are required to be obtained under all applicable Environmental Laws in connection with the operation of the business of such Transferred Company and is in compliance with all terms and conditions of such required Permits. (b) Except as set forth in Section 2.21(b) of the Disclosure Letter or except as would not reasonably be expected to have a Material Adverse Effect, each Transferred Company is and has been in compliance with all applicable Environmental Laws since the date that such Transferred Company was acquired, directly or indirectly, by Nortek. (c) Except as set forth in Section 2.21(c) of the Disclosure Letter, none of the Transferred Companies has entered into any Contract with any Governmental Authority or any other Person by which such Transferred Company has assumed responsibility, either directly or as a guarantor or surety, for any Proceedings or liabilities pursuant to Environmental Laws. (d) Except as set forth in Section 2.21(d) of the Disclosure Letter or except as would not reasonably be expected to have a Material Adverse Effect, to the Knowledge of the Sellers, no event has occurred or condition exists that has resulted in or would reasonably be expected to result in Losses to the Transferred Companies under Environmental Laws. 2.22. REAL ESTATE. (a) The Transferred Companies own good and marketable fee title to the land described in Section 2.22(a) of the Disclosure Letter and to all of the buildings, structures and other improvements located thereon (collectively, the "OWNED REAL PROPERTY") free and clear of all Liens except for the matters listed in Sections 2.14 and 2.22(a) of the Disclosure Letter and except for Liens of a type referred to in Section 2.16 of this Agreement. The Owned Real Property constitutes all of the real property owned by the Transferred Companies on the date hereof. -19- (b) Section 2.22(b) of the Disclosure Letter is a true and complete schedule of all leases, subleases, licenses and other agreements (collectively, the "REAL PROPERTY LEASES") under which the Transferred Companies use or occupy or have the right to use or occupy, now or in the future, any real property (other than warehouse leases which involve annual lease payments of $50,000 or less) (the land, buildings and other improvements covered by the Real Property Leases being herein called the "LEASED REAL PROPERTY"), which Section includes each amendment, modification and supplement thereto. The Sellers have heretofore delivered to the Buyer true and complete copies of all Real Property Leases (including all modifications, amendments and supplements). Except as set forth in Sections 2.14 and 2.22(b) of the Disclosure Letter or except as would not reasonably be expected to have a Material Adverse Effect, each Real Property Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by any of the Transferred Companies as tenant thereunder are current, no written notice of material default or termination under any Real Property Lease is outstanding, and no termination event or condition or uncured material default on the part of any of the Transferred Companies or, to the Knowledge of the Sellers, the landlord, exists under any Real Property Lease. Except for the matters listed in Sections 2.14 and 2.22(b) of the Disclosure Letter and except for Liens of a type referred to in Section 2.16 of this Agreement, the Transferred Companies hold the leasehold estate under and interest in each Real Property Lease free and clear of all Liens. (c) All of the land, buildings, structures and other improvements used by the Transferred Companies in the conduct of the business of the Transferred Companies are included in the Owned Real Property and the Leased Real Property. The Leased Real Property and the Owned Real Property are hereinafter collectively referred to as the "REAL PROPERTY." (d) The Sellers and the Transferred Companies have not received written notice and have no Knowledge of any pending, threatened or contemplated condemnation proceeding affecting the Real Property or any part thereof or of any sale or other disposition of the Real Property or any part thereof in lieu of condemnation. 2.23. INTELLECTUAL PROPERTY. (a) The Transferred Companies own, or are licensed or otherwise possess legally enforceable rights to use, license and otherwise exploit all Intellectual Property used in and material to the business of the Transferred Companies, taken as a whole, as currently conducted or contemplated (collectively, the "TRANSFERRED COMPANY INTELLECTUAL PROPERTY"). (b) Section 2.23(b) of the Disclosure Letter sets forth a true and complete list of all registrations, issuances, filings and applications for any Intellectual Property filed or owned by any of the Transferred Companies. All of the rights of the Transferred Companies in the Transferred Company Intellectual Property are valid and enforceable. Each of the Transferred Companies has taken commercially reasonable actions to maintain and protect each item of Transferred Company Intellectual Property owned or purported to be owned by such Transferred Company. -20- (c) Section 2.23(c) of the Disclosure Letter sets forth a true and complete list of each license agreement to which any of the Transferred Companies is a party relating to Intellectual Property (the "IP Licenses") that is material to the Transferred Companies taken as a whole. All of the IP Licenses are valid, subsisting, in full force and effect and binding upon the respective Transferred Company that is a party thereto and, to the Knowledge of the Sellers, the other parties thereto, in accordance with their terms. Each of the Transferred Companies and, to the Knowledge of the Sellers, each other party thereto, is in all material respects in compliance with all applicable terms and requirements of each such IP License. (d) Except as would not reasonably be expected to have a Material Adverse Effect, none of the Intellectual Property, products or services, owned, used, developed, provided, sold, licensed, imported or otherwise exploited by the Transferred Companies, or made for, used or sold by or licensed to the Transferred Companies by any Person infringes upon or otherwise violates any Intellectual Property rights of others. Except as would not reasonably be expected to have a Material Adverse Effect, to the Knowledge of the Sellers, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Transferred Companies. Except as would not reasonably be expected to have a Material Adverse Effect, there are no claims pending or, to the Knowledge of the Sellers, threatened, (i) contesting the right of the Transferred Companies to use any of its products or services or (ii) opposing or attempting to cancel any material rights of the Transferred Companies in or to any Company Intellectual Property. 2.24. BROKERS. No broker, finder or investment banker (other than UBS Securities LLC and Daroth Capital Advisors LLC, the fees and expenses of which will be paid by the Sellers) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Sellers or any of the Transferred Companies. 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. In order to induce the Sellers to enter into and perform this Agreement and to consummate the transactions contemplated hereby, the Buyer represents and warrants to the Sellers that: 3.1. ORGANIZATION. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Buyer has made available to the Sellers a true, complete and correct copy of the Charter of the Buyer, as in effect on the date hereof. 3.2. AUTHORIZATION. The Buyer has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer. This Agreement has been duly and validly executed and delivered by the Buyer, and -21- assuming the due authorization, execution and delivery by the Sellers, constitutes a legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms. 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Buyer do not, and the performance of this Agreement by the Buyer and the consummation of the transactions contemplated hereby will not, (i) violate the Charter of the Buyer, (ii) contravene, conflict with or result in a violation of, or constitute a failure to comply with, any Laws or Orders applicable to the Buyer or by which any properties or assets owned or used by the Buyer are bound or affected, (iii) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Permit that is held by the Buyer or that otherwise relates to the business of, or any of the properties or assets owned or used by, the Buyer, or (iv) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to third parties any rights of consent, termination, amendment, modification, acceleration or cancellation of, or result in the loss of any property, rights or benefits under, or result in the imposition of any additional obligations under, or result in the creation of a Lien on any properties or assets owned or used by the Buyer pursuant to any Contract to which the Buyer is a party or by which the Buyer or any properties or assets owned or used by the Buyer are bound or affected, except as to clauses (ii), (iii) and (iv) above for any such violation, breach, default, right, alteration or other occurrence that would not reasonably be expected to have a material adverse effect on the properties, assets, business, financial condition or operating results of the Buyer or on the ability of the Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated hereby. (b) The execution and delivery of this Agreement by the Buyer do not, and the performance of this Agreement by the Buyer and the consummation of the transactions contemplated hereby will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority to be obtained or made by the Buyer except (i) for compliance with applicable disclosure requirements, if any, under the Exchange Act and compliance with the pre-merger notification requirements of the HSR Act and any similar foreign Laws listed in Section 2.6(b) of the Disclosure Letter and (ii) where the failure to obtain any such consent, approval, authorization or permit, or to make any such filing or notification, would not reasonably be expected to have a material adverse effect on the properties, assets, business, financial condition or operating results of the Buyer or on the ability of the Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated hereby. 3.4. LITIGATION. There are no Proceedings pending or, to the knowledge of the Buyer, threatened against the Buyer or any Affiliate of the Buyer by or before any Governmental Authority that in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated hereby. 3.5. INVESTMENT REPRESENTATION. The Buyer is acquiring the Shares for investment and not with a view to, or in connection with, any distribution or sale thereof in violation of the -22- Securities Act. The Buyer is an "accredited investor" within the meaning of Regulation D adopted under the Securities Act. 3.6. FINANCING. (a) The Buyer has obtained the commitment letter dated the date hereof, a copy of which was provided to Nortek, from Caxton-Iseman Capital, Inc. (the "EQUITY PROVIDER"), an Affiliate of the Buyer, to provide equity financing in connection with the transactions contemplated by this Agreement (the "EQUITY COMMITMENT LETTER"). The Equity Commitment Letter has been duly authorized and executed by all parties thereto and is in full force and effect. (b) The Buyer has obtained the commitment letter attached hereto as EXHIBIT 3.6(B) from UBS Securities LLC and UBS Loan Finance LLC (collectively, the "DEBT PROVIDERS") to provide the amount of debt financing set forth therein in connection with the transactions contemplated by this Agreement (the "DEBT COMMITMENT LETTER," and together with the Equity Commitment Letter, the "COMMITMENT LETTERS"). The Debt Commitment Letter has been duly authorized and executed by the Buyer and, to the knowledge of the Buyer, by the Debt Providers, and is in full force and effect. The obligations of the Debt Providers to fund the commitments under the Debt Commitment Letter are not subject to any condition which is not set forth expressly in the Debt Commitment Letter. The Buyer is not aware of any fact, circumstance or occurrence that makes any of the assumptions or statements set forth in the Debt Commitment Letter inaccurate in any material respect or that causes the Debt Commitment Letter to be ineffective; PROVIDED, that no representation or warranty is made by the Buyer respecting any fact, circumstance or occurrence that constitutes a breach of the Sellers' representations, warranties or covenants under this Agreement. (c) The Commitment Letters provide the Buyer with aggregate financing in an amount sufficient to enable the Buyer to pay the Purchase Price and pay all contemplated fees and expenses related to the transactions contemplated by this Agreement and, to the knowledge of the Buyer, to provide adequate working capital for the Transferred Companies. Subject to the provisions of the Commitment Letters, as of the date hereof and based upon information provided by the Equity Provider and the Debt Providers, the Buyer expects to receive the funding contemplated by the Commitment Letters not later than February 27, 2004. To the knowledge of the Buyer, upon the consummation of the transactions contemplated hereby, the Buyer and each of the Transferred Companies will not: (i) be insolvent or left with unreasonably small capital, (ii) have incurred debts beyond their ability to pay such debts as they mature, or (iii) have their capital impaired. 3.7. BROKERS. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried on without the intervention of any Person acting on behalf of the Buyer in such manner as to give rise to any valid claim against the Sellers or any of the Transferred Companies for any brokerage or finder's commission, fee or similar compensation. 4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. -23- The obligation of the Buyer to purchase the Shares and to consummate the other transactions contemplated hereby is subject to the satisfaction, or waiver by the Buyer, on or prior to the Closing Date of each of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. Other than the Specified Seller Representations, the representations and warranties of the Sellers in this Agreement (as such representations and warranties would read if all limitations or qualifications therein as to materiality or Material Adverse Effect (or similar concept) were deleted therefrom) shall, except for matters that individually or in the aggregate have not had, and would not reasonably be expected to have, a Material Adverse Effect, have been true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date, except for any such representations or warranties which were made as of a specific date, the accuracy of which will be determined with reference to such specified date; and the Specified Seller Representations shall have been true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date. 4.2. PERFORMANCE OF OBLIGATIONS. The Sellers shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by them at or prior to the Closing Date. 4.3. SELLERS' CERTIFICATE. The Sellers shall have delivered to the Buyer a certificate signed on behalf of the Sellers by the chief executive officer or chief financial officer of Nortek to the effect that each of the conditions specified above in Sections 4.1 and 4.2 is satisfied. 4.4. NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect or any event or circumstance that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. 4.5. INJUNCTIONS. No Law or Order (including without limitation any temporary, preliminary or permanent injunction or order) shall be in effect that prohibits the consummation of the transactions contemplated by this Agreement. 4.6. GOVERNMENTAL APPROVALS. All Governmental Authorities, the consent, authorization, approval or Permit of which is necessary under any applicable Law (excluding consents, authorizations, approvals and Permits relating to use, occupancy, Tax Liens and similar matters) for the consummation of the transactions contemplated by this Agreement, shall have consented to, authorized, permitted or approved such transactions, and any waiting periods (and any extensions thereof) under the HSR Act or similar foreign Laws listed in Section 2.6(b) of the Disclosure Letter shall have expired or been terminated. 4.7. FUNDING. The Buyer and/or the Transferred Companies shall have received the amount of funds set forth in the Debt Commitment Letter as a result of funding thereunder or as a result of funding from one or more alternative sources of financing on terms no less favorable to the Buyer than under the Debt Commitment Letter. 4.8. RELEASE OF TRANSFERRED COMPANIES. Each of the Transferred Companies shall have been released as a borrower or guarantor, as applicable, under the Credit Agreement and all -24- Liens on the capital stock or assets of the Transferred Companies securing amounts owed in respect of the Credit Agreement shall have been released or terminated. 4.9. NO PROCEEDINGS. Since the date of this Agreement, there shall not have been commenced or threatened in writing against the Buyer, or against any Affiliate of the Buyer, any Proceeding which, in the reasonable judgment of the Buyer, has a reasonable likelihood of success on the merits (a) involving any challenge to, or seeking damages or other relief in connection with, the transactions contemplated hereby or (b) that may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on or otherwise interfering with the transactions contemplated hereby. 4.10. TRANSITION SERVICES AGREEMENT. Nortek shall have executed and delivered, as of the Closing Date, a transition services agreement in form and substance reasonably satisfactory to the Buyer and Nortek, containing the terms set forth on EXHIBIT 4.10. 4.11. OPINION. The Buyer shall have received an opinion of Ropes & Gray LLP, counsel to the Sellers, in a form reasonably acceptable to the Buyer, regarding the authorization, execution and delivery by the Sellers, and the enforceability against the Sellers, of this Agreement, together with a letter permitting the Buyer's financing sources to rely upon such opinion. 4.12. TRANSFER OF CWD. Nortek shall have caused all of the assets and liabilities constituting the CWD Windows and Doors division of Broan-NuTone Canada Inc. to be transferred to CWD Windows and Doors, Inc. in accordance with Section 6.22. 4.13. GENERAL. All instruments and legal and corporate proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Buyer, and the Buyer shall have received counterpart originals, or certified or other copies, of all documents, including records of corporate proceedings, that it may reasonably request in connection therewith. 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The obligation of the Sellers to effect the sale of the Shares and to consummate the other transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of each of the following conditions: 5.1. REPRESENTATIONS AND WARRANTIES. Other than the representations and warranties of the Buyer contained in Sections 3.1, 3.2, 3.6 and 3.7, the representations and warranties of the Buyer in this Agreement (as such representations and warranties would read if all limitations or qualifications therein as to materiality or material adverse effect (or similar concept) were deleted therefrom) shall, except for matters that individually or in the aggregate have not had, and would not reasonably be expected to have, a material adverse effect on the properties, assets, business, financial condition or operating results of the Buyer or on the ability of the Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, have been true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date, except for any such representations or warranties which were made -25- as of a specific date, the accuracy of which will be determined with reference to such specified date; and the representations and warranties of the Buyer contained in Sections 3.1, 3.2, 3.6 and 3.7 shall have been true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date. 5.2. PERFORMANCE OF OBLIGATIONS. The Buyer shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing Date. 5.3. BUYER'S CERTIFICATE. The Buyer shall have delivered to the Sellers a certificate signed on behalf of the Buyer by the chief executive officer or chief financial officer of the Buyer to the effect that each of the conditions specified above in Sections 5.1 and 5.2 are satisfied. 5.4. INJUNCTIONS. No Law or Order (including without limitation any temporary, preliminary or permanent injunction or order) shall be in effect that prohibits the consummation of the transactions contemplated by this Agreement. 5.5. GOVERNMENTAL APPROVALS. All Governmental Authorities, the consent, authorization, approval or Permit of which is necessary under any applicable Law (excluding consents, authorizations, approvals and Permits relating to use, occupancy, Tax Liens and similar matters) for the consummation of the transactions contemplated by this Agreement, shall have consented to, authorized, permitted or approved such transactions, and any waiting periods (and any extensions thereof) under the HSR Act or similar foreign Laws listed in Section 2.6(b) of the Disclosure Letter shall have expired or been terminated. 5.6. OPINION. The Sellers shall have received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Buyer, in a form reasonably acceptable to the Sellers, regarding the authorization, execution and delivery by the Buyer, and the enforceability against the Buyer, of this Agreement. 5.7. GENERAL. All instruments and legal and corporate proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Sellers, and the Sellers shall have received counterpart originals, or certified or other copies, of all documents, including records of corporate proceedings, that it may reasonably request in connection therewith. -26- 6. COVENANTS OF THE PARTIES. 6.1. ACCESS TO PREMISES AND INFORMATION. Upon reasonable notice and subject to reasonable supervision by the Sellers or their agents and to the restrictions contained in any confidentiality agreement to which such party is subject, on and prior to the Closing Date, the Sellers will permit, and will cause the Transferred Companies to permit, the Buyer and its authorized representatives (including, without limitation, any financing sources and their respective authorized representatives) to have reasonable access during normal operating hours to the respective records and books of the Transferred Companies (the "RECORDS") in possession of the Transferred Companies or the Sellers (or deliver copies thereof) and the premises, agents and personnel of any of the Transferred Companies during normal business hours that relate in any manner to the conduct or operations of the Transferred Companies on or prior to the Closing Date. No investigation by the Buyer shall diminish or obviate any of the representations, warranties, covenants or agreements of the Sellers contained in this Agreement. In order that the Buyer may have full opportunity to utilize such access, the Sellers shall cause the Seller's authorized representatives, the Transferred Companies and their authorized representatives to cooperate fully with the Buyer and its authorized representatives (including, without limitation, any financing sources and their respective authorized representatives) in connection with their examination or investigation. 6.2. CONDUCT OF BUSINESS PRIOR TO CLOSING. Prior to the Closing, except as otherwise contemplated by this Agreement, the Sellers agree that they will cause the Transferred Companies to (a) conduct their business in the Ordinary Course of Business and (b) conduct their respective businesses in a manner such that the conditions to Closing set forth in Sections 4.1 and 4.2 would reasonably be expected to be satisfied. Without limiting the generality of the foregoing, without the prior consent of the Buyer, the Sellers will cause each of the Transferred Companies not to, and each of the Transferred Companies shall not, take any action as a result of which any of the changes or events listed in Section 2.9 (other than any action or event referred to in clause (a) thereof) is likely to occur or enter into any Contract that, if in existence on the date of this Agreement, would have been required to be listed in Section 2.14 of the Disclosure Letter (other than any extension or renewal of a Contract listed on Section 2.14 of the Disclosure Schedule on terms substantially similar to the terms of such Contract on the date hereof), except as expressly contemplated by this Agreement. Notwithstanding the foregoing, (i) the Sellers agree that they shall cause the transfer to Nortek or any of its Affiliates (other than a Transferred Company) prior to Closing of (x) the real estate and facility owned by Napco, Inc. in Butler, PA and (y) all of the stock of Studley Canada Limited, and (ii) the Sellers shall approve in a timely manner the request for capital expenditures totaling approximately $1,400,000 in respect of the Fair Bluff, NC facility capacity expansion project and shall cause to be spent the portion of such amount scheduled to be spent prior to the Closing in accordance with the schedule set forth on EXHIBIT 6.2 hereto (it being understood that the Sellers shall not have any responsibility to make any expenditure of the remaining portion of such amount). Buyer acknowledges that the Sellers operate a centralized cash management system and that substantially all of the cash of the Transferred Companies has been, and will continue to be, distributed to the Sellers; PROVIDED, HOWEVER, that the Sellers shall not remove from the Transferred Companies any restricted cash held in connection with any industrial revenue bond financing otherwise than in respect of the payment of capital expenditures in connection with the facility or assets to which such industrial -27- revenue bond financing relates; PROVIDED, FURTHER, that the amount of any such cash on account with the Transferred Companies as of the Closing Date shall increase the Purchase Price payable under Section 1.2 dollar for dollar. 6.3. REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each of the parties agrees to use all reasonable commercial efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby. 6.4. CONFIDENTIALITY. (a) CONFIDENTIALITY AGREEMENT. The provisions of that certain confidentiality letter agreement between the Buyer (or an Affiliate of the Buyer) and UBS Securities LLC, dated September 8, 2003 relating to the Transferred Companies (the "CONFIDENTIALITY AGREEMENT"), to the extent not inconsistent with the express terms of this Agreement, are hereby ratified, confirmed and agreed to as though fully set forth herein. (b) CONFIDENTIALITY OBLIGATION OF THE SELLERS. From and after the date of this Agreement and, in the event of the consummation of the transactions contemplated hereby, from and after the Closing Date, each of the Sellers, agrees, and agrees to cause each of their respective authorized representatives, to keep confidential any and all confidential information or documents relating to any Transferred Company or the properties, assets, operations, business or results of operations of any Transferred Company, and shall not disclose such information or documents to any Person or use such information or documents in any manner without the prior written consent of the Buyer (other than in connection with the operation of the businesses of the Transferred Companies in the Ordinary Course of Business prior to the Closing). (c) ANNOUNCEMENTS. Any announcement or disclosure by any party hereto of the transactions contemplated hereby must be approved in advance by each of the Buyer and the Sellers, which approval shall not be unreasonably withheld. (d) PERMITTED DISCLOSURES. No provision of this Section 6.4 shall be construed to prohibit (1) disclosures to appropriate authorities of such information as may be legally required for federal securities, Tax, accounting or other reporting purposes; (2) disclosures by the Sellers or any of the Transferred Companies to suppliers, customers, agents and independent contractors of any of the Transferred Companies to the extent reasonably necessary, in the Sellers' judgment and in consultation with the Buyer, to preserve the business of the applicable Transferred Company or to facilitate the transactions contemplated hereby; (3) confidential disclosures to legal counsel, accountants, consultants and other authorized representatives and financing sources and their respective legal counsels, accountants, consultants and other authorized representatives; (4) confidential disclosures to corporate parents and other corporate Affiliates; (5) disclosures pursuant to the terms of an order of a court or other governmental authority of competent jurisdiction; (6) disclosures required in connection with legal proceedings; or (7) disclosures of matters of which there is public knowledge other than as a result of disclosures made in breach hereof. -28- (e) RETURN OF CONFIDENTIAL INFORMATION. In the event that the parties do not close the transactions contemplated hereby, each party agrees, in addition to (and not instead of) any obligations set forth in the Confidentiality Agreement, (1) within five business days to return (or, at the option of the provider of such information, destroy) all confidential information (including without limitation all Evaluation Material, as defined in the Confidentiality Agreement) that was provided by any other party in contemplation of the transactions hereunder (and, in the case of destruction, provide written certification of such destruction to the provider of such information); (2) to refrain from using such confidential information; and (3) to keep such confidential information strictly confidential. (f) TAX DISCLOSURE. Notwithstanding any other provision in this Agreement, the Confidentiality Agreement or in any other written or oral understanding or agreement to which the parties hereto are parties or by which they are bound, each party hereto (and its representatives, agents and employees) may consult any tax advisor regarding the tax treatment and tax structure of the transaction and may disclose to any Person, without limitation, the tax treatment and tax structure of the transaction and all materials (including opinions or other tax analyses) that are provided relating to such treatment or structure. 6.5. BUSINESS RECORDS. The Buyer acknowledges that the Sellers may from time to time from and after the Closing require access to copies of certain of the Records, and agrees that upon reasonable prior notice, it will, and will ensure that the Transferred Companies will, during normal business hours, provide the Sellers with either reasonable access to or copies of the Records. 6.6. REGULATORY AUTHORIZATIONS AND CONSENTS; FILINGS UNDER HSR ACT; THIRD PARTY CONSENTS. (a) Each party hereto shall use its reasonable commercial efforts to obtain all authorizations, consents, Permits and approvals of all Governmental Authorities that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement, and the Buyer will cooperate fully with the Sellers and the Transferred Companies in promptly seeking to obtain all such authorizations, consents, Permits and approvals. As promptly as practicable, and in any event within 10 business days after the date of the execution of this Agreement or such later date as the Buyer and the Sellers may agree in writing, the Sellers and the Buyer shall file notifications under and in accordance with the HSR Act and any similar foreign filings with respect to the transactions contemplated hereby, seek early termination of any waiting period thereunder and supply as promptly as practicable any additional information and documentary material that may be requested by any Governmental Authority pursuant to the HSR Act or similar foreign requirements. The parties shall cooperate with each other in connection with the making of all such filings or responses, including providing copies of all such documents to the non-filing or non-responding party and its advisors prior to filing or responding. The parties hereto shall not take any action that will have the effect of delaying, impairing or impeding the receipt of any required approvals or the termination or expiration of required waiting periods. -29- (b) The Sellers shall use all reasonable commercial efforts to obtain all consents, waivers or other approvals from all Persons (other than Governmental Authorities) listed in EXHIBIT 6.6(B) (it being understood that no party shall be required to pay any money to the Person from whom such consent, waiver or approval is sought (other than reimbursement of the reasonable out-of-pocket costs of providing the same) or otherwise undertake any new obligation to such Person or waive any existing benefit or right in order to obtain any such consent, waiver or approval). The parties will cooperate with each other in exercising such reasonable efforts. The failure to obtain any such consent, waiver or approval shall not constitute a failure to fulfill any of the conditions set forth in Section 4 of this Agreement; PROVIDED, HOWEVER, the Sellers shall, with respect to any Contract as to which a required consent, waiver or approval is listed in EXHIBIT 6.6(B), arrange for Buyer to receive substantially the same benefits under such Contract after the Closing to which the Buyer would have been entitled if such consent, waiver or approval had been obtained. 6.7. NO SECTION 338 ELECTION. The Buyer and the Sellers hereby agree that they will make no election pursuant to Section 338 of the Code (or any corresponding election under state, local and foreign Tax law) with respect to the purchase and sale of the stock of the Transferred Companies hereunder. 6.8. WARN. The Buyer shall indemnify the Sellers and their Affiliates and defend and hold each of them harmless from and against any Losses which may be incurred by any of them under WARN or under any state, local or foreign law with respect to plant closing, layoff or relocation or the like or with respect to any obligation to provide notice, payment or any other benefit as a result of or arising out of any action taken by the Buyer or any of the Transferred Companies following the Closing. 6.9. FURTHER ASSURANCES. From time to time after the Closing, at the request of the Buyer, the Sellers shall execute and deliver any further instruments and take such other action as the Buyer may reasonably request to carry out the transactions contemplated hereby. 6.10. NOTIFICATION; SUPPLEMENTS TO DISCLOSURE LETTER. (a) Each of the Sellers, on the one hand, and the Buyer, on the other hand, agrees to give prompt notice to the other party of any event or circumstance occurring or existing on or after the date of this Agreement that, directly or indirectly, (i) may contravene, conflict with or result in a violation or breach of (A) any representation or warranty of such party contained in this Agreement, whether made as of the date of this Agreement or as of the Closing Date, or (B) any covenant or agreement of such Party contained in this Agreement, or (ii) may render any of the conditions specified in Sections 4 and/or 5 incapable of being satisfied before the Expiration Date; PROVIDED, HOWEVER, that, except as set forth in Sections 6.10(b) and 6.10(c) below, no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. (b) Prior to the Closing, the Sellers may supplement or amend the Disclosure Letter with respect to any matter existing or occurring at or prior to the date of this -30- Agreement; PROVIDED, HOWEVER, that the Disclosure Letter shall not be deemed supplemented or amended for purposes of the rights or obligations of the Buyer under this Agreement unless and until the Buyer has accepted such supplement or amendment in writing prior to the Closing. (c) Prior to the Closing, the Sellers may revise the Disclosure Letter with respect to any matter arising after the date of this Agreement by delivery of such proposed revision to the Buyer, together with a statement as to whether the Sellers believe the revision is a Routine Update or a Material Update. Any such revision constituting a Routine Update shall constitute an effective amendment of the Disclosure Letter for all purposes of this Agreement. If the Buyer disputes that such revision constitutes a Routine Update by delivering to the Sellers written notice of such dispute within ten days of delivery of such revision, the parties shall retain all of their rights under this Agreement respecting such disputed item. If, despite such dispute, such proposed revision is a Routine Update, then such revision shall constitute an effective amendment of the Disclosure Letter. In the event such revision constitutes a Material Update, the Buyer shall have ten days to provide a written notice to the Sellers under Section 7.1(b)(1), with the provision of such notice and the rights of the Buyer under Section 7.1(b) following delivery of such notice being the sole remedy relating to matters set forth in the Material Update, and if the Buyer does not provide such a notice within such period, the Material Update shall constitute an effective amendment of the Disclosure Letter for all purposes of this Agreement (including for purposes of curing any misrepresentation or breach of warranty that would have existed hereunder had the Material Update not been made). If a Material Update is provided less than ten days before the Expiration Date, the Expiration Date shall be extended until ten days after the Material Update is so provided in order to afford the Buyer an opportunity to review such Material Update as contemplated by the immediately preceding sentence and, if prior to the end of such ten-day period, the Buyer shall have provided a written notice to the Sellers under Section 7.1(b), the Expiration Date shall occur not sooner than the tenth day following the receipt by the Sellers of such notice. 6.11. CONFLICTS OF INTEREST. Buyer hereby waives on its own behalf, and agrees to cause each of the Transferred Companies to waive, any conflicts that may arise in connection with (a) counsel representing any of the Transferred Companies in connection with the transactions contemplated by this Agreement representing the Sellers after the Closing and (b) the communication by such counsel to the Sellers, in any such representation, of any fact known to such counsel, including in connection with a dispute with the Buyer prior to, on or following the Closing. 6.12. TAX MATTERS. (a) TAX RETURNS AND TAX LIABILITY. (i) The applicable income, deductions and credits with respect to the Transferred Companies for taxable periods ending on or before the Closing Date ("PRE-CLOSING PERIODS") will be included in the Pre-Closing Combined Returns. The Sellers shall be solely responsible for all Pre-Closing Taxes of the Transferred Companies and -31- the Combined Group. The Buyer shall be responsible for, and shall indemnify and hold harmless the Sellers with respect to, all other Taxes of the Transferred Companies. (ii) The Sellers shall prepare or cause to be prepared and shall file or cause to be filed all Tax Returns for the Transferred Companies for Pre-Closing Periods which are required to be filed (giving effect to any allowed extensions) after the Closing Date. (iii) The Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of the Transferred Companies for Tax periods which end after the Closing Date. In the case of each such Tax Return for a period which begins before and ends after the Closing Date (a "STRADDLE PERIOD"), the Buyer shall deliver a draft of such Tax Return to the Sellers at least fifteen (15) days prior to the date such Tax Return is required to be filed (giving effect to any allowed extensions) and shall not file such Tax Returns without consent of Sellers, which consent shall not be unreasonably withheld. Sellers shall pay to Buyer at least five (5) days before the date on which Taxes are paid with respect to such Straddle Periods an amount equal to the portion of such Taxes which relates to the portion of such Straddle Period which ends on the Closing Date. For purposes of determining in the case of any Taxes that are imposed on a periodic basis the portion of such Tax which relates to the portion of such Straddle Period ending on the Closing Date, such portion shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (y) in the case of any Tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant Taxable period ended on the Closing Date. Any credits relating to a Straddle Period shall be taken into account as though the relevant Taxable period ended on the Closing Date. For all purposes of Section 6.12 and 6.13, any income, deductions, credits and Taxes of the Transferred Companies resulting from a transaction not in the Ordinary Course of Business occurring on the Closing Date but after the Closing shall be deemed to occur on the date following the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with prior practice of the Transferred Companies. (b) TAX REFUNDS. The Sellers shall be entitled to all refunds of Pre-Closing Taxes. If the Buyer or any of the Transferred Companies receives any refund with respect to Pre-Closing Taxes to which the Sellers are entitled, the Buyer shall promptly pay (or cause the relevant Transferred Companies to pay) the entire amount of such refund (including interest) to the Sellers. If the Sellers receive any refund to which the Buyer is entitled, the Sellers shall promptly pay the entire amount of such refund (including interest) to the Buyer. (c) TRANSFER TAXES. The Buyer agrees to pay any sales, use, transfer, stock transfer or withholding or like Taxes related to the transactions contemplated by this Agreement, other than Taxes related to the transfer of the CWD Windows and Doors division of Broan-NuTone Canada Inc. to CWD Windows and Doors, Inc. as -32- contemplated by Section 6.22 of this Agreement, which Taxes shall be the sole responsibility of the Sellers. If required in connection with any Tax filing, the Sellers and the Buyer shall agree to a reasonable allocation of the Purchase Price to the affected parcels of Real Property. (d) COOPERATION AND CONTROL OF TAX DISPUTES. (i) The Buyer and the Sellers agree to cooperate and to cause each of the Transferred Companies to cooperate with them to the extent reasonably required after the Closing Date in connection with (1) the filing, amendment, preparation and execution of all Tax Returns with respect to any Transferred Company, and (2) any audit, claim for refund, or administrative or judicial proceeding involving any asserted Tax liability or refund with respect to any Transferred Company (any such audit, claim for refund, or proceeding relating to an asserted Tax liability referred to herein as a "CONTEST"). Within a reasonable time (but not more than ten (10) days) after the Buyer or any of the Transferred Companies or the Sellers receive official notice of any such Contest, the Buyer or the Sellers, as the case may be, shall notify or cause the applicable Transferred Company or Transferred Companies to notify the other in writing of such Contest. (ii) After the Closing Date, except in the case of any Contest involving any asserted Tax liability or refund with respect to any Transferred Company relating to a Pre-Closing Combined Return, and except as provided in (iii) and (iv) below, Buyer shall control the conduct, through counsel of its own choosing, of any Contest; provided that the Buyer shall not be permitted to settle, compromise, and/or concede any portion of such Contest in any manner which would adversely affect the Sellers without the written consent of Sellers, which consent shall not be unreasonably withheld or delayed. (iii) In the case of a Contest after the Closing Date that relates solely to Pre-Closing Taxes (including, without limitation, any Pre-Closing Combined Returns), or any Taxes for which the Seller may be responsible pursuant to Section 6.13(a)(iv), the Sellers shall control the conduct of such Contest, but Buyer shall have the right to participate in such Contest (or, in the case of a Contest that relates to a Combined Tax Return of the Sellers, in any portion of such Contest that related to any Transferred Company) at its own expense, and the Sellers shall not be permitted to settle, compromise and/or concede any portion of such Contest that is reasonably likely to adversely affect Post-Closing Taxes without the written consent of Buyer, which consent shall not be unreasonably withheld or delayed. Notwithstanding the preceding sentence, with respect to any Contest other than a Contest that relates solely to a Combined Tax Return of the Sellers, if the Sellers notify the Buyer in writing that they decline to assume control of the conduct of any such Contest within 30 days following the receipt by the Sellers of notice from the Buyer pursuant to Section 6.12(d)(i) of such Contest, Buyer shall have the right but not the obligation to assume control of such Contest, and shall be able to settle, compromise and/or concede such Contest; provided, however, that the Sellers shall have no indemnification obligations with respect to any matter with respect to which the Buyer shall have assumed control if such matter shall be settled by the Buyer without the prior written consent of the Sellers (which consent shall not be unreasonably withheld or delayed). -33- (iv) In the case of a Contest that relates to a Straddle Period and includes issues in respect of both Pre-Closing and Post-Closing Taxes, Buyer shall control the conduct of such Contest, but the Buyer shall not be permitted to settle, compromise and/or concede such Contest without the consent of the Sellers, which consent shall not be unreasonably withheld or delayed. (v) No loss, credit or other item of a Transferred Company may be carried back without the Sellers' written consent, which the Sellers may withhold in their sole and absolute discretion, to a taxable period for which either Seller or any subsidiary of the Sellers filed a Pre-Closing Combined Return with such Transferred Company unless such carryback is required by law. The Sellers shall promptly pay over to the Buyer the amount of any refund (including interest) received as a result of such a permitted carryback but may retain any refund (including interest) resulting from a carryback not so permitted. (vi) The Sellers agree to cooperate with the Buyer, and the Buyer agrees to cooperate (and cause each of the Transferred Companies to cooperate) with the Sellers, to the extent necessary in connection with the filing of any information return or similar document relating to the Buyer's acquisition of the Transferred Companies. 6.13. TAX INDEMNIFICATION. Notwithstanding anything to the contrary contained in this Agreement, the sole indemnification obligations of any party hereunder in respect of Taxes shall be provided by this Section 6.13. (a) TAX INDEMNIFICATION BY THE SELLERS. Subject to the limitations contained in Sections 8.1 and 8.3, the Sellers jointly and severally agree to indemnify, defend and hold harmless the Indemnified Buyer Parties from and against any and all Losses based upon, arising from or relating to: (i) Pre-Closing Taxes; (ii) Taxes of any member of an affiliated, consolidated, combined or unitary group of which any of the Transferred Companies was a member on or prior to the Closing Date by reason of liability under Treasury Regulation ss.1.1502-6, Treasury Regulation ss.1.1502-78 or comparable provision of foreign, state or local Law; (iii) without duplication, Pre-Closing Taxes imposed on an Indemnified Buyer Party as a result of (x) any inaccuracy in or breach of any representation or warranty made by the Sellers in Section 2.20 of this Agreement as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date or (y) a breach of a covenant or agreement set forth in Section 6.12; and (iv) Taxes required to be paid after the date hereof by any of the Transferred Companies to any party under any Tax Sharing Agreements in effect prior to the Closing (whether written or not) or by reason of being, prior to Buyer's ownership, a successor-in-interest or transferee of another entity. -34- (b) TAX INDEMNIFICATION BY THE BUYER. Subject to the limitations contained in Sections 8.1 and 8.5, the Buyer agrees to indemnify, defend, and hold harmless the Indemnified Seller Parties from and against all Losses based upon, arising from or relating to: (i) any and all Post-Closing Taxes, and (ii) any and all Taxes of the Buyer or any of its Affiliates (other than the Transferred Companies). (c) TAX INDEMNIFICATION PAYMENT PROCEDURES. (i) Payment by an Indemnifying Party of any amount due to an Indemnified Party under this Section 6.13 shall be made within ten (10) days following written notice by the Indemnified Party that payment of such amounts to the appropriate Governmental Authority or other applicable Person is due by the Indemnified Party, provided that the Indemnifying Party shall not be required to make any payment earlier than five (5) business days before it is due to the appropriate Governmental Authority or applicable Person. In the case of a Tax that is contested in accordance with the provisions of Section 6.12(d), payment of such contested Tax will not be considered due earlier than the date a "final determination" to such effect is made by such Governmental Authority. For this purpose, a "final determination" shall mean a settlement, compromise, or other agreement with the relevant Governmental Authority, whether contained in an IRS Form 870 or other comparable form, or otherwise, or such procedurally later event, such as a closing agreement with the relevant Governmental Authority, and agreement contained in Internal Revenue Service form 870-D or other comparable form, an agreement that constitutes a "determination" under Section 1313(a)(4) of the Code, a deficiency notice with respect to which the period for filing a petition with the Tax Court or the relevant state, local or foreign tribunal has expired or a decision of any court of competent jurisdiction that is not subject to appeal or as to which the time for appeal has expired. (ii) All amounts required to be paid pursuant to this Section 6.13 shall be paid promptly in immediately available funds by wire transfer to a bank account designated by the Indemnified Party. (iii) Any payments required pursuant to this Section 6.13 that are not made within the time period specified in this Section 6.13 shall bear interest at a rate and in the manner provided in the Code for interest on underpayments of federal income Tax. 6.14. ACTIONS WITH RESPECT TO FINANCING. (a) The Buyer and its Affiliates shall perform all obligations required to be performed by them in accordance with and pursuant to the Commitment Letters, shall maintain the same in full force and effect, and shall not, without the prior written consent of the Sellers, amend, terminate or waive any provisions under such Commitment Letters if such amendment, termination or waiver would adversely affect in any material respect -35- the likelihood of the Buyer and/or the Transferred Companies receiving the funds contemplated by the Commitment Letters prior to the Expiration Date. The Buyer shall from time to time provide such information as the Sellers may reasonably request regarding the status of the financing for the transactions contemplated hereby and related negotiations. (b) The Buyer shall provide prompt written notice to the Sellers following its receipt of notification by any financing source under the Debt Commitment Letter of such source's refusal or intended refusal to provide the financing described in the Debt Commitment Letter and, in each case, the stated reasons therefor (if any). In any such event, the Buyer shall use reasonable commercial efforts to arrange a substitute for such financing on terms no less favorable to the Buyer than under the Debt Commitment Letter as promptly as practicable. (c) The Sellers shall cooperate fully with the Buyer and its Affiliates in connection with the fulfillment of its obligations under this Section 6.14 and the fulfillment of the condition set forth in Section 4.7, including without limitation, causing the Sellers, the Transferred Companies and their respective officers, employees, advisers and authorized representatives to (i) assist with the preparation of such offering memoranda and documentation as is required under the Commitment Letters, (ii) complete the work necessary to permit the Transferred Companies to obtain the Transferred Companies' Financials on a schedule that is consistent with the schedule for Nortek receiving its audited financial statements for such year, and (iii) meet with potential lenders and financing sources. (d) The Sellers shall provide such assistance to and cooperate with their independent auditors as such independent auditors may reasonably request to enable them to complete the preparation of the Transferred Companies' Financials, and to render an unqualified opinion on the Transferred Companies' Financials. Upon the request of the Buyer, the Sellers shall (i) use their commercially reasonable efforts to cause their independent auditors to deliver to the Securities and Exchange Commission (the "SEC") any auditor's consent that is required to be included in any filing with the SEC that includes or incorporates by reference the Transferred Companies' Financials and (ii) to the extent the Buyer or any of its Affiliates conducts or intends to conduct an offering of securities (and if the registration statement, prospectus or offering memorandum for such offering includes or incorporates by reference the financial statements relating to the Transferred Companies), use their commercially reasonable efforts to cause their independent auditors to deliver a letter containing statements and information of the type ordinarily included in accountant's "comfort letters" with respect to the financial statements and financial information relating to the Transferred Companies contained or incorporated by reference in any such document relating to any such offering, in the case of each of (i) and (ii) above, within the time period reasonably requested by the Buyer or any of its Affiliates. In addition, in connection with any SEC filing required to be made by the Buyer or any of its Affiliates (or any SEC review of such filing), the Sellers shall permit the Buyer and its authorized representatives to have reasonable access, during normal business hours and upon reasonable advance notice, to the properties, books and records of the Sellers and its Affiliates relating to the Transferred Companies solely for -36- the purpose of preparing any such SEC filing or responding to SEC questions, comments or requests on such SEC filing; PROVIDED, HOWEVER, that any information obtained by the Buyer and its authorized representatives hereunder shall be governed by the Confidentiality Agreement and any other reasonable confidentiality agreement requested by the Sellers. The Buyer shall be solely responsible for all reasonable costs and expenses incurred by the Sellers in performing their obligations under this Section 6.14(d) (including all reasonable fees and disbursements of the Sellers' independent auditors). 6.15. CLAIMS UNDER SELLER INSURANCE POLICIES. The Buyer acknowledges that the Transferred Companies, former Subsidiaries of the Transferred Companies, and parties with whom the Transferred Companies and such Subsidiaries have done business (collectively, the "COVERED PARTIES") have been covered for certain periods under insurance policies maintained by the Sellers or certain of their Affiliates. The Sellers and the Buyer hereby agree that the coverage under these policies will cease to apply to the Covered Parties for occurrences after the Closing Date. The Sellers agree to allow the Covered Parties to continue to be covered by the insurance policies of the Sellers for pre-Closing occurrences related to the Covered Parties and the Sellers shall, and shall cause their Affiliates to, cooperate fully in the processing of claims related to such occurrences; PROVIDED, HOWEVER, that the Buyer or the Transferred Companies reimburse the Sellers for all charges to Sellers or any of their Affiliates incurred after the Closing Date in connection with claims under such policies (including, without limitation, all retained or deductible amounts (appropriately pro-rated), legal fees, premium tax payments and claim administration fees), except to the extent that the Buyer is entitled to indemnification from the Sellers for such charges under this Agreement. The Buyer or the Transferred Companies shall, promptly after receipt of notice and supporting documentation (and in any event within 30 days), reimburse the Sellers for all such amounts charged to the Sellers. 6.16. RELEASE OF PARTIES AND THEIR AFFILIATES. (a) The Buyer shall cause the Sellers and their Affiliates to be released from all obligations, including without limitation any obligations to provide stand-by letters of credit, in respect of any Indebtedness of the Transferred Companies listed on EXHIBIT 6.16(A) following the Closing; PROVIDED, that the Buyer shall not be responsible for any failure of any Person holding such letters of credit to abide by an agreement by which such holder is bound; and PROVIDED, FURTHER, that in the event any amount is drawn under any such letter of credit following the Closing, then the Buyer shall promptly reimburse the Sellers in cash for the full amount drawn. The parties will cooperate with each other and Nortek shall cause its lenders under the Credit Agreement to cooperate with the parties in obtaining such releases. (b) The Sellers shall use their reasonable commercial efforts to (i) seek to have the Transferred Companies and their Affiliates replaced by the Sellers or otherwise released, from and after the Closing, from all obligations in respect of the Contracts listed in Part A of EXHIBIT 6.16(B) and (ii) assign to Ply Gem their rights under the Contracts listed in Part B of EXHIBIT 6.16(B); PROVIDED, HOWEVER, that the Sellers shall not be required to pay any moneys to any counterparty to any such Contract (other than reimbursement of the reasonable out-of-pocket costs of providing the same) or otherwise -37- undertake any new obligation to any of such counterparty (other than to provide financial information respecting the Sellers, subject to reasonable confidentiality provisions) or waive any benefit or right in order to obtain any such replacement or release. The parties will cooperate with each other in exercising such reasonable efforts. The provisions of this Section 6.16(b) shall expire six months following the Closing; PROVIDED, that no such expiration shall relieve the Sellers of any liability for any breach of this provision occurring while such provision is in effect. 6.17. PAYMENT IN FULL OF CERTAIN TRANSFERRED COMPANY INDEBTEDNESS. The Sellers shall, prior to the Closing, (i) cause the release referred to in Section 4.8 to be obtained and (ii) pay or cause to be paid in full or otherwise terminated in a manner reasonably satisfactory to the Buyer to each Transferred Company all Indebtedness owed to such Transferred Company by such Seller or any Affiliate of such Seller. At and as of the Closing, any Indebtedness owed by any Transferred Company to any Seller or to any Affiliate of any of the Sellers shall be canceled, and all Indebtedness owed by any Transferred Company other than the Indebtedness listed in EXHIBIT 6.17 shall be paid in full. 6.18. NO SOLICITATION OF ACQUISITION PROPOSALS. As an inducement to the Buyer to enter into this Agreement, and in consideration of the time and expense which it has devoted and will devote to the transactions contemplated hereby during the period beginning on the date of this Agreement and ending on the earlier of (a) the Closing Date and (b) the termination of this Agreement in accordance with Section 7, except for the transactions contemplated hereby, the Sellers shall not, and shall cause each Transferred Company and each of the Affiliates and authorized representatives of each Transferred Company and the Sellers not to, directly or indirectly, (i) initiate, solicit or encourage, or respond to, any inquiry or proposal by any Person with respect to (a) a merger, consolidation, share exchange, business combination, joint venture, liquidation, dissolution or similar transaction involving any Transferred Company, (b) a sale, lease, exchange or other disposition of all or any portion of the business, properties or assets of any Transferred Company (other than in the Ordinary Course of Business) or the outstanding shares of capital stock of, or other ownership interests in, any Transferred Company or (c) a sale of any securities of, or otherwise making an investment in, any Transferred Company (each, an "ACQUISITION PROPOSAL"), or (ii) enter into any discussions, negotiations or agreements concerning an Acquisition Proposal with, or provide any information concerning any Transferred Company or afford any access to properties, books and records of any Transferred Company to, or otherwise assist or facilitate any effort relating to an Acquisition Proposal by, any Person. The Sellers shall, and shall cause each Transferred Company and each of the Affiliates and authorized representatives of each Transferred Company and the Sellers to, immediately cease any existing discussions or negotiations with any Person concerning any Acquisition Proposal. 6.19. NON-COMPETITION; NON-SOLICITATION. (a) Each of the Sellers acknowledges that (v) the Transferred Companies are engaged in the business of manufacturing and marketing vinyl siding, windows, patio doors, fencing, railing and decking for the residential repair/remodeling and new construction markets (the "TRANSFERRED COMPANY BUSINESS"); (w) the Company Business is conducted throughout the United States of America and Canada; (x) its ownership until the Closing Date of the Transferred Companies has given it trade secrets of and -38- confidential information concerning the Transferred Companies; (y) the agreements and covenants contained in this Section 6.19 are essential to protect the business and goodwill of the Transferred Companies; and (z) the Buyer would not purchase the Shares but for such agreements and covenants. Accordingly, each covenants and agrees as follows: (i) For a period of two (2) years commencing on the Closing Date (the "RESTRICTED PERIOD"), no Seller shall, in the United States of America or in Canada, directly or indirectly, (A) engage in the Transferred Company Business for such Seller's own account; (B) except as agreed to in writing by the Buyer and such Seller, render any services to any Person engaged in the Transferred Company Business or for use in competing with the Transferred Company Business; (C) have an interest in any Person engaged in the Transferred Company Business in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; PROVIDED, HOWEVER, a Seller may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if such Seller is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person; or (D) interfere in any material respects with business relationships (whether formed prior to or after the date of this Agreement) between any Transferred Company and customers or suppliers of any Transferred Company; and (ii) Without the prior written consent of the Buyer, during the Restricted Period, no Seller shall, directly or indirectly, hire or solicit any employee of any Transferred Company or encourage any such employee to leave such employment or hire any such employee who has left such employment within one (1) year of the termination of such employment, except pursuant to a general solicitation which is not directed specifically to any such employees. (b) If any Seller breaches, or threatens to commit a breach of, any of the provisions of Section 6.19, each of the Buyer and each Transferred Company shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to any of the Buyer or any Transferred Company under law or in equity: (i) The right and remedy to have such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to each of the Buyer and each Transferred Company and that money damages would not provide an adequate remedy to the Buyer or any Transferred Company; and (ii) The right and remedy to require each Seller to account for and pay over to the Buyer or any Transferred Company, as the case may be, all compensation, profits, monies, accruals, increments or other benefits derived or received by such Seller as the result of any transactions constituting a breach of such provision. -39- (c) Each Seller acknowledges and agrees that as to it the provisions of this Section 6.19 are reasonable and valid in geographical and temporal scope and in all other respects. If any court of competent jurisdiction determines that all or any part of any of this Section 6.19 is invalid or unenforceable as to one or more of the Sellers, the remainder of this Section 6.19 shall not be affected and shall be given full effect as to the Sellers or such Seller, without regard to the invalid portions. (d) If any court of competent jurisdiction determines that all or any part of this Section 6.19 is unenforceable as to one or more of the Sellers, such court shall have the power to reduce the scope of this Section 6.19, as to the Sellers or such Seller, and, in its reduced form, such provision shall then be enforceable. (e) The Buyer and each Seller intend to and confer jurisdiction to enforce the provisions of this Section 6.19 upon the courts of any jurisdiction within the geographical scope specified in Section 6.19(a). If the courts of any one or more of such jurisdictions hold the provisions of this Section 6.19 unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Buyer and each Seller that such determination not bar or in any way affect the right of the Buyer or any Transferred Company to the relief provided above in the courts of any other jurisdiction within the geographical scope specified in Section 6.19(a), as to breaches of the provisions of this Section 6.19 in such other respective jurisdictions, the provisions of this Section 6.19 as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. 6.20. POST-CLOSING LIMITATIONS. (a) Nortek shall not, directly or indirectly, sell, lease, convey, transfer or otherwise dispose of all or substantially all of its property and assets in a single transaction or a series of related transactions (including without limitation in connection with an internal corporate restructuring), unless the Person or Persons that acquire or lease such property and assets shall expressly assume, by a written instrument, executed and delivered to the Buyer, all of the obligations of Nortek under this Agreement; PROVIDED that the sale, lease, conveyance, transfer or disposition of either (but not both) of the residential building products segment of Nortek (the "RESIDENTIAL BUILDING PRODUCTS SEGMENT") or the air conditioning and heating products segment of Nortek (the "HVAC SEGMENT") at a time when Nortek and its Subsidiaries own both such segments shall not be deemed to constitute a sale, lease, conveyance, transfer or disposition of all or substantially all of Nortek's property and assets; and PROVIDED, FURTHER, that in connection with the sale, lease, conveyance, transfer or disposition of either (but not both) of the Residential Building Products Segment or the HVAC Segment at a time when Nortek and its Subsidiaries own both such segments, the Person or Persons that acquire or lease such segment may expressly, unconditionally and irrevocably assume, by a written instrument executed and delivered to the Buyer, all of the obligations of the Sellers under this Agreement. In the event that the Person or Persons acquiring or leasing such segment, as contemplated by and in accordance with the immediately preceding sentence, assume in writing the obligations of the Sellers under this Agreement as provided above, the Sellers shall be fully, finally and irrevocably released from all such obligations; PROVIDED, HOWEVER, the Sellers shall not be released from a particular -40- obligation set forth on EXHIBIT 6.20 hereto unless and until the Sellers have caused the applicable Transferred Company to be fully, finally and irrevocably released from such obligation. Nortek agrees that promptly following the execution of definitive documentation with respect to a sale, lease, conveyance, transfer or disposition pursuant to which another Person or Persons are required to or will assume the obligations of the Sellers under this Agreement as contemplated by and in accordance with the foregoing provisions of this Section 6.20(a), Nortek shall provide written notice to the Buyer of such execution and reasonable details with respect thereto, including without limitation the identity of the Person that has agreed to acquire or lease such property and assets and the anticipated closing date. (b) Nortek acknowledges and agrees that irreparable injury to the Buyer may result if Nortek breaches any covenant of Nortek contained in this Section 6.20 and that the remedy at law for the breach of any such covenant may be inadequate. Accordingly, if Nortek engages in any act in violation of the provisions of this Section 6.20, the Buyer shall be entitled, in addition to such other remedies and damages as may be available to it by law or under this Agreement, to injunctive relief to enforce the provisions of this Section 6.20. 6.21. PAYMENT OF YEAR END BONUSES. Prior to the Closing, the Sellers shall pay a year-end bonus for the 2003 calendar year to the executive officers of the Transferred Companies in an amount (each, a "Paid Bonus Amount") determined on an individual basis in accordance with, and subject to, the terms of the performance bonus plan applicable to such individual and based upon an estimate by the Seller of the financial results of the applicable Transferred Companies for the year-ended December 31, 2003 (the "Year End Estimates"); provided, however, if it is determined after the Closing and upon receipt of the Transferred Companies' Financials that the Paid Bonus Amount paid to any such executive officer is more than the amount (each an "Actual Bonus Amount") calculated in accordance with the applicable bonus plan using the Transferred Companies' Financials, the Buyer shall pay or cause to be paid to Nortek within 30 days of receipt of the Transferred Companies Financials an amount equal to the difference between the aggregate Paid Bonus Amounts and the aggregate Actual Bonus Amounts. 6.22. TRANSFER OF CWD. Prior to the Closing, Nortek shall transfer or shall cause the transfer of all of the assets and liabilities constituting the CWD Windows and Doors division of Broan-NuTone Canada Inc. to CWD Windows and Doors, Inc. pursuant to written documentation reasonably acceptable to the Buyer and on substantially the terms set forth on EXHIBIT 6.22 hereto. Except for purposes of this Section 6.22 and for Section 4.2, it shall be assumed for all purposes of this Agreement that the aforementioned transfer was consummated as of the date of this Agreement. 6.23. POST-CLOSING ENVIRONMENTAL SAMPLING. The Buyer agrees that, after the Closing, it shall not, and shall cause the Transferred Companies and its and their respective Affiliates not to, initiate, conduct or authorize any sampling and analysis of surface or subsurface soil or water (collectively, "SAMPLING") at any of the Real Property, except for any such Sampling (i) required, as reasonably determined by the Buyer, by applicable Environmental Laws, (ii) required by a Governmental Authority, (iii) recommended by an independent environmental consultant in a Phase I environmental site assessment in connection with a proposed sale of such Real Property -41- or of the stock of the Buyer, any direct or indirect parent company or any Transferred Company or in connection with a material financing transaction of a Transferred Company, or (iv) undertaken with the express written consent of the Sellers. Promptly following the execution hereof, the Sellers and the Buyer shall cooperate to cause the Buyer's environmental consultant to conduct Sampling with respect to the environmental conditions at the Calgary facility of CWD Windows and Doors disclosed in Section 2.21 of the Disclosure Letter (the "CALGARY CONDITION"). After the Closing, any Transferred Company may engage in Sampling with respect to the Calgary Condition based on the recommendation of its environmental consultant. 7. TERMINATION; EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS. 7.1. TERMINATION. The parties may not terminate this Agreement other than as follows: (a) The Buyer and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing. (b) The Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (1) in the event at any time after the date hereof the Sellers have breached any representation, warranty, covenant or agreement contained in this Agreement which would give rise to a failure of the conditions to Closing set forth in Section 4.1 or 4.2 of this Agreement to be satisfied if the Closing were to be held at such time, the Buyer has notified the Sellers in writing of such failure, and the Sellers have not effected a remedy to such failure within ten days following the receipt by the Sellers of such notice, (2) any of the conditions set forth in Section 4 is not capable of being satisfied prior to the Expiration Date, provided that the Buyer is not then in breach of any representation, warranty, covenant or agreement that would give rise to the failure of a condition set forth in Section 5.1 or 5.2, or (3) if the Closing shall not have occurred on or before March 31, 2004 (the "EXPIRATION DATE") by reason of the failure of any condition precedent under Section 4 hereof (unless the failure results primarily from the Buyer itself willfully or intentionally breaching any representation, warranty, covenant or agreement contained in this Agreement). (c) The Sellers may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (1) in the event at any time after the date hereof the Buyer has breached any representation, warranty, covenant or agreement contained in this Agreement which would give rise to a failure of the conditions to Closing set forth in Section 5.1 or 5.2 of this Agreement to be satisfied if the Closing were to be held at such time, the Sellers have notified the Buyer in writing of such failure, and the Buyer has not effected a remedy to such failure within ten days following the receipt by the Buyer of such notice, (2) any of the conditions set forth in Section 5 is not capable of being satisfied prior to the Expiration Date, provided that the Sellers are not then in breach of any representation, warranty, covenant or agreement that would give rise to the failure of a condition set forth in Sections 4.1 or 4.2, or (3) if the Closing shall not have occurred on or before the Expiration Date by reason of the failure of any condition precedent under Section 5 hereof (unless the failure results primarily from the Sellers themselves willfully or intentionally breaching any representation, warranty, covenant or agreement contained in this Agreement). -42- 7.2. EFFECT OF TERMINATION. If any party terminates this Agreement pursuant to Section 7.1 above, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party, except that (a) the rights and obligations of the parties under Sections 6.4, 7.2 and 10 shall survive such termination, and (b) nothing herein shall relieve any party from liability for any willful or intentional breach hereof occurring prior to termination. The Confidentiality Agreement shall survive the termination of this Agreement as set forth therein. 8. SURVIVAL; GENERAL INDEMNIFICATION. 8.1. SURVIVAL. Notwithstanding any right of the Buyer to investigate fully the affairs of any Transferred Company and notwithstanding any knowledge of facts determined or determinable by the Buyer pursuant to such investigation or right of investigation, the Buyer has the right to rely fully upon the representations, warranties, covenants and agreements of the Sellers contained in this Agreement. All such representations, warranties, covenants and agreements shall survive the execution and delivery of this Agreement and the Closing. All representations and warranties contained in this Agreement shall terminate and expire on the Survival Termination Date with respect to any claim based upon, arising out of or otherwise in respect of any inaccuracy or breach of any such representation or warranty that is not made prior to such date by the Buyer giving written notice to the Sellers, except for the representations and warranties of the Sellers contained in (a) Sections 2.1, 2.2, 2.3, 2.4, 2.5, and 2.24, all of which representations and warranties shall survive without limitation, (b) Sections 2.12 and 2.20 (but in the case of Section 2.12, only in respect of any matter constituting a violation of Law or relating to a controlled group liability), all of which representations and warranties shall terminate and expire on the date which is 90 days after the date upon which the liability to which any claim based upon, arising out of or otherwise in respect of any inaccuracy or breach of any such representation or warranty may relate is barred by all applicable statutes of limitations (including, without limitation, all periods of extension, whether automatic or permissive), and (c) Section 2.21, all of which representations and warranties shall terminate and expire on the date that is three (3) years after the Closing Date, with respect to any claim based upon, arising out of or otherwise in respect of any inaccuracy or breach of any such representation or warranty that is not made prior to such date by the Buyer giving written notice to the Sellers. Except as otherwise expressly provided in this Agreement, the covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 8.2. OBLIGATION OF THE SELLERS TO INDEMNIFY. Subject to the limitations contained in Sections 8.1 and 8.3, the Sellers jointly and severally agree to indemnify, defend and hold harmless the Buyer and its directors, officers, employees, shareholders, partners, members, Affiliates, successors, assigns, consultants, accountants, counsel, advisors and other agents or representatives (collectively, the "INDEMNIFIED BUYER PARTIES") from and against any and all Losses based upon, arising from or relating to: (a) any inaccuracy in or breach of any representation or warranty made by the Sellers in this Agreement or in any certificate or other document delivered by the Sellers pursuant to this Agreement (other than any inaccuracy in or breach of any such representation or warranty set forth in Section 2.20, the indemnification for which is exclusively provided by Section 6.13), including without limitation Section 4.3, as of the date such -43- representation or warranty was made or as if such representation or warranty were made on and as of the Closing Date; (b) any breach of any covenant or agreement of the Sellers contained in this Agreement or any other document delivered by the Sellers pursuant to this Agreement (except in respect of Taxes, the indemnification for which is exclusively provided by Section 6.13); (c) the conduct of business, the ownership or use of properties or assets or the incurrence of any liability or obligation by any Seller or any Seller's Subsidiaries or Affiliates or former Subsidiaries or Affiliates, other than the Transferred Companies; (d) the conduct of business, the ownership or use of properties or assets or the incurrence of any liability or obligation by the Transferred Companies based upon, arising from or relating to any division, business unit, operations, Subsidiary or Affiliate of any Transferred Company that was sold, discontinued or otherwise transferred or disposed of prior to the Closing Date (collectively, the "FORMER OPERATIONS"), and any obligation under any agreement pursuant to which any Former Operation was sold, transferred, disposed of or discontinued; (e) (i) any liability of Studley Products, Inc. in respect of the Production Service and Sales District Council Pension Fund or (ii) any liability of any Transferred Company in respect of any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA) subject to Title IV of ERISA in effect prior to the Closing, other than the Ply Gem Industries, Inc. Group Pension Plan; (f) any liabilities or obligations based upon, arising from or relating to any lease under which any Former Operation is or was a party and Ply Gem is a guarantor, co-tenant or other obligor, including without limitation, the leases set forth in EXHIBIT 8.2(F); (g) any Proceeding set forth in Section 2.11 of the Disclosure Letter that is identified with a double asterisk; (h) any liability arising from or under any Environmental Law with respect to the conduct of business, the ownership or use of properties or assets or the incurrence of any liability or obligation by Thermal Gard, Inc. prior to the Closing; (i) any Losses in respect of harm to human health arising from the Calgary Condition; (j) one-half (1/2) of any Losses (other than Losses referred to above in Section 8.2(i)) in excess of $750,000 arising from the Calgary Condition; or (k) enforcing the indemnification provided for under this Agreement. -44- The provisions of Section 8.2(i) and 8.2(j) shall expire and have no further force and effect with respect to any matter as to which the Indemnified Buyer Parties shall not have made a claim in writing against the Sellers on or prior to the fifth anniversary of the Closing Date unless prior to the Closing the Buyer provides written notice to the Sellers that a Sampling conducted by a nationally-recognized independent environmental consultant has determined that contamination arising from the Calgary Condition appears likely to have migrated beyond the borders of the Calgary facility. 8.3. LIMITATIONS ON INDEMNIFICATION BY SELLERS. The indemnification provided for in Sections 6.13 and 8.2 shall be subject to the following limitations: (a) The Sellers shall not be obligated to pay any amounts for indemnification under Section 8.2(a), except those based upon, arising from or otherwise relating to Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.12 (but, in the case of Section 2.12, only in respect of any matter constituting a violation of Law or relating to a controlled group liability), 2.20 and 2.24 (the "SELLER BASKET EXCLUSIONS"), until the aggregate amounts for indemnification under such Sections, exclusive of those based on the Seller Basket Exclusions, equals $7,000,000 (the "BASKET AMOUNT"), after the occurrence of which the Sellers shall be obligated to pay in full all such amounts for such indemnification in excess of the Basket Amount. (b) The Sellers shall be obligated to pay any amounts for indemnification based on the Seller Basket Exclusions (in accordance with their liability as set forth in Sections 6.13 and 8.2) without regard to the individual or aggregate amounts thereof and without regard to whether all other indemnification payments shall have exceeded, in the aggregate, the Basket Amount. (c) The maximum amount of indemnification payments under Section 8.2(a) to which the Indemnified Buyer Parties shall be entitled to receive indemnification in connection with inaccuracies in or breaches of representations or warranties of the Sellers referred to therein (excluding those based upon, arising out of or otherwise in respect of, the Seller Basket Exclusions), shall not exceed $50,000,000 in the aggregate (the "CAP AMOUNT"). (d) For all purposes of Section 6.13, Section 8.2(a) and this Section 8.3, including for purposes of determining whether a breach has occurred and determining the amount of any Loss, each representation and warranty of the Sellers referred to therein (other than Section 2.10) shall be considered without regard to any limitation or qualification as to materiality or Material Adverse Effect (or similar concept) set forth in such representation or warranty. (e) Indemnification under Section 6.13 and Section 8.2 of an Indemnified Buyer Party by the Sellers shall be limited to the amount of any Loss that remains after deducting therefrom (and the cumulative amount of all Losses for purposes of determining the Basket Amount shall be reduced by the amount of) (i) any tax benefit actually realized by such Indemnified Buyer Party and (ii) any insurance proceeds or any -45- indemnity, contribution or other similar payment actually received by an Indemnified Buyer Party from any third party with respect thereto. (f) None of the Indemnified Buyer Parties shall be entitled to recover any Losses relating to any matter arising under one provision of this Agreement to the extent that such Indemnified Buyer Party has already recovered the full amount of such Indemnified Buyer Party's Losses with respect to such matter pursuant to other provisions of this Agreement. Without limiting the generality of the foregoing, the operation of Section 1.4 is an exclusive remedy in respect of the assets and liabilities and related items taken into account in connection with the determination of the Closing Net Working Capital, and no Indemnified Buyer Party shall be entitled to any additional recourse in respect thereof, whether arising from a breach of a representation or warranty or otherwise. (g) The Sellers shall not be obligated to indemnify the Indemnified Buyer Parties in respect of (i) any Losses which result from matters discovered as a result of Sampling undertaken in breach of the covenant in Section 6.23 of this Agreement or (ii) any Losses for environmental remediation arising out of a breach or inaccuracy in the representations and warranties in Section 2.21 beyond the standard for such remediation in effect under applicable Environmental Laws on the date hereof with respect to the use of the applicable facility or property on the date hereof. 8.4. OBLIGATION OF THE BUYER TO INDEMNIFY. Subject to the limitations contained in Sections 8.1 and 8.5, the Buyer agrees to, and, from and after the Closing, agrees to cause each of the Transferred Companies to, indemnify, defend and hold harmless the Sellers and their respective directors, officers, employees, shareholders, partners, members, Affiliates, successors, assigns, consultants, accountants, counsel, advisors and other agents or representatives (collectively, the "INDEMNIFIED SELLER PARTIES") from and against all Losses based upon, arising from or relating to: (a) any inaccuracy in or breach of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement or in any certificate or other document delivered by the Buyer pursuant to this Agreement, including without limitation Section 5.3, as of the date such representation or warranty was made or as if such representation or warranty were made on and as of the Closing Date; (b) any breach of any covenant or agreement of the Buyer contained in this Agreement or any other document delivered by the Buyer pursuant to this Agreement (except in respect of Taxes, the indemnification for which is exclusively provided by Section 6.13); or (c) enforcing the indemnification provided for in this Section 8.4. 8.5. LIMITATIONS ON INDEMNIFICATION BY BUYER. The indemnification provided for in Section 6.13(b) and Section 8.4 shall be subject to the following limitations: -46- (a) For all purposes of 6.13, Section 8.4(a) and this Section 8.5, including for purposes of determining whether a breach has occurred and determining the amount of any Loss, each representation and warranty of the Buyer referred to therein shall be considered without regard to any limitation or qualification as to materiality or material adverse effect (or similar concept) set forth in such representation or warranty. (b) Indemnification under Section 6.13 and Section 8.4 of an Indemnified Seller Party by the Buyer shall be limited to the amount of any Loss that remains after deducting therefrom (i) any tax benefit actually realized by such Indemnified Seller Party and (ii) any insurance proceeds or any indemnity, contribution or other similar payment actually received by an Indemnified Seller Party from any third party with respect thereto. (c) None of the Indemnified Seller Parties shall be entitled to recover any Losses relating to any matter arising under one provision of this Agreement to the extent that such Indemnified Seller Party has already recovered the full amount of such Indemnified Seller Party's Losses with respect to such matter pursuant to other provisions of this Agreement. 8.6. PROCEDURE FOR INDEMNIFICATION. The party making a claim under Section 6.13 or under this Section 8 is referred to as the "INDEMNIFIED PARTY," and the party against whom such claims are asserted under Section 6.13 or under this Section 8 is referred to as the "INDEMNIFYING PARTY." All claims by any Indemnified Party under Section 6.13 or under this Section 8 shall be asserted and resolved as follows: (a) NOTICE OF ASSERTED LIABILITY. After receipt by the Indemnified Party of notice of any event or circumstance that may result in a Loss for which the Indemnifying Party is or may be obligated to pay amounts for indemnification under this Agreement (each, an "ASSERTED LIABILITY"), the Indemnified Party shall give notice of such Asserted Liability (the "CLAIMS NOTICE") to the Indemnifying Party. The failure to give such notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except to the extent that the Indemnifying Party forfeits material rights or defenses by reason of such failure. The Claims Notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary and to the extent feasible) of the Loss that has been or may be suffered by the Indemnified Party. (b) NON-THIRD PARTY CLAIMS. If the Claims Notice from the Indemnified Party pertains to an Asserted Liability other than a claim or demand from a third party for which the Indemnifying Party is or may be obligated to pay amounts for indemnification under this Agreement, then the Indemnifying Party shall have 30 days following receipt of the Claims Notice to make such investigation at the expense of the Indemnifying Party of the Asserted Liability as the Indemnifying Party deems necessary or desirable. For the purposes of such investigation, the Indemnified Party agrees to make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Asserted Liability. If the Indemnified Party and the Indemnifying Party agree at or prior to the expiration of said 30 day period (or any mutually agreed upon extension thereof) on the validity and amount of such Asserted Liability, the Indemnifying Party -47- shall immediately pay to the Indemnified Party the full amount of the claim by wire transfer of immediately available funds to an account designated by the Indemnified Party. (c) OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS. (i) If the Indemnifying Party elects to compromise or defend an Asserted Liability that relates to a claim or demand from a third party (including without limitation a Governmental Authority) for which the Indemnifying Party is or may be obligated to pay amounts for indemnification under this Agreement (a "THIRD PARTY CLAIM"), it shall notify within 30 days following its receipt of the applicable Claims Notice the Indemnified Party of its intent to do so, and the Indemnified Party, at the expense of the Indemnifying Party, shall cooperate in the compromise of, or defense against, such Asserted Liability. During such 30 day period, the Indemnified Party (at the Indemnifying Party's expense) shall make such filings, including motions for continuance (and answers if a motion for continuance has not been granted), as may be necessary to preserve the parties' positions and rights with respect to such claim or demand. (ii) If the Claims Notice pertains to a Third Party Claim, the Indemnifying Party may elect to compromise or defend, at its own expense and by its own counsel, such Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party shall not have the right to defend or direct the defense of any Third Party Claim if it refuses to acknowledge fully in writing its obligations to indemnify the Indemnified Party in accordance with and subject to the provisions of this Section 8. (iii) If the Indemnifying Party elects not to compromise or defend a Third Party Claim, fails to notify the Indemnified Party of its election as provided in this Agreement or refuses to acknowledge fully in writing its obligations to indemnify the Indemnified Party in accordance with and subject to the provisions of this Section 8, the Indemnified Party may pay, compromise or defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party shall have no indemnification obligations with respect to any Third Party Claim which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed); PROVIDED, FURTHER, that notwithstanding the foregoing, the Indemnified Party shall not be required to refrain from paying any claim which has matured by a court judgment or decree, unless an appeal is duly taken from such court judgment or decree and exercise of such court judgment or decree has been stayed, nor shall it be required to refrain from paying any claim where the delay in paying such claim would result in the foreclosure of a Lien upon any of the property or assets then held by the Indemnified Party or where any delay in payment would cause the Indemnified Party material economic loss. (iv) The Indemnifying Party's right to direct the defense shall include the right to compromise or enter into an agreement settling any Third Party Claim; PROVIDED that, without the prior written consent of the Indemnified Party (which consent -48- shall not be unreasonably withheld or delayed), (x) no such compromise or settlement shall obligate the Indemnified Party to agree to any settlement which requires the taking of any action by the Indemnified Party other than the delivery of a customary release, (y) such compromise or settlement shall include an unconditional release of the Indemnified Party and (z) such compromise or settlement shall not require the taking by the Indemnified Party of any action or require any modification by the Indemnified Party or by any Transferred Company in any business practice. Notwithstanding anything to the contrary contained in the preceding sentence, it is understood that (A) the Indemnified Party shall be obligated to pay amounts in respect of any such compromise or settlement for which the Indemnifying Party is not obligated to indemnify the Indemnified Party under this Agreement and (B) the Indemnified Party may withhold or delay its consent to any compromise or settlement described in clause (x) or (z) above unless all Losses associated with any action required to be taken by the Indemnified Party in connection with such compromise or settlement (other than the making of payments referred to in clause (A) of this proviso) are included in the calculation of Losses for purposes of the obligation of the Indemnifying Party to indemnify the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party's right to direct the defense. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party; PROVIDED, HOWEVER, that if in the reasonable opinion of counsel to any Indemnified Party, (I) there are or may be legal defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party or (II) there exists a conflict or potential conflict of interest between the Indemnifying Party and such Indemnified Party, the Indemnifying Party shall be liable for the reasonable legal fees and expenses of separate counsel to the Indemnified Party (but, in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one separate counsel and, if necessary, one local counsel, for all Indemnified Parties in respect of the applicable Third Party Claim). If the Indemnifying Party chooses to defend any Third Party Claim, the Indemnified Party shall make available to the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for such defense and otherwise provide full cooperation in such defense. (v) Notwithstanding anything to the contrary in the foregoing provisions of this Section 8.6(c), the Buyer shall be entitled to compromise or defend any claim or demand from a Governmental Authority having regulatory power under applicable Environmental Laws with respect to the matters for which Losses are subject to indemnification under Section 8.2(j). The Sellers shall have the right to participate in the defense of such claim or demand with counsel selected by them subject to the Buyer's right to direct the defense, and the fees and disbursements of such counsel shall be at the expense of the Sellers. 8.7. SOLE AND EXCLUSIVE REMEDY. To the maximum extent permitted by applicable Law, from and after the Closing, the remedies provided in Section 6.13 and this Section 8 shall be the sole recourse of all parties hereto in respect of any rights, claims and causes of action (including any arising under or based upon common law) in respect of this Agreement and the transactions contemplated hereby. Nothing in this Section 8.7 shall limit any Person's right to seek and obtain any equitable relief to which any Person shall be entitled (including as provided -49- in any Section of this Agreement) or to seek any remedy on account of any Person's engaging in fraud or intentional misconduct. 8.8. TREATMENT OF INDEMNIFICATION PAYMENTS. It is the intention of the parties to treat any indemnification payment made under this Agreement as an adjustment to the Purchase Price for all federal, state, local and foreign Tax purposes, and the parties agree to file their Tax Returns accordingly. 9. DEFINITIONS. Certain capitalized terms are used in this Agreement with the specific meanings defined below in this Section 9. "ACTUAL BONUS AMOUNT" has the meaning set forth in Section 6.21. "AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act. "AGREEMENT" has the meaning set forth in the preamble. "ASSERTED LIABILITY" has the meaning set forth in Section 8.6(a). "AUDITED BALANCE SHEET" has the meaning set forth in Section 2.8. "AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section 2.8. "BASKET AMOUNT" has the meaning set forth in Section 8.3(a). "BUYER" has the meaning set forth in the preamble. "CALGARY CONDITION" has the meaning set forth in Section 6.23. "CAP AMOUNT" has the meaning set forth in Section 8.3(c). "CHARTER" means the articles of incorporation, articles of organization, certificate of incorporation, limited partnership agreement, limited liability company operating agreement, and by-laws (or equivalent charter documents) of any business entity. "CLAIMS NOTICE" has the meaning set forth in Section 8.6(a). "CLASS A STOCK OPTION" means a stock option issued by Nortek Holdings, Inc. under its 2002 Stock Option Plan and constituting a "Class A" option under such plan. "CLOSING" has the meaning set forth in Section 1.3. -50- "CLOSING BALANCE SHEET" has the meaning set forth in Section 1.4(a). "CLOSING DATE" has the meaning set forth in Section 1.3. "CLOSING NET WORKING CAPITAL" has the meaning set forth in Section 1.4(a). "COBRA" has the meaning set forth in Section 2.12(g). "CODE" means the Internal Revenue Code of 1986, as amended and the regulations issued thereunder. "COMBINED GROUP" means the affiliated group having Nortek Holdings, Inc. as its common parent. "COMBINED TAX RETURNS" means the consolidated federal income Tax Return of the affiliated group having Nortek Holdings, Inc. as its common parent and the combined or unitary state or local income Tax Returns of any groups having Nortek Holdings, Inc. as their common parent. "COMMITMENT LETTERS" has the meaning set forth in Section 3.6(b). "COMPANY PENSION PLAN" has the meaning set forth in Section 2.12(c). "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 6.4(a). "CONTEST" has the meaning set forth in Section 6.12(d). "CONTRACT" means any contract, agreement, deed, mortgage, lease, license, instrument, note, commitment, undertaking, or arrangement. "COVERED PARTIES" has the meaning set forth in Section 6.15. "CREDIT AGREEMENT" means the Loan and Security Agreement dated as of July 25, 2002 among Nortek certain of Nortek's Subsidiaries, Fleet Securities, Inc., Fleet Capital Corporation, Fleet Capital Canada Corporation, Congress Financial Corporation, General Electric Capital Corporation, CIT Group/Business Credit, PNC Bank, National Association, and certain other parties, as from time to time in effect. "DEBT COMMITMENT LETTER" has the meaning set forth in Section 3.6(b). "DEBT PROVIDERS" has the meaning set forth in Section 3.6(b). "DISCLOSURE LETTER" has the meaning set forth in Section 2.1. "DISPUTE NOTICE" has the meaning set forth in Section 1.4(b). "ENVIRONMENTAL LAWS" means all applicable federal, state, foreign or local laws or any regulation, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder relating to pollution, protection of the environment or exposure to Hazardous Substances, including laws relating to emissions, discharges, releases or threatened releases of pollutants, noise, contaminants, or hazardous or toxic materials or wastes or any other Hazardous Substance into ambient air, surface water, ground water, or land or otherwise relating to the manufacture, processing, distribution, use, presence, production, -51- labeling, testing, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials or wastes. "EQUITY COMMITMENT LETTER" has the meaning set forth in Section 3.6(a). "EQUITY PROVIDER" has the meaning set forth in Section 3.6(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder. "ERISA AFFILIATES" has the meaning set forth in Section 2.12(c). "EXCHANGE ACT" has the meaning set forth in Section 2.6(b). "EXPIRATION DATE" has the meaning set forth in Section 7.1(b). "FINANCIAL STATEMENTS" has the meaning set forth in Section 2.8. "FOREIGN PLAN" has the meaning set forth in Section 2.12(i). "FORMER OPERATIONS" has the meaning set forth in Section 8.2(d). "GAAP" means United States generally accepted accounting principles. "GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of any such government or political subdivision, or any self-regulated organization or other non-governmental regulating authority (to the extent that the rules, regulations or orders of such authority have the force of law), or any arbitrator, tribunal or court of competent jurisdiction. "HAZARDOUS SUBSTANCE" means any pollutants, contaminants, hazardous or toxic substance, material or waste, including any "hazardous substance" (as defined in 42 U.S.C. ss. 9601(14)), asbestos-containing material, oil, gasoline and any other petroleum-based substance, noise and electromagnetic emissions. "HSR ACT" has the meaning set forth in Section 1.3. "HVAC SEGMENT" has the meaning set forth in Section 6.20(a). "INDEBTEDNESS" means with respect to any Person, all obligations contingent or otherwise, in respect of: (a) borrowed money; (b) indebtedness evidenced by notes, debentures or similar instruments; (c) capitalized lease obligations; (d) the deferred purchase price of assets, services or securities (other than ordinary trade accounts payable); (e) conditional sale or other title retention agreements; (f) reimbursement obligations, whether contingent or matured, with respect to letters of credit, bankers' acceptances, surety bonds, other financial guarantees and interest rate protection agreements (without duplication of other indebtedness supported or guaranteed thereby); and (g) interest, premium, penalties and other amounts owing in respect of the items described in the foregoing clauses (a) through (g). "INDEMNIFIED BUYER PARTIES" has the meaning set forth in Section 8.2. -52- "INDEMNIFIED PARTY" has the meaning set forth in Section 8.6. "INDEMNIFIED SELLER PARTIES" has the meaning set forth in Section 8.4. "INDEMNIFYING PARTY" has the meaning set forth in Section 8.6. "INDEPENDENT ACCOUNTANTS" has the meaning set forth in Section 1.4(c). "INTELLECTUAL PROPERTY" means, as they exist anywhere in the world, all copyrights and mask works, whether or not registered, any all renewals and extensions thereof, domain names, Internet addresses and other computer identifiers, computer software programs (including all source code, object code, specifications, designs and documentation related to such programs), Patents, Trade Secrets, Trademarks and IP Licenses. "INTERIM FINANCIAL STATEMENTS" has the meaning set forth in Section 2.8. "IP LICENSES" has the meaning set forth in Section 2.23(c). "IRS" means the Internal Revenue Service. "KNOWLEDGE OF THE SELLERS" means the actual knowledge of any of (a) Lee D. Meyer, John Wayne, Mark Watson, Bryan Sveinson or Shawn Poe or (b) the executive officers of Nortek. "LAW" means any law, statute, constitution, treaty, code, ordinance, regulation or other requirement of any Governmental Authority. "LEASED REAL PROPERTY" has the meaning set forth in Section 2.22(b). "LIEN" means any mortgage, deed of trust, lease, option, right of first refusal, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including a capital lease), transfer for the purpose of subjection to the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom. "LOSSES" means losses, liabilities, judgments, damages, deficiencies, awards, fines, penalties, expenses, fees, costs, or amounts paid in settlement (including interest and reasonable costs or expenses (including, without limitation, attorneys' fees and costs)), arising out of any incident, event, circumstance or Proceeding asserted or initiated or otherwise occurring or existing in respect of any matter; PROVIDED, HOWEVER, that Losses shall not include any of the foregoing in the nature of punitive damages (other than punitive damages payable to a Governmental Authority or other third party in respect of a Third Party Claim). "MATERIAL ADVERSE EFFECT" means any change, effect or circumstance that is materially adverse (i) to the properties, assets, business, financial condition or operating results of the Transferred Companies taken as a whole; PROVIDED, HOWEVER, that no change, effect or -53- circumstance shall be deemed (either alone or in combination) to constitute, nor shall be taken into account in determining whether there has been or may be, a Material Adverse Effect to the extent that it arises out of or relates to: (a) a general deterioration in the economy or in the industries in which the Transferred Companies operate, (b) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including an act of terrorism, (c) the disclosure of the fact that the Buyer is the prospective acquirer of the Transferred Companies, (d) the announcement of the possibility or pendency of the transactions contemplated hereby or any similar transaction involving any of the Transferred Companies, (e) any change in accounting requirements or principles imposed upon any of the Transferred Companies or any change in applicable laws, rules or regulations or the interpretation thereof, or (f) compliance with the terms of, or the taking of any action required by, this Agreement, or (ii) on the ability of any Seller to perform its obligations under this Agreement or to consummate the transactions contemplated hereby. "MATERIAL UPDATE" means any revision to the Disclosure Letter provided by the Sellers to the Buyer pursuant to Section 6.10(c) with respect to which, when considered together with all previous supplements or amendments that the Buyer has accepted under Section 6.10(b) and all Routine Updates and Material Updates that have resulted in amendments to the Disclosure Letter, the Sellers would not be able to provide an accurate certificate as contemplated by Section 4.3 hereof. "MULTIEMPLOYER PLAN" has the meaning set forth in Section 2.12(d). "MOST RECENT BALANCE SHEET" has the meaning set forth in Section 2.8. "NET WORKING CAPITAL" means current assets within the meaning of GAAP (other than cash and cash equivalents, deferred or current income taxes, intercompany accounts receivable from Nortek or any of its Subsidiaries, and assets in respect of fire retardant treated wood products), reduced in the case of inventories of Napco, Inc. by revision of a LIFO adjustment consistent with the adjustment made in the preparation of the Target Net Working Capital, minus current liabilities within the meaning of GAAP (other than any such liabilities in respect of Indebtedness, deferred or current income taxes, intercompany accounts payable to Nortek or any of its Subsidiaries, and liabilities in respect of fire retardant treated wood products), calculated in a manner consistent with the calculation of the Target Net Working Capital as set forth on EXHIBIT 9. In calculating the foregoing, all assets and liabilities of Former Operations shall be excluded. "NORTEK" has the meaning set forth in the preamble. "ORDER" means any judgment, injunction, award, decision, decree, ruling, verdict, writ or order of any nature of any Governmental Authority. "ORDINARY COURSE OF BUSINESS" means the ordinary course of business of the Transferred Companies, consistent with past practice and custom. "OWNED REAL PROPERTY" has the meaning set forth in Section 2.22(a). -54- "PAID BONUS AMOUNT" has the meaning set forth in Section 6.21. "PATENTS" means any patents, patent applications and inventions, designs and improvements described and claimed therein, patentable inventions and other patent rights (including any divisions, continuations, continuations-in-part, reissues, reexaminations, or interferences thereof, whether or not patents are issued on any such applications and whether or not any such applications are modified, withdrawn or resubmitted). "PBGC" has the meaning set forth in Section 2.12(d). "PERMIT" means any license, permit, exemption, consent, waiver, authorization, right, certificate of occupancy, franchise, order or approval issued, granted, given or otherwise made available by or under the authority of, or registration with, any Governmental Authority or pursuant to any Law. "PERSON" means any present or future natural person or any corporation, association, partnership, joint venture, limited liability, joint stock or other company, business trust, trust, organization, business or government or any governmental agency or political subdivision thereof. "PLAN" has the meaning set forth in Section 2.12(a). "PLY GEM" has the meaning set forth in the recitals. "POST-CLOSING TAXES" means Taxes of the Transferred Companies for periods or portions thereof beginning after the Closing Date. "PRE-CLOSING COMBINED RETURNS" means Combined Tax Returns for Pre-Closing Periods. "PRE-CLOSING PERIODS" has the meaning set forth in Section 6.12(a). "PRE-CLOSING TAXES" means Taxes of the Transferred Companies for periods or portions thereof ending on or before the Closing Date. "PROCEEDING" means any action, cause of action, suit, claim, complaint, demand, audit, dispute, litigation or legal, administrative or arbitral proceeding or investigation, whether at law, in equity or in arbitration, before any Governmental Authority. "PURCHASE PRICE" has the meaning set forth in Section 1.2. "REAL PROPERTY" has the meaning set forth in Section 2.22(c). "REAL PROPERTY LEASES" has the meaning set forth in Section 2.22(b). "RECORDS" has the meaning set forth in Section 6.1. "RESIDENTIAL BUILDING PRODUCTS SEGMENT" has the meaning set forth in Section 6.20(a). "RESTRICTED PERIOD" has the meaning set forth in Section 6.19(a)(i). -55- "ROUTINE UPDATE" means any revision to the Disclosure Letter provided by the Sellers to the Buyer pursuant to Section 6.10(c) with respect to which, when considered together with all previous supplements or amendments that the Buyer has accepted under Section 6.10(b) and all Routine Updates and Material Updates that have resulted in amendments to the Disclosure Letter, the Sellers would nevertheless be able to provide an accurate certificate as contemplated by Section 4.3 hereof. "SAMPLING" has the meaning set forth in Section 6.23. "SEC" has the meaning set forth in Section 6.14(d). "SECURITIES ACT" means the Securities Act of 1933, as amended and the regulations issued thereunder. "SELLER BASKET EXCLUSIONS" has the meaning set forth in Section 8.3(a). "SELLERS" has the meaning set forth in the preamble. "SHARES" has the meaning set forth in the recitals. "SPECIFIED SELLER REPRESENTATIONS" means the representations and warranties in Sections 2.1, 2.2, 2.3, 2.4, 2.5 and 2.24 hereof. "STATEMENT" has the meaning set forth in Section 1.4(a). "STOCK OPTION ADJUSTMENT AMOUNT" shall mean, with respect to each Class A Stock Option cancelled in connection with the transactions contemplated hereby, the amount represented by the product of (a) the number of shares of common stock of Nortek Holdings, Inc. issuable upon exercise of such Class A Stock Option and (b) the difference between $69.25 and the exercise price per share for such Class A Stock Option. "STRADDLE PERIOD" has the meaning set forth in Section 6.12(a). "SUBSIDIARY" means with respect to any Person, any corporation or other legal entity of which such Person owns, directly or indirectly, 50% or more of the outstanding stock or other equity interests or the holders of which are entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. "SURVIVAL TERMINATION DATE" means the ninetieth day following the receipt of audited financial statements of Ply Gem for the fiscal year ended December 31, 2004; PROVIDED that in no event shall the Survival Termination Date be later than June 30, 2005. "TARGET NET WORKING CAPITAL" has the meaning set forth in Section 1.4(d). "TAX RETURNS" means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements required to be supplied to a governmental authority in connection with Taxes, including any schedule or attachment thereto or amendment thereof. -56- "TAX SHARING AGREEMENTS" has the meaning set forth in Section 2.22(d). "TAXES" means (i) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, and similar governmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto) including, without limitation (x) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated withholding, employment, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes, and customs duties, and (ii) any transferee liability in respect of any items described in clause (i) above. "THIRD PARTY CLAIM" has the meaning set forth in Section 8.6(c). "TRADE SECRETS" means any trade secrets, know-how, inventions, processes, procedures, databases, confidential business information and other proprietary information and rights (whether or not patentable or subject to copyright, mask work or trade secret protection). "TRADEMARKS" means any trademarks, service marks, trade dress, trade names, brand names, designs, logos, or corporate names, whether or not registered, and all registrations and applications for registration thereof, and all goodwill related thereto. "TRANSFERRED COMPANIES" has the meaning set forth in the recitals. For purposes of this Agreement, the CWD Windows and Doors division of Broan-NuTone Canada Inc. prior to the date of this Agreement, shall be deemed to be a Transferred Company. "TRANSFERRED COMPANIES' FINANCIALS" means the audited financial statements of the Transferred Companies for the year ended December 31, 2003. "TRANSFERRED COMPANY BUSINESS" has the meaning set forth in Section 6.19(a). "TRANSFERRED COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in Section 2.23(a). "TRANSFERRED COMPANY MATERIAL CONTRACTS" has the meaning set forth in Section 2.13(a). "TRANSFERRED COMPANY MATERIAL PERMITS" has the meaning set forth in Section 2.7(b). "TRANSFERRED COMPANY PLAN" has the meaning set forth in Section 2.12(a). "TRANSFERRED COMPANY PRODUCTS" has the meaning set forth in Section 2.18. "WARN" means the Worker Adjustment and Retraining Notification Act of 1988. "WDS" has the meaning set forth in the preamble. "YEAR END ESTIMATES" has the meaning set forth in Section 6.21. -57- 10. MISCELLANEOUS. 10.1. NOTICES. All notices, requests, demands, claims and other communications required or permitted hereunder shall be in writing and shall be sent by nationally recognized overnight courier, registered mail or certified mail. Any notice, request, demand, claim, or other communication required or permitted hereunder shall be deemed duly given, as applicable, (a) one business day following the date sent when sent by overnight delivery or (b) five business days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid to the following address: If to the Sellers, to: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02902 Tel.: (401) 751-1600 Fax: (401) 751-4610 Attention: Kevin W. Donnelly, Esq. - with a copy to - Ropes & Gray LLP One International Place Boston, Massachusetts 02110-2624 Tel.: (617) 951-7000 Fax: (617) 951-7050 Attention: John B. Ayer, Esq. If to the Buyer, to it at: CI Investment Holdings, Inc. c/o Caxton-Iseman Capital, Inc. 667 Madison Avenue New York, New York 10021 Tel.: (212) 774-5801 Fax: (212) 832-9450 Attention: Frederick J. Iseman - with a copy to - Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Tel.: (212) 373-3000 Fax: (212) 757-3990 Attention: Carl L. Reisner, Esq. -58- Notwithstanding the foregoing, any party may send any notice, request, demand, claim, or other communication required or permitted hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, messenger service, facsimile transmission, ordinary mail, or electronic mail); PROVIDED, HOWEVER, that no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications required or permitted hereunder are to be delivered by giving the other party notice in the manner herein set forth. 10.2. EXPENSES OF TRANSACTION. Whether or not the transactions provided for herein are consummated, each of the parties hereto will assume and bear all expenses, costs and fees (including legal and accounting fees and expenses) incurred by such party in connection with the preparation, negotiation and execution of this Agreement and the transactions contemplated hereby; PROVIDED, HOWEVER, that, in the event the transactions contemplated hereby are not consummated by reason of the failure of any conditions in Section 4 to be satisfied or the termination of this Agreement pursuant to Section 7.1(b)(1) or (2), the filing fee for any filing under the HSR Act or similar foreign requirement required to be made in connection with this Agreement will be shared one-half (1/2) by the Buyer and one-half (1/2) by the Sellers. 10.3. ENTIRE AGREEMENT. This Agreement (including the Disclosure Letter and the agreements, certificates and other documents contemplated hereby or required to be delivered hereunder) sets forth the entire agreement and understanding between the parties relating to the subject matter hereof and supersedes any prior agreement or understanding (other than the Confidentiality Agreement), whether oral or written, relating to the subject matter of this Agreement. 10.4. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or under public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. 10.5. AMENDMENT; WAIVER. This Agreement may be amended, modified or supplemented by the parties hereto at any time, but only by an instrument in writing executed by each of the Buyer and the Sellers. The terms of this Agreement may be waived by any party hereto at any time, but only by an instrument in writing executed by the party waiving compliance, and no such waiver will be applicable except in the specific instance for which it is given. 10.6. PARTIES IN INTEREST. Subject to Section 10.7, this Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any -59- nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation. 10.7. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permissible assigns of the Sellers and the Buyer. This Agreement and any rights and obligations hereunder shall not be assigned, hypothecated or otherwise transferred by any party hereto (by operation of law or otherwise) without the prior written consent of the other party hereto, except that, from and after the Closing, the Buyer may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to any of its Affiliates, to any successor to all or substantially all of its business or assets or to any bank or other financial institution that may provide financing for the transactions contemplated hereby. 10.8. GOVERNING LAW. This Agreement, and all claims arising under, related to, or in connection therewith shall be governed by and construed in accordance with the domestic substantive laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. 10.9. CONSENT TO JURISDICTION. Each party to this Agreement, by its execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the state courts of the State of New York, New York County or the United States District Court located in the State of New York, New York County for the purpose of any and all actions, suits or proceedings arising in whole or in part out of, related to, based upon or in connection with this Agreement or the subject matter hereof, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of FORUM NON CONVENIENS, should be transferred to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (c) hereby agrees not to commence any such action other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise. Each party hereby (x) consents to service of process in any such action in any manner permitted by New York law; (y) agrees that service of process made in accordance with clause (x) or made by registered or certified mail, return receipt requested, at its address specified pursuant to Section 10.1 hereof, shall constitute good and valid service of process in any such action; and (z) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such action any claim that service of process made in accordance with clause (x) or (y) does not constitute good and valid service of process. 10.10. WAIVER OF JURY TRIAL. To the extent not prohibited by applicable law that cannot be waived, each party hereby waives, and covenants that it will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any issue, claim, -60- demand, action or cause of action arising in whole or in part under, related to, based on or in connection with this Agreement or the subject matter hereof, whether now existing or hereafter arising and whether sounding in tort or contract or otherwise. Any party hereto may file an original counterpart or a copy of this Section 10.10 with any court as written evidence of the consent of each such party to the waiver of its right to trial by jury. 10.11. RELIANCE. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of Sections 10.9 and 10.10 above constitute a material inducement upon which such party is relying and will rely in entering into this Agreement, and each such party agrees that any breach by such party of any of the provisions of Sections 10.9 or 10.10 above would constitute a material breach of this Agreement. 10.12. SPECIFIC ENFORCEMENT. Each party acknowledges and agrees that the other party would be irreparably damaged in the event that this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction (without having to post bond or undertake any similar action) to specifically enforce the terms of this Agreement, in addition to any other remedy to which such party may be entitled hereunder, at law or in equity. 10.13. NO WAIVER. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or of any other right. 10.14. INVESTIGATION; NO ADDITIONAL REPRESENTATIONS. Neither the Buyer nor the Sellers has made, or is making, any representation, warranty, covenant or agreement, express or implied, with respect to the matters contained in this Agreement other than the explicit representations, warranties, covenants and agreements set forth herein. The Buyer acknowledges and agrees that it (a) has made its own inquiry and investigation into, and based thereon has formed an independent judgment concerning, the Transferred Companies, and (b) has been furnished with or given adequate access to such information about the Transferred Companies as it has requested. 10.15. NEGOTIATION OF AGREEMENT. Each of the parties acknowledges that it has been represented by independent counsel of its choice throughout all negotiations that have preceded the execution of this Agreement. Each party and its counsel cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it is of no application and is hereby expressly waived. 10.16. CONSTRUCTION. The inclusion of any information in the Disclosure Letter shall not be deemed an admission or acknowledgment, in and of itself and solely by virtue of the inclusion of such information in the Disclosure Letter, that such information is required to be listed in the Disclosure Letter or that such items are material to the Transferred Companies. The headings, if any, of the individual sections of each of the Disclosure Letter are inserted for convenience only -61- and shall not be deemed to constitute a part thereof or a part of the Agreement. Disclosure of any fact or item in any Disclosure Letter or supplement to any Disclosure Letter hereto referenced by a particular Section in this Agreement shall not be deemed disclosed with respect to any other Section in this Agreement or the Disclosure Letter unless an explicit cross-reference appears indicating the other Sections in this Agreement or the Disclosure Letter to which such fact or item also relates or unless the relevance of such fact or item to such other Section in this Agreement or the Disclosure Letter is reasonably apparent on the face of such fact or item, whether or not such Section (or any portion thereof) of this Agreement contemplates that items with respect to such Section are set forth in the Disclosure Letter. 10.17. HEADINGS. The headings contained in this Agreement are inserted only for reference as a matter of convenience and in no way define, limit, or describe the scope or intent of this Agreement, and shall not affect in any way the meaning or interpretation of this Agreement. 10.18. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed an original for all purposes and all of which together shall constitute one and the same instrument. 10.19. USAGE. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. All terms defined in this Agreement in their singular or plural forms have correlative meanings when used in this Agreement in their plural or singular forms, respectively. Unless otherwise expressly provided, the words "include," "includes" and "including" do not limit the preceding words or terms and shall be deemed to be followed by the words "without limitation." [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.] -62- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed under seal by their respective duly authorized officers as of the day and year first written above. The Buyer: CI INVESTMENT HOLDINGS, INC. By: /s/ Frederick J. Iseman --------------------------------------- Name: Frederick J. Iseman Title: President The Sellers: NORTEK, INC. By: /s/ Richard L. Bready --------------------------------------- Name: Richard L. Bready Title: Chairman, President & CEO WDS LLC By: /s/ Richard L. Bready --------------------------------------- Name: Richard L. Bready Title: President -63- EX-3.1 4 y95660exv3w1.txt AMENDED & RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 ----------- STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 09/04/1997 971294896 - 2122600 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PLY GEM INDUSTRIES, INC. Ply Gem Industries, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the Corporation is Ply Gem Industries, Inc. The Certificate of Incorporation was filed with the Secretary of State on the 6th day of April, 1987. 2. This Amended and Restated Certificate of Incorporation restates, integrates and amends the Certificate of Incorporation pursuant to Sections 245 and 242 of the General Corporation Law of the State of Delaware. 3. The text of the Amended and Restated Certificate of Incorporation is hereby amended to read as herein set forth in full: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PLY GEM INDUSTRIES, INC. ARTICLE I The name of the corporation is Ply Gem Industries, Inc. ARTICLE II The address of its registered office in the State of Delaware is The Prentice-Hall Corporation System, Inc., 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The total number of shares of stock which the corporation shall have the authority to issue shall be Three Thousand (3,000) shares of Common Stock, $.01 par value per share. Each share of Common Stock shall be entitled to one vote. ARTICLE V The name of the incorporator is Maria Lombardo, 1050 Franklin Avenue, Garden City, New York. ARTICLE VI The following provisions am inserted for the regulation of the business and the conduct of the affairs of the corporation, and as a limitation upon the powers and rights of its stockholders and directors, but nothing therein shall be construed or deemed to exempt the stockholders and directors from the performance of any obligation or duty imposed by law. (a) The board of directors shall have the power to determine from time to time whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the corporation or any of them (except such as may be by statute specifically open to inspection) shall be open to inspection of the stockholders and no stockholder shall have any right to inspect any account or book or documents of the corporation except as conferred by statute or authorized by the board of directors. (b) The board of directors shall have the power to appoint an Executive Committee from among their number, which Committee, to the extent and in the manner provided by the by-laws of the corporation, shall have and may exercise in the interim between the meetings of the board of directors all of the powers of the board of directors, so far as may be permitted by law, in the management of the business and affairs of the corporation. (c) In the absence of fraud, no contract or other transaction between the corporation and any other corporation shall be affected or invalidated by the fact that any one or more of the directors of this corporation are or may be interested in or are or may be directors or officers of such other corporation or by reason of the fact that such other corporation owns all or a controlling interest in the voting stock of this corporation or this corporation owns all or a controlling interest in the voting stock of such other corporation. Any director or officer of this corporation, individually or jointly, may be a party to or may be interested in any contract or transaction of this corporation or in which this corporation is interested, and such fact shall in no way affect or invalidate the transaction or contract entered into, and each and every person who may become a director or officer of this corporation is hereby relieved from any liability that might otherwise exist in respect of contracting with the corporation for the benefit of himself or the benefit of any person, firm or corporation in which he in any way may be interested. Any and all directors of this corporation who are also directors, officers, stockholders, or members of such other corporation, or who are so interested in any contract, transaction or act of this corporation may be counted in determining the existence of a quorum at any meeting of the Board of Directors of this corporation which shall authorize any such contract, transaction or act with like force and effect, as if they were not such directors, -2- officers, stockholders or members of any such other corporation or were not interested in such contract, transaction or act. (d) No stockholder shall be entitled as of right to purchase or subscribe for any part of any unissued stock or any additional stock to be issued by reason of any increase of the authorized capital stock of the corporation, or the issuance of bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation, but any such unissued stock options to purchase stock may be issued and disposed of pursuant to resolution of the Board of Directors, to such persons, firms, corporations or associations as may be deemed advisable by the Board of Directors, in the exercise of their discretion. ARTICLE VII (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of this corporation or is or was serving at the request of the corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expenses, liability and loss (including attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such persons in connection therewith; provided, however, that the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. Such right shall be a contract right and shall include the right to be paid by the corporation for expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article VII or otherwise. The corporation may, by action of the board of directors, provide indemnification to employees and agents of the corporation with a lesser or the same scope and effect as the foregoing indemnification of directors and officers. -3- (b) If a claim under Paragraph (a) of this Article VII is not paid in full by the corporation within ninety days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in said law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to action or create a presumption that the claimant had not met the applicable standard of conduct. (c) The rights conferred on any person by Paragraphs (a) and (b) of this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) The corporation may maintain insurance, at its expense, to protect itself and any such director or officer of the corporation or of another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. ARTICLE VIII A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (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 General Corporation Law of the State of the Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation law is amended after approval by the stockholders of this Article VIII to authorize corporate action further eliminating or limiting personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time. -4- An appeal or modification of this Article VIII shall not increase the personal liability of any director of this corporation for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. The provisions of this Article VIII shall not be deemed to limit or preclude indemnification of a director by the corporation for any liability of a director which has not been eliminated by the provisions of this Article VIII. ARTICLE IX In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE X (a) Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. (b) Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation ARTICLE XI The corporation reserves the right to amend, alter, change or repeal any provision contained in this amended and restated certificate of incorporation, in the manner now and hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, I have made, subscribed and acknowledged this certificate this 4th day of September, 1997. /s/ Kevin W. Donnelly ----------------------------------------- Kevin W. Donnelly Secretary -5- EX-3.2 5 y95660exv3w2.txt AMENDED BYLAWS EXHIBIT 3.2 ----------- AMENDED BY-LAWS of PLY GEM INDUSTRIES, INC. (A Delaware Corporation) ________________________ ARTICLE 1 DEFINITIONS ----------- As used in these By-laws, unless the context otherwise requires, the term: 1.1 "ASSISTANT SECRETARY" means an Assistant Secretary of the Corporation. 1.2 "ASSISTANT TREASURER" means an Assistant Treasurer of the Corporation. 1.3 "BOARD" means the Board of Directors of the Corporation. 1.4 "BY-LAWS" means the initial by-laws of the Corporation, as amended from time to time. 1.5 "CERTIFICATE OF INCORPORATION" means the initial certificate of incorporation of the Corporation, as amended, supplemented or restated from time to time. 1.6 "CHAIRMAN" means the Chairman of the Board of Directors of the Corporation. 1.7 "CHAIRMAN OF THE EXECUTIVE COMMITTEE" means the Chairman of the Executive Committee of the Board of Directors of the Corporation. 1.8 "CORPORATION" means Ply Gem Industries, Inc. 1.9 "DIRECTORS" means directors of the Corporation. 1.10 "ENTIRE BOARD" means all then authorized directors of the Corporation. 1.11 "GENERAL CORPORATION LAW" means the General Corporation Law of the State of Delaware, as amended from time to time. 1.12 "OFFICE OF THE CORPORATION" means the executive office of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding. 1.13 "PRESIDENT" means the President of the Corporation. 1.14 "SECRETARY" means the Secretary of the Corporation. 1.15 "STOCKHOLDERS" means stockholders of the Corporation. 1.16 "TREASURER" means the Treasurer of the Corporation. 1.17 "VICE PRESIDENT" means a Vice President of the Corporation. ARTICLE 2 STOCKHOLDERS ------------ 2.1 PLACE OF MEETINGS. Every meeting of Stockholders may be held at such place, within or without the State of Delaware, as may be designated by resolution of the Board from time to time. The Board may, in its sole discretion, determine that the meeting of Stockholders shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Delaware law. 2.2 ANNUAL MEETING. If required by applicable law, a meeting of Stockholders shall be held annually for the election of Directors at such date and time as 3 may be designated by resolution of the Board from time to time. Any other business may be transacted at the annual meeting. 2.3 SPECIAL MEETINGS. Unless otherwise prescribed by applicable law, special meetings of Stockholders may be called at any time by the Board and may not be called by any other person or persons. Business transacted at any special meeting of Stockholders shall be limited to the purpose stated in the notice. 2.4 FIXING RECORD DATE. For the purpose of (a) determining the Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders or any adjournment thereof, (ii) unless otherwise provided in the Certificate of Incorporation, to express consent to corporate action in writing without a meeting or (iii) to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or (b) any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date was adopted by the Board and which record date, unless otherwise required by applicable law, shall not be (x) in the case of clause (a)(i) above, more than 60 nor less than 10 days before the date of such meeting, (y) in the case of clause (a)(ii) above, more than 10 days after the date upon which the resolution fixing the record date was adopted by the Board and (z) in the case of clause (a)(iii) or (b) above, more than 60 days prior to such action. If no such record date is fixed: 2.4.1 The record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the 4 day next preceding the day on which the meeting is held; 2.4.2 The record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting (unless otherwise provided in the Certificate of Incorporation), when no prior action by the Board is required by applicable law, shall be the first day on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law; and when prior action by the Board is required by applicable law, the record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action; and 2.4.3 The record date for determining Stockholders for any purpose other than those specified in Sections 2.4.1 and 2.4.2 shall be at the close of business on the day on which the Board adopts the resolution relating thereto. When a determination of Stockholders of record entitled to notice of or to vote at any meeting of Stockholders has been made as provided in this Section 2.4, such determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. 2.5 NOTICE OF MEETINGS OF STOCKHOLDERS. Whenever under the provisions of applicable law, the Certificate of Incorporation or these By-laws, Stockholders are required or permitted to take any action at a meeting, notice shall be given stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which Stockholders and proxy holders may be deemed to be 5 present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, notice of any meeting shall be given, not less than 10 nor more than 60 days before the date of the meeting, to each Stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the Stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this Section 2.5 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Any meeting of Stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. 2.6 WAIVERS OF NOTICE. Whenever the giving of any notice to Stockholders is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the person entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Stockholder at a meeting shall constitute a waiver of notice of such 6 meeting except when the Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders need be specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these By-laws. 2.7 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at least 10 days before every meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, the Stockholder's agent, or attorney, at the Stockholder's expense, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting, during ordinary business hours at the principal place of business of the Corporation, or on a reasonably accessible electronic network as provided by applicable law. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for examination as provided by applicable law. Upon the willful neglect or refusal of the Directors to produce such a list at any meeting for the election of Directors, they shall be ineligible for election to any office at such meeting. Except as provided by applicable law, the stock ledger shall be the only evidence as to who are the Stockholders entitled to 7 examine the stock ledger, the list of Stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. 2.8 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, at each meeting of Stockholders, the presence in person or by proxy of the holders of a majority in voting power of all outstanding shares of stock entitled to vote at the meeting of Stockholders, shall constitute a quorum for the transaction of any business at such meeting. In the absence of a quorum, the holders of a majority in voting power of the shares of stock present in person or represented by proxy at any meeting of Stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. 2.9 VOTING; PROXIES. Unless otherwise provided in the Certificate of Incorporation, every Stockholder entitled to vote at any meeting of Stockholders shall be entitled to one vote for each share of stock held by such Stockholder which has voting power upon the matter in question. At any meeting of Stockholders, all matters, except as otherwise provided by the Certificate of Incorporation, these By-laws, the rules and regulations of any stock exchange applicable to the Corporation, applicable law or pursuant to any rules or regulations applicable to the Corporation or its securities, shall be 8 decided by the affirmative vote of a majority in voting power of shares of stock present in person or represented by proxy and entitled to vote thereon. At all meetings of Stockholders for the election of Directors, a plurality of the votes cast shall be sufficient to elect. Each Stockholder entitled to vote at a meeting of Stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such Stockholder by proxy but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or by delivering a new proxy bearing a later date. 2.10 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF STOCKHOLDERS. The Board, in advance of any meeting of Stockholders, may, and shall if required by applicable law, appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting, the person presiding at the meeting may, and shall if required by applicable law, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, 9 (b) determine the shares represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies or votes, or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a Stockholder shall determine otherwise. In determining the validity and counting of proxies and ballots cast at any meeting of Stockholders, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election. 2.11 CONDUCT OF MEETINGS; ORGANIZATION. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of Stockholders as it shall deem appropriate. At each meeting of Stockholders, the President, or in the absence of the President, the Chairman, or if there is no Chairman or if there be one and the Chairman is absent, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present), shall preside over the meeting. Except to the extent inconsistent with such rules and regulations as adopted by 10 the Board, the person presiding over any meeting of Stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to Stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding officer at any meeting of Stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding officer should so determine, such person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of Stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The Secretary, or in his or her absence, one of the Assistant Secretaries, shall act as secretary of the meeting. In case none of the officers above designated to act as the person presiding over the meeting or as secretary of the meeting, 11 respectively, shall be present, a person presiding over the meeting or a secretary of the meeting, as the case may be, shall be designated by the Board, and in case the Board has not so acted, in the case of the designation of a person to act as secretary of the meeting, designated by the person presiding over the meeting. 2.12 ORDER OF BUSINESS. The order of business at all meetings of Stockholders shall be as determined by the person presiding over the meeting. 2.13 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless otherwise provided in the Certificate of Incorporation, any action required by the General Corporation Law to be taken at any annual or special meeting of Stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of Stockholders are recorded. Every written consent shall bear the date of signature of each Stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.13, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to 12 the extent required by applicable law, be given to those Stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. ARTICLE 3 DIRECTORS --------- 3.1 GENERAL POWERS. Except as otherwise provided in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or these By-laws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation. 3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board. Directors need not be Stockholders. Each Director shall hold office until a successor is duly elected and qualified or until the Director's earlier death, resignation, disqualification or removal. 3.3 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise provided by applicable law or the Certificate of Incorporation, any newly created directorships resulting from an increase in the authorized number of Directors and vacancies occurring in the Board for any cause, may be filled by the affirmative votes of a majority of the remaining members of the Board, although less than a quorum, or by a sole remaining Director, or may be elected by a plurality of the votes cast. A Director so 13 elected shall be elected to hold office until the expiration of the term of office of the Director whom he or she has replaced or until a successor is elected and qualified, or until the Director's earlier death, resignation or removal. 3.4 RESIGNATION. Any Director may resign at any time by notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective. 3.5 REGULAR MEETINGS. Regular meetings of the Board may be held without notice at such times and at such places within or without the State of Delaware as may be determined from time to time by resolution of the Board. 3.6 SPECIAL MEETINGS. Special meetings of the Board may be held at such times and at such places within or without the State of Delaware whenever called by the Chairman, the President or the Secretary or by any two or more Directors then serving as Directors on at least 24 hours' notice to each Director given by one of the means specified in Section 3.9 hereof other than by mail, or on at least three days' notice if given by mail. Special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of any two or more of the Directors then serving as Directors. 3.7 TELEPHONE MEETINGS. Directors or members of any committee designated by the Board may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.7 shall constitute presence in person at such meeting. 14 3.8 ADJOURNED MEETINGS. A majority of the Directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. At least 24 hours' notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.9 hereof other than by mail, or at least three days' notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called. 3.9 NOTICE PROCEDURE. Subject to Sections 3.6 and 3.10 hereof, whenever, under applicable law, the Certificate of Incorporation or these By-laws, notice is required to be given to any Director, such notice shall be deemed given effectively if given in person or by telephone, by mail addressed to such Director at such Director's address as it appears on the records of the Corporation, with postage thereon prepaid, or by telegram, telecopy or by other means of electronic transmission. 3.10 WAIVER OF NOTICE. Whenever the giving of any notice to Directors is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the Director entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Directors or a committee of Directors need be 15 specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these By-laws. 3.11 ORGANIZATION. At each meeting of the Board, the Chairman, or in the absence of the Chairman, the Chairman of the Executive Committee, or in the absence of the Chairman of the Executive Committee, the President, or in the absence of the President, a chairman chosen by a majority of the Directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting. 3.12 QUORUM OF DIRECTORS. The presence in person of a majority of the Entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board. 3.13 ACTION BY MAJORITY VOTE. Except as otherwise expressly required by applicable law, the Certificate of Incorporation or these By-laws, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board. 3.14 ACTION WITHOUT MEETING. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic 16 transmission or transmissions are filed with the minutes of proceedings of the Board or committee. ARTICLE 4 COMMITTEES OF THE BOARD ----------------------- The Board may, by resolution, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted by applicable law and to the extent provided in the resolution of the Board designating such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it. Unless otherwise specified in the resolution of the Board designating a committee, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal 17 rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article 3 of these By-laws. ARTICLE 5 OFFICERS -------- 5.1 POSITIONS. The officers of the Corporation shall be a President, a Secretary, a Treasurer and such other officers as the Board may elect, including a Chairman, one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by resolution of the Board. The Board may elect one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide. 5.2 ELECTION. The officers of the Corporation shall be elected by the Board at its annual meeting or at such other time or times as the Board shall determine. 5.3 TERM OF OFFICE. Each officer of the Corporation shall hold office for the term for which he or she is elected and until such officer's successor is elected and qualifies or until such officer's earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contract 18 rights of the Corporation, if any. Any officer may be removed at any time, with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board. The removal of an officer with or without cause shall be without prejudice to the officer's contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. 5.4 FIDELITY BONDS. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 5.5 CHAIRMAN. The Chairman, if one shall have been appointed, shall preside at all meetings of the Board and shall exercise such powers and perform such other duties as shall be determined from time to time by resolution of the Board. 5.6 CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Chairman of the Executive Committee shall preside at all meetings of the Board at which the Chairman (if there be one) is not present and shall exercise such powers and perform such other duties as shall be determined from time to time by the Charter of the Executive Committee of the Board (the "CHARTER") or by resolution of the Board. 5.7 PRESIDENT. The President shall be the Chief Executive Officer of the Corporation and shall have general supervision over the business of the Corporation, subject, however, to the control of the Board and of any duly authorized committee of the Board. The President shall preside at all meetings of the Stockholders and at all meetings of the Board at which the Chairman (if there be one) and the Chairman of the Executive Committee are not present. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the 19 Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed and, in general, the President shall perform all duties incident to the office of President of a corporation and such other duties as may from time to time be assigned to the President by resolution of the Board. 5.8 VICE PRESIDENTS. At the request of the President, or, in the President's absence, at the request of the Board, the Vice Presidents shall (in such order as may be designated by the Board, or, in the absence of any such designation, in order of seniority based on age) perform all of the duties of the President and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by resolution of the Board or by the President. 5.9 SECRETARY. The Secretary shall attend all meetings of the Board and of the Stockholders and shall record all the proceedings of the meetings of the Board and of the Stockholders in a book to be kept for that purpose, and shall perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the Stockholders and shall perform such other duties as may be prescribed by the Board or by the President, under whose 20 supervision the Secretary shall be. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix the same on any instrument requiring it, and when so affixed, the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may, by resolution, give general authority to any other officer to affix the seal of the Corporation and to attest the same by such officer's signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by applicable law are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by resolution of the Board or by the President. 5.10 TREASURER. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the 21 Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the President or the Board, whenever the President or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; disburse the funds of the Corporation as ordered by the Board; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by resolution of the Board or by the President. 5.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by resolution of the Board or by the President. ARTICLE 6 INDEMNIFICATION --------------- 6.1 RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "COVERED PERSON") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "PROCEEDING"), by reason of the fact that he or she, or a person for whom he or she is legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent 22 of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an "OTHER Entity"), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board. 6.2 PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, PROVIDED, HOWEVER, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 6 or otherwise. 6.3 CLAIMS. If a claim for indemnification or advancement of expenses under this Article 6 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. 23 6.4 NONEXCLUSIVITY OF RIGHTS. The rights conferred on any Covered Person by this Article 6 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise. 6.5 OTHER SOURCES. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity. 6.6 AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article 6 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. 6.7 OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES. This Article 6 shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. ARTICLE 7 GENERAL PROVISIONS ------------------ 7.1 CERTIFICATES REPRESENTING SHARES. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman, if any, or the President or a Vice President and by the Secretary or an 24 Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by such Stockholder in the Corporation. Any or all of the signatures upon a certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 7.2 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board. 7.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. 7.4 FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so 25 kept upon the request of any person entitled to inspect such records pursuant to applicable law. 7.5 SEAL. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. 7.6 FISCAL YEAR. The fiscal year of the Corporation shall be determined by resolution of the Board. 7.7 AMENDMENTS. The Board is expressly authorized to alter, amend and repeal these By-laws and new By-laws may be adopted by the Board, subject to the power of the stockholders of the Corporation to alter or repeal any By-law whether adopted by them or otherwise. EX-3.3 6 y95660exv3w3.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.3 ----------- CERTIFICATE OF INCORPORATION of PLY GEM HOLDINGS, INC. The undersigned incorporator, in order to form a corporation under the General Corporation Law of the State of Delaware (the "GENERAL CORPORATION LAW"), certifies as follows: 1. NAME. The name of the corporation is "Ply Gem Holdings, Inc." (the "CORPORATION"). 2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the Corporation's registered office is 615 South DuPont Highway, Dover, Delaware 19901; and its registered agent at such address is National Corporate Research, Ltd. 3. PURPOSES. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law. 4. CAPITAL STOCK. 4.1 NUMBER OF SHARES. The corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock". The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred (200) shares, consisting of (i) One Hundred (100) shares of Common Stock, $.01 par value per share ("COMMON STOCK"), and (ii) One 2 Hundred (100) shares of Preferred Stock, $.01 par value per share ("PREFERRED STOCK"). Except as otherwise provided in the provisions establishing a class of capital stock, the number of authorized shares of any class of capital stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law. The relative rights, privileges and restrictions granted to or imposed upon the respective classes and series of shares of capital stock of the holder thereof are set forth below. 4.2 "BLANK-CHECK" PREFERRED STOCK. The Preferred Stock may be issued from time to time in one or more series. Subject to the voting rights of the holders of any outstanding shares of Preferred Stock, the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") is hereby expressly vested with authority to designate by resolution or resolutions the powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, including, without limitation, the voting powers, if any, the dividend rate, conversion rights, redemption price or liquidation preference, of any series of Preferred Stock, and to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding). The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or 3 restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. 4.3 COMMON STOCK. 4.3.1 VOTING RIGHTS. Except as may otherwise be provided in this Certificate of Incorporation or by applicable law, the holders of shares of Common Stock shall be entitled to one vote for each share so held with respect to all matters on which stockholders of the Corporation generally are entitled to vote. 4.3.2 DIVIDENDS. Subject to the provisions of law and the rights of the Preferred Stock, dividends may be declared and paid to the holders of Common Stock pro rata, based on the number of shares of Common Stock held by each such holder relative to the total number of outstanding shares of Common Stock, at such times and in such amounts as the Board shall determine. 4.3.3 LIQUIDATION PREFERENCE. Subject to the prior and superior right of the Preferred Stock, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Common Stock shall be entitled to receive that portion of the remaining funds to be distributed after all distributions to the holders of the Preferred Stock, including without limitation the Senior Preferred Stock. Such funds shall be paid to the holders of Common Stock on a pro rata basis based on the number of shares of Common Stock held by each of them relative to the total number of shares of outstanding Common Stock on the date such funds are distributed. 4 5. NAME AND MAILING ADDRESS OF INCORPORATOR. The name and mailing address of the incorporator are: Brett Nadritch, c/o Paul, Weiss, Rifkind Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019-6064. 6. ELECTION OF DIRECTORS. Except as otherwise fixed by or pursuant to the provisions of Article 4 of this Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock, the number of the directors of the Corporation shall be fixed from time to time by or pursuant to the By-laws of the Corporation. Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 7. LIMITATION OF LIABILITY. To the fullest extent permitted under the General Corporation Law, as amended from time to time, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment, repeal or modification of the foregoing provision shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, repeal or modification. 5 8. INDEMNIFICATION. 8.1 RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "COVERED PERSON") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "PROCEEDING"), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an "OTHER Entity"), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 8.3, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board of Directors of the Corporation. 8.2 PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, PROVIDED, HOWEVER, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered 6 Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 8 or otherwise. 8.3 CLAIMS. If a claim for indemnification or advancement of expenses under this Article 8 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. 8.4 NONEXCLUSIVITY OF RIGHTS. The rights conferred on any Covered Person by this Article 8 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, the By-laws of the Corporation, agreement, vote of stockholders or disinterested directors or otherwise. 8.5 OTHER SOURCES. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity. 7 8.6 AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article 8 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. 8.7 OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES. This Article 8 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. 9. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter and repeal the By-laws of the Corporation, subject to the power of the stockholders of the Corporation to alter or repeal any By-law of the Corporation whether adopted by them or otherwise. 10. POWERS OF INCORPORATORS. The powers of the incorporators are to terminate upon the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware. The name and mailing address of the persons who are to serve as the initial directors of the Corporation, or until their successors are duly elected and qualified, are: Robert A. Ferris Frederick J. Iseman c/o Caxton-Iseman Capital, Inc. c/o Caxton-Iseman Capital, Inc. 667 Madison Avenue 667 Madison Avenue New York, New York 10021 New York, New York 10021 8 11. CERTIFICATE AMENDMENTS. The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by applicable law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this article. WITNESS the signature of this Certificate of Incorporation this 23rd day of January, 2004. /s/ Brett Nadritch --------------------------------------- Brett Nadritch, Incorporator EX-3.4 7 y95660exv3w4.txt BYLAWS EXHIBIT 3.4 ----------- AMENDED BY-LAWS of PLY GEM HOLDINGS, INC. (A Delaware Corporation) ------------------------ ARTICLE 1 DEFINITIONS As used in these By-laws, unless the context otherwise requires, the term: 1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation. 1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation. 1.3 "Board" means the Board of Directors of the Corporation. 1.4 "By-laws" means the initial by-laws of the Corporation, as amended from time to time. 1.5 "Certificate of Incorporation" means the initial certificate of incorporation of the Corporation, as amended, supplemented or restated from time to time. 1.6 "Chairman" means the Chairman of the Board of Directors of the Corporation. 1.7 "Chairman of the Executive Committee" means the Chairman of the Executive Committee of the Board of Directors of the Corporation. 1.8 "Corporation" means Ply Gem Holdings, Inc. 2 1.9 "Directors" means directors of the Corporation. 1.10 "Entire Board" means all then authorized directors of the Corporation. 1.11 "General Corporation Law" means the General Corporation Law of the State of Delaware, as amended from time to time. 1.12 "Office of the Corporation" means the executive office of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding. 1.13 "President" means the President of the Corporation. 1.14 "Secretary" means the Secretary of the Corporation. 1.15 "Stockholders" means stockholders of the Corporation. 1.16 "Treasurer" means the Treasurer of the Corporation. 1.17 "Vice President" means a Vice President of the Corporation. ARTICLE 2 STOCKHOLDERS 2.1 Place of Meetings. Every meeting of Stockholders may be held at such place, within or without the State of Delaware, as may be designated by resolution of the Board from time to time. The Board may, in its sole discretion, determine that the meeting of Stockholders shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Delaware law. 2.2 Annual Meeting. If required by applicable law, a meeting of Stockholders shall be held annually for the election of Directors at such date and time as 3 may be designated by resolution of the Board from time to time. Any other business may be transacted at the annual meeting. 2.3 Special Meetings. Unless otherwise prescribed by applicable law, special meetings of Stockholders may be called at any time by the Board and may not be called by any other person or persons. Business transacted at any special meeting of Stockholders shall be limited to the purpose stated in the notice. 2.4 Fixing Record Date. For the purpose of (a) determining the Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders or any adjournment thereof, (ii) unless otherwise provided in the Certificate of Incorporation, to express consent to corporate action in writing without a meeting or (iii) to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or (b) any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date was adopted by the Board and which record date, unless otherwise required by applicable law, shall not be (x) in the case of clause (a)(i) above, more than 60 nor less than 10 days before the date of such meeting, (y) in the case of clause (a)(ii) above, more than 10 days after the date upon which the resolution fixing the record date was adopted by the Board and (z) in the case of clause (a)(iii) or (b) above, more than 60 days prior to such action. If no such record date is fixed: 2.4.1 The record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the 4 day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; 2.4.2 The record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting (unless otherwise provided in the Certificate of Incorporation), when no prior action by the Board is required by applicable law, shall be the first day on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law; and when prior action by the Board is required by applicable law, the record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action; and 2.4.3 The record date for determining Stockholders for any purpose other than those specified in Sections 2.4.1 and 2.4.2 shall be at the close of business on the day on which the Board adopts the resolution relating thereto. When a determination of Stockholders of record entitled to notice of or to vote at any meeting of Stockholders has been made as provided in this Section 2.4, such determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. 2.5 Notice of Meetings of Stockholders. Whenever under the provisions of applicable law, the Certificate of Incorporation or these By-laws, Stockholders are required or permitted to take any action at a meeting, notice shall be given stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which Stockholders and proxy holders may be deemed to be 5 present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, notice of any meeting shall be given, not less than 10 nor more than 60 days before the date of the meeting, to each Stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the Stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this Section 2.5 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Any meeting of Stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. 2.6 Waivers of Notice. Whenever the giving of any notice to Stockholders is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the person entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Stockholder at a meeting shall constitute a waiver of notice of such 6 meeting except when the Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders need be specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these By-laws. 2.7 List of Stockholders. The Secretary shall prepare and make, at least 10 days before every meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, the Stockholder's agent, or attorney, at the Stockholder's expense, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting, during ordinary business hours at the principal place of business of the Corporation, or on a reasonably accessible electronic network as provided by applicable law. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for examination as provided by applicable law. Upon the willful neglect or refusal of the Directors to produce such a list at any meeting for the election of Directors, they shall be ineligible for election to any office at such meeting. Except as provided by applicable law, the stock ledger shall be the only evidence as to who are the Stockholders entitled to 7 examine the stock ledger, the list of Stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. 2.8 Quorum of Stockholders; Adjournment. Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, at each meeting of Stockholders, the presence in person or by proxy of the holders of a majority in voting power of all outstanding shares of stock entitled to vote at the meeting of Stockholders, shall constitute a quorum for the transaction of any business at such meeting. In the absence of a quorum, the holders of a majority in voting power of the shares of stock present in person or represented by proxy at any meeting of Stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. 2.9 Voting; Proxies. Unless otherwise provided in the Certificate of Incorporation, every Stockholder entitled to vote at any meeting of Stockholders shall be entitled to one vote for each share of stock held by such Stockholder which has voting power upon the matter in question. At any meeting of Stockholders, all matters, except as otherwise provided by the Certificate of Incorporation, these By-laws, the rules and regulations of any stock exchange applicable to the Corporation, applicable law or pursuant to any rules or regulations applicable to the Corporation or its securities, shall be 8 decided by the affirmative vote of a majority in voting power of shares of stock present in person or represented by proxy and entitled to vote thereon. At all meetings of Stockholders for the election of Directors, a plurality of the votes cast shall be sufficient to elect. Each Stockholder entitled to vote at a meeting of Stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such Stockholder by proxy but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or by delivering a new proxy bearing a later date. 2.10 Voting Procedures and Inspectors of Election at Meetings of Stockholders. The Board, in advance of any meeting of Stockholders, may, and shall if required by applicable law, appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting, the person presiding at the meeting may, and shall if required by applicable law, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, 9 (b) determine the shares represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies or votes, or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a Stockholder shall determine otherwise. In determining the validity and counting of proxies and ballots cast at any meeting of Stockholders, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election. 2.11 Conduct of Meetings; Organization. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of Stockholders as it shall deem appropriate. At each meeting of Stockholders, the President, or in the absence of the President, the Chairman, or if there is no Chairman or if there be one and the Chairman is absent, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present), shall preside over the meeting. Except to the extent inconsistent with such rules and regulations as adopted by 10 the Board, the person presiding over any meeting of Stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to Stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding officer at any meeting of Stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding officer should so determine, such person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of Stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The Secretary, or in his or her absence, one of the Assistant Secretaries, shall act as secretary of the meeting. In case none of the officers above designated to act as the person presiding over the meeting or as secretary of the meeting, 11 respectively, shall be present, a person presiding over the meeting or a secretary of the meeting, as the case may be, shall be designated by the Board, and in case the Board has not so acted, in the case of the designation of a person to act as secretary of the meeting, designated by the person presiding over the meeting. 2.12 Order of Business. The order of business at all meetings of Stockholders shall be as determined by the person presiding over the meeting. 2.13 Written Consent of Stockholders Without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required by the General Corporation Law to be taken at any annual or special meeting of Stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of Stockholders are recorded. Every written consent shall bear the date of signature of each Stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.13, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to 12 the extent required by applicable law, be given to those Stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. ARTICLE 3 Directors 3.1 General Powers. Except as otherwise provided in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or these By-laws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation. 3.2 Number; Qualification; Term of Office. The Board shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board. Directors need not be Stockholders. Each Director shall hold office until a successor is duly elected and qualified or until the Director's earlier death, resignation, disqualification or removal. 3.3 Newly Created Directorships and Vacancies. Unless otherwise provided by applicable law or the Certificate of Incorporation, any newly created directorships resulting from an increase in the authorized number of Directors and vacancies occurring in the Board for any cause, may be filled by the affirmative votes of a majority of the remaining members of the Board, although less than a quorum, or by a sole remaining Director, or may be elected by a plurality of the votes cast. A Director so 13 elected shall be elected to hold office until the expiration of the term of office of the Director whom he or she has replaced or until a successor is elected and qualified, or until the Director's earlier death, resignation or removal. 3.4 Resignation. Any Director may resign at any time by notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective. 3.5 Regular Meetings. Regular meetings of the Board may be held without notice at such times and at such places within or without the State of Delaware as may be determined from time to time by resolution of the Board. 3.6 Special Meetings. Special meetings of the Board may be held at such times and at such places within or without the State of Delaware whenever called by the Chairman, the President or the Secretary or by any two or more Directors then serving as Directors on at least 24 hours' notice to each Director given by one of the means specified in Section 3.9 hereof other than by mail, or on at least three days' notice if given by mail. Special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of any two or more of the Directors then serving as Directors. 3.7 Telephone Meetings. Directors or members of any committee designated by the Board may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.7 shall constitute presence in person at such meeting. 14 3.8 Adjourned Meetings. A majority of the Directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. At least 24 hours' notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.9 hereof other than by mail, or at least three days' notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called. 3.9 Notice Procedure. Subject to Sections 3.6 and 3.10 hereof, whenever, under applicable law, the Certificate of Incorporation or these By-laws, notice is required to be given to any Director, such notice shall be deemed given effectively if given in person or by telephone, by mail addressed to such Director at such Director's address as it appears on the records of the Corporation, with postage thereon prepaid, or by telegram, telecopy or by other means of electronic transmission. 3.10 Waiver of Notice. Whenever the giving of any notice to Directors is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the Director entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Directors or a committee of Directors need be 15 specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these By-laws. 3.11 Organization. At each meeting of the Board, the Chairman, or in the absence of the Chairman, the Chairman of the Executive Committee, or in the absence of the Chairman of the Executive Committee, the President, or in the absence of the President, a chairman chosen by a majority of the Directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting. 3.12 Quorum of Directors. The presence in person of a majority of the Entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board. 3.13 Action by Majority Vote. Except as otherwise expressly required by applicable law, the Certificate of Incorporation or these By-laws, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board. 3.14 Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic 16 transmission or transmissions are filed with the minutes of proceedings of the Board or committee. ARTICLE 4 COMMITTEES OF THE BOARD The Board may, by resolution, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted by applicable law and to the extent provided in the resolution of the Board designating such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it. Unless otherwise specified in the resolution of the Board designating a committee, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal 17 rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article 3 of these By-laws. ARTICLE 5 OFFICERS 5.1 Positions. The officers of the Corporation shall be a President, a Secretary, a Treasurer and such other officers as the Board may elect, including a Chairman, one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by resolution of the Board. The Board may elect one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide. 5.2 Election. The officers of the Corporation shall be elected by the Board at its annual meeting or at such other time or times as the Board shall determine. 5.3 Term of Office. Each officer of the Corporation shall hold office for the term for which he or she is elected and until such officer's successor is elected and qualifies or until such officer's earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contract 18 rights of the Corporation, if any. Any officer may be removed at any time, with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board. The removal of an officer with or without cause shall be without prejudice to the officer's contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. 5.4 Fidelity Bonds. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 5.5 Chairman. The Chairman, if one shall have been appointed, shall preside at all meetings of the Board and shall exercise such powers and perform such other duties as shall be determined from time to time by resolution of the Board. 5.6 Chairman of the Executive Committee. The Chairman of the Executive Committee shall preside at all meetings of the Board at which the Chairman (if there be one) is not present and shall exercise such powers and perform such other duties as shall be determined from time to time by the Charter of the Executive Committee of the Board (the "Charter") or by resolution of the Board. 5.7 President. The President shall be the Chief Executive Officer of the Corporation and shall have general supervision over the business of the Corporation, subject, however, to the control of the Board and of any duly authorized committee of the Board. The President shall preside at all meetings of the Stockholders and at all meetings of the Board at which the Chairman (if there be one) and the Chairman of the Executive Committee are not present. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the 19 Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed and, in general, the President shall perform all duties incident to the office of President of a corporation and such other duties as may from time to time be assigned to the President by resolution of the Board. 5.8 Vice Presidents. At the request of the President, or, in the President's absence, at the request of the Board, the Vice Presidents shall (in such order as may be designated by the Board, or, in the absence of any such designation, in order of seniority based on age) perform all of the duties of the President and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by resolution of the Board or by the President. 5.9 Secretary. The Secretary shall attend all meetings of the Board and of the Stockholders and shall record all the proceedings of the meetings of the Board and of the Stockholders in a book to be kept for that purpose, and shall perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the Stockholders and shall perform such other duties as may be prescribed by the Board or by the President, under whose 20 supervision the Secretary shall be. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix the same on any instrument requiring it, and when so affixed, the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may, by resolution, give general authority to any other officer to affix the seal of the Corporation and to attest the same by such officer's signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by applicable law are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by resolution of the Board or by the President. 5.10 Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the 21 Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the President or the Board, whenever the President or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; disburse the funds of the Corporation as ordered by the Board; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by resolution of the Board or by the President. 5.11 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by resolution of the Board or by the President. ARTICLE 6 INDEMNIFICATION 6.1 Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "Covered Person") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she, or a person for whom he or she is legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent 22 of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an "Other Entity"), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board. 6.2 Prepayment of Expenses. The Corporation shall pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 6 or otherwise. 6.3 Claims. If a claim for indemnification or advancement of expenses under this Article 6 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. 23 6.4 Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article 6 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise. 6.5 Other Sources. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity. 6.6 Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article 6 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. 6.7 Other Indemnification and Prepayment of Expenses. This Article 6 shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. ARTICLE 7 GENERAL PROVISIONS 7.1 Certificates Representing Shares. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman, if any, or the President or a Vice President and by the Secretary or an 24 Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by such Stockholder in the Corporation. Any or all of the signatures upon a certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 7.2 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board. 7.3 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. 7.4 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so 25 kept upon the request of any person entitled to inspect such records pursuant to applicable law. 7.5 Seal. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. 7.6 Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board. 7.7 Amendments. The Board is expressly authorized to alter, amend and repeal these By-laws and new By-laws may be adopted by the Board, subject to the power of the stockholders of the Corporation to alter or repeal any By-law whether adopted by them or otherwise. EX-3.5 8 y95660exv3w5.txt ARTICLES OF INCORPORATION EXHIBIT 3.5 ----------- G0039-0652 ARTICLES OF INCORPORATION OF GLW ACQUISITION CORP. * * * * * * THE UNDERSIGNED, desiring to form a corporation for profit, under Sections 1701.01 et seq. of the Revised Code of Ohio, do hereby certify: FIRST: The name of said corporation shall be GLW Acquisition Corp. SECOND: The place in the State of Ohio where its principal office is to be located is Cleveland in Cuyahoga County. THIRD: The purpose for which it is formed is to engage in any lawful act or activity for which corporations may be formed under Chapter 1701 of the Revised Code of Ohio. FOURTH: The authorized number of shares of the corporation is Seven hundred fifty (750) all of which shall be with a par value of One cent ($.01) each. FIFTH: The amount of stated capital with which the corporation will begin business is One Thousand Dollars ($1,000). IN WITNESS WHEREOF, I have hereunto subscribed my name this 20th day of November, 1986. /s/ Lyla Olshan ------------------------------------- Lyla Olshan 14036 EX-3.6 9 y95660exv3w6.txt CERTIFICATE OF AMENDMENT TO ARTICLES EXHIBIT 3.6 ----------- G0077-1225 CERTIFICATE OF AMENDMENT ------------------------ TO ARTICLES OF GLW ACQUISITION CORP. --------------------- Jeffrey S. Silverman, President, and Herbert Dooskin, Secretary, of GLW ACQUISITION CORP., an Ohio corporation, do hereby certify that a meeting of the holders of the shares of said corporation entitling them to vote on the proposal to amend the articles of incorporation thereof, as contained in the following resolution, was duly called and held on the 17th day of December, 1986, at which meeting a quorum of such shareholders was present in person or by proxy, and that by the affirmative vote of the holders of shares entitling them to exercise one hundred percent (100%) of the voting power of the corporation on such proposal, the following resolutions were adopted to amend the articles: RESOLVED, that the Articles of Incorporation be amended to change the name of this Corporation to Great Lakes Window, Inc. IN WITNESS WHEREOF, said Jeffrey Silverman, President, and Herbert Dooskin, Secretary of GLW ACQUISITION CORP., acting for and on behalf of said corporation, have hereunto subscribed their names and caused the seal of this corporation to be hereunto affixed this 22nd day of December, 1986. By: /s/ Jeffrey S. Silverman --------------------------------------- President By: /s/ Herbert Dooskin --------------------------------------- Secretary 1637C CONSENT ------- Pursuant to the joint unanimous written action of the Board of Directors and Shareholders of Great Lakes Window Corp., an Ohio corporation, taken on November 25, 1986, Great Lakes Window Corp. hereby consents to the use of the name "Great Lakes Window, Inc." by GLW Acquisition Corp., an Ohio corporation. Certified this 22nd day of December, 1986. GREAT LAKES WINDOW CORP. By: /s/ Ralph Delman --------------------------------------- Ralph Delman, President By: /s/ David A. Katz --------------------------------------- David A. Katz, Secretary EX-3.7 10 y95660exv3w7.txt BY-LAWS EXHIBIT 3.7 ----------- BY-LAWS OF GREAT LAKES WINDOW, INC. TABLE OF CONTENTS

- i - Section 4.3. Additional Officers........................................ 9 Section 4.4. Terms of Office............................................ 9 Section 4.5. Compensation of Officers................................... 9 Section 4.6. Chairman of the Board...................................... 9 Section 4.7. President.................................................. 9 Section 4.8. Vice-Presidents............................................ 9 Section 4.9. Treasurer.................................................. 10 Section 4.10. Secretary.................................................. 10 Section 4.11. Assistant Secretary........................................ 11 Section 4.12. Assistant Treasurer........................................ 11 Section 4.13. Subordinate Officers....................................... 11 ARTICLE V - Stock 11 Section 5.1. Stock...................................................... 11 Section 5.2. Fractional Share Interests................................. 12 Section 5.3. Transfers of Stock......................................... 12 Section 5.4. Record Date................................................ 13 Section 5.5. Transfer Agent and Registrar............................... 13 Section 5.6. Dividends.................................................. 13 Section 5.7. Lost, Stolen or Destroyed Certificates..................... 14 Section 5.8. Inspection of Books........................................ 14 ARTICLE VI - Miscellaneous Management Provisions..................................... 14 Section 6.1. Execution of Papers........................................ 14 Section 6.2. Notices.................................................... 14 Section 6.3. Conflict of Interest....................................... 15 Section 6.4. Voting of Securities Owned by this Corporation............. 15 ARTICLE VII - Indemnification........................................................ 16 Section 7.1. Right to Indemnification................................... 16 ARTICLE VIII - Amendments............................................................ 17 Section 8.1. Amendments................................................. 17

- ii - BY-LAWS OF GREAT LAKES WINDOW, INC. ARTICLE I - General SECTION 1.1. DRAFTER'S NOTE. ALTHOUGH THESE BY-LAWS HAVE BEEN DRAFTED TO CONFORM GENERALLY TO CORPORATE LAW REQUIREMENTS, SPECIFIC CORPORATE LAW REQUIREMENTS SHOULD BE CONSULTED IN THE EVENT OF ANY SIGNIFICANT CORPORATE ACTION. IF ANY PROVISION OF THESE BY-LAWS SHALL CONFLICT WITH APPLICABLE LAW, SUCH LAW SHALL CONTROL. Section 1.2. Relationship to Charter, etc. These by-laws are subject to applicable corporate law and to the Corporation's certificate of incorporation, articles of organization or similar document (the "charter"). In these by-laws, references to law, the charter and by-laws mean the law, the provisions of the charter and the by-laws as from time to time in effect. Section 1.3. Seal. The board of directors may provide for a seal of the Corporation, which, if so provided, shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the state of its incorporation, and such other words, dates or images as may be approved from time to time by the directors. Section 1.4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. ARTICLE II - Stockholders Section 2.1. Place of Meetings. All meetings of the stockholders shall be held at the principal executive office of the Corporation, except such meetings as the Board of Directors expressly determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such other place or places within or without the state of incorporation of the Corporation as the Board of Directors shall have determined and as shall be stated in such notice. Section 2.2. Annual Meeting. The annual meeting of the stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the charter, or these by-laws. If the election of directors shall not be held on the day designated in accordance with these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefore or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting; and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called as provided in Section 2.9. Section 2.3. Quorum. At all meetings of the stockholders, the holders of a majority by voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise provided by law, by the charter or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of voting stock shall be present. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted if the meeting had been held as originally called. Section 2.4. Right to Vote; Proxies. Each holder of a share or shares of capital stock of the Corporation having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him, unless otherwise provided in the charter. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy which is dated more than three years prior to the meeting - 2 - at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. Subject to applicable statutory provisions, a proxy may be granted by a writing executed by the stockholder or his authorized officer, director, employee or agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission. Section 2.5. Voting. At all meetings of stockholders, except as otherwise expressly provided for by statute, the charter or these by-laws, (a) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (b) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise expressly provided by law, the charter or these by-laws, at all meetings of stockholders the voting shall be by voice vote, but any stockholder qualified to vote on the matter in question may demand a stock vote, by shares of stock, upon such question, whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if such ballot be cast by a proxy, it shall also state the name of the proxy. Section 2.6. Notice of Annual Meetings. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock books of the Corporation at least 10 days (and not more than 60 days) prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Corporation or to the transfer agent, if any, of the class of stock owned by him, his post-office address and to notify said Secretary or transfer agent of any change therein. Section 2.7. Stockholders' List. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and made available either at a place within the city where the meeting is - 3 - to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, at least 10 days before such meeting, and shall at all times during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder for a purpose germane to the meeting. Section 2.8. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called by the Board of Directors or the Chairman of the Board. Section 2.9. Notice of Special Meetings. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than 10 nor more than 60 days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof or such other business as may be germane or supplementary to that stated in said notice or notices. Section 2.10. Inspectors. One or more inspectors may be appointed by the Board of Directors before or at any meeting of stockholders, or, if no such appointment shall have been made, the presiding officer may make such appointment at the meeting. At the meeting for which the inspector or inspectors are appointed, he or they shall open and close the polls, receive and take charge of the proxies and ballots, and decide all questions touching on the qualifications of voters, the validity of proxies and the acceptance and rejection of votes. If any inspector previously appointed shall fail to attend or refuse or be unable to serve, the presiding officer shall appoint an inspector in his place. Section 2.11. Stockholders' Consent in Lieu of Meetings. Unless otherwise provided in the charter, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, in the manner, and to the fullest extent, provided by applicable law. - 4 - ARTICLE III - Directors Section 3.1. Number of Directors. Except as otherwise provided by law, the charter or these by-laws, the property and business of the Corporation shall be managed by or under the direction of a board of not less than two nor more than thirteen directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. Directors need not be stockholders, residents of the Corporation's state of incorporation or citizens of the United States. The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for that purpose. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term. Section 3.2. Change in Number of Directors; Vacancies. The maximum number of directors may be increased by an amendment to these by-laws adopted by a majority vote of the Board of Directors or by a majority vote of the capital stock having voting power, and if the number of directors is so increased by action of the Board of Directors or of the stockholders or otherwise, then the additional directors may be elected in the manner provided above for the filling of vacancies in the Board of Directors or at the annual meeting of stockholders or at a special meeting called for that purpose. Section 3.3. Resignation. Any director of this Corporation may resign at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. - 5 - Section 3.4. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 3.5. Place of Meetings and Books. The Board of Directors may hold their meetings and keep the books of the Corporation inside or outside the Corporation's state of incorporation, at such places as they may from time to time determine. Section 3.6. General Powers. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the charter or by these by-laws directed or required to be exercised or done by the stockholders. Section 3.7. Committees. The Board of Directors may designate one or more committees by resolution or resolutions passed by a majority of the whole board. Such committee or committees shall consist of one or more directors of the Corporation, and, to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Corporation to the extent permitted by statute and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 3.8. Powers Denied to Committees. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the charter, adopt an agreement of merger, or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend the by-laws of the Corporation unless the resolution or resolutions designating such committee expressly so provides. Further, no committee of the Board of Directors shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger unless the resolution or resolutions designating such committee expressly so provides. - 6 - Section 3.9. Substitute Committee Member. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its proceedings and report the same to the board as may be required by the board. Section 3.10. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.11. Annual Meeting. The newly-elected board may meet at such place and time as shall be fixed and announced by the presiding officer at the annual meeting of stockholders, for the purpose of organization or otherwise, and no further notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such place and time as shall be stated in a notice given to such directors two (2) days prior to such meeting, or as shall be fixed by the consent in writing of all the directors. Section 3.12. Regular Meetings. Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board. Section 3.13. Special Meetings. Special meetings of the board may be called by the Chairman of the Board on 2 days' notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified. Special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors. Section 3.14. Quorum. At all meetings of the Board of Directors, a majority of the total number of directors shall be - 7 - necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the charter, or by these by-laws. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. Section 3.15. Telephonic Participation in Meetings. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.16. Action by Consent. Unless otherwise restricted by law, the charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV - Officers Section 4.1. Selection; Statutory Officers. The officers of the Corporation shall be chosen by the Board of Directors. There shall be a President, a Secretary and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers, as the Board of Directors may elect. Any number of offices may be held by the same person. Subject to law, the charter and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. Section 4.2. Time of Election. The officers above named shall be chosen by the Board of Directors at its first meeting - 8 - after each annual meeting of stockholders. None of said officers need be a director or stockholder. Section 4.3. Additional Officers. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4.4. Terms of Office. Each officer of the Corporation shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors, with or without cause. Section 4.5. Compensation of Officers. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Section 4.6. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors. Section 4.7. President. Unless the Board of Directors otherwise determines, the President shall be the chief executive officer and head of the Corporation. Unless there is a Chairman of the Board, the President shall preside at all meetings of directors and stockholders. Under the supervision of the Board of Directors and of any applicable committee thereof, the President shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors and of any applicable committee to confer any specific power, except such as may be by statute exclusively conferred on the President, upon any other officer or officers of the Corporation. The President shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or any applicable committee thereof. Section 4.8. Vice-President. The Vice-Presidents shall perform such of the duties of the President on behalf of the Corporation as may be respectively assigned to them from time to - 9 - time by the Board of Directors or by the executive committee or by the President. The Board of Directors or any applicable committee may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the board and of any applicable committee. Section 4.9. Treasurer. The Treasurer shall have the care and custody of all the funds and securities of the Corporation which may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors or any applicable committee, or the officers or agents to whom the Board of Directors or any applicable committee may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Corporation. He may sign all receipts and vouchers for the payments made to the Corporation. He shall render an account of his transactions to the Board of Directors or to any applicable committee as often as the board or such committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Corporation. He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors and of any applicable committee. He shall, when requested pursuant to vote of the Board of Directors or any applicable committee, give a bond to the Corporation conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Corporation. Section 4.10. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders. He shall attend to the giving and serving of all notices of the Corporation. Except as otherwise ordered by the Board of Directors or any applicable committee, he shall attest the seal of the Corporation upon all contracts and instruments executed under such seal and shall affix the seal of the Corporation thereto and to all certificates of shares of capital stock of the Corporation. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other - 10 - books and papers as the Board of Directors or any applicable committee may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors and of any applicable committee. Section 4.11. Assistant Secretary. The Board of Directors may appoint or remove one or more Assistant Secretaries of the Corporation. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors, any applicable committee, the President, any Vice-President, the Treasurer or the Secretary may designate. Section 4.12. Assistant Treasurer. The Board of Directors may appoint or remove one or more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors or any applicable committee may designate. Section 4.13. Subordinate Officers. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. ARTICLE V - Stock Section 5.1. Stock. Each stockholder shall be entitled to a certificate or certificates of stock of the Corporation in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall certify the holder's name and number and class of shares and shall be signed by both of (a) either the President or a Vice-President, and (b) any one of the Treasurer or the Secretary, and shall be sealed with the corporate seal of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, the signature of the officers of the Corporation and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or - 11 - or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers or the Corporation. Section 5.2. Fractional Share Interests. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (a) arrange for the disposition of fractional interests by those entitled thereto, (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (c) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. Section 5.3. Transfers of Stock. Subject to any transfer restrictions then in force, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in - 12 - such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by applicable law. Section 5.4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. Section 5.6. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the charter and applicable law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the - 13 - Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. Section 5.8. Inspection of Books. The Board of Directors shall have power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors. ARTICLE VI - Miscellaneous Management Provisions Section 6.1. Execution of Papers. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made accepted or endorsed by the Corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. Section 6.2. Notices. Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given 5 days after the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person. Whenever any notice is required to be given under the provisions of the statutes or of the charter of the Corporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose - 14 - of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6.3. Conflict of Interest. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Director or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Corporation entitled to vote thereon, and the contract or transaction is specifically approved by vote of such stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.4. Voting of Securities Owned by this Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other Corporation and owned or controlled by this Corporation may be voted in person at any meeting of security holders of such other corporation by the President, any Vice President, or the Treasurer, and (b) whenever, in the judgment of the President or any other appropriate officer, it is desirable for this Corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other Corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the President or such officer, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or - 15 - attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Corporation the same as such shares or other securities might be voted by this Corporation. ARTICLE VII - Indemnification Section 7.1. Right to Indemnification. The Corporation shall, to the maximum extent permitted from time to time under the laws of the state of incorporation of the Corporation, indemnify, and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation or while a director or officer is or was serving at the request of this Corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 7.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The Corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the Corporation and stockholders purporting to act on behalf of the Corporation, to the extent permitted by the law of the state of incorporation of the Corporation. - 16 - ARTICLE VIII - Amendments Section 8.1. Amendments. The by-laws of the Corporation may be altered, amended or repealed at any meeting of the Board of Directors upon notice thereof in accordance with these by-laws, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the charter of the Corporation and applicable laws. - 17 - EX-3.8 11 y95660exv3w8.txt RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.8 ----------- RESTATED CERTIFICATE OF INCORPORATION OF KROY INDUSTRIES, INC., a Delaware Corporation Incorporated August 31, 1994 Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware The undersigned, Kenneth T. Nordlund and Robert V. Jahrling are President and Secretary, respectively, of Kroy Industries, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"). The Corporation's Certificate of incorporation was initially filed in the Office of the Secretary of State of the State of Delaware on August 31, 1994. A Certificate of Amendment of the Certificate of Incorporation was filed with the Office of the Secretary of State of the State of Delaware on October 17, 1994. The undersigned, as President and Secretary of the Corporation, do hereby certify that (a) the Board of Directors duly adopted a resolution pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware proposing that this Restated Certificate of Incorporation (the "Restated Certificate") be approved and declaring the adoption of such Restated Certificate to be advisable; and (b) the stockholders of the Corporation duly approved this Restated Certificate by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware, and written notice of such consent has been given to all stockholders who have not consented in writing to this Restated Certificate. FIRST: The name of the Corporation is: Kroy Industries, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent. The name of the registered agent of the Corporation at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 6,000,000 shares, consisting of (A) 1,000,000 shares of Preferred Stock, $.01 par value (the "Preferred Stock"), and (B) 5,000,000 shares of Common Stock, $.01 par value (the "Common Stock"). A statement of the designations of the authorized classes of stock, and the powers, preferences and relative participating, optional, or other special rights, and the qualifications, limitations or restrictions thereof, is as follows: A. VOTING RIGHTS. Except as otherwise provided by the laws of Delaware, the Common Stock and the Preferred Stock shall vote as one class, with the holder of each share of Common Stock being entitled to one vote in respect of such share of Common Stock and the holder of Preferred Stock being entitled to the number of votes equal to the number of whole shares of Common Stock into which all such shares of Preferred Stock could have been converted as of the record date for determining the stockholders having the right to notice of and to vote at such meeting. B. DIVIDEND RIGHTS. During any fiscal year of the Corporation, no dividends (other than dividends or distributions payable solely in shares of Common Stock of the Corporation) shall be paid or declared, and no other distribution shall be made, on or with respect to the Common Stock of the Corporation unless and until there shall have been paid, or declared and set aside for payment, during such fiscal year, dividends with respect to the Preferred Stock in an amount which the holders of Preferred Stock would have received if they had converted their Preferred Stock into Common Stock immediately prior to the record date for such dividend or distribution. C. LIQUIDATION RIGHTS. (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then before any distribution or payment shall be made to or set apart for the holders of Common Stock, the holders of Preferred Stock shall be entitled to receive from the assets of the Corporation an amount equal to $3.529412 per share of Preferred Stock (such amount to be adjusted appropriately in the event of any stock dividend, stock split or combination, or similar recapitalization affecting the Preferred Stock) plus, in the case of each share, an amount equal to any dividends declared but unpaid thereon or required to be so paid under paragraph B of this Article FOURTH. After such payment shall have been made in full to the holders of Preferred Stock, the holders of Common Stock shall be entitled to receive from the remaining assets of the Corporation an amount equal to the original issue price of such Common Stock (such amount to be adjusted appropriately in the event of any stock dividend, stock split or combination or similar recapitalization affecting the Common Stock, plus, in the case of each share, an amount equal to any dividends declared but unpaid thereon, any such declaration of dividends to be subject to paragraph B of this Article IV above. Any assets of the Corporation remaining after all the payments specified above in this paragraph C(1) shall be distributed with respect to the then outstanding shares of Preferred Stock and Common Stock pro rata on a per share basis without regard to class. If upon the occurrence of any such liquidation, dissolution or winding up, the assets and funds to be thus distributed among the holders of the Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then each issued and outstanding share of Preferred Stock shall entitle the holder thereof to a proportion of the assets and funds to be distributed on a pro rata basis, and the holders of -2- the Common Stock shall in no event be entitled to participate in any such distribution in respect of their shares. (2) A merger or consolidation of the Corporation into or with any other Corporation, a merger of any other Corporation into the Corporation, or a sale, lease, exchange, transfer or similar disposition (other than a mortgage or pledge) by the Corporation of all or substantially all of its assets shall be deemed, for purposes of this paragraph C, to be a liquidation, dissolution, or winding up of the Corporation unless, in the case of any such merger or consolidation, the holders of Preferred Stock retain their existing shares of Preferred Stock or receive a security of the surviving or resulting corporation which entitles them to substantially equivalent rights and obligations as those of the Preferred Stock. Written notice of any proposed merger, consolidation, sale, lease, exchange, transfer or similar disposition meeting the foregoing description, in reasonable detail, shall be furnished to the holders of Preferred Stock no later than 30 days prior to the anticipated effective date thereof. D. CONVERSION RIGHTS. (1) OPTIONAL CONVERSION. Each share of Preferred Stock shall be convertible at any time at the option of the holder thereof at the office of the Corporation or any transfer agent for the Preferred Stock into one fully paid and nonassessable share of Common Stock. Such conversion rate shall be subject to appropriate adjustment in the event the Corporation declares a dividend or other distribution payable in Common Stock, or subdivides its outstanding shares of Common Stock into a larger number or combines its outstanding shares of Common Stock into a smaller number of shares. (2) MECHANICS OF CONVERSION. (a) Before any holder of shares of Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor at the office of the Corporation or the transfer agent for the Preferred Stock, and shall give written notice to the Corporation or such transfer agent at said office that he elects to convert the same and shall state in such notice the name or names in which he wishes the certificate or certificates for shares of Common Stock to be registered. The Corporation will, as soon as practicable thereafter, issue and deliver at said office to the person for whose account such surrender of the shares of Preferred Stock was made or to his nominee or nominees certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid together with the cash payment to be made in respect of any fraction of a share as herein provided. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on said date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder surrendering Preferred Stock for conversion be conditioned upon the closing with the underwriter of the sale of securities pursuant to such offering, in which event the -3- persons(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities. (b) The shares of Common Stock issued by the Corporation from time to time upon the conversion of any shares of Preferred Stock shall be deemed fully paid and not liable to any further call or assessment thereon. (c) The Corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Preferred Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Preferred Stock from time to time outstanding. (d) No fractional shares or script representing fractional shares shall be issued upon the conversion of any of the shares of Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether conversion would result in the issuance of any fractional share. If any such conversion results in a fraction, an amount equal to such fraction multiplied by the then current market price (as determined in good faith by the board of directors of the Corporation) of one share of Common Stock shall be paid to such holder in cash by the Corporation. FIFTH: The Corporation is to have perpetual existence. SIXTH: The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The Directors shall have the power to adopt, amend, or repeal the By-Laws of the Corporation. Election of Directors need not be by written ballot unless the By-Laws of the Corporation so provide. SEVENTH: The Corporation shall indemnify and hold harmless any director, officer, employee or agent of the Corporation from and against any and all expenses and liabilities that may be imposed upon or incurred by him in connection with, or as a result of, any proceeding in which he may become involved, as a party or otherwise, by reason of the fact that he is or was such a director, officer, employee or agent of the Corporation, whether or not he continues to be such at the time such expenses and liabilities shall have been imposed or incurred, to the fullest extent permitted by the laws of the State of Delaware, as they may be amended from time to time. EIGHTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (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 General Corporation Law of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of Delaware is amended to -4- authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of Delaware, as so amended from time to time. EXECUTED at York, Nebraska, as of the 26th day of April, 1995. /s/ Kenneth T. Nordlund ------------------------------------------- Kenneth T. Nordlund President ATTEST: /s/ Robert V. Jahrling - ------------------------------- Robert V. Jahrling Secretary -5- EX-3.9 12 y95660exv3w9.txt BY-LAWS Exhibit 3.9 ----------- BY-LAWS OF KBP ACQUISITION CORP., INC. Article I - General Section 1.1. Drafter's Note. Although these by-laws have been drafted to conform generally to corporate law requirements, specific corporate law requirements should be consulted in the event of any significant corporate action. If any provision of these by-laws shall conflict with applicable law, such law shall control. Section 1.2. Relationship to Charter, etc. These by-laws are subject to applicable corporate law and to the Corporation's certificate of incorporation, articles of organization or similar document (the "charter"). In these by-laws, references to law, the charter and by-laws mean the law, the provisions of the charter and the by-laws as from time to time in effect. Section 1.3. Seal. The board of directors may provide for a seal of the Corporation, which, if so provided, shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the state of its incorporation, and such other words, dates or images as may be approved from time to time by the directors. Section 1.4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. Article II - Stockholders Section 2.1. Place of Meetings. All meetings of the stockholders shall be held at the principal executive office of the Corporation, except such meetings as the Board of Directors expressly determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such other place or places within or without the state of incorporation of the Corporation as the Board of Directors shall have determined and as shall be stated in such notice. Section 2.2. Annual Meeting. The annual meeting of the stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the charter, or these by-laws. If the election of directors shall not be held on the day designated in accordance with these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefore or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting; and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called as provided in Section 2.9. Section 2.3. Quorum. At all meetings of the stockholders, the holders of a majority by voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise provided by law, by the charter or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of voting stock shall be present. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted if the meeting had been held as originally called. Section 2.4. Right to Vote; Proxies. Each holder of a share or shares of capital stock of the Corporation having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him, unless otherwise provided in the charter. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy which is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. Subject to applicable statutory provisions, a proxy may be granted by a writing executed by the stockholder or his authorized officer, director, employee or agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission. Section 2.5. Voting. At all meetings of stockholders, except as otherwise expressly provided for by statute, the charter or these by-laws, (a) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (b) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise expressly provided by law, the charter or these by-laws, at all meetings of stockholders the voting shall be by voice vote, but any stockholder qualified to vote on the matter in question may demand a stock vote, by shares of stock, upon such question, whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if such ballot be cast by a proxy, it shall also state the name of the proxy. - 2 - Section 2.6. Notice of Annual Meetings. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock books of the Corporation at least 10 days (and not more than 60 days) prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Corporation or to the transfer agent, if any, of the class of stock owned by him, his post-office address and to notify said Secretary or transfer agent of any change therein. Section 2.7. Stockholders' List. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and made available either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, at least 10 days before such meeting, and shall at all times during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder for a purpose germane to the meeting. Section 2.8. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called by the Board of Directors or the Chairman of the Board. Section 2.9. Notice of Special Meetings. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than 10 nor more than 60 days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof or such other business as may be germane or supplementary to that stated in said notice or notices. Section 2.10. Inspectors. One or more inspectors may be appointed by the Board of Directors before or at any meeting of stockholders, or, if no such appointment shall have been made, the presiding officer may make such appointment at the meeting. At the meeting for which the inspector or inspectors are appointed, he or they shall open and close the polls, receive and take charge of the proxies and ballots, and decide all questions touching on the qualifications of voters, the validity of proxies and the acceptance and rejection of votes. If any inspector previously appointed shall fail to attend or refuse or be unable to serve, the presiding officer shall appoint an inspector in his place. Section 2.11. Stockholders' Consent in Lieu of Meetings. Unless otherwise provided in the charter, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, in the manner, and to the fullest extent, provided by applicable law. - 3 - Article III - Directors Section 3.1. Number of Directors. Except as otherwise provided by law, the charter or these by-laws, the property and business of the Corporation shall be managed by or under the direction of a board of not less than two nor more than thirteen directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. Directors need not be stockholders, residents of the Corporation's state of incorporation or citizens of the United States. The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for that purpose. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term. Section 3.2. Change in Number of Directors; Vacancies. The maximum number of directors may be increased by an amendment to these by-laws adopted by a majority vote of the Board of Directors or by a majority vote of the capital stock having voting power, and if the number of directors is so increased by action of the Board of Directors or of the stockholders or otherwise, then the additional directors may be elected in the manner provided above for the filling of vacancies in the Board of Directors or at the annual meeting of stockholders or at a special meeting called for that purpose. Section 3.3. Resignation. Any director of this Corporation may resign at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.4. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 3.5. Place of Meetings and Books. The Board of Directors may hold their meetings and keep the books of the Corporation inside or outside the Corporation's state of incorporation, at such places as they may from time to time determine. Section 3.6. General Powers. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the - 4 - charter or by these by-laws directed or required to be exercised or done by the stockholders. Section 3.7. Committees. The Board of Directors may designate one or more committees by resolution or resolutions passed by a majority of the whole board. Such committee or committees shall consist of one or more directors of the Corporation, and, to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Corporation to the extent permitted by statute and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 3.8. Powers Denied to Committees. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the charter, adopt an agreement of merger, or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend the by-laws of the Corporation unless the resolution or resolutions designating such committee expressly so provides. Further, no committee of the Board of Directors shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger unless the resolution or resolutions designating such committee expressly so provides. Section 3.9. Substitute Committee Member. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its proceedings and report the same to the board as may be required by the board. Section 3.10. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.11. Annual Meeting. The newly-elected board may meet at such place and time as shall be fixed and announced by the presiding officer at the annual meeting of stockholders, for the purpose of organization or otherwise, and no further notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such - 5 - place and time as shall be stated in a notice given to such directors two (2) days prior to such meeting, or as shall be fixed by the consent in writing of all the directors. Section 3.12. Regular Meetings. Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board. Section 3.13. Special Meetings. Special meetings of the board may be called by the Chairman of the Board on 2 days' notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified. Special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors. Section 3.14. Quorum. At all meetings of the Board of Directors, a majority of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the charter, or by these by-laws. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. Section 3.15. Telephonic Participation in Meetings. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.16. Action by Consent. Unless otherwise restricted by law, the charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee. Article IV - Officers Section 4.1. Selection; Statutory Officers. The officers of the Corporation shall be chosen by the Board of Directors. There shall be a President, a Secretary and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers, as the Board of Directors may elect. Any number of offices may be held by the same person. Subject to law, the charter and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties - 6 - and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. Section 4.2. Time of Election. The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders. None of said officers need be a director or stockholder. Section 4.3. Additional Officers. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4.4. Terms of Office. Each officer of the Corporation shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors, with or without cause. Section 4.5. Compensation of Officers. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Section 4.6. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors. Section 4.7. President. Unless the Board of Directors otherwise determines, the President shall be the chief executive officer and head of the Corporation. Unless there is a Chairman of the Board, the President shall preside at all meetings of directors and stockholders. Under the supervision of the Board of Directors and of any applicable committee thereof, the President shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors and of any applicable committee to confer any specific power, except such as may be by statute exclusively conferred on the President, upon any other officer or officers of the Corporation. The President shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or any applicable committee thereof. Section 4.8. Vice-President. The Vice-Presidents shall perform such of the duties of the President on behalf of the Corporation as may be respectively assigned to them from time to time by the Board of Directors or by the executive committee or by the President. The Board of Directors or any applicable committee may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the board and of any applicable committee. - 7 - Section 4.9. Treasurer. The Treasurer shall have the care and custody of all the funds and securities of the Corporation which may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors or any applicable committee, or the officers or agents to whom the Board of Directors or any applicable committee may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Corporation. He may sign all receipts and vouchers for the payments made to the Corporation. He shall render an account of his transactions to the Board of Directors or to any applicable committee as often as the board or such committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Corporation. He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors and of any applicable committee. He shall, when requested pursuant to vote of the Board of Directors or any applicable committee, give a bond to the Corporation conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Corporation. Section 4.10. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders. He shall attend to the giving and serving of all notices of the Corporation. Except as otherwise ordered by the Board of Directors or any applicable committee, he shall attest the seal of the Corporation upon all contracts and instruments executed under such seal and shall affix the seal of the Corporation thereto and to all certificates of shares of capital stock of the Corporation. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or any applicable committee may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors and of any applicable committee. Section 4.11. Assistant Secretary. The Board of Directors may appoint or remove one or more Assistant Secretaries of the Corporation. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors, any applicable committee, the President, any Vice-President, the Treasurer or the Secretary may designate. Section 4.12. Assistant Treasurer. The Board of Directors may appoint or remove one or more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors or any applicable committee may designate. Section 4.13. Subordinate Officers. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors - 8 - may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. Article V - Stock Section 5.1. Stock. Each stockholder shall be entitled to a certificate or certificates of stock of the Corporation in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall certify the holder's name and number and class of shares and shall be signed by both of (a) either the President or a Vice-President, and (b) any one of the Treasurer or the Secretary, and shall be sealed with the corporate seal of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, the signature of the officers of the Corporation and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers or the Corporation. Section 5.2. Fractional Share Interests. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (a) arrange for the disposition of fractional interests by those entitled thereto, (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (c) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. Section 5.3. Transfers of Stock. Subject to any transfer restrictions then in force, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer - 9 - books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by applicable law. Section 5.4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. Section 5.6. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the charter and applicable law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. - 10 - Section 5.8. Inspection of Books. The Board of Directors shall have power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors. Article VI - Miscellaneous Management Provisions Section 6.1. Execution of Papers. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made accepted or endorsed by the Corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. Section 6.2. Notices. Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given 5 days after the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person. Whenever any notice is required to be given under the provisions of the statutes or of the charter of the Corporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6.3. Conflict of Interest. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Director or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Corporation entitled to vote thereon, and the contract or transaction is specifically approved by vote of such stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or - 11 - ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.4. Voting of Securities Owned by this Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other Corporation and owned or controlled by this Corporation may be voted in person at any meeting of security holders of such other corporation by the President, any Vice President, or the Treasurer, and (b) whenever, in the judgment of the President or any other appropriate officer, it is desirable for this Corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other Corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the President or such officer, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Corporation the same as such shares or other securities might be voted by this Corporation. Article VII - Indemnification . The Corporation shall, to the maximum extent permitted from time to time under the laws of the state of incorporation of the Corporation, indemnify, and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation or while a director or officer is or was serving at the request of this Corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 7.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The Corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the Corporation and stockholders purporting to act on behalf of the Corporation, to the extent permitted by the law of the state of incorporation of the Corporation. - 12 - Article VIII - Amendments Section 8.1. Amendments. The by-laws of the Corporation may be altered, amended or repealed at any meeting of the Board of Directors upon notice thereof in accordance with these by-laws, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the charter of the Corporation and applicable laws. - 13 - BY-LAWS OF KBP ACQUISITION CORP., INC. TABLE OF CONTENTS
Title Page Article I - General...................................................... 1 Section 1.1. Drafter's Note........................................... 1 Section 1.2. Relationship to Charter, etc............................. 1 Section 1.3. Seal..................................................... 1 Section 1.4. Fiscal Year.............................................. 1 Article II - Stockholders................................................ 1 Section 2.1. Place of Meetings........................................ 1 Section 2.2. Annual Meeting........................................... 1 Section 2.3. Quorum................................................... 2 Section 2.4. Right to Vote; Proxies................................... 2 Section 2.5. Voting................................................... 2 Section 2.6. Notice of Annual Meetings................................ 3 Section 2.7. Stockholders' List....................................... 3 Section 2.8. Special Meetings......................................... 3 Section 2.9. Notice of Special Meetings............................... 3 Section 2.10. Inspectors.............................................. 3 Section 2.11. Stockholders' Consent in Lieu of Meetings............... 3 Article III - Directors.................................................. 4 Section 3.1. Number of Directors...................................... 4 Section 3.2. Change in Number of Directors; Vacancies................. 4 Section 3.3. Resignation.............................................. 4 Section 3.4. Removal.................................................. 4 Section 3.5. Place of Meetings and Books.............................. 4 Section 3.6. General Powers........................................... 4 Section 3.7. Committees............................................... 5 Section 3.8. Powers Denied to Committees.............................. 5 Section 3.9. Substitute Committee Member.............................. 5 Section 3.10. Compensation of Directors............................... 5 Section 3.11. Annual Meeting.......................................... 5 Section 3.12. Regular Meetings........................................ 6 Section 3.13. Special Meetings........................................ 6 Section 3.14. Quorum.................................................. 6 Section 3.15. Telephonic Participation in Meetings.................... 6 Section 3.16. Action by Consent....................................... 6 Article IV - Officers.................................................... 6 Section 4.1. Selection; Statutory Officers............................ 6
Section 4.2. Time of Election......................................... 7 Section 4.3. Additional Officers...................................... 7 Section 4.4. Terms of Office.......................................... 7 Section 4.5. Compensation of Officers................................. 7 Section 4.6. Chairman of the Board.................................... 7 Section 4.7. President................................................ 7 Section 4.8. Vice-President........................................... 7 Section 4.9. Treasurer................................................ 8 Section 4.10. Secretary............................................... 8 Section 4.11. Assistant Secretary..................................... 8 Section 4.12. Assistant Treasurer..................................... 8 Section 4.13. Subordinate Officers.................................... 8 Article V - Stock........................................................ 9 Section 5.1. Stock.................................................... 9 Section 5.2. Fractional Share Interests............................... 9 Section 5.3. Transfers of Stock....................................... 9 Section 5.4. Record Date.............................................. 10 Section 5.5. Transfer Agent and Registrar............................. 10 Section 5.6. Dividends................................................ 10 Section 5.7. Lost, Stolen or Destroyed Certificates................... 10 Section 5.8. Inspection of Books...................................... 11 Article VI - Miscellaneous Management Provisions......................... 11 Section 6.1. Execution of Papers...................................... 11 Section 6.2. Notices.................................................. 11 Section 6.3. Conflict of Interest..................................... 11 Section 6.4. Voting of Securities Owned by this Corporation........... 12 Article VII - Indemnification............................................ 12 Article VIII - Amendments................................................ 13 Section 8.1. Amendments............................................... 13

~~-ii-~~ EX-3.10 13 y95660exv3w10.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.10 ------------ BOOK M118 PAGE 212 FILED JAN 13 1989 [STAMP SEAL] CERTIFICATE OF INCORPORATION OF PGI INVESTMENTS, INC. * * * * * ARTICLE I The name of the corporation is PGI Investments, Inc. ARTICLE II The address of its registered office in the State of Delaware is Prentice-Hall Corporation System, Inc., 229 South State Street, in the City of Dover, County of Kent. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The aggregate number of shares which the corporation shall be authorized to issue is two thousand (2,000), having a par value of $.01 per share. ARTICLE V The name of the incorporator is Maria Lombardo, EAB Plaza, Uniondale, New York. ARTICLE VI The following provisions are inserted for the regulation of the business and the conduct of the affairs of the corporation, and as a limitation upon the powers and rights of its stockholders and directors, but nothing therein shall be construed or deemed to exempt the stockholders and directors from the performance of any obligation or duty imposed by law. (a) The board of directors shall have the power to determine from time to time whether and to what extent, and at what times and places and under what conditions and regulations the accounts and books of the corporation or any of them BOOK M118 PAGE 212 (except such as may be by statute specifically open to inspection) shall be open to inspection of the stockholders and no stockholder shall have any right to inspect any account or book or documents of the corporation except as conferred by statute or authorized by the board of directors. (b) The board of directors shall have the power to appoint an Executive Committee from among their number, which Committee, to the extent and in the manner provided by the by-laws of the corporation, shall have and may exercise in the interim between the meetings of the board of directors all of the powers of the board of directors, so far as may be permitted by law, in the management of the business and affairs of the corporation. (c) In the absence of fraud, no contract or other transaction between the corporation and any other corporation shall be affected or invalidated by the fact that any one or more of the directors of this corporation are or may be interested in or are or may be directors or officers of such other corporation or by reason of the fact that such other corporation owns all or a controlling interest in the voting stock of this corporation or this corporation owns all or a controlling interest in the voting stock of such other corporation. Any director or officer of this corporation individually or jointly, may be a party to or may be interested in any contract or transaction of this corporation or in which this corporation is interested, and such fact shall in no way affect or invalidate the transaction or contract entered into, and each and every person who may become a director or officer of this corporation is hereby relieved from any liability that might otherwise exist in respect of contracting with the corporation for the benefit of himself or the benefit of any person, firm or corporation in which he in any way may be interested. Any and all directors of this corporation who are also directors, officers, stockholders, or members of such other corporation, or who are so interested in any contract, transaction or act of this corporation may be counted in determining the existence of a quorum at any meeting of the Board of Directors of this corporation which shall authorize any such contract, transaction or act with like force and effect, as if they were not such directors, officers, stockholders or members of any such other corporation or were not interested in such contract, transaction or act. (d) No stockholder shall be entitled as of right to purchase or subscribe for any part of any unissued stock or any additional stock to be issued by reason of any increase of the authorized capital stock of the corporation, or the issuance of bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation but any such unissued stock or options to purchase stock may be issued and disposed of pursuant to resolution of the Board of Directors, to such persons, firms, corporations or associations as may be deemed advisable by the Board of Directors, in the exercise of their discretion. ARTICLE VII (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or she, or a 2 BOOK M118 PAGE 212 person of whom he or she is the legal representative, is or was a director or officer of this corporation or is or was serving at the request of the corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the corporation to the fullest extend authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such persons in connection therewith; provided, however, that the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. Such right shall be a contract right and shall include the right to be paid by the corporation for expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article VII or otherwise. The corporation may, by action of the board of directors, provide indemnification to employees and agents of the corporation with a lesser or the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under Paragraph (a) of this Article VII is not paid in full by the corporation within ninety days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in said law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be 3 BOOK M118 PAGE 212 a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct. (c) The rights conferred on any person by Paragraphs (a) and (b) of this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) The corporation may maintain insurance, at its expense, to protect itself and any such director or officer of the corporation or of another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. ARTICLE VIII A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (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 General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article VIII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time. Any appeal or modification of this Article VIII shall not increase the personal liability of any director of this corporation for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. The provisions of this Article VIII shall not be deemed to limit or preclude indemnification of a director by the corporation for any liability of a director which has not been eliminated by the provisions of this Article VIII. ARTICLE IX In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter or repeal the by-laws of the corporation. 4 BOOK M118 PAGE 212 ARTICLE X (a) Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. (b) Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. ARTICLE XI The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, I have made, subscribed and acknowledged this certificate this 11th day of January, 1989. /s/ Maria Lombardo ------------------------------------------- MARIA LOMBARDO EAB Plaza Uniondale, NY 11556-0132 STATE OF NEW YORK ) ) ss.: COUNTY OF NASSAU ) On the 11th day of January, 1989, before me personally came Maria Lombardo to me known and known to me to be the individual described in and who executed the foregoing instrument and duly acknowledged to me that she executed the same. /s/ Elizabeth Totino ------------------------------------------- Notary Public Elizabeth Totino NOTARY PUBLIC, State of New York No. 43-4513559 Qualified in Richmond County Commission Expires 6/30/89 -------------- 5 EX-3.11 14 y95660exv3w11.txt CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INC. EXHIBIT 3.11 ------------ CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF PGI INVESTMENTS, INC. PGI Investments, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of the Corporation, in the manner prescribed by Section 242 of the General Corporation Law of Delaware, duly adopted resolutions proposing and declaring advisable the following amendment to the Certificate of Incorporation: RESOLVED, that the text of Article I of the Corporation's Certificate of Incorporation be amended to read in its entirety as follows: ARTICLE I The name of the corporation is 2001 Investments, Inc. SECOND: That said amendment was duly adopted by the stockholders of the Corporation in the manner prescribed by Section 228, and in accordance with the provisions of Section 242 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, PGI Investments, Inc. has caused this certificate to be signed by its President, this 9th day of December, 1994. PGI Investments, Inc. By: /s/ ----------------------------- President EX-3.12 15 y95660exv3w12.txt CERTIFICATE OF MERGER EXHIBIT 3.12 ------------ CERTIFICATE OF MERGER OF NAPCO, INC. AND NVP, INC. Pennsylvania corporations (referred to hereinafter as the "Extinguished Corporations") WITH AND INTO 2001 INVESTMENTS, INC., a Delaware corporation ****** The undersigned corporation organized and existing under and by virtue of the General Corporation Law of Delaware, DOES HEREBY CERTIFY: FIRST: The Extinguished Corporations which are constituent corporations are organized and existing under the laws of the Commonwealth of Pennsylvania. SECOND: That a Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 252 of the General Corporation Law of Delaware. THIRD: That the name of the surviving corporation shall be "2001 Investments, Inc." and that the Certificate of Incorporation of 2001 Investments, Inc., a Delaware corporation, which survives the merger, shall be the Certificate of Incorporation of the surviving corporation with article one to be amended as follows: The name of the corporation is: "Napco, Inc." FOURTH: That the executed Plan of Merger is on file at the principal place of business of the surviving corporation, the address of which is 50 Kennedy Plaza, Providence, Rhode Island 02903. FIFTH: That a copy of the Plan of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. SIXTH: That the authorized capital stock of the Extinguished Corporations is 300,000 shares of Common Stock with a par value of $1.00 of Napco, Inc. and 300,000 shares of Common Stock with a par value of $1.00 of NVP, Inc. SEVENTH: That this certificate of merger shall be effective upon filing with the Secretary of State of Delaware. 2001 INVESTMENTS, INC. By: /s/ Richard J. Harris --------------------------------------- Name: Richard J. Harris Title: V.P. Dated: October 9, 1998 -2- EX-3.13 16 y95660exv3w13.txt BY-LAWS EXHIBIT 3.13 ------------ BY-LAWS OF 2001 INVESTMENTS, INC. TABLE OF CONTENTS
Title Page - ----- ---- Article I - General ..............................................................................1 Section 1.1. Drafter's Note.......................................................1 Section 1.2. Relationship to Charter, etc.........................................1 Section 1.3. Seal.................................................................1 Section 1.4. Fiscal Year..........................................................1 Article II - Stockholders.........................................................................1 Section 2.1. Place of Meetings....................................................1 Section 2.2. Annual Meeting.......................................................2 Section 2.3. Quorum...............................................................2 Section 2.4. Right to Vote; Proxies...............................................3 Section 2.5. Voting...............................................................3 Section 2.6. Notice of Annual Meetings............................................4 Section 2.7. Stockholders' List...................................................4 Section 2.8. Special Meetings.....................................................4 Section 2.9. Notice of Special Meetings...........................................4 Section 2.10. Inspectors...........................................................5 Section 2.11. Stockholders' Consent in Lieu of Meetings.............................................................5 Article III - Directors...........................................................................5 Section 3.1. Number of Directors..................................................5 Section 3.2. Change in Number of Directors; Vacancies............................................................6 Section 3.3. Resignation..........................................................6 Section 3.4. Removal..............................................................6 Section 3.5. Place of Meetings and Books..........................................6 Section 3.6. General Powers.......................................................6 Section 3.7. Committees...........................................................7 Section 3.8. Powers Denied to Committees..........................................7 Section 3.9. Substitute Committee Member..........................................7 Section 3.10. Compensation of Directors............................................8 Section 3.11. Annual Meeting.......................................................8 Section 3.12. Regular Meetings.....................................................8 Section 3.13. Special Meetings.....................................................8 Section 3.14. Quorum...............................................................8 Section 3.15. Telephonic Participation in Meetings.................................9 Section 3.16. Action by Consent....................................................9
-i- Article IV - Officers.............................................................................9 Section 4.1. Selection; Statutory Officers........................................9 Section 4.2. Time of Election....................................................10 Section 4.3. Additional Officers.................................................10 Section 4.4. Terms of Office.....................................................10 Section 4.5. Compensation of Officers............................................10 Section 4.6. Chairman of the Board...............................................10 Section 4.7. President...........................................................10 Section 4.8. Vice-Presidents.....................................................11 Section 4.9. Treasurer...........................................................11 Section 4.10. Secretary...........................................................12 Section 4.11. Assistant Secretary.................................................12 Section 4.12. Assistant Treasurer.................................................12 Section 4.13. Subordinate Officers................................................12 Article V - Stock ...............................................................................13 Section 5.1. Stock...............................................................13 Section 5.2. Fractional Share Interests..........................................13 Section 5.3. Transfers of Stock..................................................14 Section 5.4. Record Date.........................................................14 Section 5.5. Transfer Agent and Registrar........................................15 Section 5.6. Dividends...........................................................15 Section 5.7. Lost, Stolen or Destroyed Certificates..............................15 Section 5.8. Inspection of Books.................................................15 Article VI - Miscellaneous Management Provisions.................................................16 Section 6.1. Execution of Papers.................................................16 Section 6.2. Notices.............................................................16 Section 6.3. Conflict of Interest................................................16 Section 6.4. Voting of Securities Owned by this Corporation......................17 Article VII - Indemnification....................................................................18 Section 7.1. Right to Indemnification............................................18 Article VIII - Amendments........................................................................19 Section 8.1. Amendments..........................................................19

-ii- BY-LAWS OF 2001 INVESTMENTS, INC. Article I - General Section 1.1. DRAFTER'S NOTE. ALTHOUGH THESE BY-LAWS HAVE BEEN DRAFTED TO CONFORM GENERALLY TO CORPORATE LAW REQUIREMENTS, SPECIFIC CORPORATE LAW REQUIREMENTS SHOULD BE CONSULTED IN THE EVENT OF ANY SIGNIFICANT CORPORATE ACTION. IF ANY PROVISION OF THESE BY-LAWS SHALL CONFLICT WITH APPLICABLE LAW, SUCH LAW SHALL CONTROL. Section 1.2. Relationship to Charter, etc. These by-laws are subject to applicable corporate law and to the Corporation's certificate of incorporation, articles of organization or similar document (the "charter"). In these by-laws, references to law, the charter and by-laws mean the law, the provisions of the charter and the by-laws as from time to time in effect. Section 1.3. Seal. The board of directors may provide for a seal of the Corporation, which, if so provided, shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the state of its incorporation, and such other words, dates or images as may be approved from time to time by the directors. Section 1.4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. Article II - Stockholders Section 2.1. Place of Meetings. All meetings of the stockholders shall be held at the principal executive office of the Corporation, except such meetings as the Board of Directors expressly determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such other place or places within or without the state of incorporation of the Corporation as the Board of Directors shall have determined and as shall be stated in such notice. Section 2.2. Annual Meeting. The annual meeting of the stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the charter, or these by-laws. If the election of directors shall not be held on the day designated in accordance with these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefore or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting; and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called as provided in Section 2.9. Section 2.3. Quorum. At all meetings of the stockholders, the holders of a majority by voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise provided by law, by the charter or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of voting stock shall be present. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such -2- adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted if the meeting had been held as originally called. Section 2.4. Right to Vote; Proxies. Each holder of a share or shares of capital stock of the Corporation having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him, unless otherwise provided in the charter. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy which is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. Subject to applicable statutory provisions, a proxy may be granted by a writing executed by the stockholder or his authorized officer, director, employee or agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission. Section 2.5. Voting. At all meetings of stockholders, except as otherwise expressly provided for by statute, the charter or these by-laws, (a) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (b) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise expressly provided by law, the charter or these bylaws, at all meetings of stockholders the voting shall be by voice vote, but any stockholder qualified to vote on the matter in question may demand a stock vote, by shares of stock, upon such question, whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if such ballot be cast by a proxy, it shall also state the name of the proxy. -3- Section 2.6. Notice of Annual Meetings. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock books of the Corporation at least 10 days (and not more than 60 days) prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Corporation or to the transfer agent, if any, of the class of stock owned by him, his post-office address and to notify said Secretary or transfer agent of any change therein. Section 2.7. Stockholders' List. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and made available either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, at least 10 days before such meeting, and shall at all times during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder for a purpose germane to the meeting. Section 2.8. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called by the Board of Directors or the Chairman of the Board. Section 2.9. Notice of Special Meetings. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than 10 nor more than 60 days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof or such other business as may be germane or supplementary to that stated in said notice or notices. -4- Section 2.10. Inspectors. One or more inspectors may be appointed by the Board of Directors before or at any meeting of stockholders, or, if no such appointment shall have been made, the presiding officer may make such appointment at the meeting. At the meeting for which the inspector or inspectors are appointed, he or they shall open and close the polls, receive and take charge of the proxies and ballots, and decide all questions touching on the qualifications of voters, the validity of proxies and the acceptance and rejection of votes. If any inspector previously appointed shall fail to attend or refuse or be unable to serve, the presiding officer shall appoint an inspector in his place. Section 2.11. Stockholders' Consent in Lieu of Meeting. Unless otherwise provided in the charter, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, in the manner, and to the fullest extent, provided by applicable law. Article III - Directors Section 3.1. Number of Directors. Except as otherwise provided by law, the charter or these by-laws, the property and business of the Corporation shall be managed by or under the direction of a board of not less than two nor more than thirteen directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. Directors need not be stockholders, residents of the Corporation's state of incorporation or citizens of the United States. The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the -5- stockholders called for that purpose. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term. Section 3.2. Change in Number of Directors; Vacancies. The maximum number of directors may be increased by an amendment to these by-laws adopted by a majority vote of the Board of Directors or by a majority vote of the capital stock having voting power, and if the number of directors is so increased by action of the Board of Directors or of the stockholders or otherwise, then the additional directors may be elected in the manner provided above for the filling of vacancies in the Board of Directors or at the annual meeting of stockholders or at a special meeting called for that purpose. Section 3.3. Resignation. Any director of this Corporation may resign at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.4. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 3.5. Place of Meetings and Books. The Board of Directors may hold their meetings and keep the books of the Corporation inside or outside the Corporation's state of incorporation, at such places as they may from time to time determine. Section 3.6. General Powers. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of -6- the Corporation and do all such lawful acts and things as are not by statute or by the charter or by these by-laws directed or required to be exercised or done by the stockholders. Section 3.7. Committees. The Board of Directors may designate one or more committees by resolution or resolutions passed by a majority of the whole board. Such committee or committees shall consist of one or more directors of the Corporation, and, to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Corporation to the extent permitted by statute and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 3.8. Powers Denied to Committees. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the charter, adopt an agreement of merger, or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend the by-laws of the Corporation unless the resolution or resolutions designating such committee expressly so provides. Further, no committee of the Board of Directors shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger unless the resolution or resolutions designating such committee expressly so provides. Section 3.9. Substitute Committee Member. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its -7- proceedings and report the same to the board as may be required by the board. Section 3.10. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity, and receiving compensation therefor, Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.11. Annual Meeting. The newly elected board may meet at such place and time as shall be fixed and announced by the presiding officer at the annual meeting of stockholders, for the purpose of organization or otherwise, and no further notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such place and time as shall be stated in a notice given to such directors two (2) days prior to such meeting, or as shall be fixed by the consent in writing of all the directors. Section 3.12. Regular Meetings. Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board. Section 3.13. Special Meetings. Special meetings of the board may be called by the Chairman of the Board on 2 days' notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified. Special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors. Section 3.14. Quorum. At all meetings of the Board of Directors, a majority of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at -8- which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the charter, or by these by-laws. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. Section 3.15. Telephonic Participation in Meetings. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.16. Action by Consent. Unless otherwise restricted by law, the charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee. Article IV - Officers Section 4.1. Selection; Statutory Officers. The officers of the Corporation shall be chosen by the Board of Directors. There shall be a President, a Secretary and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers, as the Board of Directors may elect. Any number of offices may be held by the same person. Subject to law, the charter and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. -9- Section 4.2. Time of Election. The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders. None of said officers need be a director or stockholder. Section 4.3. Additional Officers. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4.4. Terms of Office. Each officer of the Corporation shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors, with or without cause. Section 4.5. Compensation of Officers. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Section 4.6. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors. Section 4.7. President. Unless the Board of Directors otherwise determines, the President shall be the chief executive officer and head of the Corporation. Unless there is a Chairman of the Board, the President shall preside at all meetings of directors and stockholders. Under the supervision of the Board of Directors and of any applicable committee thereof, the President shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors and of any applicable committee to confer any specific power, except such as may be by statute exclusively conferred on the President, upon any other officer or officers of the Corporation. The President shall perform and do all acts and things -10- incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or any applicable committee thereof. Section 4.8. Vice-President. The Vice-Presidents shall perform such of the duties of the President on behalf of the Corporation as may be respectively assigned to them from time to time by the Board of Directors or by the executive committee or by the President. The Board of Directors or any applicable committee may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the board and of any applicable committee. Section 4.9. Treasurer. The Treasurer shall have the care and custody of all the funds and securities of the Corporation which may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors or any applicable committee, or the officers or agents to whom the Board of Directors or any applicable committee may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Corporation. He may sign all receipts and vouchers for the payments made to the Corporation. He shall render an account of his transactions to the Board of Directors or to any applicable committee as often as the board or such committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Corporation. He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors and of any applicable committee. He shall, when requested pursuant to vote of the Board of Directors or any applicable committee, give a bond to the Corporation conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Corporation. -11- Section 4.10. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders. He shall attend to the giving and serving of all notices of the Corporation. Except as otherwise ordered by the Board of Directors or any applicable committee, he shall attest the seal of the Corporation upon all contracts and instruments executed under such seal and shall affix the seal of the Corporation thereto and to all certificates of shares of capital stock of the Corporation. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or any applicable committee may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors and of any applicable committee. Section 4.11. Assistant Secretary. The Board of Directors may appoint or remove one or more Assistant Secretaries of the Corporation. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors, any applicable committee, the President, any Vice-President, the Treasurer or the Secretary may designate. Section 4.12. Assistant Treasurer. The Board of Directors may appoint or remove one or more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors or any applicable committee may designate. Section 4.13. Subordinate Officers. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. -12- Article V - Stock Section 5.1. Stock. Each stockholder shall be entitled to a certificate or certificates of stock of the Corporation in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall certify the holder's name and number and class of shares and shall be signed by both of (a) either the President or a Vice-President, and (b) any one of the Treasurer or the Secretary, and shall be sealed with the corporate seal of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, the signature of the officers of the Corporation and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers or the Corporation. Section 5.2. Fractional Share Interests. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (a) arrange for the disposition of fractional interests by those entitled thereto, (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (c) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of -13- the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. Section 5.3. Transfers of Stock. Subject to any transfer restrictions then in force, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by applicable law. Section 5.4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the day on which the -14- first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. Section 5.6. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the charter and applicable law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. Section 5.8. Inspection of Books. The Board of Directors shall have power from time to time to determine whether and to what extent and at what times -15- and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors. Article VI - Miscellaneous Management Provisions Section 6.1. Execution of Papers. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made accepted or endorsed by the Corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. Section 6.2. Notices. Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given 5 days after the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person. Whenever any notice is required to be given under the provisions of the statutes or of the charter of the Corporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6.3. Conflict of Interest. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, -16- or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Director or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Corporation entitled to vote thereon, and the contract or transaction is specifically approved by vote of such stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.4. Voting of Securities Owned by This Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other Corporation and owned or controlled by this Corporation may be voted in person at any meeting of security holders of such other corporation by the President, any Vice President, or the Treasurer, and (b) whenever, in the judgment of the President or any other appropriate officer, it is desirable for this Corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other Corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the President or such officer, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the shares or -17- other securities issued by such other corporation and owned by this Corporation the same as such shares or other securities might be voted by this Corporation. Article VII - Indemnification Section 7.1. The Corporation shall, to the maximum extent permitted from time to time under the laws of the state of incorporation of the Corporation, indemnify, and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation or while a director or officer is or was serving at the request of this Corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 7.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The Corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the Corporation and stockholders purporting to act on behalf of the Corporation, to the extent permitted by the law of the state of incorporation of the Corporation. -18- Article VIII - Amendments Section 8.1. Amendments. The by-laws of the Corporation may be altered, amended or repealed at any meeting of the Board of Directors upon notice thereof in accordance with these by-laws, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the charter of the Corporation and applicable laws. -19- EX-3.14 17 y95660exv3w14.txt ARTICLES OF INCORPORATION EXHIBIT 3.14 ------------ MICROFILM NUMBER: 9906-281 FILED WITH THE DEPARTMENT OF STATE ON ______ ENTRY NUMBER 2857315 ____________________________________________ ACTING SECRETARY OF THE COMMONWEALTH ARTICLES OF INCORPORATION-FOR PROFIT DSCB:15-1306/2102/2303/2702/2903/7102A (REV 90) INDICATE TYPE OF DOMESTIC CORPORATION (CHECK ONE):
[X] BUSINESS-STOCK (15 PA. C.S.SS. 1306) [_] MANAGEMENT (15 PA. C.S.SS.2702) [_] BUSINESS-NONSTOCK (15 PA. C.S.SS. 2102) [_] PROFESSIONAL (15 PA. C.S.SS.2903) [_] BUSINESS-STATUTORY CLOSE (15 PA. C.S.SS. 2303) [_] COOPERATIVE (15 PA. C.S.SS.7102A)
IN COMPLIANCE WITH THE REQUIREMENTS OF THE APPLICABLE PROVISIONS OF 15 PA.C.S. (RELATING TO CORPORATIONS AND UNINCORPORATED ASSOCIATIONS) THE UNDERSIGNED, DESIRING TO INCORPORATE A CORPORATION FOR PROFIT HEREBY STATE(S) THAT: 1. THE NAME OF THE CORPORATION IS CARADON THERMAL-GARD, INC. 2. THE (A) ADDRESS OF THE CORPORATIONS'S INITIAL REGISTERED OFFICE IN THIS COMMONWEALTH OR (B) NAME OF ITS COMMERCIAL REGISTERED OFFICE PROVIDER AND THE COUNTY OF VENUE IS: (A)____________________________________________________________________ NUMBER AND STREET CITY STATE ZIP COUNTY (B) C/O: CT CORPORATION SYSTEM JEFFERSON COUNTY -------------------------------------------------------------------- NAME OF COMMERCIAL REGISTERED OFFICE PROVIDER COUNTY FOR A CORPORATION REPRESENTED BY A COMMERCIAL REGISTERED OFFICE PROVIDER, THE COUNTY IN (B) SHALL BE DEEMED THE COUNTY IN WHICH THE CORPORATION IS LOCATED FOR VENUE AND OFFICIAL PUBLICATION PURPOSES. 3. THE CORPORATION IS INCORPORATED UNDER THE PROVISION OF THE BUSINESS CORPORATION LAW OF 1988. 4. THE AGGREGATE NUMBER OF SHARES AUTHORIZED IS: 10,000 (OTHER PROVISIONS, IF ANY, ATTACH 8 1/2 X 11 SHEET) 5. THE NAME AND ADDRESS, INCLUDING STREET AND NUMBER, IF ANY, OF EACH INCORPORATOR IS: NAME ADDRESS GREG SCHMIDT 900 OLD KENT BUILDING, 111 LYON ST., N.W., GRAND RAPIDS, MI 49503-2487 -------------------- ----------------------------------------------- ____________________ _______________________________________________ 6. THE SPECIFIC EFFECTIVE DATE, IF ANY, IS________________________________ MONTH DAY YEAR HOUR, IF ANY 7. ANY ADDITIONAL PROVISIONS OF THE ARTICLES, IF ANY, ATTACH AN 8 1/2 X 11 SHEET. 8. STATUTORY CLOSE CORPORATIONS ONLY: NEITHER THE CORPORATION NOR ANY SHAREHOLDER SHALL MAKE AN OFFERING OF ANY OF ITS SHARES OF ANY CLASS THAT WOULD CONSTITUTE A "PUBLIC OFFERING" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 (15 U.S.C. SS. 77A ET SEQ.). 9906-282 DSCB:15-1306/2102/2303/2702/2903/7102A (REV 90)-2 9. COOPERATIVE CORPORATIONS ONLY: (COMPLETE AND STRIKE OUT INAPPLICABLE TERM) THE COMMON BOND OF MEMBERSHIP AMONG ITS MEMBERS/SHAREHOLDERS IS _______________________________________________________________________ IN TESTIMONY WHEREOF, THE INCORPORATOR(S) HAS (HAVE) SIGNED THESE ARTICLES OF INCORPORATION THIS _____ DAY OF JANUARY , 1999. /s/ Gregory E. Schmidt - ------------------------------------ ____________________________________ (SIGNATURE) (SIGNATURE) Gregory E. Schmidt, Incorporator EX-3.15 18 y95660exv3w15.txt BY-LAWS EXHIBIT 3.15 ------------ BYLAWS OF THERMAL-GARD, INC. ARTICLE I SHAREHOLDERS SECTION 1. PLACE OF MEETING. All shareholder meetings shall be held at the time and place determined by the Board of Directors. SECTION 2. ANNUAL MEETING. An annual shareholder meeting for the election of directors and for other purposes shall be held on the date and at the time set by the Board of Directors. SECTION 3. SPECIAL MEETINGS. The Board of Directors or the President may call a special shareholders' meeting by giving notice of the meeting to each shareholder of record entitled to vote at the meeting. SECTION 4. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of the date, time, place, and purposes of a shareholder meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting. SECTION 5. ADJOURNMENTS. If a meeting is adjourned to another time or place, it is not necessary to give notice of the adjourned meeting if (i) the date, time, and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and (ii), at the adjourned meeting only, such business is transacted as might have been transacted at the original meeting. If, after the adjournment, the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with Section 4 above. SECTION 6. WAIVERS OF NOTICE. A shareholder or a shareholder's attorney-in-fact may waive the shareholder's right to notice before or after a meeting by a signed waiver of notice. A shareholder's attendance at a meeting constitutes a waiver of objection to: (a) lack of notice, or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to the holding of the meeting or transacting business at the meeting; and (b) consideration of a particular matter at the meeting that is not within the purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. SECTION 7. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer or agent having charge of the stock transfer books for shares of the corporation shall make and certify a complete list of the shareholders entitled to vote at a shareholder meeting or any adjournment thereof. The list shall be: (a) arranged alphabetically within each class and series, with the address of, and the number of shares held by, each shareholder; (b) produced at the time and place of the meeting; (c) subject to inspection by any shareholder at any time during the meeting; and (d) prima facie evidence as to who are the shareholders entitled to examine the list or to vote at the meeting. Failure to comply with the requirements of this Section shall not affect the validity of any action taken at a meeting before a shareholder makes a demand to comply with the requirements. SECTION 8. QUORUM. Unless a greater quorum is required by the Articles of Incorporation or statute, the presence in person or by proxy of shareholders holding shares entitled to cast a majority of votes at a meeting shall constitute a quorum. Once a quorum is present, the shareholders may continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Whether or not a quorum is present, the meeting may be adjourned by a vote of the shares present. When the holders of a class or series of shares are entitled to vote separately on an item of business, each class or series must have a quorum, as determined by this Section, for the purposes of transacting the item of business. SECTION 9. VOTING RIGHTS. Except as otherwise provided by statute or the Articles of Incorporation, each share is entitled to one vote on each matter submitted to a vote. SECTION 10. VOTE REQUIRED. Any action, other than the election of directors, to be taken by shareholder vote shall be authorized by a majority of the votes cast by the shareholders entitled to vote on the action, unless a greater vote is required by statute, the Articles of Incorporation, or these Bylaws. Unless the Articles of Incorporation provide otherwise, directors shall be elected by a plurality of votes cast. Shareholders may not cumulate their votes. SECTION 11. CLASS VOTING. If the Articles of Incorporation provide that a class of shares, or any series of a class, shall vote as a class or series, either generally or to authorize one or more specified actions, such voting as a class or series shall be in addition to any other required vote. Where voting as a class or series is required on a matter other than the election of directors, the action shall be authorized by a majority of the votes cast by the holders of the class or series entitled to vote on the action, unless a greater vote is required by statute or the Articles of Incorporation. -2- SECTION 12. ELECTRONIC PARTICIPATION IN MEETING. Unless otherwise restricted by the Articles of Incorporation, a shareholder may participate in a shareholder meeting by a conference telephone or other similar communications equipment through which all persons participating in the meeting may communicate with the other participants, if the participants are advised of the communications equipment and the names of the participants in the conference are divulged to all participants. Participation in a meeting pursuant to this Section constitutes presence in person at the meeting. SECTION 13. CONDUCT OF MEETINGS. Shareholder meetings shall be conducted as follows: (a) The chairperson of the meeting shall have absolute authority over matters of procedure. (b) If disorder arises that prevents the continuation of the business of the meeting, the chairperson may adjourn the meeting. (c) The chairperson may require any person who is not a shareholder of record or holding a proxy to leave the meeting. SECTION 14. BUSINESS TRANSACTED. The business effectively transacted at a shareholder meeting shall be confined to the following: (a) Any matter specified in the notice; (b) Any matter reasonably related to a matter specified in the notice; and (c) Any matter (i) the consideration of which is not objected to by any shareholder attending the meeting, and (ii) notice of which is waived by all shareholders not in attendance at the meeting. SECTION 15. ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a shareholder meeting may be taken without a meeting, without prior notice, and without a vote, if: (a) Before or after the action, all the shareholders entitled to vote consent in writing; or (b) The Articles of Incorporation provide for shareholder action without a meeting, and written consents, setting forth the action taken, are signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted. A written consent under this subsection (b) must bear the date of signature of each shareholder who signs the consent and is not effective to take the corporate action referred to unless, within 60 days after the record date for determining shareholders entitled to express consent to or dissent from the proposal without a meeting, written consents signed by a sufficient number of shareholders to take the action are delivered to the corporation. Delivery shall be to the corporation's registered office, its principal place of business, or an officer or agent of the corporation having custody of the minutes of the proceedings of its shareholders. Delivery made to a corporation's -3- registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. SECTION 16. RECORD DATE. (a) SHAREHOLDERS ENTITLED TO NOTICE AND VOTE. For the purpose of determining shareholders entitled to notice of, and to vote at, a shareholder meeting or any adjournment thereof, the Board of Directors may fix a record date which may not precede the date on which the Board adopts the resolution fixing the record date. The record date shall not be more than sixty (60) nor less than ten (10) days before the date of the meeting. If not fixed by the Board of Directors, the record date for determination of shareholders entitled to notice of, and to vote at, a shareholder meeting shall be the close of business on the day next preceding the day on which notice is given or, if no notice is given, the day next preceding the day on which the meeting is held. When a determination of shareholders of record entitled to notice of, or to vote at, a shareholder meeting is made as provided in this Section, the determination applies to any adjournment of the meeting, unless the Board of Directors fixes a new record date under this Section for the adjourned meeting. (b) SHAREHOLDERS ENTITLED TO EXPRESS CONSENT OR DISSENT. For the purpose of determining shareholders entitled to express consent to, or dissent from, a proposal without a meeting, the Board of Directors may fix a record date which may not precede the date on which the Board adopts the resolution fixing the record date and may not be more than ten (10) days after the Board resolution. If a record date is not fixed by the Board of Directors and prior action by the Board is required with respect to the corporate action to be taken without a meeting, the record date shall be the close of business on the day on which the Board resolution is adopted. If a record date is not fixed by the Board of Directors and prior Board action is not required, the record date shall be the first date on which a signed written consent is delivered to the corporation as provided in these Bylaws. (c) OTHER ACTIONS. For the purpose of determining shareholders entitled to receive payment of a share dividend or distribution, or allotment of a right, or for the purpose of any other action, the Board of Directors may fix a record date which may not precede the date on which the Board adopts the resolution fixing the record date. The record date may not be more than sixty (60) days before the payment of the share dividend or distribution or allotment of a right or other action. If a record date is not fixed by the Board of Directors, the record date shall be the close of business on the day on which the Board resolution relating to the corporate action is adopted. SECTION 17. PROXIES. A shareholder entitled to vote at a shareholder meeting or to express consent to, or dissent from, action without a meeting may authorize one or more other persons to act for the shareholder by proxy. A proxy shall be signed by the shareholder or the -4- shareholder's authorized agent or representative. The corporation may require a shareholder's agent or representative to present written evidence, satisfactory to the corporation, of authority to sign the shareholder's proxy. A proxy is not valid after the expiration of three years from its date unless otherwise provided in the proxy. A proxy must be in writing and must be filed with the corporation at or before the meeting. A proxy need not be sealed, witnessed, or acknowledged. ARTICLE II DIRECTORS SECTION 1. NUMBER AND TERM OF DIRECTORS. The Board of Directors shall consist of one or more directors, as determined initially by the Incorporator, and thereafter the Board of Directors shall consist of such number of directors as may be determined by the Board from time to time. A director need not be a shareholder. The first Board of Directors shall hold office until the first annual shareholder meeting. Directors shall be elected at each annual shareholder meeting, except as provided in Section 2 of this Article, and each director shall hold office until a successor is elected and qualified or until the director's resignation or removal. If shareholders of any class or series of shares have the exclusive right to elect one or more directors, those directors may be elected only by the vote of those shareholders. SECTION 2. VACANCIES. Except as otherwise provided in the Articles of Incorporation, a vacancy on the Board of Directors (including a vacancy resulting from an increase in the number of directors) may be filled by the shareholders or the remaining directors. If the directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. Except as otherwise provided in the Articles of Incorporation, if the holders of any class or series of shares are entitled to elect one or more directors to the exclusion of other shareholders, vacancies of that class or series may be filled by the holders of shares of that class or series. A vacancy that will occur at a specific date, by reason of resignation effective at a later date, may be filled before the vacancy occurs, but the newly elected or appointed director may not take office until the vacancy occurs. SECTION 3. REMOVAL. The holders of a majority of the shares entitled to vote for the election of directors may remove one or more directors with or without cause. SECTION 4. RESIGNATION. A director may resign by written notice to the corporation. A resignation is effective upon its receipt by the corporation or at a later date specified in the notice. SECTION 5. POWERS. The Board of Directors shall manage the business and affairs of the corporation and may exercise all of the powers of the corporation except those powers or acts required by statute or the Articles of Incorporation to be exercised or done by the shareholders. SECTION 6. DIRECTOR'S COMPENSATION. The Board of Directors, by affirmative vote of a majority of directors then in office and irrespective of any personal interest of any of them, may establish reasonable compensation for a director's services to the corporation as a director -5- or officer. Directors may also be reimbursed their expenses, if any, of attendance at each meeting of the Board or a committee. SECTION 7. ANNUAL MEETING OF BOARD. An annual meeting of the Board of Directors shall be held immediately following the annual shareholder meeting. A notice to directors is not required for an annual meeting. SECTION 8. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at the date, time, and place that the Board determines. A notice to directors is not required for a regular meeting, except that, when the Board establishes or changes the schedule of regular meetings, or changes the date, time, or place of a previously scheduled regular meeting, notice of the action shall be given to each director who was absent from the meeting at which the action was taken. SECTION 9. SPECIAL MEETINGS. The President or directors constituting at least one-third of the directors then in office may call a special meeting of the Board of Directors by giving notice to each director. SECTION 10. NOTICE OF MEETINGS. Except as otherwise provided by these Bylaws, notice of the date, time, and place of each meeting of the Board of Directors shall be given to each director by either of the following methods: (a) by mailing written notice of the meeting to the address that the director designates or, in the absence of designation, to the last known address of the director, at least five days before the date of the meeting; or (b) by delivering a written notice of the meeting at least one full business day before the meeting, personally or by telecopier, to the director's last known office or home address. SECTION 11. WAIVER OF NOTICE. A director's attendance at, or participation in, a meeting waives any required notice to the director of the meeting, unless at the beginning of the meeting, or promptly upon the director's arrival, the director objects to the meeting or the transacting of business at the meeting and does not thereafter vote for or assent to any action taken at the meeting. A director may waive, in writing, any right to notice before or after a meeting. SECTION 12. PURPOSES OF MEETINGS. Neither the business to be transacted nor the purpose of a meeting need be specified in the notice or waiver of notice of the meeting. If the purpose is stated in the notice, the business transacted at the meeting is not limited to the purpose stated. SECTION 13. QUORUM AND REQUIRED VOTE OF BOARD AND COMMITTEES. A majority of the directors then in office, or of the members of a committee of the Board, constitutes a quorum for the transaction of business, unless the Articles of Incorporation or these Bylaws or, in the case of a committee, the Board resolution establishing the committee, provide for a larger or smaller number. The vote of the majority of members present at a meeting at which a quorum is -6- present constitutes the action of the Board or of the committee, unless the vote of a larger number is required by express provision of statute, the Articles of Incorporation, or these Bylaws, or, in the case of a committee, the Board resolution establishing the committee. SECTION 14. ACTION BY WRITTEN CONSENT. Action required or permitted to be taken under authorization voted at a meeting of the Board of Directors or a committee of the Board may be taken without a meeting if, before or after the action, all members of the Board then in office or of the committee consent to the action in writing. The written consents shall be filed with the minutes of the Board or committee. The consent has the same effect as a vote of the Board or committee for all purposes. SECTION 15. ELECTRONIC PARTICIPATION IN MEETING. Unless otherwise restricted by the Articles of Incorporation, a director may participate in a meeting of the Board of Directors or a committee of the Board by means of a conference telephone or similar communications equipment through which all persons participating in the meeting may communicate with the other participants. Participation in a meeting pursuant to this Section constitutes presence in person at the meeting. A director must be permitted to participate in a meeting by such means if the director so requests. SECTION 16. COMMITTEES OF DIRECTORS. The Board of Directors may designate one or more committees consisting of one or more directors. Any committee, and each member thereof, shall serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of a committee to replace an absent or disqualified member at a meeting of the committee. Unless prohibited by the Board resolution creating the committee, in the absence or disqualification of a member of a committee, the committee members present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of the absent or disqualified member. A committee may establish a time and place for regular meetings for which no notice shall be required; provided, however, that if the committee changes the date, time, or place of a regular meeting, then notice of such changed meeting shall be given to each member who was absent at the meeting at which such change was made. Otherwise, notice of meetings of committees shall be given in the same manner as notices of meetings of the Board. SECTION 17. POWERS OF COMMITTEES. A committee, to the extent provided in the resolution of the Board creating the committee, may exercise the Board's power and authority in the management of the business and affairs of the corporation, except that a committee may not: (a) Amend the Articles of Incorporation; (b) Adopt an agreement of merger or consolidation; (c) Recommend to shareholders the sale, lease, or exchange of all or substantially all of the corporation's property and assets; (d) Recommend to the shareholders a dissolution of the corporation or a revocation of a dissolution; -7- (e) Amend the Bylaws of the corporation; (f) Fill vacancies in the Board of Directors; or (g) Declare a distribution or a dividend, or authorize the issuance of stock, unless the resolution of the Board creating the committee expressly so provides. ARTICLE III OFFICERS SECTION 1. APPOINTMENT. The Board of Directors, at its first meeting following appointment by the Incorporator and thereafter at its first meeting following the annual shareholder meeting, shall appoint a President, Secretary, and Treasurer. The Board may also appoint one or more Vice Presidents and other officers that it deems necessary. The Board of Directors need not appoint or elect an officer to an office that is already filled and whose specified term has not expired. The same person may hold two or more offices, but an officer may not execute, acknowledge, or verify an instrument in more than one capacity if the instrument is required by law, the Articles of Incorporation, these Bylaws, or resolution of the Board of Directors, to be executed, acknowledged, or verified by two or more officers. SECTION 2. TERM, REMOVAL AND RESIGNATION. An officer shall hold office for the term the board specifies upon election or appointment and until a successor is elected or appointed and qualified, or until the officer's death, resignation, or removal. The Board may remove an officer with or without cause at any time. Any officer may resign by written notice to the corporation. A resignation is effective upon its receipt by the corporation or at a later date specified in the notice. SECTION 3. PRESIDENT. The President shall be the corporation's Chief Executive Officer and have general control and management of its business, under the direction of the Board. The President shall ensure that all orders and resolutions of the Board are carried into effect. Unless the Board specifically provides otherwise, the President shall be an ex officio member of all committees. The President shall perform all duties incident to the office of President and other duties as the Board prescribes. The President may make and execute contracts, instruments, papers, and documents of every kind in the name and on behalf of the corporation, except when the Board specifies the same to be done by another officer or agent. The President shall preside over all meetings of the shareholders and, if he is a director, all meetings of the Board of Directors. SECTION 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have the power, subject to the control of the Board of Directors, to appoint, suspend or discharge and to prescribe the duties and to fix the compensation of such agents and employees of the corporation, other than the officers appointed by the Board, as he or she may deem necessary. SECTION 5. VICE PRESIDENTS. The Board may designate one or more Vice Presidents to perform the duties and exercise the powers of the President during the President's absence or -8- disability. Each Vice President shall perform other duties that the President assigns or the Board of Directors prescribes. SECTION 6. SECRETARY. The Secretary shall cause to be recorded and maintained minutes of all meetings of the Board, Board committees, and shareholders. The Secretary shall cause to be given all notices required by law, these Bylaws, or resolution of the Board and shall perform other duties that the President assigns or the Board of Directors prescribes. SECTION 7. TREASURER. The Treasurer shall cause to be kept in books belonging to the corporation a full and accurate account of all receipts, disbursements, and other financial transactions of the corporation. The Treasurer shall perform other duties that the President assigns or the Board of Directors prescribes. SECTION 8. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Any Assistant Secretary and any Assistant Treasurer may perform any duty or exercise any authority of the Secretary or Treasurer, respectively. The Assistant Secretaries and Assistant Treasurers shall also perform duties that the Secretary or Treasurer, respectively, or President assigns or that the Board of Directors prescribes. SECTION 9. OTHER OFFICERS. The Board of Directors may appoint other officers to perform duties and exercise authority that the President assigns or the Board of Directors prescribes. ARTICLE IV INDEMNIFICATION SECTION 1. INDEMNIFICATION PERMITTED. The corporation may indemnify a director of the corporation who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding by reason of the fact that he or she is or was serving as a director, or is or was serving at the request of the corporation in another capacity, to the fullest extent permitted by law. Changes in these Bylaws reducing the scope of indemnification shall not apply to actions or omissions occurring before such change. SECTION 2. INSURANCE. The corporation may purchase and maintain insurance on behalf of any person who 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, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person's status as such, whether or not the corporation would have power to indemnify the person against the liability under this Article. -9- ARTICLE V SHARE CERTIFICATES AND TRANSFERS SECTION 1. SHARE CERTIFICATES. Except as otherwise required by the Articles of Incorporation or these Bylaws and permitted by statute, shares of the corporation's stock shall be represented by certificates. Each certificate shall be signed by the President. Share certificates may be sealed with the seal of the corporation or a facsimile of the seal. The signatures of the officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. The corporation may issue a certificate even though the officer who has signed or whose facsimile signature has been placed upon the certificate ceases to be an officer before the certificate is issued. SECTION 2. REPLACEMENT OF CERTIFICATES. The corporation shall issue a new certificate for shares in place of a certificate that has been lost or destroyed. The Board of Directors may require the owner of the lost or destroyed certificate, or his legal representative, to give the corporation a bond or other security sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged lost or destroyed certificate or the issuance of a replacement certificate. SECTION 3. REGISTERED SHAREHOLDERS. The corporation may treat the registered holder of a share as the absolute owner of the share and shall not be bound to recognize any equitable or other claim to, or interest in, the share on the part of any other person, whether or not the corporation has actual notice of the interest or claim, except as otherwise provided by law. SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint a transfer agent and a registrar for the registration and transfer of the corporation's securities. SECTION 5. TRANSFER OF STOCK. A sale, assignment, exchange, conveyance, gift, pledge, hypothecation, or other transfer of the corporation's stock, whether by operation of law or otherwise, shall not be effective as to the corporation until recorded on the corporation's stock transfer books. ARTICLE VI GENERAL PROVISIONS SECTION 1. DIVIDENDS OR OTHER DISTRIBUTIONS. By action of the Board of Directors, the corporation may declare and pay dividends or make other distributions as permitted by law. SECTION 2. VOTING SECURITIES. Unless the Board directs otherwise, the President or, during his absence or disability, the Vice Presidents, in the order that the Board designates, may, on behalf of the corporation, attend and vote (or execute, in the name or on behalf of the corporation, a consent in writing in lieu of a meeting of shareholders or a proxy authorizing an agent or attorney-in-fact for the corporation to attend and vote) at any meeting of security -10- holders of any corporation in which the corporation holds securities. At such meetings such person may exercise any and all rights and powers incident to the ownership of such securities that the corporation might exercise if present. The Board may confer this voting power upon any other person. SECTION 3. CHECKS. The corporation's checks, drafts, and orders for the payment of money shall be signed in the name of the corporation in the manner and by the persons that the Board of Directors designates. SECTION 4. SIGNING OF INSTRUMENTS. When the Board or these Bylaws authorize the execution of any contract, conveyance, or other instrument without specification of the signing officer, the President, any Vice President, the Secretary or the Treasurer may sign in the name and on behalf of the corporation and may affix the corporate seal to the instrument. The Board of Directors may authorize other officers and agents to sign instruments on behalf of the corporation. SECTION 5. CORPORATE BOOKS AND RECORDS. The corporation shall keep books and records of account and minutes of the proceedings of its shareholders, Board of Directors, and committees, if any. The books, records, and minutes may be kept outside the State of Pennsylvania. The corporation shall keep at its registered office, or at the office of its transfer agent within or without the State of Pennsylvania, records containing the names and addresses of all shareholders, the number, class, and series of shares held by each, and the dates when they respectively became holders of record. Any of the books, records, or minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. The corporation shall convert into written form, without charge, any record not in written form, unless otherwise requested by a person entitled to inspect the record. SECTION 6. SEAL. The Corporation may have a seal in the form that the Board of Directors determines. The seal may be used by causing it or a facsimile to be affixed, impressed, or reproduced. ARTICLE VII AMENDMENTS The shareholders or the Board of Directors may amend or repeal these Bylaws or adopt new bylaws, unless the Articles of Incorporation or these Bylaws provide that the power to adopt new bylaws is reserved exclusively to the shareholders or that the Board may not alter or repeal these Bylaws or any particular Bylaw. Amendment of these Bylaws by the Board requires the vote of not less than a majority of the directors then in office. #392837 -11- EX-3.16 19 y95660exv3w16.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.16 ------------ ARTICLES OF INCORPORATION OF VARIFORM PLASTICS INC. We, the undersigned, being natural persons of the age of twenty one (21) years or more and subscribers to the shares of the corporation to be organized pursuant hereto, for the purposes of forming a corporation under "The General and Business Corporation Act of Missouri", and all amendments thereto, do hereby adopt the following Articles of Incorporation: ARTICLE I The name of the corporation is Variform Plastics Inc. ARTICLE II The address of its initial registered agent in the State of Missouri is: 4228 North Chelsea, Kansas City North, Missouri, and the name of its initial registered agent at such address is: Ralph L. Ayers. ARTICLE III The aggregate number of shares which the corporation shall have authority to issue shall be three thousand (3,000) shares at Ten and no/100ths Dollars ($10.00) per share par value, which shall be common stock with full voting privileges. ARTICLE IV The consideration per share of par value of common stock presently to be issued shall be Ten and no/100ths Dollars ($10.00) and Five Hundred and no/100ths Dollars ($500.00) has been paid up in lawful money of the United States. 2 ARTICLE V The names and places of residence of the shareholders and the number of shares subscribed by each are:
NAME: RESIDENCE NO. OF SHARES - ----- --------- ------------- Ralph L. Ayers 4228 North Chelsea 48 Kansas City North, Mo. Marilyn M. Ayers 4228 North Chelsea 1 Kansas City North, Mo Arthur L. Ayers 4821 East 46th St. North 1 Kansas City, Missouri
ARTICLE VI The number of directors to be elected at the first meeting of shareholders shall be three (3). ARTICLE VII The duration of the corporation is perpetual. ARTICLE VIII The board of directors may repeal or amend the by-laws of this corporation and may adopt new or additional by-laws. ARTICLE IX This corporation is formed for the following purposes, to wit: (a) To manufacture, compound, process, buy, sell, deal in and use plastics and plastic compositions of all kinds, and all articles, apparatuses, processes, patents and things used or of use in the manufacture, compounding, maintenance, and working thereof, and also apparatuses, machinery, implements and things for use either alone or in connection with products of which they are ingredients or in the manufacture or compounding of which they are a factor. To manufacture and sell any laminated, corrugated, or flat reinforced plastic polyester resin-based material. 3 (b) To manufacture, purchase, or otherwise acquire, own, mortgage, pledge, sell, assign and transfer, or otherwise dispose of, to invest , trade, deal in and deal with goods, wares, and merchandise and real and personal property of every class and description. (c) To invest its funds from time to time in any real or personal property and to lend money for its corporate purposes and to take and hold real and personal property as security for the payment of funds so invested or loaned. (d) To make contracts and incur liabilities which may be appropriate to enable it to accomplish any or all of its purposes; to borrow money for its corporate purposes at such rates of interest as the corporation may determine; to issue its notes, bonds, and other obligations; to secure any of its obligations by mortgage, pledge or deed of trust of all or any part of its property, franchises and income. (e) To buy, sell or deal in the corporation's own stock or the stock of other corporations. The foregoing enumerated paragraphs shall not limit or restrain in any manner the powers of this corporation but it shall have and exercise all of the powers, rights and privileges conferred and permitted by the laws of the State of Missouri upon corporations formed under "The General and Business Corporation Act of Missouri", including all amendments and supplements thereto. It shall have all other powers not forbidden by law which may be necessary, convenient or incidental in carrying out and performing any or all business, operation or other powers of this organization and to do any and all of the things herein mentioned as fully and to the same extent as natural persons might or could do. 4 IN WITNESS WHEREOF, we have hereunto set our hands this day 22 of February, 1964. /s/ Ralph L. Ayers ---------------------------- /s/ Marilyn M. Ayers ---------------------------- /s/ Arthur L. Ayers ---------------------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) The undersigned, Ralph L. Ayers, Marilyn M. Ayers and Arthur L. Ayers, being all of the incorporators of Variform Plastics Inc. being duly sworn upon their oath, each did say that the statements and matters set forth in the foregoing Articles of Incorporation are true. /s/ Ralph L. Ayers ---------------------------- /s/ Marilyn M. Ayers ---------------------------- /s/ Arthur L. Ayers ---------------------------- 5 On this 22 day of February, 1964, before me personally appeared Ralph L. Ayers, Marilyn M. Ayers and Arthur L. Ayers, to me known to be the persons described in and who executed the foregoing instrument and acknowledge that they executed the same as their free act and deed. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notary seal the day and year first above written. [Notary Seal] /s/ Notary ---------------------------- Notary Public My commission expires: 2-9-67 ------- FILED AND CERTIFICATE OF INCORPORATION ISSUED FEB 25 1964 EX-3.17 20 y95660exv3w17.txt CERTIFICATE OF MERGER AND ARTICLES OF MERGER EXHIBIT 3.17 ------------ [SEAL] CERTIFICATE OF MERGER -- MISSOURI CORPORATION SURVIVING WHEREAS, Articles of Merger of the following corporations: Name of Corporations AYERS PLASTICS COMPANY, INC. (00111807) INTO -------------------------------------------------------- VARIFORM PLASTICS INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Organized and Existing Under Laws of MISSOURI ------------------------------------------- have been received, found to conform to law, and filed. NOW, THEREFORE, I, JAMES C. KIRKPATRICK, Secretary of State of the State of Missouri, issue this Certificate of Merger, certifying that the merger of the aforenamed corporations is effected, with VARIFORM PLASTICS INC. as the surviving corporation. SEAL IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the GREAT SEAL of the State of Missouri, at the City of Jefferson, this 28TH day of FEBRUARY, 1977. /s/ James C. Kirkpatrick ------------------------ SECRETARY OF STATE RECEIVED OF: VARIFORM PLASTICS INC. THREE AND NO/100 Dollars, $3.00 For Credit of General Revenue Fund, on Account of Amendment Fee. No. 00111906 [SEAL] THE HONORABLE JAMES C. KIRKPATRICK SECRETARY OF STATE STATE OF MISSOURI JEFFERSON CITY, MISSOURI 65101 Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned certify the following: 1. That Variform Plastics Inc., a Missouri corporation, and Ayers Plastics Company, Inc., a Missouri corporation, are hereby merged and that the above-named Variform Plastics Inc. is the surviving corporation. 2. That the Board of Directors of Variform Plastics Inc. met on the 21st day of February, 1977, and by resolution adopted by a majority vote of the members of such Board approved the Plan of Merger set forth in these Articles. 3. That the Board of Directors of Ayers Plastics Company, Inc. met on the 21st day of February, 1977, and by resolution adopted by a majority vote of the members of such Board approved the Plan of Merger set forth in these Articles. 4. That there are issued and outstanding 1000 shares of stock of Variform Plastics Inc. 5. That there are issued and outstanding 1700 shares of stock of Ayers Plastics Company, Inc. 6. That the Plan of Merger thereafter was submitted to a vote at the special meeting of the shareholders of Variform Plastics Inc. held on the 21st day of February, 1977, at Kansas City, Missouri, and at such meeting there were 1000 shares entitled to vote and 1000 shares voted in favor and no shares voted against said Plan. 7. That the Plan of Merger thereafter was submitted to a vote at the special meeting of the shareholders of Ayers Plastics Company, Inc., held on the 21st day of February, 1977, at Kansas City, Missouri, and at such meeting there were 1700 shares entitled to vote and 1700 shares voted in favor and no shares voted against said Plan. [SEAL] are not amended. IN WITNESS WHEREOF, these Articles of Merger have been executed by the aforementioned corporations as of the day and year hereafter acknowledged. VARIFORM PLASTICS INC. By /s/ Ralph L. Ayers --------------------------------------- Ralph L. Ayers, President ATTEST: /s/ Marilyn M. Ayers - ------------------------------- Marilyn M. Ayers, Secretary AYERS PLASTICS COMPANY, INC. By /s/ Ralph L. Ayers --------------------------------------- Ralph L. Ayers, President ATTEST: /s/ Marilyn M. Ayers - ------------------------------- Marilyn M. Ayers, Secretary STATE OF MISSOURI ) : ss. COUNTY OF JACKSON ) I, the undersigned notary public, do hereby certify that on this 22ND day of February, 1977, personally appeared before me Ralph L. Ayers and Marilyn M. Ayers, who, being by me first duly sworn, declared that they are the President and Secretary respectively of Variform Plastics Inc., that they signed the foregoing document as [SEAL] President and Secretary of the corporation, and that the statements therein contained are true. /s/ Beulah L. Bambery ------------------------------------------- Notary Public Beulah L. Bambery My Commission expires My Commission Expires: 1/3/78 - ------------------------------- [SEAL] STATE OF MISSOURI ) : ss. COUNTY OF JACKSON ) I, the undersigned notary public, do hereby certify that on this 22ND day of February, 1977, personally appeared before me Ralph L. Ayers and Marilyn M. Ayers, who, being by me first duly sworn, declared that they are the President and Secretary respectively of Ayers Plastics Company, Inc., that they signed the foregoing document as President and Secretary of the corporation, and that the statements therein contained are true. /s/ Beulah L. Bambery ------------------------------------------- Notary Public Beulah L. Bambery My Commission expires My Commission Expires: 1/3/78 - ------------------------------- FILED AND CERTIFICATE ISSUED FEB 28 1977 /s/ _______ Corporation Dept. SECRETARY OF STATE EX-3.18 21 y95660exv3w18.txt CERTIFICATE OF AMENDMENT TO ARTICLES OF INC. EXHIBIT 3.18 ------------ CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF VARIFORM PLASTICS, INC. -------------------------- Pursuant to "The General and Business Corporation Law of Missouri", the undersigned corporation hereby certifies the following: 1. The name of the corporation is "Variform Plastics, Inc.". 2. The amendment set forth in paragraph 3 below was adopted in the manner prescribed by "The General and Business Corporation Law of Missouri" by written consent of the shareholders of the corporation dated June 19, 1981. 3. The amendment adopted by the shareholders is as follows, to-wit: The Articles of Incorporation of Variform Plastics, Inc. be and the same are hereby amended by striking therefrom Article III and Article VI as presently constituted and inserting in lieu thereof the following provisions: ARTICLE III The aggregate number of shares which the corporation shall have authority to issue shall be 67,000 shares, of which 64,000 shares shall be preferred stock having a par value of $1.00 per share and 3,000 shares shall be common stock having a par value of $10.00 per share. The preferred stock may be issued from time to time in one or more series, each of such series to have such voting powers (full or limited or without voting powers) designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as stated and expressed herein, or in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. Authority is hereby granted to the Board of Directors, subject to the provisions of this Article III, to create one or more series of preferred stock and, with respect to each series, to fix or alter as permitted by law, by resolution or resolutions providing for the issue of such series: (a) the number of shares to constitute such series and the distinctive designation thereof; (b) the dividend rate on the shares of such series, the dividend payment dates, the periods in respect of which dividends are payable ("dividend periods") whether such dividends shall be cumulative, and if cumulative, the date or dates from which dividends shall accumulate; (c) whether or not the shares of such series shall be redeemable, and, if redeemable, on what terms, including the redemption prices which the shares of such series shall be entitled to receive upon the redemption thereof; (d) whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (e) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and the conversion price or prices or rate or rates, or the rate or rates at which such exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided in such resolution or resolutions; (f) the voting power, if any, of the shares of such series; (g) the amounts, if any, payable on the shares of such series in the events of dissolution or liquidation; and (h) such other terms, conditions, special rights and protective provisions as the Board of Directors may be deem advisable. No dividend shall be declared and set apart for payment on any series of preferred stock in respect of any dividend period unless there shall likewise be or have been paid, or declared and set apart for payment, on all shares of preferred stock of each other series entitled to cumulative dividends at the time outstanding which rank equally as to dividends with the series in question, dividends ratably in accordance with the sums which would be payable on the said shares through the end of the last preceding dividend period if all dividends were declared and paid in full. ARTICLE VI The number of directors to constitute the board of directors of the corporation shall be three (3) to be elected by the holders of its common stock of the corporation, except in the event that the corporation is in default in the performance of any of its obligations under its Second Amended Plan of Reorganization, the holders of its common stock shall have the right to elect two of the three directors, and in such event the holders of its preferred stock shall have the right to elect one of the three directors. 4. At the time the foregoing amendment was adopted, there were Two Thousand Seven Hundred (2,700) shares of the Common Stock of the Corporation outstanding, all of which were entitled to vote on the foregoing amendment. 2 5. Two Thousand Seven Hundred (2,700) shares of Common Stock were voted in favor of the foregoing amendment and no (-0-) shares were voted against said amendment. IN WITNESS WHEREOF, the undersigned President and Secretary of Variform Plastics, Inc. have executed this instrument and affixed hereto the corporate seal of said corporation on this 19th day of JUNE 1981 . VARIFORM PLASTICS, INC. By /s/ Ralph L. Ayers --------------------------------------- President /s/ Susan L. Ayers --------------------------------------- Secretary STATE OF MISSOURI ) ) COUNTY OF JACKSON ) ss. I, MELINDA A LAGER, a Notary Public, do hereby certify that on this 19th day of June, 1981, personally appeared before me Ralph L. Ayers who being by me first duly sworn, declared that he is the President of Variform Plastics, Inc., that he signed the foregoing document acting in said capacity for the corporation and that the statements therein contained are true. /s/ Melinda A. Lager --------------------------------------- Notary Public My Commission Expires: 11-12-82 - ---------------------- FILED AND CERTIFICATE ISSUED JUN 25 1981 3 EX-3.19 22 y95660exv3w19.txt CERTIFICATE OF AMENDMENT TO ARTICLES OF INC. EXHIBIT 3.19 ------------ [SEAL] STATE OF MISSOURI ... OFFICE OF SECRETARY OF STATE ROY D. BLUNT, SECRETARY OF STATE AMENDMENT OF ARTICLES OF INCORPORATION (TO BE SUBMITTED IN DUPLICATE BY AN ATTORNEY) HONORABLE ROY D. BLUNT SECRETARY OF STATE STATE OF MISSOURI P.O. BOX 778 JEFFERSON CITY, MO 65102 Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following: 1. The present name of the Corporation is VARIFORM PLASTICS INC. -------------------------------- - -------------------------------------------------------------------------------- The name under which it was originally organized was VARIFORM PLASTICS INC. ---------------------------- - -------------------------------------------------------------------------------- 2. An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on JULY 22 , 1985 3. Article Number 1 is amended to read as follows: "1. The name of the corporation is Variform, Inc." (IF MORE THAN ONE ARTICLE IS TO BE AMENDED OR MORE SPACE IS NEEDED ATTACH FLY SHEET.) Corp. 44 (I-85) 2 IN WITNESS WHEREOF, the undersigned, RALPH L. AYERS, PRESIDENT -------------------------------------------- President or - -------------------------------------------------------------------------------- Vice President has executed this instrument and its SECRETARY, SUSAN L. AYERS ------------------------------------------- Secretary or Assistant Secretary has affixed its corporate seal hereto and attested said seal on the 29TH day of JULY, 1985. CORPORATE SEAL VARIFORM PLASTICS INC. ------------------------------ Name of Corporation ATTEST: /s/ Susan L. Ayers By /s/ Ralph L. Ayers - ------------------------------- --------------------------------------- Secretary President Susan L. Ayers, Secretary Ralph L. Ayers, President STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) I, LINDA SOHM , a Notary Public, do hereby certify that on this 29TH day of JULY , 1985, personally appeared before me RALPH L. AYERS who, being by me first duly sworn, declared that he is the PRESIDENT of VARIFORM PLASTICS INC. that he signed the foregoing document as PRESIDENT of the corporation, and that the statements therein contained are true. 3 NOTARIAL SEAL /s/ Linda Sohm ---------------------------------------- Notary Public My commission expires AUGUST 19, 1988 FILED AND CERTIFICATE ISSUED AUG 01 1985 /s/ Roy D. Blunt Corporation Dept. Secretary of State Corp. 44 (Page 3) EX-3.20 23 y95660exv3w20.txt BY-LAWS EXHIBIT 3.20 ------------ BY-LAWS OF VARIFORM, INC. TABLE OF CONTENTS
Title Page - ----- ---- Article I - General........................................................................ 1 Section 1.1. DRAFTER'S NOTE....................................................... 1 Section 1.2. Relationship to Charter, etc......................................... 1 Section 1.3. Seal................................................................. 1 Section 1.4. Fiscal Year.......................................................... 1 Article II - Stockholders.................................................................. 1 Section 2.1. Place of Meetings.................................................... 1 Section 2.2. Annual Meeting....................................................... 1 Section 2.3. Quorum............................................................... 2 Section 2.4. Right to Vote; Proxies............................................... 2 Section 2.5. Voting............................................................... 2 Section 2.6. Notice of Annual Meetings............................................ 3 Section 2.7. Stockholders' List................................................... 3 Section 2.8. Special Meetings..................................................... 3 Section 2.9. Notice of Special Meetings........................................... 3 Section 2.10. Inspectors........................................................... 3 Section 2.11. Stockholders' Consent in Lieu of Meeting............................. 3 Article III - Directors.................................................................... 4 Section 3.1. Number of Directors.................................................. 4 Section 3.2. Change in Number of Directors; Vacancies............................. 4 Section 3.3. Resignation.......................................................... 4 Section 3.4. Removal.............................................................. 4 Section 3.5. Place of Meetings and Books.......................................... 4 Section 3.6. General Powers....................................................... 4 Section 3.7. Committees........................................................... 5 Section 3.8. Powers Denied to Committees.......................................... 5 Section 3.9. Substitute Committee Member.......................................... 5 Section 3.10. Compensation of Directors............................................ 5 Section 3.11. Annual Meeting....................................................... 5 Section 3.12. Regular Meetings..................................................... 6 Section 3.13. Special Meetings..................................................... 6 Section 3.14. Quorum............................................................... 6 Section 3.15. Telephonic Participation in Meetings................................. 6 Section 3.16. Action by Consent.................................................... 6
i Article IV - Officers...................................................................... 6 Section 4.1. Selection; Statutory Officers........................................ 6 Section 4.2. Time of Election..................................................... 7 Section 4.3. Additional Officers.................................................. 7 Section 4.4. Terms of Office...................................................... 7 Section 4.5. Compensation of Officers............................................. 7 Section 4.6. Chairman of the Board................................................ 7 Section 4.7. President............................................................ 7 Section 4.8. Vice-President....................................................... 7 Section 4.9. Treasurer............................................................ 7 Section 4.10. Secretary............................................................ 8 Section 4.11. Assistant Secretary.................................................. 8 Section 4.12. Assistant Treasurer.................................................. 8 Section 4.13. Subordinate Officers................................................. 8 Article V - Stock.......................................................................... 9 Section 5.1. Stock................................................................ 9 Section 5.2. Fractional Share Interests........................................... 9 Section 5.3. Transfers of Stock................................................... 9 Section 5.4. Record Date.......................................................... 10 Section 5.5. Transfer Agent and Registrar......................................... 10 Section 5.6. Dividends............................................................ 10 Section 5.7. Lost, Stolen or Destroyed Certificates............................... 10 Section 5.8. Inspection of Books.................................................. 10 Article VI - Miscellaneous Management Provisions........................................... 11 Section 6.1. Execution of Papers.................................................. 11 Section 6.2. Notices.............................................................. 11 Section 6.3. Conflict of Interest................................................. 11 Section 6.4. Voting of Securities Owned by This Corporation....................... 11 Article VII - Indemnification.............................................................. 12 Section 7.1. ..................................................................... 12 Article VIII - Amendments.................................................................. 12 Section 8.1. Amendments........................................................... 12

ii BY-LAWS OF VARIFORM, INC. Article I - General SECTION 1.1. DRAFTER'S NOTE. ALTHOUGH THESE BY-LAWS HAVE BEEN DRAFTED TO CONFORM GENERALLY TO CORPORATE LAW REQUIREMENTS, SPECIFIC CORPORATE LAW REQUIREMENTS SHOULD BE CONSULTED IN THE EVENT OF ANY SIGNIFICANT CORPORATE ACTION. IF ANY PROVISION OF THESE BY-LAWS SHALL CONFLICT WITH APPLICABLE LAW, SUCH LAW SHALL CONTROL. Section 1.1. Relationship to Charter, etc. These by-laws are subject to applicable corporate law and to the Corporation's certificate of incorporation, articles of organization or similar document (the "charter"). In these by-laws, references to law, the charter and by-laws mean the law, the provisions of the charter and the by-laws as from time to time in effect. Section 1.2. Seal. The board of directors may provide for a seal of the Corporation, which, if so provided, shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the state of its incorporation, and such other words, dates or images as may be approved from time to time by the directors. Section 1.3. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. Article II - Stockholders Section 2.1. Place of Meetings. All meetings of the stockholders shall be held at the principal executive office of the Corporation, except such meetings as the Board of Directors expressly determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such other place or places within or without the state of incorporation of the Corporation as the Board of Directors shall have determined and as shall be stated in such notice. Section 2.2. Annual Meeting. The annual meeting of the stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the charter, or these by-laws. If the election of directors shall not be held on the day designated in accordance with these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefore or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting; and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called as provided in Section 2.9. Section 2.3. Quorum. At all meetings of the stockholders, the holders of a majority by voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise provided by law, by the charter or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of voting stock shall be present. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted if the meeting had been held as originally called. Section 2.4. Right to Vote; Proxies. Each holder of a share or shares of capital stock of the Corporation having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him, unless otherwise provided in the charter. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy which is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. Subject to applicable statutory provisions, a proxy may be granted by a writing executed by the stockholder or his authorized officer, director, employee or agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission. Section 2.5. Voting. At all meetings of stockholders, except as otherwise expressly provided for by statute, the charter or these by-laws, (a) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (b) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise expressly provided by law, the charter or these by-laws, at all meetings of stockholders the voting shall be by voice vote, but any stockholder qualified to vote on the matter in question may demand a stock vote, by shares of stock, upon such question, whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if such ballot be cast by a proxy, it shall also state the name of the proxy. - 2 - Section 2.6. Notice of Annual Meetings. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock books of the Corporation at least 10 days (and not more than 60 days) prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Corporation or to the transfer agent, if any, of the class of stock owned by him, his post-office address and to notify said Secretary or transfer agent of any change therein. Section 2.7. Stockholders' List. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and made available either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, at least 10 days before such meeting, and shall at all times during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder for a purpose germane to the meeting. Section 2.8. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called by the Board of Directors or the Chairman of the Board. Section 2.9. Notice of Special Meetings. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than 10 nor more than 60 days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof or such other business as may be germane or supplementary to that stated in said notice or notices. Section 2.10. Inspectors. One or more inspectors may be appointed by the Board of Directors before or at any meeting of stockholders, or, if no such appointment shall have been made, the presiding officer may make such appointment at the meeting. At the meeting for which the inspector or inspectors are appointed, he or they shall open and close the polls, receive and take charge of the proxies and ballots, and decide all questions touching on the qualifications of voters, the validity of proxies and the acceptance and rejection of votes. If any inspector previously appointed shall fail to attend or refuse or be unable to serve, the presiding officer shall appoint an inspector in his place. Section 2.11. Stockholders' Consent in Lieu of Meeting. Unless otherwise provided in the charter, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, in the manner, and to the fullest extent, provided by applicable law. - 3 - Article III - Directors Section 3.1. Number of Directors. Except as otherwise provided by law, the charter or these by-laws, the property and business of the Corporation shall be managed by or under the direction of a board of not less than two nor more than thirteen directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. Directors need not be stockholders, residents of the Corporation's state of incorporation or citizens of the United States. The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for that purpose. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term. Section 3.2. Change in Number of Directors; Vacancies. The maximum number of directors may be increased by an amendment to these by-laws adopted by a majority vote of the Board of Directors or by a majority vote of the capital stock having voting power, and if the number of directors is so increased by action of the Board of Directors or of the stockholders or otherwise, then the additional directors may be elected in the manner provided above for the filling of vacancies in the Board of Directors or at the annual meeting of stockholders or at a special meeting called for that purpose. Section 3.3. Resignation. Any director of this Corporation may resign at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.4. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 3.5. Place of Meetings and Books. The Board of Directors may hold their meetings and keep the books of the Corporation inside or outside the Corporation's state of incorporation, at such places as they may from time to time determine. Section 3.6. General Powers. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the charter or by these by-laws directed or required to be exercised or done by the stockholders. - 4 - Section 3.7. Committees. The Board of Directors may designate one or more committees by resolution or resolutions passed by a majority of the whole board. Such committee or committees shall consist of one or more directors of the Corporation, and, to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Corporation to the extent permitted by statute and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 3.8. Powers Denied to Committees. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the charter, adopt an agreement of merger, or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend the by-laws of the Corporation unless the resolution or resolutions designating such committee expressly so provides. Further, no committee of the Board of Directors shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger unless the resolution or resolutions designating such committee expressly so provides. Section 3.9. Substitute Committee Member. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its proceedings and report the same to the board as may be required by the board. Section 3.10. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.11. Annual Meeting. The newly-elected board may meet at such place and time as shall be fixed and announced by the presiding officer at the annual meeting of stockholders, for the purpose of organization or otherwise, and no further notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such place and time as shall be stated in a notice given to such directors two (2) days prior to such meeting, or as shall be fixed by the consent in writing of all the directors. - 5 - Section 3.12. Regular Meetings. Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board. Section 3.13. Special Meetings. Special meetings of the board may be called by the Chairman of the Board on 2 days' notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified. Special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors. Section 3.14. Quorum. At all meetings of the Board of Directors, a majority of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the charter, or by these by-laws. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. Section 3.15. Telephonic Participation in Meetings. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.16. Action by Consent. Unless otherwise restricted by law, the charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee. Article IV - Officers Section 4.1. Selection; Statutory Officers. The officers of the Corporation shall be chosen by the Board of Directors. There shall be a President, a Secretary and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers, as the Board of Directors may elect. Any number of offices may be held by the same person. Subject to law, the charter and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. - 6 - Section 4.2. Time of Election. The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders. None of said officers need be a director or stockholder. Section 4.3. Additional Officers. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4.4. Terms of Office. Each officer of the Corporation shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors, with or without cause. Section 4.5. Compensation of Officers. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Section 4.6. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors. Section 4.7. President. Unless the Board of Directors otherwise determines, the President shall be the chief executive officer and head of the Corporation. Unless there is a Chairman of the Board, the President shall preside at all meetings of directors and stockholders. Under the supervision of the Board of Directors and of any applicable committee thereof, the President shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors and of any applicable committee to confer any specific power, except such as may be by statute exclusively conferred on the President, upon any other officer or officers of the Corporation. The President shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or any applicable committee thereof. Section 4.8. Vice-President. The Vice Presidents shall perform such of the duties of the President on behalf of the Corporation as may be respectively assigned to them from time to time by the Board of Directors or by the executive committee or by the President. The Board of Directors or any applicable committee may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the board and of any applicable committee. Section 4.9. Treasurer. The Treasurer shall have the care and custody of all the funds and securities of the Corporation which may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment - 7 - of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors or any applicable committee, or the officers or agents to whom the Board of Directors or any applicable committee may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Corporation. He may sign all receipts and vouchers for the payments made to the Corporation. He shall render an account of his transactions to the Board of Directors or to any applicable committee as often as the board or such committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the corporation. He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors and of any applicable committee. He shall, when requested pursuant to vote of the Board of Directors or any applicable committee, give a bond to the Corporation conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Corporation. Section 4.10. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders. He shall attend to the giving and serving of all notices of the Corporation. Except as otherwise ordered by the Board of Directors or any applicable committee, he shall attest the seal of the Corporation upon all contracts and instruments executed under such seal and shall affix the seal of the Corporation thereto and to all certificates of shares of capital stock of the Corporation. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or any applicable committee may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors and of any applicable committee. Section 4.11. Assistant Secretary. The Board of Directors may appoint or remove one or more Assistant Secretaries of the Corporation. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors, any applicable committee, the President, any Vice-President, the Treasurer or the Secretary may designate. Section 4.12. Assistant Treasurer. The Board of Directors may appoint or remove one or more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors or any applicable committee may designate. Section 4.13. Subordinate Officers. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. - 8 - Article V - Stock Section 5.1. Stock. Each stockholder shall be entitled to a certificate or certificates of stock of the Corporation in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall certify the holder's name and number and class of shares and shall be signed by both of (a) either the President or a Vice-President, and any one of the Treasurer or the Secretary, and shall be sealed with the corporate seal of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, the signature of the officers of the Corporation and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers or the Corporation. Section 5.2. Fractional Share Interests. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (a) arrange for the disposition of fractional interests by those entitled thereto, (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (c) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. Section 5.3. Transfers of Stock. Subject to any transfer restrictions then in force, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and - 9 - accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by applicable law. Section 5.4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. Section 5.6. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the charter and applicable law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. Section 5.8. Inspection of Books. The Board of Directors shall have power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders - 10 - and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors. Article VI - Miscellaneous Management Provisions Section 6.1. Execution of Papers. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made accepted or endorsed by the Corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. Section 6.2. Notices. Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given 5 days after the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person. Whenever any notice is required to be given under the provisions of the statutes or of the charter of the Corporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6.3. Conflict of Interest. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Corporation entitled to vote thereon, and the contract or transaction is specifically approved by vote of such stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.4. Voting of Securities Owned by This Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities - 11 - issued by any other Corporation and owned or controlled by this Corporation may be voted in person at any meeting of security holders of such other corporation by the President, any Vice President, or the Treasurer, and (b) whenever, in the judgment of the President or any other appropriate officer, it is desirable for this Corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other Corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the President or such officer, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Corporation the same as such shares or other securities might be voted by this Corporation. Article VII - Indemnification Section 7.1. The Corporation shall, to the maximum extent permitted from time to time under the laws of the state of incorporation of the Corporation, indemnify, and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation or while a director or officer is or was serving at the request of this Corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 7.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The Corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the Corporation and stockholders purporting to act on behalf of the Corporation, to the extent permitted by the law of the state of incorporation of the Corporation. Article VIII - Amendments Section 8.1. Amendments. The by-laws of the Corporation may be altered, amended or repealed at any meeting of the Board of Directors upon notice thereof in accordance with these by-laws, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such - 12 - meeting, in accordance with the provisions of the charter of the Corporation and applicable laws. - 13 - EX-3.21 24 y95660exv3w21.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.21 ------------ State of Delaware Secretary of State Division of Corporations Filed 9:00 AM 8/22/2000 0014 25777-3278169 CERTIFICATE OF INCORPORATION OF NAPCO WINDOW SYSTEMS, INC. FIRST: The name of the Corporation is Napco Window Systems, Inc. SECOND: The registered office of the Corporation in the State of Delaware is located at 1013 Centre Road, City of Wilmington, County of New Castle. The name and address of its registered agent is Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Laws of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is Three Thousand (3,000) shares of Common Stock of the par value of One Cent ($.01) per share. FIFTH: The name and mailing address of the Incorporator is Dawn M. Urbanowicz; Nortek, Inc.; 50 Kennedy Plaza; Providence, RI 02903. SIXTH: The Corporation is to have perpetual existence. SEVENTH: Elections of Directors need not be by written ballot unless the by-laws of the Corporation so provide. EIGHTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is authorized and empowered to adopt, alter, amend and repeal the by-laws of the Corporation in any manner not inconsistent with the laws of the State of Delaware. NINTH: The Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the General Corporation Laws of Delaware. TENTH: Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation. ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in the Certificate of Incorporation, in the manner now or hereafter prescribed by statute. TWELFTH: A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as the same exists or may hereafter be amended. No amendment or repeal of this Article TWELFTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. I, THE UNDERSIGNED. being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Laws of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act 2 and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 22nd day of August, 2000. Dawn M. Urbanowicz ------------------------------------------- Dawn M. Urbanowicz 3 EX-3.22 25 y95660exv3w22.txt BY-LAWS EXHIBIT 3.22 ------------ BY-LAWS OF NAPCO WINDOW SYSTEMS, INC. ------------------------------------- ARTICLE I - GENERAL ------------------- SECTION 1.1. DRAFTER'S NOTE. Although these by-laws have been drafted to conform generally to corporate law requirements, specific corporate law requirements should be consulted in the event of any significant corporate action. If any provision of these by-laws shall conflict with applicable law, such law shall control. SECTION 1.2. RELATIONSHIP TO CHARTER, ETC. These by-laws are subject to applicable corporate law and to the Corporation's certificate of incorporation, articles of organization or similar document (the "charter"). In these by-laws, references to law, the charter and by-laws mean the law, the provisions of the charter and the by-laws as from time to time in effect. SECTION 1.3. SEAL. The board of directors may provide for a seal of the Corporation, which, if so provided, shall be in the form of a circle and shall have inscribed thereon the name of the Corporation, the state of its incorporation, and such other words, dates or images as may be approved from time to time by the directors. SECTION 1.4. FISCAL YEAR. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. ARTICLE II - STOCKHOLDERS - ------------------------- SECTION 2.1. PLACE OF MEETINGS. All meetings of the stockholders shall be held at the principal executive office of the Corporation, except such meetings as the Board of Directors expressly determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such other place or places within or without the state of incorporation of the Corporation as the Board of Directors shall have determined and as shall be stated in such notice. SECTION 2.2. ANNUAL MEETING. The annual meeting of the stockholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the charter, or these by-laws. If the election of directors shall not be held on the day designated in accordance with these by-laws, the directors shall cause the election to be held as soon thereafter as convenient, and to that end, if the annual meeting is omitted on the day herein provided therefore or if the election of directors shall not be held thereat, a special meeting of the stockholders may be held in place of such omitted meeting or election, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting; and in such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called as provided in Section 2.9. SECTION 2.3. QUORUM. At all meetings of the stockholders, the holders of a majority by voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise provided by law, by the charter or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of voting stock shall be present. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted if the meeting had been held as originally called. SECTION 2.4. RIGHT TO VOTE; PROXIES. Each holder of a share or shares of capital stock of the Corporation having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him, unless otherwise provided in the charter. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy which is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. Subject to applicable statutory provisions, a proxy may be granted by a writing executed by the stockholder or his authorized officer, director, employee or agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission. SECTION 2.5. VOTING. At all meetings of stockholders, except as otherwise expressly provided for by statute, the charter or these by-laws, (a) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (b) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise expressly provided by law, the charter or these by-laws, at all meetings of stockholders the voting shall be by voice vote, but any stockholder qualified to vote on the matter in question may demand a stock vote, by shares of stock, upon such question, whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if such ballot be cast by a proxy, it shall also state the name of the proxy. -2- SECTION 2.6. NOTICE OF ANNUAL MEETINGS. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock books of the Corporation at least 10 days (and not more than 60 days) prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Corporation or to the transfer agent, if any, of the class of stock owned by him, his post-office address and to notify said Secretary or transfer agent of any change therein. SECTION 2.7. STOCKHOLDERS' LIST. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and made available either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, at least 10 days before such meeting, and shall at all times during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder for a purpose germane to the meeting. SECTION 2.8. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called by the Board of Directors or the Chairman of the Board. SECTION 2.9. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than 10 nor more than 60 days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof or such other business as may be germane or supplementary to that stated in said notice or notices. SECTION 2.10. INSPECTORS. One or more inspectors may be appointed by the Board of Directors before or at any meeting of stockholders, or, if no such appointment shall have been made, the presiding officer may make such appointment at the meeting. At the meeting for which the inspector or inspectors are appointed, he or they shall open and close the polls, receive and take charge of the proxies and ballots, and decide all questions touching on the qualifications of voters, the validity of proxies and the acceptance and rejection of votes. If any inspector previously appointed shall fail to attend or refuse or be unable to serve, the presiding officer shall appoint an inspector in his place. SECTION 2.11. STOCKHOLDERS' CONSENT IN LIEU OF MEETINGS. Unless otherwise provided in the charter, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, in the manner, and to the fullest extent, provided by applicable law. -3- ARTICLE III - DIRECTORS - ----------------------- SECTION 3.1. NUMBER OF DIRECTORS. Except as otherwise provided by law, the charter or these by-laws, the property and business of the Corporation shall be managed by or under the direction of a board of not less than two nor more than thirteen directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. Directors need not be stockholders, residents of the Corporation's state of incorporation or citizens of the United States. The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; PROVIDED that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for that purpose. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term. SECTION 3.2. CHANGE IN NUMBER OF DIRECTORS; VACANCIES. The maximum number of directors may be increased by an amendment to these by-laws adopted by a majority vote of the Board of Directors or by a majority vote of the capital stock having voting power, and if the number of directors is so increased by action of the Board of Directors or of the stockholders or otherwise, then the additional directors may be elected in the manner provided above for the filling of vacancies in the Board of Directors or at the annual meeting of stockholders or at a special meeting called for that purpose. SECTION 3.3. RESIGNATION. Any director of this Corporation may resign at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.4. REMOVAL. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 3.5. PLACE OF MEETINGS AND BOOKS. The Board of Directors may hold their meetings and keep the books of the Corporation inside or outside the Corporation's state of incorporation, at such places as they may from time to time determine. SECTION 3.6. GENERAL POWERS. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the -4- charter or by these by-laws directed or required to be exercised or done by the stockholders. SECTION 3.7. COMMITTEES. The Board of Directors may designate one or more committees by resolution or resolutions passed by a majority of the whole board. Such committee or committees shall consist of one or more directors of the Corporation, and, to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Corporation to the extent permitted by statute and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 3.8. POWERS DENIED TO COMMITTEES. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the charter, adopt an agreement of merger, or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend the by-laws of the Corporation unless the resolution or resolutions designating such committee expressly so provides. Further, no committee of the Board of Directors shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger unless the resolution or resolutions designating such committee expressly so provides. SECTION 3.9. SUBSTITUTE COMMITTEE MEMBER. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its proceedings and report the same to the board as may be required by the board. SECTION 3.10. COMPENSATION OF DIRECTORS. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3.11. ANNUAL MEETING. The newly-elected board may meet at such place and time as shall be fixed and announced by the presiding officer at the annual meeting of stockholders, for the purpose of organization or otherwise, and no further notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such -5- place and time as shall be stated in a notice given to such directors two (2) days prior to such meeting, or as shall be fixed by the consent in writing of all the directors. SECTION 3.12. REGULAR MEETINGS. Regular meetings of the board may be held without notice at such time and place as shall from time to time be determined by the board. SECTION 3.13. SPECIAL MEETINGS. Special meetings of the board may be called by the Chairman of the Board on 2 days' notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified. Special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors. SECTION 3.14. QUORUM. At all meetings of the Board of Directors, a majority of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the charter, or by these by-laws. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. SECTION 3.15. TELEPHONIC PARTICIPATION IN MEETINGS. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. SECTION 3.16. ACTION BY CONSENT. Unless otherwise restricted by law, the charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV - OFFICERS - --------------------- SECTION 4.1. SELECTION; STATUTORY OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors. There shall be a President, a Secretary and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers, as the Board of Directors may elect. Any number of offices may be held by the same person. Subject to law, the charter and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties -6- and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. SECTION 4.2. TIME OF ELECTION. The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders. None of said officers need be a director or stockholder. SECTION 4.3. ADDITIONAL OFFICERS. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. SECTION 4.4. TERMS OF OFFICE. Each officer of the Corporation shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors, with or without cause. SECTION 4.5. COMPENSATION OF OFFICERS. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 4.6. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors. SECTION 4.7. PRESIDENT. Unless the Board of Directors otherwise determines, the President shall be the chief executive officer and head of the Corporation. Unless there is a Chairman of the Board, the President shall preside at all meetings of directors and stockholders. Under the supervision of the Board of Directors and of any applicable committee thereof, the President shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors and of any applicable committee to confer any specific power, except such as may be by statute exclusively conferred on the President, upon any other officer or officers of the Corporation. The President shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or any applicable committee thereof. SECTION 4.8. VICE-PRESIDENT. The Vice-Presidents shall perform such of the duties of the President on behalf of the Corporation as may be respectively assigned to them from time to time by the Board of Directors or by the executive committee or by the President. The Board of Directors, or any applicable committee may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the board and of any applicable committee. -7- SECTION 4.9. TREASURER. The Treasurer shall have the care and custody of all the funds and securities of the Corporation which may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors or any applicable committee, or the officers or agents to whom the Board of Directors or any applicable committee may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Corporation. He may sign all receipts and vouchers for the payments made to the Corporation. He shall render an account of his transactions to the Board of Directors or to any applicable committee as often as the board or such committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Corporation. He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors and of any applicable committee. He shall, when requested pursuant to vote of the Board of Directors or any applicable committee, give a bond to the Corporation conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Corporation. SECTION 4.10. SECRETARY. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders. He shall attend to the giving and serving of all notices of the Corporation. Except as otherwise ordered by the Board of Directors or any applicable committee, he shall attest the seal of the Corporation upon all contracts and instruments executed under such seal and shall affix the seal of the Corporation thereto and to all certificates of shares of capital stock of the Corporation. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or any applicable committee may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors and of any applicable committee. SECTION 4.11. ASSISTANT SECRETARY. The Board of Directors may appoint or remove one or more Assistant Secretaries of the Corporation. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors, any applicable committee, the President, any Vice-President, the Treasurer or the Secretary may designate. SECTION 4.12. ASSISTANT TREASURER. The Board of Directors may appoint or remove one or more Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors or any applicable committee may designate. SECTION 4.13. SUBORDINATE OFFICERS. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors -8- may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. ARTICLE V - STOCK - ----------------- SECTION 5.1. STOCK. Each stockholder shall be entitled to a certificate or certificates of stock of the Corporation in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall certify the holder's name and number and class of shares and shall be signed by both of (a) either the President or a Vice-President, and (b) any one of the Treasurer or the Secretary, and shall be sealed with the corporate seal of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, the signature of the officers of the Corporation and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers or the Corporation. SECTION 5.2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (a) arrange for the disposition of fractional interests by those entitled thereto, (b) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (c) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. SECTION 5.3. TRANSFERS OF STOCK. Subject to any transfer restrictions then in force, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer -9- books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by applicable law. SECTION 5.4. RECORD DATE. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5.5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. SECTION 5.6. DIVIDENDS. Dividends upon the capital stock of the Corporation, subject to the provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the charter and applicable law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 5.7. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. -10- SECTION 5.8. INSPECTION OF BOOKS. The Board of Directors shall have power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors. ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS - ------------------------------------------------ SECTION 6.1. EXECUTION OF PAPERS. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made accepted or endorsed by the Corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. SECTION 6.2. NOTICES. Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given 5 days after the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person. Whenever any notice is required to be given under the provisions of the statutes or of the charter of the Corporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 6.3. CONFLICT OF INTEREST. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Director or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Corporation entitled to vote thereon, and the contract or transaction is specifically approved by vote of such stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or -11- ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 6.4. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other Corporation and owned or controlled by this Corporation may be voted in person at any meeting of security holders of such other corporation by the President, any Vice President, or the Treasurer, and (b) whenever, in the judgment of the President or any other appropriate officer, it is desirable for this Corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other Corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the President or such officer, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Corporation the same as such shares or other securities might be voted by this Corporation. ARTICLE VII - INDEMNIFICATION - ----------------------------- SECTION 7.1. The Corporation shall, to the maximum extent permitted from time to time under the laws of the state of incorporation of the Corporation, indemnify, and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation or while a director or officer is or was serving at the request of this Corporation as a director, officer, partner, trustee, fiduciary, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with such action, suit, proceeding or claim; PROVIDED, HOWEVER, that the foregoing shall not require this Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person, other than an action to enforce indemnification rights. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any such person seeking indemnification under this Section 7.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. The Corporation shall have the power to provide indemnification and advance expenses to any other person, including employees and agents of the Corporation and stockholders purporting to act on behalf of the Corporation, to the extent permitted by the law of the state of incorporation of the Corporation. -12- ARTICLE VIII - AMENDMENTS - ------------------------- SECTION 8.1. AMENDMENTS. The by-laws of the Corporation may be altered, amended or repealed at any meeting of the Board of Directors upon notice thereof in accordance with these by-laws, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the charter of the Corporation and applicable laws. -13- BY-LAWS OF NAPCO WINDOW SYSTEMS, INC. TABLE OF CONTENTS ----------------- TITLE PAGE - ----- ---- ARTICLE I - GENERAL 1 SECTION 1.1. DRAFTER'S NOTE.......................................1 SECTION 1.2. RELATIONSHIP TO CHARTER, ETC.........................1 SECTION 1.3. SEAL.................................................1 SECTION 1.4. FISCAL YEAR..........................................1 ARTICLE II - STOCKHOLDERS......................................................1 SECTION 2.1. PLACE OF MEETINGS....................................1 SECTION 2.2. ANNUAL MEETING.......................................1 SECTION 2.3. QUORUM...............................................2 SECTION 2.4. RIGHT TO VOTE; PROXIES...............................2 SECTION 2.5. VOTING...............................................2 SECTION 2.6. NOTICE OF ANNUAL MEETINGS............................3 SECTION 2.7. STOCKHOLDERS' LIST...................................3 SECTION 2.8. SPECIAL MEETINGS.....................................3 SECTION 2.9. NOTICE OF SPECIAL MEETINGS...........................3 SECTION 2.10. INSPECTORS.........................................3 SECTION 2.11. STOCKHOLDERS' CONSENT IN LIEU OF MEETINGS..........3 ARTICLE III - DIRECTORS........................................................4 SECTION 3.1. NUMBER OF DIRECTORS..................................4 SECTION 3.2. CHANGE IN NUMBER OF DIRECTORS; VACANCIES.............4 SECTION 3.3. RESIGNATION..........................................4 SECTION 3.4. REMOVAL..............................................4 SECTION 3.5. PLACE OF MEETINGS AND BOOKS..........................4 SECTION 3.6. GENERAL POWERS.......................................4 SECTION 3.7. COMMITTEES...........................................5 i TITLE PAGE - ----- ---- SECTION 3.8. POWERS DENIED TO COMMITTEES..........................5 SECTION 3.9. SUBSTITUTE COMMITTEE MEMBER..........................5 SECTION 3.10. COMPENSATION OF DIRECTORS..........................5 SECTION 3.11. ANNUAL MEETING.....................................5 SECTION 3.12. REGULAR MEETINGS...................................6 SECTION 3.13. SPECIAL MEETINGS...................................6 SECTION 3.14. QUORUM.............................................6 SECTION 3.15. TELEPHONIC PARTICIPATION IN MEETINGS...............6 SECTION 3.16. ACTION BY CONSENT..................................6 ARTICLE IV - OFFICERS..........................................................6 SECTION 4.1. SELECTION; STATUTORY OFFICERS........................6 SECTION 4.2. TIME OF ELECTION.....................................7 SECTION 4.3. ADDITIONAL OFFICERS..................................7 SECTION 4.4. TERMS OF OFFICE......................................7 SECTION 4.5. COMPENSATION OF OFFICERS.............................7 SECTION 4.6. CHAIRMAN OF THE BOARD................................7 SECTION 4.7. PRESIDENT............................................7 SECTION 4.8. VICE-PRESIDENTS......................................7 SECTION 4.9. TREASURER............................................8 SECTION 4.10. SECRETARY..........................................8 SECTION 4.11. ASSISTANT SECRETARY................................8 SECTION 4.12. ASSISTANT TREASURER................................8 SECTION 4.13. SUBORDINATE OFFICERS...............................8 ARTICLE V - STOCK 9 SECTION 5.1. STOCK................................................9 SECTION 5.2. FRACTIONAL SHARE INTERESTS...........................9 SECTION 5.3. TRANSFERS OF STOCK...................................9 SECTION 5.4. RECORD DATE.........................................10 ii TITLE PAGE - ----- ---- SECTION 5.5. TRANSFER AGENT AND REGISTRAR........................10 SECTION 5.6. DIVIDENDS...........................................10 SECTION 5.7. LOST, STOLEN OR DESTROYED CERTIFICATES..............10 SECTION 5.8. INSPECTION OF BOOKS.................................11 ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS..............................11 SECTION 6.1. EXECUTION OF PAPERS.................................11 SECTION 6.2. NOTICES.............................................11 SECTION 6.3. CONFLICT OF INTEREST................................11 SECTION 6.4. VOTING OF SECURITIES OWNED BY THIS CORPORATION......12 ARTICLE VII - INDEMNIFICATION.................................................12 SECTION 7.1. Right to Indemnification............................12 ARTICLE VIII - AMENDMENTS.....................................................13 SECTION 8.1. AMENDMENTS..........................................13 iii EX-4.1 26 y95660exv4w1.txt INDENTURE EXHIBIT 4.1 ----------- ================================================================================ PLY GEM INDUSTRIES, INC. as Issuer, the GUARANTORS named herein, as Guarantors, and U.S. Bank National Association, as Trustee ________________________ INDENTURE ________________________ Dated as of February 12, 2004 ________________________ 9% Senior Subordinated Notes due 2012 ================================================================================ CROSS-REFERENCE TABLE TRUST INDENTURE ACT INDENTURE SECTION SECTION ------- ------- 310 (a)(1).......................................... 7.10 (a)(2).......................................... 7.10 (a)(3).......................................... N.A. (a)(4).......................................... N.A. (a)(5).......................................... 7.08; 7.10 (b)............................................. 7.08; 7.10; 12.02 (c)............................................. N.A. 311 (a)............................................. 7.11 (b)............................................. 7.11 (c)............................................. N.A. 312 (a)............................................. 2.05 (b)............................................. 12.03 (c)............................................. 12.03 313 (a)............................................. 7.06 (b)(1).......................................... 7.06 (b)(2).......................................... 7.06 (c)............................................. 7.06; 12.02 (d)............................................. 7.06 314 (a)............................................. 4.06; 4.18; 12.02 (b)............................................. N.A. (c)(1).......................................... 7.02; 12.04; 12.05 (c)(2).......................................... 7.02; 12.04; 12.05 (c)(3).......................................... N.A. (d)............................................. N.A. (e)............................................. 12.05 (f)............................................. N.A. 315 (a)............................................. 7.01(b); 7.02(a) (b)............................................. 7.05; 12.02 (c)............................................. 7.01 (d)............................................. 6.05; 7.01(c) (e)............................................. 6.11 316 (a)(last sentence).............................. 2.09 (a)(1)(A)....................................... 6.05 (a)(1)(B)....................................... 6.04 (a)(2).......................................... 9.02 (b)............................................. 6.07 (c)............................................. 9.05 317 (a)(1).......................................... 6.08 (a)(2).......................................... 6.09 (b)............................................. 2.04 318 (a)............................................. 12.01 (c)............................................. 12.01 ________________________ N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. TABLE OF CONTENTS PAGE ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions..................................................1 SECTION 1.02. Other Definitions...........................................33 SECTION 1.03. Incorporation by Reference of Trust Indenture Act...........34 SECTION 1.04. Rules of Construction.......................................34 ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating.............................................35 SECTION 2.02. Execution, Authentication and Denomination; Additional Notes; Exchange Notes...................................36 SECTION 2.03. Registrar and Paying Agent..................................37 SECTION 2.04. Paying Agent To Hold Assets in Trust........................38 SECTION 2.05. Holder Lists................................................38 SECTION 2.06. Transfer and Exchange.......................................38 SECTION 2.07. Replacement Notes...........................................39 SECTION 2.08. Outstanding Notes...........................................39 SECTION 2.09. Treasury Notes..............................................40 SECTION 2.10. Temporary Notes.............................................40 SECTION 2.11. Cancellation................................................40 SECTION 2.12. Defaulted Interest..........................................40 SECTION 2.13. CUSIP and ISIN Numbers......................................41 SECTION 2.14. Deposit of Moneys...........................................41 SECTION 2.15. Book-Entry Provisions for Global Notes......................41 SECTION 2.16. Special Transfer and Exchange Provisions....................42 ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee..........................................46 SECTION 3.02. Selection of Notes To Be Redeemed...........................46 SECTION 3.03. Notice of Redemption........................................47 SECTION 3.04. Effect of Notice of Redemption..............................48 SECTION 3.05. Deposit of Redemption Price.................................48 SECTION 3.06. Notes Redeemed in Part......................................48 -i- PAGE ---- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes............................................49 SECTION 4.02. Maintenance of Office or Agency.............................49 SECTION 4.03. Corporate Existence.........................................49 SECTION 4.04. Payment of Taxes............................................50 SECTION 4.05. Maintenance of Properties and Insurance.....................50 SECTION 4.06. Compliance Certificate; Notice of Default...................50 SECTION 4.07. Intentionally Omitted.......................................51 SECTION 4.08. Waiver of Stay, Extension or Usury Laws.....................51 SECTION 4.09. Change of Control...........................................51 SECTION 4.10. Limitations on Additional Indebtedness......................53 SECTION 4.11. Limitations on Restricted Payments..........................55 SECTION 4.12. Limitations on Liens........................................58 SECTION 4.13. Limitations on Asset Sales..................................58 SECTION 4.14. Limitations on Transactions with Affiliates.................63 SECTION 4.15. Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries.................................65 SECTION 4.16. Additional Note Guarantees..................................67 SECTION 4.17. Limitations on Layering Indebtedness........................67 SECTION 4.18. Reports to Holders..........................................67 SECTION 4.19. Limitations on Designation of Unrestricted Subsidiaries.....68 SECTION 4.20. Limitation on the Issuance or Sale of Equity Interests of Restricted Subsidiaries..............................69 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Mergers, Consolidations, Etc................................70 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default...........................................72 SECTION 6.02. Acceleration................................................74 SECTION 6.03. Other Remedies..............................................75 SECTION 6.04. Waiver of Past Defaults.....................................75 SECTION 6.05. Control by Majority.........................................75 SECTION 6.06. Limitation on Suits.........................................76 SECTION 6.07. Rights of Holders To Receive Payment........................76 SECTION 6.08. Collection Suit by Trustee..................................76 SECTION 6.09. Trustee May File Proofs of Claim............................76 -ii- PAGE ---- SECTION 6.10. Priorities..................................................77 SECTION 6.11. Undertaking for Costs.......................................77 ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee...........................................78 SECTION 7.02. Rights of Trustee...........................................79 SECTION 7.03. Individual Rights of Trustee................................80 SECTION 7.04. Trustee's Disclaimer........................................80 SECTION 7.05. Notice of Default...........................................81 SECTION 7.06. Reports by Trustee to Holders...............................81 SECTION 7.07. Compensation and Indemnity..................................81 SECTION 7.08. Replacement of Trustee......................................82 SECTION 7.09. Successor Trustee by Merger, Etc............................83 SECTION 7.10. Eligibility; Disqualification...............................83 SECTION 7.11. Preferential Collection of Claims Against the Issuer........84 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Issuer's Obligations.....................84 SECTION 8.02. Legal Defeasance and Covenant Defeasance....................85 SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.......86 SECTION 8.04. Application of Trust Money..................................87 SECTION 8.05. Repayment to the Issuer.....................................88 SECTION 8.06. Reinstatement...............................................88 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders..................................88 SECTION 9.02. With Consent of Holders.....................................89 SECTION 9.03. Effect on Senior Debt.......................................90 SECTION 9.04. Compliance with the Trust Indenture Act.....................91 SECTION 9.05. Revocation and Effect of Consents...........................91 SECTION 9.06. Notation on or Exchange of Notes............................91 SECTION 9.07. Trustee To Sign Amendments, Etc.............................92 -iii- PAGE ---- ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. Notes Subordinated to Senior Debt...........................92 SECTION 10.02. Suspension of Payment When Senior Debt Is in Default........92 SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of the Issuer..............................................94 SECTION 10.04. Payments May Be Made on Notes...............................95 SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt.............................................96 SECTION 10.06. Obligations of the Issuer Unconditional.....................96 SECTION 10.07. Notice to Trustee...........................................96 SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent.......................................97 SECTION 10.09. Trustee's Relation to Senior Debt...........................97 SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior Debt.................97 SECTION 10.11. Holders Authorize Trustee To Effectuate Subordination of Notes................................................98 SECTION 10.12. This Article Ten Not To Prevent Events of Default...........98 SECTION 10.13. Trustee's Compensation Not Prejudiced.......................99 ARTICLE ELEVEN NOTE GUARANTEE SECTION 11.01. Unconditional Guarantee.....................................99 SECTION 11.02. Subordination of Note Guarantee............................100 SECTION 11.03. Limitation on Guarantor Liability..........................100 SECTION 11.04. Execution and Delivery of Note Guarantee...................101 SECTION 11.05. Release of a Subsidiary Guarantor..........................101 SECTION 11.06. Waiver of Subrogation......................................102 SECTION 11.07. Immediate Payment..........................................102 SECTION 11.08. No Set-Off.................................................103 SECTION 11.09. Guarantee Obligations Absolute.............................103 SECTION 11.10. Note Guarantee Obligations Continuing......................103 SECTION 11.11. Note Guarantee Obligations Not Reduced.....................103 SECTION 11.12. Note Guarantee Obligations Reinstated......................103 SECTION 11.13. Note Guarantee Obligations Not Affected....................104 SECTION 11.14. Waiver.....................................................105 SECTION 11.15. No Obligation to Take Action Against the Issuers...........105 SECTION 11.16. Dealing with the Issuers and Others........................105 SECTION 11.17. Default and Enforcement....................................106 SECTION 11.18. Acknowledgment.............................................106 SECTION 11.19. Costs and Expenses.........................................106 SECTION 11.20. No Merger or Waiver; Cumulative Remedies...................106 SECTION 11.21. Survival of Note Guarantee Obligations.....................106 SECTION 11.22. Note Guarantee in Addition to Other Guarantee Obligations..107 -iv- PAGE ---- SECTION 11.23. Severability...............................................107 SECTION 11.24. Successors and Assigns.....................................107 ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls...............................107 SECTION 12.02. Notices....................................................107 SECTION 12.03. Communications by Holders with Other Holders...............108 SECTION 12.04. Certificate and Opinion as to Conditions Precedent.........109 SECTION 12.05. Statements Required in Certificate or Opinion..............109 SECTION 12.06. Rules by Paying Agent or Registrar.........................109 SECTION 12.07. Legal Holidays.............................................109 SECTION 12.08. Governing Law..............................................110 SECTION 12.09. No Adverse Interpretation of Other Agreements..............110 SECTION 12.10. No Recourse Against Others.................................110 SECTION 12.11. Successors.................................................110 SECTION 12.12. Duplicate Originals........................................110 SECTION 12.13. Severability...............................................110 Signatures...................................................................S-1 Exhibit A - Form of Note Exhibit B - Form of Legends Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit E - Form of Certificate To Be Delivered in Connection with Transfers of Temporary Regulation S Global Note Exhibit F - Form of Notation of Subsidiary Guarantee Note: This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. -v- INDENTURE dated as of February 12, 2004 among Ply Gem Industries, Inc., a Delaware corporation (the "ISSUER"), and each of the Guarantors named herein, as Guarantors, and U.S. Bank National Association, a national banking association, as Trustee (the "TRUSTEE"). The Issuer has duly authorized the creation of an issue of 9% Senior Subordinated Notes due 2012 and, to provide therefor, the Issuer and the Guarantors have duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes, when duly issued and executed by the Issuer and authenticated and delivered hereunder, the valid and binding obligations of the Issuer and to make this Indenture a valid and binding agreement of the Issuer and the Guarantors has been done. For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. Set forth below are certain defined terms used in this Indenture. "144A GLOBAL NOTE" has the meaning given to such term in Section 2.01. "ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition. "ACQUISITION" means the acquisition on the Issue Date of all of the outstanding Equity Interests of the Issuer by Parent pursuant to the Stock Purchase Agreement, dated as of December 19, 2003, as amended on January 23, 2004, and as further amended on February 12, 2004, by and among Holdings, Nortek, Inc. and WDS LLC. "ADDITIONAL INTEREST" has the meaning set forth in the Registration Rights Agreement. "ADVISORY AGREEMENT" means the advisory agreement to be entered into between the Issuer and Sponsor or an Affiliate or Related Party thereof in connection with the Acquisition. "AFFILIATE" of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of Section 4.14 only, Affiliates shall be deemed to include, with respect to any Person, any other Person (1) which beneficially owns 10% or more of any class of the Voting Stock of the referent Person or (2) of which 10% or more of the Voting Stock is beneficially owned by the referenced Person. For purposes of this definition and the definition of "Permitted Holder", "CONTROL" of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. "AGENT" means any Registrar or Paying Agent. "AMEND" means to amend, supplement, restate, amend and restate or otherwise modify; and "AMENDMENT" shall have a correlative meaning. "APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date, the greater of: (i) 1.0% of the principal amount of such Note; and (ii) the excess of: (a) the present value at such Redemption Date of (1) the Redemption Price of such Note on the First Call Date (such Redemption Price being that described in Section 5 of the Notes) plus (2) all required remaining scheduled interest payments due on such Note through the First Call Date, other than accrued interest to such Redemption Date, computed using a discount rate equal to the Treasury Rate plus 75 basis points per annum discounted on a semi-annual bond equivalent basis, over (b) the principal amount of such Note on such Redemption Date. Calculation of the Applicable Premium will be made by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate; PROVIDED, HOWEVER, that such calculation shall not be a duty or obligation of the Trustee. "ASSET" means any asset or property. "ASSET ACQUISITION" means (1) an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer or any Restricted Subsidiary of the Issuer, or (2) the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person. -2- "ASSET SALE" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer or any Restricted Subsidiary to any Person other than the Issuer or any Restricted Subsidiary (including by means of a sale and leaseback transaction or a merger or consolidation) (collectively, for purposes of this definition, a "TRANSFER"), in one transaction or a series of related transactions, of any assets of the Issuer or any of its Restricted Subsidiaries other than in the ordinary course of business. For purposes of this definition, the term "Asset Sale" shall not include: (1) transfers of cash or Cash Equivalents; (2) transfers of assets (including Equity Interests) that are governed by, and made in accordance with, Section 5.01; (3) Permitted Investments and Restricted Payments permitted under Section 4.11; (4) the creation or realization of any Lien permitted under this Indenture; (5) transfers of damaged, worn-out or obsolete equipment or assets that, in the Issuer's reasonable judgment, are no longer used or useful in the business of the Issuer or its Restricted Subsidiaries; (6) sales or grants of licenses or sublicenses to use the patents, trade secrets, know-how and other intellectual property, and licenses, leases or subleases of other assets, of the Issuer or any Restricted Subsidiary to the extent not materially interfering with the business of Issuer and the Restricted Subsidiaries; and (7) any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $2.5 million. "BANK FINANCING" means the Issuer's entry into the Credit Agreement on or about the Issue Date and its initial borrowings thereunder in connection with the funding of the Acquisition. "BANKRUPTCY LAW" means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing or, in each case, other than for purposes of the definition of "Change of Control," any duly authorized committee of such body. -3- "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close. "CAPITALIZED LEASE" means a lease required to be capitalized for financial reporting purposes in accordance with GAAP. "CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "CASH EQUIVALENTS" means: (1) marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof), maturing within 360 days of the date of acquisition thereof; (2) demand and time deposits and certificates of deposit or acceptances, maturing within 360 days of the date of acquisition thereof, of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million and is assigned at least a "B" rating by Thomson Financial BankWatch; (3) commercial paper maturing no more than 180 days from the date of creation thereof issued by a corporation that is not the Issuer or an Affiliate of the Issuer, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (4) repurchase obligations with a term of not more than ten days for underlying securities of the types described in clause (1) above entered into with any commercial bank meeting the specifications of clause (2) above; and (5) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (1) through (4) above. "CHANGE OF CONTROL" means the occurrence of any of the following events: (1) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, except that in no event shall the parties to the Stockholders' Agreement be deemed a "group" solely by virtue of being parties to the Stockholders' Agreement), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause that person or group shall be deemed to have "beneficial ownership" of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing 50% or more of the voting power of the total outstanding Vot- -4- ing Stock of the Issuer; PROVIDED, HOWEVER, that such event shall not be deemed to be a Change of Control so long as one or more of the Permitted Holders have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Issuer; (2) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors or whose nomination for election by the stockholders of the Issuer was approved by a vote of the majority of the directors of the Issuer 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 Issuer; (3) (a) all or substantially all of the assets of the Issuer and the Restricted Subsidiaries are sold or otherwise transferred to any Person other than a Wholly-Owned Restricted Subsidiary or one or more Permitted Holders or (b) the Issuer consolidates or merges with or into another Person or any Person consolidates or merges with or into the Issuer, in either case under this clause (3), in one transaction or a series of related transactions in which immediately after the consummation thereof Persons beneficially owning (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing in the aggregate a majority of the total voting power of the Voting Stock of the Issuer immediately prior to such consummation do not beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing a majority of the total voting power of the Voting Stock of the Issuer or the surviving or transferee Person; PROVIDED that it shall not constitute a Change of Control under this clause (3)(b) if, after giving effect to such transaction, one or more of the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, Voting Stock representing (i) 35% or more of the total voting power of the Voting Stock of the Issuer or the surviving or transferee Person in such transaction immediately after such transaction and (ii) a greater percentage of the total voting power of the Voting Stock of the Issuer than any other "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act); or (4) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer. For purposes of this definition, (i) a Person shall not be deemed to have beneficial ownership of securities subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement and (ii) any holding company whose only significant asset is Equity Interests of Parent or the Issuer shall not itself be considered a "person" or "group" for purposes of clause (1) or (3) above. "CONSOLIDATED AMORTIZATION EXPENSE" for any period means the amortization expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. -5- "CONSOLIDATED CASH FLOW" for any period means, without duplication, the sum of the amounts for such period of (1) Consolidated Net Income, PLUS (2) in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to any Restricted Subsidiary (other than any Foreign Subsidiary) only if a corresponding amount would be permitted at the date of determination to be distributed to the Issuer by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds), instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders, (a) Consolidated Income Tax Expense, (b) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense), (c) Consolidated Depreciation Expense, (d) Consolidated Interest Expense, (e) Restructuring Expenses, (f) payments pursuant to the Advisory Agreement, and (g) all other non-cash items reducing the Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, in each case determined on a consolidated basis in accordance with GAAP, MINUS (3) the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period, PLUS or MINUS (4) without duplication of amounts included as Restructuring Expenses, with respect to any part of a Four-Quarter Period covered by the section "Summary historical and pro forma financial information" in the Offering Memorandum, the pro forma adjustments to net earnings and the adjustments to "EBITDA" to derive "Adjusted EBITDA" set forth in such section. "CONSOLIDATED DEPRECIATION EXPENSE" for any period means the depreciation expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. -6- "CONSOLIDATED INCOME TAX EXPENSE" for any period means the provision for taxes of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO" means the ratio of Consolidated Cash Flow during the most recent four consecutive full fiscal quarters for which financial statements are available (the "FOUR-QUARTER PERIOD") ending on or prior to the date of determination (the "TRANSACTION DATE") to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence of any Indebtedness or the issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and (2) any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated Cash Flow (including any Pro Forma Cost Savings) associated with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period. In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio: (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on this Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and -7- (3) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements. "CONSOLIDATED INTEREST EXPENSE" for any period means the sum, without duplication, of the total interest expense (less interest income) of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including without duplication, (1) imputed interest on Capitalized Lease Obligations, (2) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers' acceptance financing and receivables financings, (3) the net costs associated with Hedging Obligations, (4) the interest portion of any deferred payment obligations, (5) all other non-cash interest expense, (6) capitalized interest, (7) the product of (a) all dividend payments on any series of Disqualified Equity Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), MULTIPLIED BY (b) a fraction, the numerator of which is one and the denominator of which is one MINUS the then current combined federal, state and local statutory tax rate of the Issuer and the Restricted Subsidiaries, expressed as a decimal, (8) all interest payable with respect to discontinued operations, and (9) all interest on any Indebtedness described in clause (7) or (8) of the definition of "Indebtedness"; PROVIDED that such interest shall be included in Consolidated Interest Expense only to the extent that the amount of the related Indebtedness is reflected on the balance sheet of the Issuer or any Restricted Subsidiary, LESS, to the extent included in such total interest expense, (A) the amortization during such period of capitalized financing costs associated with the Transactions and (B) the amortization during such period of other capitalized financing costs; PROVIDED, HOWEVER, that, in the case of clause (B), the aggregate amount of amortization relating to such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5% of the aggregate amount of the financing giving rise thereto. -8- Consolidated Interest Expense shall be calculated excluding unrealized gains and losses with respect to Hedging Obligations. "CONSOLIDATED NET INCOME" for any period means the net income (or loss) of the Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; PROVIDED that there shall be excluded from such net income (or loss) (to the extent otherwise included therein), without duplication: (1) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer or any of its Wholly-Owned Restricted Subsidiaries during such period; (2) except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer or any Restricted Subsidiary; (3) the net income of any Restricted Subsidiary (other than any Foreign Subsidiary) during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not permitted by operation of the terms of its charter or any agreement (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds), instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income; (4) for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets; (5) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary or (b) any Asset Sale by the Issuer or any Restricted Subsidiary; (6) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP; (7) unrealized gains and losses with respect to Hedging Obligations; (8) the cumulative effect of any change in accounting principles; -9- (9) any amortization or write-offs of debt issuance or deferred financing costs, premiums and prepayment penalties, and other costs and expenses, in each case, paid during such period to the extent attributable to the Transactions and the Exchange Offer pursuant to the Registration Rights Agreement; (10) gains and losses realized upon the refinancing of any Indebtedness of the Issuer or any Restricted Subsidiary; (11) any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such extraordinary or nonrecurring gain (or the tax effect of any such extraordinary or nonrecurring loss), realized by the Issuer or any Restricted Subsidiary during such period; (12) non-cash compensation charges or other non-cash expenses or charges arising from the grant of or issuance or repricing of Equity Interests or other equity-based awards or any amendment or substitution of any such Equity Interests or other equity-based awards; (13) any non-cash goodwill or non-cash asset impairment charges subsequent to the Issue Date; (14) any expenses or reserves for liabilities to the extent that the Issuer or any Restricted Subsidiary is entitled to indemnification therefor under binding agreements; PROVIDED that any liabilities for which the Issuer or such Restricted Subsidiary is not actually indemnified shall reduce Consolidated Net Income in the period in which it is determined that the Issuer or such Restricted Subsidiary will not be indemnified; and (15) so long as the Issuer and the Restricted Subsidiaries file a consolidated tax return, or are part of a consolidated group for tax purposes, with Parent, Holdings or any other holding company, the excess of (a) the Consolidated Income Tax Expense for such period over (b) all tax payments payable for such period by the Issuer and the Restricted Subsidiaries to Parent, Holdings or such other holding company under a tax sharing agreement or arrangement. In addition: (a) Consolidated Net Income shall be reduced by the amount of any payments to or on behalf of Parent made pursuant to Section 4.14(b)(4); and (b) any return of capital with respect to an Investment that increased the Restricted Payments Basket pursuant to Section 4.11(a)(3)(d) or decreased the amount of Investments outstanding pursuant to clause (17), (18) or (19) of the definition of "Permitted Investments" shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket. -10- For purposes of this definition of "Consolidated Net Income," "NONRECURRING" means, with respect to any cash gain or loss, any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; PROVIDED that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring. "CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets of the Issuer (less applicable reserves and other properly deductible items) after deducting therefrom (to the extent otherwise included therein) (a) all current liabilities (other than the obligations under this Indenture or current maturities of long-term Indebtedness), and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the books and records of the Issuer and the Restricted Subsidiaries on a consolidated basis and in accordance with GAAP. "CORPORATE TRUST OFFICE" means the corporate trust office of the Trustee located at 60 Livingston Avenue, EP-MN-WS3C, St. Paul, Minnesota, 55107-2292, Attention: Corporate Trust Department, or such other office, designated by the Trustee by written notice to the Issuer, at which at any particular time its corporate trust business shall be administered. "CREDIT AGREEMENT" means the Credit Agreement dated on or about the Issue Date by and among the Issuer, as Borrower, UBS AG, Stamford Branch, as administrative and collateral agent, UBS Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, CIBC World Markets Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-arrangers, Deutsche Bank AG Cayman Islands Branch, as syndication agent, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation, as co-documentation agents, the lenders named therein and the guarantors party thereto, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Indebtedness incurred thereunder), and in each case as amended or refinanced from time to time. "CREDIT FACILITIES" means one or more debt facilities (which may be outstanding at the same time and including, without limitation, the Credit Agreement) providing for revolving credit loans, term loans, letters of credit, receivables financing, commercial paper or any other form of senior debt securities and, in each case, as such agreements may be amended, amended and restated, supplemented, modified, extended, refinanced, replaced or otherwise restructured, in whole or in part from time to time (including increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder) with respect to all or any portion of the Indebtedness under such agreement or agreements or any successor or replacement agreement or agreements and whether by the same or any other agent, lender or group of lenders. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "DEFAULT" means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default. -11- "DEPOSITORY" means The Depository Trust Company, New York, New York, or a successor thereto registered under the Exchange Act or other applicable statute or regulation. "DESIGNATED SENIOR DEBT" means (1) Senior Debt and Guarantor Senior Debt under or in respect of the Credit Facilities and (2) any other Indebtedness constituting Senior Debt or Guarantor Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt." "DISQUALIFIED EQUITY INTERESTS" of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; PROVIDED, HOWEVER, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; PROVIDED, FURTHER, HOWEVER, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests is convertible, exchangeable or exercisable) the right to require the Issuer to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the 91st day after the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change in control or asset sale provisions applicable to such Equity Interests are no more favorable to such holders than the provisions set forth in Section 4.09 and Section 4.13 respectively, and such Equity Interests provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer's purchase of the Notes as required pursuant to the provisions set forth in Section 4.09 and 4.13 respectively. "EQUITY CONTRIBUTION" means the contribution of approximately $141.0 million (in cash and management equity awards) by Sponsor, its affiliates and Related Parties, certain other Persons and certain members of the Issuer's management to Holdings in return for Equity Interests in Holdings, and the contribution of cash by Holdings to Parent in connection with the funding of the Acquisition. "EQUITY INTERESTS" of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person. -12- "EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER" means an offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Notes bearing the Private Placement Legend for the Exchange Notes. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning given to such term in the Registration Rights Agreement. "FAIR MARKET VALUE" means, with respect to any asset, the price (after taking into account any liabilities relating to such asset) that would be negotiated in an arm's-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction. Fair Market Value (other than of any asset with a public trading market) in excess of $5.0 million shall be determined by the Board of Directors of the Issuer acting reasonably and in good faith and shall be evidenced by a board resolution delivered to the Trustee. Fair Market Value (other than of any asset with a public trading market) in excess of $20.0 million shall be determined by an Independent Financial Advisor, which determination shall be evidenced by an opinion addressed to the Board of Directors of the Issuer and delivered to the Trustee. "FIRST CALL DATE" means February 15, 2008. "FOREIGN SUBSIDIARY" means any Restricted Subsidiary of the Issuer which (i) is not organized under the laws of (x) the United States or any state thereof or (y) the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America. "FOUR-QUARTER PERIOD" has the meaning given to such term in the definition of "Consolidated Interest Coverage Ratio." "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 may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date. "GUARANTEE" means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or -13- (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); "GUARANTEE," when used as a verb, and "GUARANTEED" have correlative meanings. "GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on and all Obligations of any Indebtedness of such Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (1) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (2) all Hedging Obligations in respect of the Credit Facilities; in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (1) any Indebtedness of such Guarantor to Parent or any of its Subsidiaries; (2) obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services; (3) Indebtedness represented by Disqualified Equity Interests; (4) any liability for taxes owed or owing by such Guarantor; (5) that portion of any Indebtedness incurred in violation of Section 4.10 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (5) if the holder(s) of such obligation or their representative shall have received an officers' certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); -14- (6) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to such Guarantor; and (7) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "GUARANTORS" means (1) Parent, (2) each Restricted Subsidiary of the Issuer on the Issue Date (other than CWD Windows and Doors, Inc., a Canadian corporation) and (3) each other Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of this Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of this Indenture. "HEDGING OBLIGATIONS" of any Person means the obligations of such Person under swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies. "HOLDER" means any registered holder, from time to time, of the Notes. "HOLDINGS" means Ply Gem Investment Holdings, Inc., a Delaware corporation, and its successors and assigns. "INCUR" means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or, indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; PROVIDED that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) the accrual of interest, the accretion of original issue discount or the accretion or accumulation of dividends on any Equity Interests shall not be deemed to be an incurrence of Indebtedness. "INDEBTEDNESS" of any Person at any date means, without duplication: (1) all liabilities, contingent or otherwise, of such Person for 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); (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers' acceptances and similar credit transactions; (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services; -15- (5) the amount of all Disqualified Equity Interests of such Person calculated in accordance with GAAP (whether classified as debt, equity or mezzanine); (6) all Capitalized Lease Obligations of such Person; (7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (8) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; PROVIDED that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the Issuer or the Issuer's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer and its Subsidiaries on a consolidated basis; (9) to the extent not otherwise included in this definition, Hedging Obligations of such Person; and (10) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person, except trade payables incurred by such Person in the ordinary course of business. The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured. Notwithstanding the foregoing, Indebtedness shall not include any liability for Federal, state, local or other taxes owed or owing to any governmental entity. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer's Board of Directors, disinterested and independent with respect to the Issuer and its Affiliates. "INITIAL GLOBAL NOTES" has the meaning given to such term in Section 2.01. "INITIAL NOTES" has the meaning given to such term in Section 2.01. "INITIAL PURCHASERS" means UBS Securities LLC, Deutsche Bank Securities Inc., CIBC World Markets Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. -16- "INSTITUTIONAL ACCREDITED INVESTOR" or "IAI" means an "accredited investor" with the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INTEREST" means, with respect to the Notes, interest and Additional Interest, if any, on the Notes. "INTEREST PAYMENT DATE" means the Stated Maturity of an installment of interest on the Notes. "INVESTMENTS" of any Person means: (1) all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person; (2) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof); (3) all other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP; and (4) the Designation of any Subsidiary as an Unrestricted Subsidiary. Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with Section 4.19. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary, or any Restricted Subsidiary issues any Equity Interests, in either case, such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Restricted Subsidiary retained. Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the Issuer, Parent or Holdings shall be deemed not to be Investments. "ISSUE DATE" means the date on which the Notes are originally issued. "LIEN" means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement. -17- "MATURITY DATE" means February 15, 2012. "MOODY'S" means Moody's Investors Service, Inc. and its successors. "NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of (1) brokerage commissions and other fees and expenses (including fees, discounts and expenses of legal counsel, accountants, investment banks, consultants and placement agents) of such Asset Sale; (2) provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements); (3) amounts required to be paid to any Person (other than the Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon; (4) payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale; and (5) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; PROVIDED, HOWEVER, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds. "NON-U.S. PERSON" has the meaning assigned to such term in Regulation S. "NOTE GUARANTEE" means the subordinated guarantee by each Guarantor of the Issuer's payment obligations under this Indenture and the Notes, executed pursuant to this Indenture. "NOTES" means, collectively, the Issuer's 9% Senior Subordinated Notes due 2012 issued in accordance with Section 2.02 (whether issued on the Issue Date, issued as Additional Notes, issued as Exchange Notes or Private Exchange Notes, or otherwise issued after the Issue Date) treated as a single class of securities under this Indenture, as amended or supplemented from time to time in accordance with the terms of this Indenture. "OBLIGATION" means any principal, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. -18- "OFFERING MEMORANDUM" means the offering memorandum of the Issuers relating to the Notes dated February 5, 2004. "OFFICER" means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers. "OFFERING" means the offering of the Notes by the Issuer pursuant to the Offering Memorandum in connection with the funding of the Acquisition. "OPINION OF COUNSEL" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Issuer, a Guarantor or the Trustee. "PARENT" means Ply Gem Holdings, Inc., a Delaware corporation, and its successors and assigns. "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Issuer or any Guarantor that ranks PARI PASSU in right of payment with the Notes or the Note Guarantees, as applicable. "PERMANENT REGULATION S GLOBAL NOTE" has the meaning given to such term in Section 2.01. "PERMITTED BUSINESS" means the businesses engaged in by the Issuer and its Subsidiaries on the Issue Date as described in the Offering Memorandum and businesses that are reasonably related thereto, reasonable extensions thereof or necessary or desirable to facilitate any such business, and any unrelated business to the extent that it is not material in size as compared with the Issuer's business as a whole. "PERMITTED HOLDERS" means (1) Sponsor, Caxton Associates, LLC, Caxton-Iseman (Ply Gem) L.P., Frederick J. Iseman, Lee D. Meyer, John Wayne, Shawn Poe, Mark Watson, Bryan Sveinson, David S. McCready, Robert A. Ferris, Steven M. Lefkowitz and any other Person that is a controlled Affiliate of any of the foregoing and (2) any Related Party of any of the foregoing; PROVIDED that in no event shall any operating portfolio company or any holding company for any operating portfolio company (other than the Issuer) shall be a Permitted Holder. "PERMITTED INVESTMENT" means: (1) (i) Investments by the Issuer or any Subsidiary Guarantor in (a) any Restricted Subsidiary that is a Subsidiary Guarantor or (b) any Person that will become immediately after such Investment a Restricted Subsidiary that is a Subsidiary Guarantor or that will merge or consolidate into the Issuer or any Restricted Subsidiary that is a Sub- -19- sidiary Guarantor and (ii) Investments by any Restricted Subsidiary that is not a Subsidiary Guarantor in any other Restricted Subsidiary; (2) Investments in the Issuer by any Restricted Subsidiary; (3) loans and advances to directors, employees and officers of the Issuer and the Restricted Subsidiaries for bona fide business purposes and to purchase Equity Interests of the Issuer, Parent or Holdings not in excess of $5.0 million at any one time outstanding; (4) Hedging Obligations incurred pursuant to Section 4.10; (5) cash and Cash Equivalents; (6) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the circumstances; (7) Investments in securities of trade creditors or customers received upon foreclosure or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (8) Investments made by the Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.13; (9) lease, utility and other similar deposits in the ordinary course of business; (10) Investments made by the Issuer or a Restricted Subsidiary for consideration consisting only of Qualified Equity Interests; (11) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments; (12) guarantees of Indebtedness permitted to be incurred under this Indenture; (13) loans and advances to suppliers, licensees, franchisees or customers of the Issuer or any Restricted Subsidiary made in the ordinary course of business in an aggregate amount, together with the aggregate amount of Indebtedness under clause (14) of the definition of "Permitted Indebtedness," not to exceed $5.0 million at any time outstanding; -20- (14) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as operating expenses for accounting purposes and that are made in the ordinary course of business; (15) Investments in existence on the Issue Date; (16) prepaid expenses, negotiable instruments held for collection and workers' compensation, performance and other similar deposits in the ordinary course of business; (17) Investments in an aggregate amount not to exceed, at any one time outstanding, the greater of (a) $20.0 million and (b) 7.0% of Consolidated Net Tangible Assets at such time (with each Investment being valued as of the date made and without regard to subsequent changes in value); (18) Investments in Subsidiaries that are not Guarantors or Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value); and (19) Investments in Foreign Subsidiaries in an aggregate amount not to exceed, at any one time outstanding, the greater of (a) $10.0 million and (b) 3.5% of Consolidated Net Tangible Assets at such time (with each Investment being valued as of the date made and without regard to subsequent changes in value). The amount of Investments outstanding at any time pursuant to clause (17), (18) or (19) above shall be deemed to be reduced: (a) upon the disposition or repayment of or return on any Investment made pursuant to clause (17), (18) or (19) above, as the case may be, by an amount equal to the return of capital with respect to such Investment to the Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income); and (b) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer's proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clause (17), (18) or (19) above, as the case may be. "PERMITTED JUNIOR SECURITIES" means: (1) Equity Interests in the Issuer or any Guarantor; or (2) debt securities issued pursuant to a confirmed plan of reorganization that are subordinated in right of payment to (a) all Senior Debt and Guarantor Senior Debt and (b) any debt securities issued in exchange for Senior Debt to substantially the same -21- extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt and Guarantor Senior Debt under this Indenture. "PERMITTED LIENS" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (5) judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired; (6) easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole; (7) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof; (8) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer or any Restricted Subsidiary, including rights of offset and setoff; -22- (9) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; PROVIDED that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; (10) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer or any Restricted Subsidiary; (11) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (12) Liens securing all of the Notes and Liens securing any Note Guarantee; (13) Liens securing Senior Debt or Guarantor Senior Debt; (14) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date; (15) Liens in favor of the Issuer or a Guarantor; (16) Liens securing Indebtedness under the Credit Facilities; (17) Liens securing Purchase Money Indebtedness and Capitalized Lease Obligations; PROVIDED that such Liens shall not extend to any asset other than the specified asset being financed and additions and improvements thereon; (18) Liens securing Acquired Indebtedness permitted to be incurred under this Indenture; PROVIDED that the Liens do not extend to assets not subject to such Lien at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than those securing such Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary; (19) Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Issuer or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof); (20) Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (12), (14), (16), (17), (18) and (19); PROVIDED that in the case of Liens securing Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (14), (17), (18) and (19), such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof); -23- (21) Liens securing Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor permitted to be incurred under this Indenture; PROVIDED that such Lien extends only to the assets and Equity Interests of such Restricted Subsidiary; (22) 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; and (23) Liens with respect to obligations that do not in the aggregate exceed $5.0 million at any one time outstanding. "PERMITTED SALE AND LEASEBACK TRANSACTION" means a refinancing by the Issuer or one of its Subsidiaries following the date of this Indenture of all or a portion of the Indebtedness outstanding on the Issue Date in an aggregate principal amount of up to $29.8 million with respect to municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds, with the proceeds of one or more Sale and Leaseback Transactions effected as operating leases involving the applicable properties securing such debt; PROVIDED that (i) the Issuer or such Subsidiary receives consideration at the time of such Permitted Sale and Leaseback Transaction at least equal to the Fair Market Value of the applicable property included in such Permitted Sale and Leaseback Transaction; (ii) at the time of and immediately after giving effect to such Permitted Sale and Leaseback Transaction and the application of the proceeds thereof, no Default shall have occurred and be continuing and (iii) the proceeds of at least 525% of the aggregate operating lease payments in respect of such Permitted Sale and Leaseback Transaction (such amount, the "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT") are received in the form of cash or Cash Equivalents and used to repay Senior Debt or Guarantor Senior Debt. "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT" shall have the meaning assigned to such term in the definition of "Permitted Sale and Leaseback Transaction." "PERSON" means any individual, corporation, partnership, limited liability company, 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. "PLAN OF LIQUIDATION" with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person. "PREFERRED STOCK" means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date. -24- "PRINCIPAL" means, with respect to the Notes, the principal of, and premium, if any, on the Notes. "PRIVATE EXCHANGE" has the meaning given to it in the Registration Rights Agreement. "PRIVATE EXCHANGE NOTES" has the meaning given to it in the Registration Rights Agreement. "PRIVATE PLACEMENT LEGEND" means the legends initially set forth on the Notes in the form set forth in EXHIBIT B. "PRO FORMA COST SAVINGS" means, with respect to any period, the reductions in costs that occurred during the Four-Quarter Period that are (1) directly attributable to an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act or (2) implemented, committed to be implemented or the commencement of implementation of which has begun in good faith by the business that was the subject of any such asset acquisition within six months of the date of the asset acquisition and that are supportable and quantifiable by the underlying records of such business, as if, in the case of each of clauses (1) and (2), all such reductions in costs had been effected as of the beginning of such period, decreased by any incremental expenses incurred or to be incurred during the Four-Quarter Period in order to achieve such reduction in costs. "PURCHASE MONEY INDEBTEDNESS" means Indebtedness, including Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof, and the payment of any sales or other taxes associated therewith; PROVIDED, HOWEVER, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost and payment and (2) such Indebtedness shall be incurred within one year after such acquisition of such asset by the Issuer or such Restricted Subsidiary or such installation, construction or improvement. "QUALIFIED EQUITY INTERESTS" means Equity Interests of the Issuer other than Disqualified Equity Interests; PROVIDED that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of the Issuer or financed, directly or indirectly, using funds (1) borrowed from the Issuer or any Subsidiary of the Issuer until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Issuer or any Subsidiary of the Issuer (including, without limitation, in respect of any employee stock ownership or benefit plan). "QUALIFIED EQUITY OFFERING" means the issuance and sale of Qualified Equity Interests by the Issuer or Equity Interests by Parent or Holdings; PROVIDED, HOWEVER, that in the case of an issuance or sale of Equity Interests of Parent or Holdings, cash proceeds therefrom equal to not less than 100% of the aggregate principal amount of any Notes to be redeemed are received by the Issuer as a capital contribution or consideration for the issuance and sale of Qualified Equity Interests immediately prior to such redemption. -25- "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "RECORD DATE" means the applicable Record Date specified in the Notes; PROVIDED that if any such date is not a Business Day, the Record Date shall be the first day immediately succeeding such specified day that is a Business Day. "REDEEM" means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and "REDEMPTION" shall have a correlative meaning; provided that this definition shall not apply for purposes of Section 5 or Section 6 of the Notes or Article Three. "REDEMPTION DATE," when used with respect to any Note to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Notes. "REDEMPTION PRICE," when used with respect to any Note to be redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Notes. "REFINANCE" means to refinance, repay, prepay, replace, renew, refund, redeem, defease or retire. "REFINANCING INDEBTEDNESS" means Indebtedness of the Issuer or a Restricted Subsidiary issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to redeem or refinance in whole or in part, any Indebtedness of the Issuer or any Restricted Subsidiary (the "REFINANCED INDEBTEDNESS"); PROVIDED that: (1) the principal amount (or accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (or accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any premium paid to the holders of the Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness; (2) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness; (3) if the Refinanced Indebtedness was subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is subordinate in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness, and if the Refinanced Indebtedness was PARI PASSU with the Notes or the Note Guarantees, as the case may be, then the Refinancing Indebtedness ranks PARI PASSU with, or is subordinated in right of payment to, the Notes or the Note Guarantees, as the case may be; -26- (4) the Refinancing Indebtedness has a final Stated Maturity either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) after the maturity date of the Notes; and (5) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes. "REGISTRATION RIGHTS AGREEMENT" means (i) the Registration Rights Agreement dated as of the Issue Date among the Issuer, the Guarantors and the Initial Purchasers and (ii) any other registration rights agreement entered into in connection with an issuance of Additional Notes in a private offering after the Issue Date. "REGULATION S" means Regulation S under the Securities Act. "RELATED PARTY" means, with respect to any Person, (1) any controlling stockholder, controlling member, general partner, Subsidiary, or spouse or immediate family member (in the case of an individual), of such Person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of any Person referred to in the immediately preceding clause (2), acting solely in such capacity. "REPRESENTATIVE" means any agent or representative in respect of any Designated Senior Debt; PROVIDED that if, and for so long as, any Designated Senior Debt lacks such representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt. "RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject and shall also mean any officer who shall have direct responsibility for the administration of this Indenture. "RESTRICTED PAYMENT" means any of the following: (1) the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding (a) dividends or distributions payable solely in Qualified Equity Interests or through accretion or accumulation of such dividends on such Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer or to a Restricted Subsidiary and PRO RATA dividends or distributions payable to minority stockholders of any Restricted Subsidiary; -27- (2) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary, or any equity holder of the Issuer, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary; (3) any Investment other than a Permitted Investment; or (4) any redemption prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness. "RESTRICTED SECURITY" means a Note that constitutes a "Restricted Security" within the meaning of Rule 144(a)(3) under the Securities Act; PROVIDED, HOWEVER, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Issuer other than an Unrestricted Subsidiary. "RESTRUCTURING EXPENSES" means losses, expenses and charges incurred in connection with restructuring within the Issuer and/or one or more Restricted Subsidiaries, including in connection with integration of acquired businesses or Persons, disposition of one or more Subsidiaries or businesses, exiting of one or more lines of businesses and relocation or consolidation of facilities, including severance, lease termination and other non-ordinary-course, non-operating costs and expenses in connection therewith. "RULE 144A" means Rule 144A under the Securities Act. "S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors. "SALE AND LEASEBACK TRANSACTIONS" means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset. "SEC" means the U.S. Securities and Exchange Commission. "SECRETARY'S CERTIFICATE" means a certificate signed by the Secretary of the Issuer. "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended. -28- "SENIOR DEBT" means the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on and all Obligations of any Indebtedness of the Issuer, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (1) all monetary obligations of every nature under, or with respect to, the Credit Facilities, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (2) all Hedging Obligations in respect of the Credit Facilities; in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Indebtedness of the Issuer to Parent or any of its Subsidiaries; (2) obligations to trade creditors and other amounts incurred (but not under the Credit Facilities) in connection with obtaining goods, materials or services; (3) Indebtedness represented by Disqualified Equity Interests; (4) any liability for taxes owed or owing by the Issuer; (5) that portion of any Indebtedness incurred in violation of Section 4.10 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Issuer to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (6) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Issuer; and -29- (7) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Issuer. "SIGNIFICANT SUBSIDIARY" means (1) any Restricted Subsidiary that would be a "significant subsidiary" as defined in Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in clause (7) or (8) under Section 6.01 has occurred and is continuing, or which are being released from their Note Guarantees (in the case of clause (9) of Section 9.02(b), would constitute a Significant Subsidiary under clause (1) of this definition. "SPONSOR" means Caxton-Iseman Capital, Inc. "STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement, dated as of the Issue Date, by and among Ply Gem Investment Holdings, Inc., Caxton-Iseman (Ply Gem), L.P. and certain members of our management and other parties thereto. "STATED MATURITY" means, with respect to any installment of interest or principal on any Indebtedness, the date on which such payment of interest or principal is scheduled to be paid in the documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Issuer or any Restricted Subsidiary that is expressly subordinated in right of payment to the Notes or the Note Guarantees, respectively. "SUBSIDIARY" means, with respect to any Person: (1) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). Unless otherwise specified, "Subsidiary" refers to a Subsidiary of the Issuer. "SUBSIDIARY GUARANTOR" means any Guarantor other than Parent. -30- "TEMPORARY REGULATION S GLOBAL NOTE" has the meaning given to such term in Section 2.01. "TRANSACTIONS" means (i) the Acquisition; (ii) the Equity Contribution; (iii) the Bank Financing; and (iv) the Offering. "TREASURY RATE" means, with respect to a Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to the First Call Date; PROVIDED, HOWEVER, that if the period from such Redemption Date to the First Call Date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such Redemption Date to the First Call Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended. "TRUSTEE" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with Section 4.19 and (2) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "U.S. LEGAL TENDER" means such coin or currency of the United States of America that at the time of payment shall be legal tender for the payment of public and private debts. "VOTING STOCK" with respect to any Person, means securities of any class of Equity Interests of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof by (b) -31- the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness. "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) are owned directly by the Issuer or through one or more Wholly-Owned Restricted Subsidiaries. -32- SECTION 1.02. OTHER DEFINITIONS. TERM DEFINED IN SECTION - ---- ------------------ "Additional Notes".................................... 2.02 "Affiliate Transaction"............................... 4.14 "Authentication Order"................................ 2.02 "Change of Control Offer"............................. 4.09 "Change of Control Payment Date"...................... 4.09 "Change of Control Purchase Price".................... 4.09 "Covenant Defeasance"................................. 8.02 "Coverage Ratio Exception"............................ 4.10 "Designation"......................................... 4.19 "Designation Amount".................................. 4.19 "Event of Default".................................... 6.01 "Excess Proceeds"..................................... 4.13 "Four-Quarter Period"................................. 1.01 "Global Note"......................................... 2.01 "Guarantee Obligations"............................... 11.01 "IAI Global Note"..................................... 2.01 "Legal Defeasance".................................... 8.02 "Net Proceeds Deficiency"............................. 4.13 "Net Proceeds Offer".................................. 4.13 "Net Proceeds Payment Date"........................... 4.13 "Non-Payment Default"................................. 10.02 "Offered Price"....................................... 4.13 "Pari Passu Indebtedness Price"....................... 4.13 "Parent Successor".................................... 5.01 "Participants"........................................ 2.15 "Paying Agent"........................................ 2.03 "Payment Amount"...................................... 4.13 "Payment Blockage Notice"............................. 10.02 "Payment Blockage Period"............................. 10.02 "Payment Default"..................................... 10.02 "Permitted Indebtedness".............................. 4.10 "Physical Notes"...................................... 2.01 "Redesignation"....................................... 4.19 "Registrar"........................................... 2.03 "Regulation S Global Note"............................ 2.01 "Restricted Payments Basket".......................... 4.11 "Successor"........................................... 5.01 "Transaction Date" ................................... 1.01 -33- SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the Trust Indenture Act, such provision is incorporated by reference in, and made a part of, this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes. "INDENTURE SECURITY HOLDER" means a Holder. "INDENTURE TO BE QUALIFIED" means this Indenture. "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee. "OBLIGOR" on the indenture securities means the Issuer, any Guarantor or any other obligor on the Notes. All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. 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) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (7) the words "including," "includes" and similar words shall be deemed to be followed by "without limitation." -34- ARTICLE TWO THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of EXHIBIT A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Issuer shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and show the date of its authentication. Each Note shall have an executed Note Guarantee from each of the Guarantors existing on the Issue Date endorsed thereon substantially in the form of EXHIBIT F. The terms and provisions contained in the Notes and the Note Guarantees shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Note in registered form, substantially in the form set forth in EXHIBIT A (the "144A GLOBAL NOTE"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legends set forth in EXHIBIT B. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Note in registered form, substantially in the form of Exhibit A (the "TEMPORARY REGULATION S GLOBAL NOTE"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legends set forth in EXHIBIT B. Reasonably promptly following the date that is 40 days after the later of the commencement of the offering of the Notes in reliance on Regulation S and the Issue Date, upon receipt by the Trustee and the Issuer of a duly executed certificate certifying that the Holder of the beneficial interest in the Temporary Regulation S Global Note is a Non-U.S. Person, substantially in the form of EXHIBIT E from the Depository, a single permanent global Note in registered form substantially in the form of EXHIBIT A (the "PERMANENT REGULATION S GLOBAL NOTE," and together with the Temporary Regulation S Global Note, the "REGULATION S GLOBAL NOTE") duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depository, and the Registrar shall reflect on its books and records the cancellation of the Temporary Regulation S Global Note and the issuance of the Permanent Regulation S Global Note. -35- The initial offer and resale of the Notes shall not be to an Institutional Accredited Investor. The Notes resold to Institutional Accredited Investors in connection with the first transfer made pursuant to Section 2.16(a) shall be issued initially in the form of a single permanent Global Note in registered form, substantially in the form set forth in EXHIBIT A (the "IAI GLOBAL NOTE," and, together with the 144A Global Note and the Regulation S Global Note, the "INITIAL GLOBAL NOTES"), deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in EXHIBIT B. Notes issued after the Issue Date shall be issued initially in the form of one or more global Notes in registered form, substantially in the form set forth in EXHIBIT A, deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer (and having an executed Note Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear any legends required by applicable law (together with the Initial Global Notes, the "GLOBAL NOTES") or as Physical Notes. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Notes issued in exchange for interests in a Global Note pursuant to Section 2.16 may be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in EXHIBIT A and bearing the applicable legends, if any, (the "PHYSICAL NOTES"). SECTION 2.02. EXECUTION, AUTHENTICATION AND DENOMINATION; ADDITIONAL NOTES; EXCHANGE NOTES One Officer of the Issuer (who shall have been duly authorized by all requisite corporate actions) shall sign the Notes for such Issuer by manual or facsimile signature. One Officer of a Guarantor (who shall have been duly authorized by all requisite corporate actions) shall sign the Note Guarantee for such Guarantor by manual or facsimile signature. If an Officer whose signature is on a Note or Note Guarantee, as the case may be, was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note (and the Note Guarantees in respect thereof) shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) on the Issue Date, Notes for original issue in the aggregate principal amount not to exceed $225,000,000 (the "INITIAL NOTES"), (ii) additional Notes (the "ADDITIONAL NOTES") having identical terms and conditions to the Initial Notes, except for issue date, issue price and first interest payment date, in an unlimited amount (so long as not otherwise prohibited by the terms of this Indenture, including, without limitation, Section 4.10) -36- and (iii) Exchange Notes or Private Exchange Notes (x) in exchange for a like principal amount of Initial Notes or (y) in exchange for a like principal amount of Additional Notes in each case upon a written order of the Company in the form of a certificate of an Officer of the Company (an "AUTHENTICATION ORDER"). Each such Authentication Order 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 Initial Notes, Exchange Notes, Private Exchange Notes or Additional Notes and whether the Notes are to be issued as certificated Notes or Global Notes or such other information as the Trustee may reasonably request. In addition, with respect to authentication pursuant to clause (ii) or (iii) of the first sentence of this paragraph, the first such Authentication Order from the Company shall be accompanied by an Opinion of Counsel of the Company in a form reasonably satisfactory to the Trustee. All Notes issued under this Indenture shall be treated as a single class for all purposes under this Indenture. The Additional Notes and the Private Exchange Notes shall bear any legend required by applicable law. The Trustee may appoint an authenticating agent reasonably acceptable to the Issuer to authenticate Notes. Unless otherwise provided in the appointment, 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 Issuer and Affiliates of the Issuer. The Trustee shall have the right to decline to authenticate and deliver any Notes under this Indenture if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability. The Notes shall be issuable only in registered form without coupons in denominations of $1,000 and integral multiples thereof. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Issuer shall maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("REGISTRAR"), (b) Notes may, subject to Section 2 of the Notes, be presented or surrendered for payment ("PAYING AGENT") and (c) notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer 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; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuer may act as Registrar or Paying Agent, except that for the purposes of Article Eight, neither the Issuer nor any Affiliate of the Issuer shall act as Paying Agent. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuer, upon notice to the Trustee, may have one or more co-registrars and one or more additional -37- paying agents reasonably acceptable to the Trustee. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Issuer initially appoints the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed. The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall notify the Trustee, in advance, of the name and address of any such Agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST. The Issuer shall require each Paying Agent other than the Trustee or the Issuer or any Subsidiary to agree in writing that, subject to Article Ten and Section 11.02, each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Notes (whether such assets have been distributed to it by the Issuer or any other obligor on the Notes), and shall notify the Trustee of any Default by the Issuer (or any other obligor on the Notes) in making any such payment. The Issuer at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuer to the Paying Agent, the Paying Agent shall have no further liability for such assets. 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 Issuer shall furnish to the Trustee at least two (2) Business Days prior to each Interest Payment Date and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. TRANSFER AND EXCHANGE. Subject to Sections 2.15 and 2.16, when Notes are presented to the Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; PROVIDED, HOWEVER, that the Notes surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. -38- Without the prior written consent of the Issuer, the Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part, and (iii) beginning at the opening of business on any Record Date and ending on the close of business on the related Interest Payment Date. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Notes may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent) in accordance with the applicable legends thereon, and that ownership of a beneficial interest in the Note shall be required to be reflected in a book-entry system. SECTION 2.07. REPLACEMENT NOTES. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the Trustee's requirements are met. Such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Issuer and the Trustee, to protect the Issuer, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Issuer may charge such Holder for its reasonable out-of-pocket expenses in replacing a Note pursuant to this Section 2.07, including reasonable fees and expenses of counsel and of the Trustee. Every replacement Note is an additional obligation of the Issuer and every replacement Note Guarantee shall constitute an additional obligation of the Guarantor thereof. 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 lost, destroyed or wrongfully taken Notes. SECTION 2.08. OUTSTANDING NOTES. Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Issuer, the Guarantors or any of their respective Affiliates hold the Note (subject to the provisions of Section 2.09). If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless a Responsible Officer of the Trustee receives proof satisfactory to it that the replaced Note is held by a BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. -39- If the principal amount of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity Date the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or any of its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded. SECTION 2.10. TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. Notwithstanding the foregoing, so long as the Notes are represented by a Global Note, such Global Note may be in typewritten form. SECTION 2.11. CANCELLATION. The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Issuer or a Subsidiary), and no one else, shall cancel and, at the written direction of the Issuer, shall dispose of all Notes surrendered for transfer, exchange, payment or cancellation in accordance with its customary procedures. Subject to Section 2.07, the Issuer may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Issuer or any Guarantor shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. DEFAULTED INTEREST. If the Issuer defaults in 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, in any lawful manner. The Issuer may pay the defaulted interest to the persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date -40- fixed by the Issuer for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record date, the Issuer shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP AND ISIN NUMBERS. The Issuer in issuing the Notes may use "CUSIP" or "ISIN" numbers, and if so, the Trustee shall use the "CUSIP" or "ISIN" numbers in notices of redemption or exchange as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness or accuracy of the "CUSIP" or "ISIN" numbers printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Issuer will promptly notify the Trustee of any change in the "CUSIP" or "ISIN" numbers. SECTION 2.14. DEPOSIT OF MONEYS. Subject to Section 2 of the Notes, prior to 10:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, the Issuer shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Payment Date, as the case may be. SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in EXHIBIT B, as applicable. Members of, or participants in, the Depository ("PARTICIPANTS") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with -41- the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Notes if (i) the Depository notifies the Issuer that it is unwilling or unable to act as Depository for any Global Note, the Issuer so notifies the Trustee in writing and a successor Depository is not appointed by the Issuer within 90 days of such notice or (ii) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in the form of Physical Notes under this Indenture. Upon any issuance of a Physical Note in accordance with this Section 2.15(b) the Trustee is required to register such Physical Note in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such Physical Notes shall bear the applicable legends, if any. (c) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of authorized denominations in an aggregate principal amount equal to the principal amount of the beneficial interest in the Global Note so transferred. (d) In connection with the transfer of a Global Note as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and (i) the Issuer shall execute, (ii) the Guarantors shall execute notations of Note Guarantees on and (iii) the Trustee shall upon written instructions from the Issuer authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (f) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.16. SPECIAL TRANSFER AND EXCHANGE PROVISIONS. (a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following provisions shall apply with respect to the registration of any proposed transfer of a Restricted Security to any Institutional Accredited Investor which is not a QIB: (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; PROVIDED, HOWEVER, that neither the Issuer nor any Affiliate of the Issuer has held any beneficial interest in such Note, or portion -42- thereof, at any time on or prior to the second anniversary of the Issue Date or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form of EXHIBIT C hereto and any legal opinions and certifications as may be reasonably requested by the Trustee and the Issuer; (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the IAI Global Note, upon receipt by the Registrar of the Physical Note and (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the certificate, if required, referred to in clause (y) of paragraph (i) above (and any legal opinion or other certifications), the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the IAI Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Registrar shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the certificate, if required, referred to in clause (y) of paragraph (i) above, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the IAI Global Note in an amount equal to the principal amount of the Notes to be transferred. (b) TRANSFERS TO QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of a Restricted Security to a QIB: (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; PROVIDED, HOWEVER, that neither the Issuer nor any Affiliate of the Issuer has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the applicable Global Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the applicable Global Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the 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 QIB within the meaning of Rule 144A, 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 Issuer as it 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 its foregoing representations in order to claim the exemption from registration provided by Rule 144A; -43- (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the 144A Global Note, upon receipt by the Registrar of the Physical Note and written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its book and records the date and an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Registrar shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in the IAI Global Note or the Regulation S Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the IAI Global Note or the Regulation S Global Note, as the case may be, in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of the Notes to be transferred. (c) TRANSFERS OF INTERESTS IN THE TEMPORARY REGULATION S GLOBAL NOTE. The following provisions shall apply with respect to the registration of any proposed transfer of interests in the Temporary Regulation S Global Note: (i) the Registrar shall register the transfer of an interest in the Temporary Regulation S Global Note, whether or not such Global Note bears the Private Placement Legend if the proposed transferor has delivered to the Registrar a certificate substantially in the form of EXHIBIT E stating, among other things, that the proposed transferee is a Non-U.S. Person (except for a transfer to an Initial Purchaser); (ii) if the proposed transferee is a Participant, upon receipt by the Registrar of the documents referred to in clause (i)(x) above, if required, and instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and amount of such transfer of an interest in the Temporary Regulation S Global Note. (d) TRANSFERS TO NON-U.S. PERSONS. The following provisions shall apply with respect to any transfer of a Restricted Security to a Non-U.S. Person under Regulation S: (i) the Registrar shall register any proposed transfer of a Restricted Security to a Non-U.S. Person upon receipt of a certificate substantially in the form of EXHIBIT D from the proposed transferor and such certifications, legal opinions and other information as the Trustee or the Issuer may reasonably request; and (ii) (a) if the proposed transferor is a Participant holding a beneficial interest in the Rule 144A Global Note or the IAI Global Note or the Note to be transferred consists of Physical Notes, upon receipt by the Registrar of (x) the documents required by paragraph (i) and (y) instructions in accordance with the Depository's and the Registrar's -44- procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Rule 144A Global Note or the IAI Global Note, as the case may be, in an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Note or the IAI Global Note, as the case may be, to be transferred or cancel the Physical Notes to be transferred, and (b) if the proposed transferee is a Participant, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Permanent Regulation S Global Note in an amount equal to the principal amount of the Rule 144A Global Note, the IAI Global Note or the Physical Notes, as the case may be, to be transferred. (e) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate one or more Global Notes and/or Physical Notes not bearing the Private Placement Legend in an aggregate principal amount equal to the principal amount of the beneficial interests in the Initial Global Notes or Physical Notes, as the case may be, tendered for acceptance in accordance with the Exchange Offer and accepted for exchange in the Exchange Offer. (f) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except 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. (g) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend unless otherwise required by applicable law, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Note has been offered and sold (including pursuant to the Exchange Offer) pursuant to an effective registration statement under the Securities Act. (h) GENERAL. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or Section 2.16. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. -45- The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Trustee shall have no responsibility for the actions or omissions of the Depository, or the accuracy of the books and records of the Depository. (i) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTE. At such time as all beneficial interests in a particular Global Note have been exchanged for Physical Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Physical Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. ARTICLE THREE REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. If the Issuer elects to redeem Notes pursuant to Section 5 or Section 6 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Notes to be redeemed. The Issuer shall give notice of redemption to the Trustee at least 31 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee), together with such documentation and records as shall enable the Trustee to select the Notes to be redeemed. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time pursuant to Sections 5 and 6 of the Notes, the Trustee will select Notes for redemption as follows: -46- (x) if the Notes are listed on a national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (y) if the Notes are not so listed, on a PRO RATA basis, by lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED that, in the case of such redemption pursuant to Section 6(a) of the Notes, the Trustee will select the Notes on a PRO RATA basis or on as nearly a PRO RATA basis as practicable (subject to the procedures of the Depository) unless that method is otherwise prohibited. No Notes of $1,000 or less shall be redeemed in part. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Issuer shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed at its registered address (except that a notice issued in connection with a redemption referred to in Section 8.01 may be more than 60 days before such Redemption Date). At the Issuer's request, the Trustee shall forward the notice of redemption in the Issuer's name and at the Issuer's expense. Each notice for redemption shall identify the Notes (including the CUSIP or ISIN number) to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Issuer defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Notes redeemed; (6) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender and cancellation of such Note, a new Note or Notes in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal -47- amount of Notes to be outstanding after such partial redemption; and (8) the Section of the Notes or this Indenture, as applicable, pursuant to which the Notes are to be redeemed. The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Except with respect to redemption pursuant to Section 6(b) of the Notes, notices of redemption may not be conditional. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to, but not including, the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. On and after the Redemption Date interest shall cease to accrue on Notes or portions thereof called for redemption unless the Issuer shall have not complied with its obligations pursuant to Section 3.05. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before 10:00 a.m. New York time on the Redemption Date, the Issuer shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued and unpaid interest, if any, of all Notes to be redeemed on that date. If the Issuer complies with the preceding paragraph, then, unless the Issuer defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. SECTION 3.06. NOTES REDEEMED IN PART. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note or Notes in principal amount equal to the unredeemed portion of the original Note or Notes shall be issued in the name of the Holder thereof upon surrender and cancellation of the original Note or Notes. -48- ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Issuer shall pay the principal of (and premium, if any) and interest on the Notes in the manner provided in the Notes, the Registration Rights Agreement and this Indenture. An installment of principal of, or interest on, the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Issuer shall pay interest on overdue principal (including, without limitation, post petition interest in a proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful, at the same rate PER ANNUM borne by the Notes. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03 (which may be an office of the Trustee or an affiliate of the Trustee or Registrar). The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain 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 12.02. The Issuer 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 Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Issuer hereby initially designates U.S. Bank, National Association, located at 100 Wall Street, Suite 1600, New York, New York 10005, Lobby Level, Attn: Corporate Trust, as such office of the Issuer in accordance with Section 2.03. SECTION 4.03. CORPORATE EXISTENCE. Except as otherwise permitted by Article Five, the Issuer shall do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and material franchises of the Issuer and each of its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Issuer shall not be required to preserve any such right, franchise or corporate existence with respect to itself or any Restricted Subsidiary, if -49- the loss thereof would not, individually or in the aggregate, have a material adverse effect on the Issuer and the Guarantors, taken as a whole. SECTION 4.04. PAYMENT OF TAXES. The Issuer and the Guarantors shall, and shall cause each of the Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of the Restricted Subsidiaries or upon the income, profits or property of it or any of the Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a liability or Lien upon the property of it or any of the Restricted Subsidiaries which would reasonably be expected to have a material adverse effect on the Issuer and the Guarantors taken as a whole; PROVIDED, HOWEVER, that the Issuer and the Guarantors shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount the applicability or validity is being contested in good faith by appropriate actions and for which appropriate provision has been made, or any such tax, assessment, charge or claim that would not reasonably be expected to have a material adverse effect on the Issuer and the Guarantors taken as a whole. SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE. The Issuer shall cause all material properties owned by or leased by it or any of its Restricted Subsidiaries used or useful to the conduct of its business or the business of any of its Restricted Subsidiaries 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 repairs, renewals, replacements, and betterments thereof, all as in its judgment 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 4.05 shall prevent the Issuer or any of its Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is desirable in the conduct of the business of the Issuer or any such Restricted Subsidiary, and if such discontinuance or disposal would not, individually or in the aggregate, have a material adverse effect on the ability of the Issuer or the Guarantors to perform each of their respective obligations hereunder; PROVIDED, FURTHER, that nothing in this Section 4.05 shall prevent the Issuer or any of its Restricted Subsidiaries from discontinuing or disposing of any properties to the extent otherwise permitted by this Indenture. SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT. (a) The Issuer shall deliver to the Trustee, within 120 days after the close of each fiscal year, an Officers' Certificate stating that a review of the activities of the Issuer and its Subsidiaries has been made under the supervision of the signing Officers with a view to determining whether the Issuer and the Guarantors have kept, observed, performed and fulfilled their obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge, the Issuer and the Guarantors during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and -50- no Default occurred during such year and at the date of such certificate there is no Default that has occurred and is continuing or, if such signers do know of such Default, the certificate shall specify such Default and what action, if any, the Issuer is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes the fiscal year end. (b) The Issuer shall deliver to the Trustee promptly and in any event within seven days after any Officer of the Issuer becomes aware of the occurrence of any Default an Officers' Certificate specifying the Default and what action, if any, the Issuer is taking or proposes to take with respect thereto. SECTION 4.07. INTENTIONALLY OMITTED. SECTION 4.08. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Issuer and each Guarantor covenants (to the extent permitted by applicable law) 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 or extension law or any usury law or other law that would prohibit or forgive such Issuer or such Guarantor from paying all or any portion of the principal of and/or interest on the Notes or the Note Guarantee of any such Guarantor as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent permitted by applicable law) each hereby expressly waives all benefit or advantage of any such law, and covenants that it will not 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 had been enacted. SECTION 4.09. CHANGE OF CONTROL. Upon the occurrence of any Change of Control, each Holder of Notes will have the right to require that the Issuer purchase that Holder's Notes pursuant to a Change of Control Offer (the "CHANGE OF CONTROL OFFER"). In the Change of Control Offer, the Issuer will offer to pay an amount in cash (the "CHANGE OF CONTROL PURCHASE PRICE") equal to 101% of the principal amount of Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase. Within 30 days following any Change of Control, the Issuer will mail, or cause to be mailed, a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the date (the "CHANGE OF CONTROL PAYMENT DATE") specified in such notice, which date shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures described below. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the Change of Control Payment Date; -51- (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Issuer defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; and (7) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered (equal to $1,000 or an integral multiple thereof). On or before the Change of Control Payment Date, the Issuer will, to the extent lawful: (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of Control Purchase Price in respect of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuer. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Purchase Price for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. -52- The Issuer will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Issuer shall cause the Change of Control Offer to remain open for at least 20 Business Days or for such longer period as may be required by law. The Issuer will comply, and will cause any third party making a Change of Control Offer to 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 a Change of Control Offer. To the extent the provisions of any applicable securities laws or regulations conflict with the provisions of this Section 4.09, the Issuer will not be deemed to have breached their obligations under this Section 4.09 by virtue of complying with such laws or regulations. SECTION 4.10. LIMITATIONS ON ADDITIONAL INDEBTEDNESS. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; PROVIDED that the Issuer or any Guarantor may incur additional Indebtedness, and any Restricted Subsidiary may incur Acquired Indebtedness, in each case, if, after giving effect thereto, the Consolidated Interest Coverage Ratio would be at least 2.00 to 1.00 (the "COVERAGE RATIO EXCEPTION"). (b) Notwithstanding Section 4.10(a), each of the following shall be permitted (the "PERMITTED INDEBTEDNESS"): (1) Indebtedness of the Issuer or any Guarantor under the Credit Facilities in an aggregate amount at any time outstanding not to exceed the greater of (a) $250.0 million LESS, to the extent a permanent repayment and/or commitment reduction is required thereunder as a result of such application, the aggregate amount of Net Available Proceeds applied to repayments under the Credit Facilities in accordance with Section 4.13 (PROVIDED that the amount under this clause (a) shall in no event be reduced to below $65.0 million) and (b) the amount that is 2.5 times Consolidated Cash Flow for the Four-Quarter Period; (2) the Notes issued on the Issue Date and the Note Guarantees and the Exchange Notes and the Note Guarantees in respect thereof to be issued pursuant to the Registration Rights Agreement; (3) Indebtedness of the Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (1) and (2) above, and after giving effect to the intended use of proceeds of the Notes); (4) Indebtedness under Hedging Obligations of the Company or any Restricted Subsidiary not for the purpose of speculation; PROVIDED that if such Hedging Obligations are of the type described in clause (1) of the definition thereof, (a) such Hedging -53- Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.10, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate; (5) Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; PROVIDED, HOWEVER, that upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (5); (6) Indebtedness in respect of bid, performance, surety bonds and workers' compensation claims, self-insurance obligations and bankers acceptances issued for the account of the Issuer or any Restricted Subsidiary in the ordinary course of business, including guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance, surety bonds and workers' compensation claims, self-insurance obligations and bankers acceptances; (7) Purchase Money Indebtedness incurred by the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed at any time outstanding $25.0 million; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is extinguished within five Business Days of incurrence; (9) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; (10) Refinancing Indebtedness with respect to Indebtedness incurred pursuant to the Coverage Ratio Exception, clause (2), (3), (11)(B) or (13)(B) of this Section 4.10(b) or this clause (10); (11) (A) Acquired Indebtedness of the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed $20.0 million at any time outstanding and (B) Acquired Indebtedness of the Issuer or any Restricted Subsidiary assumed or acquired in connection with a transaction governed by, and effected in accordance with, Section 5.01(a); (12) indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets of the Issuer or any Restricted Subsidiary or Equity Interests of a Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Capital Stock for the purpose of -54- financing any such acquisition; PROVIDED that the maximum aggregate liability in respect of all such obligations outstanding under this clause (12) shall at no time exceed (a) in the case of an acquisition, $10.0 million (PROVIDED that the amount of such liability shall be deemed to be the amount thereof, if any, reflected on the balance sheet of the Issuer or any Restricted Subsidiary (E.G., the amount of such liability shall be deemed to be zero if no amount is reflected on such balance sheet)) and (b) in the case of a disposition, the gross proceeds actually received by the Issuer and the Restricted Subsidiaries in connection with such disposition; (13) (A) Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $30.0 million at any time outstanding and (B) Indebtedness of Foreign Subsidiaries if, after giving effect thereto the Consolidated Interest Coverage Ratio (with the references to the Issuer and the Restricted Subsidiaries in the definitions used in the calculation thereof being to Foreign Subsidiaries (other than Unrestricted Subsidiaries)) of all Foreign Subsidiaries would be at least 2.00 to 1.00; PROVIDED that Indebtedness under this clause (13) may be incurred under any Credit Facility; (14) Indebtedness of the Issuer or any Restricted Subsidiary incurred in the ordinary course of business under guarantees of Indebtedness of suppliers, licensees, franchisees or customers in an aggregate amount, together with the aggregate amount of Investments under clause (13) of the definition of "Permitted Investments," not to exceed $5.0 million at any time outstanding; and (15) Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $25.0 million at any time outstanding. (c) For purposes of determining compliance with this Section 4.10, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (15) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall classify and may reclassify, in its sole discretion, such item of Indebtedness and may divide, classify and reclassify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Credit Facilities on the Issue Date shall be deemed to have been incurred under clause (1) above. In addition, for purposes of determining any particular amount of Indebtedness under this covenant, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness. SECTION 4.11. LIMITATIONS ON RESTRICTED PAYMENTS. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment: (1) a Default shall have occurred and be continuing or shall occur as a consequence thereof; -55- (2) the Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or (3) the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date (other than Restricted Payments made pursuant to clause (2), (3), (4), (5), (6), (7), (8) or (9) of Section 4.11(b)), exceeds the sum (the "RESTRICTED PAYMENTS BASKET") of (without duplication): (a) 50% of Consolidated Net Income for the period (taken as one accounting period) commencing on the first day of the fiscal quarter in which the Issue Date occurs to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), PLUS (b) 100% of the aggregate net cash proceeds received by the Issuer and 100% of the Fair Market Value at the time of receipt of assets other than cash, if any, received by the Issuer, either (x) as contributions to the common equity of the Issuer after the Issue Date or (y) from the issuance and sale of Qualified Equity Interests after the Issue Date, other than (A) any such proceeds which are used to redeem Notes in accordance with Section 6(a) of the Notes or (B) any such proceeds or assets received from a Subsidiary of the Issuer, PLUS (c) the aggregate amount by which Indebtedness (other than any Subordinated Indebtedness) incurred by the Issuer or any Restricted Subsidiary subsequent to the Issue Date is reduced on the Issuer's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Issuer) into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer or any Restricted Subsidiary upon such conversion or exchange), PLUS (d) in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) 100% of the aggregate amount received by the Issuer or any Restricted Subsidiary in cash or other property (valued at the Fair Market Value thereof) as the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, PLUS (e) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer's proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer's Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced. -56- (b) The foregoing provisions will not prohibit: (1) the payment by the Issuer or any Restricted Subsidiary of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of this Indenture; (2) the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests; (3) the redemption of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests, (b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under Section 4.10 and the other terms of this Indenture or (c) upon a Change of Control or in connection with an Asset Sale to the extent required by the agreement governing such Subordinated Indebtedness but only if the Issuer shall have complied with Section 4.09 and Section 4.13 and purchased all Notes validly tendered pursuant to the relevant offer prior to redeeming such Subordinated Indebtedness; (4) payments by the Issuer or to Parent to permit Parent or Holdings, and which are used by Parent or Holdings, to redeem Equity Interests of the Issuer, Parent or Holdings held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; PROVIDED that the aggregate cash consideration paid for all such redemptions shall not exceed the sum of (A) $5.0 million during any calendar year (with unused amounts being available to be used in the following calendar year, but not in any succeeding calendar year) plus (B) the amount of any net cash proceeds received by or contributed to the Issuer from the issuance and sale after the Issue Date of Qualified Equity Interests of Holdings, Parent or the Issuer to its officers, directors or employees that have not been applied to the payment of Restricted Payments pursuant to this clause (4), plus (C) the net cash proceeds of any "key-man" life insurance policies that have not been applied to the payment of Restricted Payments pursuant to this clause (4); (5) payments to Parent permitted pursuant to clauses (3) and (4) of Section 4.14(b); (6) repurchases of Equity Interests deemed to occur upon the exercise of stock options if the Equity Interests represent a portion of the exercise price thereof; (7) to the extent that the Net Available Proceeds (without duplication of any amount that increased the Restricted Payments Basket) of any Permitted Sale and Leaseback Transaction exceed the Permitted Sale and Leaseback Transaction Amount, payments of such excess amount to Parent to permit Parent or Holdings, and the subsequent use of such payments by Parent or Holdings, to pay a dividend to the holders of Equity -57- Interests of Parent or Holdings or a distribution to the holders of Indebtedness of Parent or Holdings; (8) distributions to Parent in order to enable Parent or Holdings to pay customary and reasonable costs and expenses of an offering of securities of Parent or Holdings that is not consummated; or (9) additional Restricted Payments of $20.0 million; PROVIDED that (a) in the case of any Restricted Payment pursuant to clause (3)(c) or (7) above, no Default shall have occurred and be continuing or occur as a consequence thereof and (b) no issuance and sale of Qualified Equity Interests pursuant to clause (2), (3) or (4)(B) above shall increase the Restricted Payments Basket. SECTION 4.12. LIMITATIONS ON LIENS. The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any assets of the Issuer or any Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom securing any Indebtedness (other than Permitted Liens), unless contemporaneously therewith: (1) in the case of any Lien securing an obligation that ranks PARI PASSU with the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, at least equally and ratably with or prior to such obligation with a Lien on the same collateral; and (2) in the case of any Lien securing an obligation that is subordinated in right of payment to the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such subordinated obligation, in each case, for so long as such obligation is secured by such Lien. SECTION 4.13. LIMITATIONS ON ASSET SALES. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale (other than a Permitted Sale and Leaseback Transaction) unless: (1) the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; and -58- (2) either (x) at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents or (y) the cash or Cash Equivalents portion (without giving effect to Section 4.13(b)(3)) of the total consideration received in such Asset Sale shall be no less than an amount equal to the product of (A) 5.25 and (B) the portion of Consolidated Cash Flow for the Four-Quarter Period directly attributable to the assets included in such Asset Sale. (b) For purposes of clause (2) of Section 4.13(a), the following shall be deemed to be cash: (1) the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, (2) the amount of any obligations received from such transferee that are within 90 days converted by the Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and (3) the Fair Market Value of (i) any assets (other than securities) received by the Issuer or any Restricted Subsidiary to be used by it in the Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or (iii) a combination of (i) and (ii). (c) If at any time any non-cash consideration received by the Issuer or any Restricted Subsidiary, as the case may be, pursuant to Section 4.1(b)(2) above in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.13. (d) If the Issuer or any Restricted Subsidiary engages in an Asset Sale (other than a Permitted Sale and Leaseback Transaction), the Issuer or such Restricted Subsidiary shall, by no later than 12 months following the later of the consummation thereof and the Issuer's or Restricted Subsidiary's receipt of the Net Available Proceeds, have applied all or any of the Net Available Proceeds therefrom to: (1) repay Senior Debt or Guarantor Senior Debt, and in the case of any such repayment under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility; (2) repay any Indebtedness which was secured by the assets sold in such Asset Sale; and/or -59- (3) (A) invest in the purchase of assets (other than securities) to be used by the Issuer or any Restricted Subsidiary in the Permitted Business, (B) acquire Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (C) a combination of (A) and (B); PROVIDED that the Issuer or such Restricted Subsidiary shall be deemed to have applied Net Available Proceeds in accordance with this clause (3) within such 12-month period if, within such 12-month period, it has entered into a binding commitment or agreement to invest such Net Available Proceeds and continues to use all reasonable efforts to so apply such Net Available Proceeds as soon as practicable thereafter; PROVIDED, FURTHER, that upon any abandonment or termination of such commitment or agreement, the Net Available Proceeds not applied will constitute Excess Proceeds (as defined below). In addition, following the entering into of a binding agreement with respect to an Asset Sale and prior to the consummation thereof, cash (whether or not actual Net Available Proceeds of such Asset Sale) used for the purposes described in subclause (A), (B) and (C) of this clause (3) that are designated as uses in accordance with this clause (3), and not previously or subsequently so designated in respect of any other Asset Sale, shall be deemed to be Net Available Proceeds applied in accordance with this clause (3). The amount of Net Available Proceeds not applied or invested as provided in this Section 4.13(d) will constitute "EXCESS PROCEEDS." (e) When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows: (1) the Issuer will (a) make an offer to purchase (a "NET PROCEEDS OFFER") to all Holders in accordance with the procedures set forth in this Indenture, and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the "PAYMENT AMOUNT") of such Excess Proceeds; (2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the "OFFERED PRICE"), in accordance with the procedures set forth in this Indenture and the Redemption Price for such Pari Passu Indebtedness (the "PARI PASSU INDEBTEDNESS PRICE") shall be as set forth in the related documentation governing such Indebtedness; -60- (3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the PRO RATA portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a PRO RATA basis; and (4) upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero. (f) To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a "NET PROCEEDS DEFICIENCY"), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of this Indenture. (g) In the event of the transfer of substantially all (but not all) of the assets of the Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with Article Five other than a transaction meeting the requirements of Section 5.01(a)(3)(b), the successor shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer and the Restricted Subsidiaries not so transferred for purposes of this Section 4.13, and shall comply with the provisions of this Section 4.13 with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose). (h) Upon the commencement of a Net Proceeds Offer, the Issuer shall send, by first class mail, a notice to the Trustee and to each Holder at is registered address. The notice shall contain all instructions and materials necessary to enable such Holder to tender Notes pursuant to the Net Proceeds Offer. Any Net Proceeds Offer shall be made to all Holders. The notice, which shall govern the terms of the Net Proceeds Offer, shall state: (1) that the Net Proceeds Offer is being made pursuant to this Section; (2) the Payment Amount, the Offered Price, and the date on which Notes tendered and accepted for payment shall be purchased, which date shall be at least 30 days and not later than 60 days from the date such notices is mailed (the "NET PROCEEDS PAYMENT DATE"); (3) that any Notes not tendered or accepted for payment shall continue to accrue interest; (4) that, unless the Issuer defaults in making such payment, any Notes accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest on and after the Net Proceeds Payment Date; (5) that Holders electing to have any Notes purchased pursuant to any Net Proceeds Offer shall be required to surrender the Notes, with the form entitled "Option of -61- Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuer, a depository, if appointed by the Issuer, or the Paying Agent at the address specified in the notice at least three days before the Net Proceeds Payment Date; (6) that Holders shall be entitled to withdraw their election if the Issuer, the Depository or the Paying Agent, as the case may be, receives, not later than the Net Proceeds Payment Date, a notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the Payment Amount, the Issuer shall select the Notes to be purchased on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry). (i) On the Net Proceeds Payment Date, the Issuer shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Net Proceeds Offer, subject to pro ration if the aggregate Notes tendered exceed the Payment Amount allocable to the Notes; (2) deposit with the Paying Agent U.S. Legal Tender equal to the lesser of the Payment Amount allocable to the Notes and the amount sufficient to pay the Offered Price in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Issuer. The Issuer shall publicly announce the results of the Net Proceeds Offer on the Net Proceeds Payment Date. (j) The Paying Agent shall promptly mail to each Holder of Notes so tendered the Offered Price for such Notes, and the Trustee shall promptly authenticate pursuant to an Authentication Order and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unrepurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note shall be in principal amount of $1,000 or an integral multiple thereof. However, if the Net Proceeds Payment Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Net Proceeds Offer. (k) The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Sec- -62- tion 4.13, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.13 by virtue of this compliance. SECTION 4.14. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an "AFFILIATE TRANSACTION"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm's-length basis by the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer or that Restricted Subsidiary; and (2) the Issuer delivers to the Trustee: (x) with respect to any Affiliate Transaction involving aggregate value in excess of $5.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (1) above and (x) a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted by a majority of the directors of the Issuer who are disinterested with respect to such Affiliate Transaction, approving such Affiliate Transaction or (y) if there are no such disinterested directors, a written opinion described in clause (y) below; and (y) with respect to any Affiliate Transaction involving aggregate value of $20.0 million or more, the certificates described in the preceding clause (x) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor to the Board of Directors of the Issuer. (b) The foregoing restrictions shall not apply to: (1) transactions exclusively between or among (a) the Issuer and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; PROVIDED, in each case, that no Affiliate of the Issuer (other than another Restricted Subsidiary) owns Equity Interests of any such Restricted Subsidiary; (2) reasonable director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans), indemnification arrangements, compensation, employment and severance agreements, in each case approved by the Board of Directors; -63- (3) the entering into of a tax sharing agreement, or payments pursuant thereto, between the Issuer and/or one or more Subsidiaries, on the one hand, and any other Person with which the Issuer or such Subsidiaries are required or permitted to file a consolidated tax return or with which the Issuer or such Subsidiaries are part of a consolidated group for tax purposes, on the other hand, which payments by the Issuer and the Restricted Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis; (4) payments by the Issuer to or on behalf of Parent in an amount sufficient to pay out-of-pocket legal, accounting and filing and other general corporate overhead costs of Parent actually incurred by Parent, in any case in an aggregate amount not to exceed $500,000 in any calendar year; (5) loans and advances permitted by clause (3) of the definition of "Permitted Investments"; (6) payments to Sponsor or an Affiliate or Related Party thereof in respect of management and consulting services rendered to the Issuer and the Restricted Subsidiaries in the amounts and at the times specified or permitted in the Advisory Agreement, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Holders in any material respect than such agreement as it was in effect on the Issue Date; PROVIDED that no Default described in Section 6.01(1), (2), (3), (7) or (8) shall have occurred and be continuing or occur as a consequence thereof; (7) any Restricted Payments which are made in accordance with Section 4.11; (8) entering into an agreement that provides registration rights to the shareholders of the Issuer, Parent or Holdings or amending any such agreement with shareholders of the Issuer, Parent or Holdings and the performance of such agreements; (9) any transaction with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Issuer or a Restricted Subsidiary owns an equity interest in or otherwise controls such joint venture or similar entity; PROVIDED that no Affiliate of the Issuer or any of its Subsidiaries other than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such joint venture or similar entity; (10) any merger, consolidation or reorganization of the Issuer with an Affiliate, solely for the purposes of (a) reorganizing to facilitate an initial public offering of securities of the Issuer, Parent, Holdings or other holding company, (b) forming a holding company or (c) reincorporating the Issuer in a new jurisdiction; (11) (a) any transaction with an Affiliate where the only consideration paid by the Issuer or any Restricted Subsidiary is Qualified Equity Interests or (b) the issuance or sale of any Qualified Equity Interests; -64- (12) (a) any agreement in effect on the Issue Date (other than the Advisory Agreement) and disclosed in the Offering Memorandum, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Holders in any material respect than such agreement as it was in effect on the Issue Date or (b) any transaction pursuant to any agreement referred to in the immediately preceding clause (a); or (13) any Investment in an Unrestricted Subsidiary; PROVIDED that no Affiliate of the Issuer or any of its Subsidiaries other than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such Unrestricted Subsidiary. SECTION 4.15. LIMITATIONS ON DIVIDEND AND OTHER RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on or in respect of its Equity Interests; (b) make loans or advances or pay any Indebtedness or other obligation owed to the Issuer or any other Restricted Subsidiary; or (c) transfer any of its assets to the Issuer or any other Restricted Subsidiary; except for: (1) encumbrances or restrictions existing under or by reason of applicable law, regulation or order; (2) encumbrances or restrictions existing under this Indenture, the Notes and the Note Guarantees; (3) non-assignment provisions of any contract or any lease entered into in the ordinary course of business; (4) encumbrances or restrictions existing under agreements existing on the date of this Indenture (including, without limitation, the Credit Facilities) as in effect on that date; (5) restrictions relating to any Lien permitted under this Indenture imposed by the holder of such Lien; (6) restrictions imposed under any agreement to sell assets permitted under this Indenture to any Person pending the closing of such sale; -65- (7) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (8) any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date; (9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture, asset sale and stock sale agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person; (10) Purchase Money Indebtedness incurred in compliance with Section 4.10 that impose restrictions of the nature described in clause (c) above on the assets acquired; (11) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business; (12) encumbrances or restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrances or restrictions restrict the transfer of assets subject to such security agreements or mortgages; (13) encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries, or municipal loan or related agreements entered into in connection with the incurrence of industrial revenue bonds, permitted to be incurred under this Indenture; PROVIDED that any such encumbrances or restrictions are ordinary and customary with respect to the type of Indebtedness being incurred under the relevant circumstances and do not, in the good faith judgment of the Board of Directors of the Issuer, materially impair the Issuer's ability to make payment on the Notes when due; and (14) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (13) above; PROVIDED that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing. -66- SECTION 4.16. ADDITIONAL NOTE GUARANTEES. (a) If, after the Issue Date, (a) any Restricted Subsidiary (including any newly formed, newly acquired or newly Designated Restricted Subsidiary) guarantees any Indebtedness under any Credit Facility (other than any Foreign Subsidiary that guarantees Indebtedness of only other Foreign Subsidiaries under any such Credit Facility) or (b) the Issuer otherwise elects to have any Restricted Subsidiary become a Guarantor, then, in each such case, the Issuer shall cause such Restricted Subsidiary to: (1) execute and deliver to the Trustee (a) a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer's obligations under the Notes and this Indenture and (b) a notation of guarantee in respect of its Note Guarantee; and (2) deliver to the Trustee one or more opinions of counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. (b) Notwithstanding Section 4.16(a), a Subsidiary Guarantor will be automatically and unconditionally released and discharged from its obligations under its Note Guarantee, this Indenture and the Registration Rights Agreement under the circumstances set forth in Section 11.05. The form of the Note Guarantee is attached hereto as EXHIBIT F. SECTION 4.17. LIMITATIONS ON LAYERING INDEBTEDNESS. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur or suffer to exist any Indebtedness that is or purports to be by its terms (or by the terms of any agreement governing such Indebtedness) senior in right of payment to the Notes or the Note Guarantee of such Restricted Subsidiary and subordinated in right of payment to any other Indebtedness of the Issuer or of such Restricted Subsidiary, as the case may be. For purposes of the foregoing, no Indebtedness will be deemed to be subordinated in right of payment to any other Indebtedness of the Issuer or any Restricted Subsidiary solely by virtue of being unsecured or secured by a junior priority lien or by virtue of the fact that the holders of such Indebtedness have entered into intercreditor agreements or other arrangements giving one or more of such holders priority over the other holders in the collateral held by them. SECTION 4.18. REPORTS TO HOLDERS. Whether or not required by the SEC, so long as any Notes are outstanding, the Issuer will furnish to the Holders of Notes, or file electronically with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval System (or any successor system), within the -67- time periods that would be applicable to the Issuer if it were subject to Section 13(a) or 15(d) of the Exchange Act: (1) all quarterly and annual financial and other information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuer were required to file these Forms; and (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Issuer were required to file these reports. In addition, whether or not required by the SEC, the Issuer will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept the filing) and make the information available to securities analysts and prospective investors upon request. Notwithstanding anything to the contrary, the Issuer will be deemed to have complied with its obligations in the preceding two paragraphs following the filing of the Exchange Offer Registration Statement and prior to the effectiveness thereof if the Exchange Offer Registration Statement includes the information specified in clause (1) above at the times it would otherwise be required to file such Forms. If Parent has complied with the reporting requirements of Section 13 or 15(d) of the Exchange Act, if applicable, and has furnished the Holders of Notes, or filed electronically with the SEC's Electronic Data Gathering, Analysis and Retrieval System (or any successor system), the reports described herein with respect to Parent (including any financial information required by Regulation S-X relating to the Issuer and the Subsidiary Guarantors), the Issuer shall be deemed to be in compliance with the provisions of this Section 4.18. The Issuer and the Guarantors have agreed that, for so long as any Notes remain outstanding, the Issuer will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.19. LIMITATIONS ON DESIGNATION OF UNRESTRICTED SUBSIDIARIES. (a) The Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer as an "Unrestricted Subsidiary" under this Indenture (a "DESIGNATION") only if: (1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and (2) either (A) the Subsidiary to be so Designated has total assets of $1,000 or less; or (B) the Issuer would be permitted to make, at the time of such Designation, (x) a Permitted Investment or (y) an Investment pursuant to Section 4.11(a), in either case, in an amount (the "DESIGNATION AMOUNT") equal to the Fair Market Value of the Issuer's proportionate interest in such Subsidiary on such date. -68- (b) No Subsidiary shall be Designated as an "Unrestricted Subsidiary" if such Subsidiary or any of its Subsidiaries owns (i) any Equity Interests (other than Qualified Equity Interests) of the Issuer or (ii) any Equity Interests of any Restricted Subsidiary that is not a Subsidiary of the Subsidiary to be so Designated. (c) If, at any time, any Unrestricted Subsidiary fails to meet the requirements of Section 4.19(a) and (b) as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under Section 4.10 or the Lien is not permitted under Section 4.12, the Issuer shall be in default of the applicable section. (d) The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a "REDESIGNATION") only if: (1) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and (2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, have been permitted to be incurred or made for all purposes of this Indenture. (e) All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee, certifying compliance with the foregoing provisions. SECTION 4.20. LIMITATION ON THE ISSUANCE OR SALE OF EQUITY INTERESTS OF RESTRICTED SUBSIDIARIES. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, sell or issue any shares of Equity Interests of any Restricted Subsidiary except (1) to the Issuer, a Restricted Subsidiary or the minority stockholders of any Restricted Subsidiary, on a PRO RATA basis, (2) to the extent such shares represent directors' qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Wholly-Owned Restricted Subsidiary, or (3) if immediately after giving effect to such sale or issuance, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. The sale of all the Equity Interests of any Restricted Subsidiary is permitted by this Section 4.20 but is subject to Section 4.13. Notwithstanding the foregoing, this covenant shall not prohibit the issuance or sale of Equity Interests of any Restricted Subsidiary in connection with (a) the formation or capitalization of a Restricted Subsidiary or (b) a single transaction or a series of substantially contemporaneous transactions whereby such Restricted Subsidiary becomes a Restricted Subsidiary of the Issuer by reason of acquisition of securities or assets from another Person; PROVIDED that following the consummation of any transaction or transactions contemplated by clause (a) or (b), the ownership of the Equity Interests of the relevant Restricted Subsidiary or Restricted Subsidiaries shall be as if this covenant had been complied with at all times. -69- ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. MERGERS, CONSOLIDATIONS, ETC. (a) The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person (other than a merger with an Affiliate solely for the purpose of and with the effect of changing the Issuer's jurisdiction of incorporation to another State of the United States or forming a holding company for the Issuer), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer or the Issuer and the Restricted Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in either case: (1) either: (a) the Issuer will be the surviving or continuing Person; or (b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "SUCCESSOR") is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer under the Notes, this Indenture and the Registration Rights Agreement; (2) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default shall have occurred and be continuing; and (3) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (a) the Issuer or the Successor, as the case may be, could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception or (b) the Consolidated Interest Coverage Ratio of the Issuer or the Successor, as the case may be, would be not less than the Consolidated Coverage Ratio of the Issuer immediately prior to such transaction. For purposes of this Section 5.01(a), any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction. -70- (b) Parent will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of Parent and its Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in either case: (1) either: (a) Parent will be the surviving or continuing Person; or (b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "PARENT SUCCESSOR") is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Parent Successor (unless the Parent Successor is the Issuer) expressly assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of Parent under the Notes, this Indenture and the Registration Rights Agreement; and (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing. (c) Except as provided in Section 11.05 no Guarantor (other than Parent) may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, unless: (1) either: (a) such Guarantor will be the surviving or continuing Person; or (b) the Person formed by or surviving any such consolidation or merger assumes, by supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, this Indenture and the Registration Rights Agreement, and, in the case of a consolidation or merger with Parent, is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia; and (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing. (d) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Equity Interests of which constitute all -71- or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer or Parent, as the case may be. (e) Upon any consolidation, combination or merger of the Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer or Parent in accordance with the foregoing, in which the Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer or such Guarantor is merged or the Person to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer or such Guarantor under this Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Issuer or such Guarantor and, except in the case of a lease, the Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer's or such Guarantor's other obligations and covenants under the Notes, this Indenture and its Note Guarantee, if applicable. (f) Notwithstanding the foregoing, any Restricted Subsidiary may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to the Issuer or another Restricted Subsidiary. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. Each of the following is an "EVENT OF DEFAULT": (1) failure by the Issuer to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days (whether or not such payment is prohibited by the subordination provisions of this Indenture); (2) failure by the Issuer to pay the principal on any of the Notes when it becomes due and payable, whether at Stated Maturity, upon redemption, upon purchase, upon acceleration or otherwise (whether or not such payment is prohibited by the subordination provisions of this Indenture); (3) failure by the Issuer to comply with Section 5.01 or in respect of its obligations to make a Change of Control Offer as described under Section 4.09 (whether or not such compliance is prohibited by the subordination provisions of this Indenture); (4) failure by the Issuer to comply with any other agreement or covenant in this Indenture and continuance of this failure for 60 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding; -72- (5) default under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of the Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date, which default: (a) is caused by a failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) principal on such Indebtedness within the applicable express grace period, (b) results in the acceleration of such Indebtedness prior to its express final maturity or (c) results in the judicial authorization to foreclose upon, or to exercise remedies under applicable law or applicable security documents to take ownership of, the assets securing such Indebtedness, and in each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (a), (b) or (c) has occurred and is continuing, aggregates $20.0 million or more; (6) one or more judgments or orders that exceed $20.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; (7) the Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian of it or for all or substantially all of its assets, or (d) makes a general assignment for the benefit of its creditors; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Issuer or any Significant Subsidiary as debtor in an involuntary case, -73- (b) appoints a Custodian of the Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer or any Significant Subsidiary, or (c) orders the liquidation of the Issuer or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 60 days; or (9) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture) or is declared null and void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of this Indenture and the Note Guarantee). SECTION 6.02. ACCELERATION. (a) If an Event of Default specified in clause (7) or (8) of Section 6.01 with respect to the Issuer occurs, all outstanding Notes shall become due and payable without any further action or notice. If an Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 6.01 with respect to the Issuer) shall have occurred and be continuing under this Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may declare (an "ACCELERATION DECLARATION") all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall become due and payable (a) if there is no Indebtedness outstanding under any Credit Facility at such time, immediately and (b) if otherwise, upon the earlier of (x) the final maturity (after giving effect to any applicable grace period or extensions thereof) or an acceleration of any Indebtedness under any Credit Facility prior to the express final Stated Maturity thereof and (y) five business days after the Representative under each Credit Facility receives the acceleration declaration, but, in the case of this clause (b) only, if such Event of Default is then continuing; PROVIDED, HOWEVER, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of such outstanding Notes may rescind and annul such acceleration: (1) if the rescission would not conflict with any judgment or decree; (2) if all existing Events of Default have been cured or waived except nonpayment of principal and interest that has become due solely because of this acceleration; (3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (4) if the Issuer has paid to the Trustee its reasonable compensation and reimbursed the Trustee of its expenses, disbursements and advances; and -74- (5) in the event of a cure or waiver of an Event of Default of the type set forth in Section 6.01(7) or (8), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. (b) The Issuer shall provide prompt written notice to the holders of Senior Debt and Guarantor Senior Debt of any acceleration pursuant to Section 6.02(a). SECTION 6.03. OTHER REMEDIES. If a 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, 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 it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon a Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Notes (which may include consents obtained in connection with a tender offer or exchange offer of Notes) by notice to the Trustee may waive an existing Default and its consequences, except a Default in the payment of principal of, or interest on, any Note as specified in Section 6.01(1) or (2). The Issuer shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. When a Default is waived, it is cured and ceases. SECTION 6.05. CONTROL BY MAJORITY. The Holders of not less than a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may involve the Trustee in personal liability; PROVIDED that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification against any loss or expense caused by taking such action or following such direction. -75- SECTION 6.06. LIMITATION ON SUITS. No Holder will have any right to institute any proceeding with respect to this Indenture or for any remedy thereunder, unless the Trustee: (1) has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding; (2) has been offered indemnity satisfactory to it in its reasonable judgment; and (3) has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request. However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date therefor (after giving effect to the grace period specified in Section 6.01(1)). A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such 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 principal of, and interest on, a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If a Default in payment of principal or interest specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor on the Notes for the whole amount of principal and accrued interest and fees remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate PER ANNUM borne by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Issuer, their creditors or their -76- property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings 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 to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. 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. The Trustee shall be entitled to participate as a member of any official committee of creditors in the matters as it deems necessary or advisable. SECTION 6.10. PRIORITIES. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 7.07; Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for principal amounts due and unpaid on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; and Fourth: to the Issuer or, if applicable, the Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Issuer, 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 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 merits and good faith of the claims or defenses 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, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Notes. -77- ARTICLE SEVEN TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If a Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of a Default: (1) The Trustee need perform only those duties as are specifically set forth herein or in the Trust Indenture Act and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee. (2) 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 (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are 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 requirements of this Indenture. (c) Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of Section 7.01(b). (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) 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 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it. -78- (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee. SECTION 7.02. RIGHTS OF TRUSTEE. Subject to Section 7.01: (a) The Trustee may rely conclusively on any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or 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 the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers under this Indenture. (e) The Trustee may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby. -79- (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Issuer, to examine the books, records, and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer. (h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. (j) Except with respect to Section 4.01 and 4.06, the Trustee shall have no duty to inquire as to the performance of the Issuer with respect to the covenants contained in Article Four. In addition, the Trustee shall not be deemed to have knowledge of an Event of Default except (i) any Default or Event of Default occurring pursuant to Sections 4.01, 6.01(1) or 6.01(2) or (ii) any Default or Event of Default of which the Trustee shall have received written notification. (k) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. 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 Issuer, its Subsidiaries or its respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or any document issued in connection with the sale of Notes or any statement in the Notes other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture. -80- SECTION 7.05. NOTICE OF DEFAULT. If a Default occurs and is continuing and the Trustee receives actual notice of such Default, the Trustee shall mail to each Holder notice of the uncured Default within 30 days after such Default occurs. Except in the case of a Default in payment of principal of, or interest on, any Note, including an accelerated payment and the failure to make a payment on the Change of Control Payment Date pursuant to a Change of Control Offer or the Net Proceeds Payment Date pursuant to a Net Proceeds Offer, or a Default in complying with the provisions of Article Five, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15, beginning with May 15, 2005, the Trustee shall, to the extent that any of the events described in Trust Indenture Act ss. 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with Trust Indenture Act ss. 313(a). The Trustee also shall comply with Trust Indenture Act ss.ss. 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Holders shall be mailed to the Issuer and filed with the SEC and each securities exchange, if any, on which the Notes are listed. The Issuer shall notify the Trustee if the Notes become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with Trust Indenture Act ss. 313(d). SECTION 7.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to the Trustee from time to time such compensation as the Issuer and the Trustee shall from time to time agree in writing for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence, bad faith or willful misconduct. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Issuer shall indemnify each of the Trustee or any predecessor Trustee and its agents for, and hold them harmless against, any and all loss, damage, claims including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of -81- any of the Trustee's rights, powers or duties hereunder. The Trustee shall notify the Issuer promptly of any claim asserted against the Trustee or any of its agents for which it may seek indemnity. The Issuer shall defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents subject to the claim may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel; PROVIDED, HOWEVER, that the Issuer will not be required to pay such fees and expenses if there is no conflict of interest between the Issuer and the Trustee and its agents subject to the claim in connection with such defense as reasonably determined by the Trustee. The Issuer need not pay for any settlement made without its written consent. The Issuer need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through the Trustee's negligence, bad faith or willful misconduct. To secure the Issuer's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes against all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal and interest on particular Notes. The obligations of the Issuer and the Guarantors under this Section shall not be subordinated to the payment of Senior Debt pursuant to Article Ten or Section 11.02 except assets or money held in trust to pay principal of or interest on particular Notes. When the Trustee incurs expenses or renders services after a Default specified in Section 6.01(7) or (8) occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the appointment of a successor Trustee. SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by so notifying the Issuer in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Issuer and the Trustee and may appoint a successor Trustee. The Issuer may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee 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 Issuer shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a ma- -82- jority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Issuer. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; PROVIDED that such corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirement of Trust Indenture Act ss.ss. 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with Trust Indenture Act ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of Trust Indenture Act ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding, if the requirements for such exclusion set forth in Trust Indenture Act ss. 310(b)(1) are met. The provisions of Trust Indenture Act ss. 310 shall apply to the Issuer and any other obligor of the Notes. -83- SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE ISSUER. The Trustee, in its capacity as Trustee hereunder, shall comply with Trust Indenture Act ss. 311(a), excluding any creditor relationship listed in Trust Indenture Act ss. 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act ss. 311(a) to the extent indicated. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. TERMINATION OF THE ISSUER'S OBLIGATIONS. The Issuer may terminate its obligations under the Notes and this Indenture and the obligations of the Guarantors under the Note Guarantees and this Indenture and this Indenture shall cease to be of further effect, except those obligations referred to in the penultimate paragraph of this Section 8.01, if: (1) all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or (2) (a) all Notes not delivered to the Trustee for cancellation otherwise have become due and payable, will become due and payable, or may be called for redemption, within one year or have been called for redemption pursuant to Section 5 or Section 6 of the Notes and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in trust sufficient to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation, (b) the Issuer has paid all sums payable by it under this Indenture, and (c) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the Redemption Date, as the case may be. In addition, the Issuer must deliver an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with. In the case of clause (2) of this Section 8.01, and subject to the next sentence and notwithstanding the foregoing paragraph, the Issuer's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 4.03 (as to legal existence of the Issuer only), 7.07, 8.05 and 8.06 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.08. After -84- the Notes are no longer outstanding, the Issuer's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE. (a) The Issuer may, at its option and at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03. (b) Upon the Issuer's exercise under Section 8.02(a) hereof of the option applicable to this Section 8.02(b), the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from their obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture and the Guarantors shall be deemed to have satisfied all of their obligations under the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive, solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section 8.04, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due; (ii) the Issuer's obligations with respect to such Notes under Article Two and Section 4.02 hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer's obligations in connection therewith; and (iv) the provisions of this Article Eight applicable to Legal Defeasance. Subject to compliance with this Article Eight, the Issuer may exercise its option under this Section 8.02(b) notwithstanding the prior exercise of its option under Section 8.02(c) hereof. (c) Upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Issuer and the Guarantors shall, subject to the satisfaction of the -85- conditions set forth in Section 8.03 hereof, be released from their respective obligations under the covenants contained in Sections 4.03 (other than with respect to the legal existence of the Issuer), 4.04, 4.05 and 4.09 through 4.20, clause (3) of Section 5.01(a) and Article Eleven hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.03 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, clauses (3), (5), (6) and (9) of Section 6.01 hereof shall not constitute Events of Default. SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes: (1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment), in the opinion of a nationally recognized firm of independent public accountants selected by the Issuer, to pay the principal of and interest on the Notes on the stated date for payment or on the Redemption Date of the principal or installment of principal of or interest on the Notes, (2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that: (a) the Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or (b) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon this Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred, -86- (3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred, (4) no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit), (5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under this Indenture or a default under any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound (other than any such Default or default resulting solely from the borrowing of funds to be applied to such deposit), (6) the Issuer shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by it with the intent of preferring the Holders over any other of its creditors or with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, and (7) the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the conditions provided for in, in the case of the Officers' Certificate, clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (2) and/or (3) and (5) of this Section 8.03 have been complied with. SECTION 8.04. APPLICATION OF TRUST MONEY. The Trustee or Paying Agent shall hold in trust U.S. Legal Tender and U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and the interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender and U.S. Government Obligations, except as it may agree with the Issuer. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender and U.S. Government Obligations deposited pursuant to Section 8.03 or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the Issuer's request any U.S. Legal Tender and U.S. Government Obligations held by it as provided in Section 8.03 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certifica- -87- tion thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.05. REPAYMENT TO THE ISSUER. The Trustee and the Paying Agent shall pay to the Issuer upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; PROVIDED that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Issuer cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Issuer. After payment to the Issuer, Holders entitled to such money must look to the Issuer for payment as general creditors unless an applicable law designates another Person. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, or if the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to pay the principal of, and interest on, the Notes when due, the Issuer's obligations under this Indenture, and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight; PROVIDED that if the Issuer has made any payment of interest on, or principal of, any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. (a) Subject to Section 9.03, the Issuer and the Trustee, together, may amend or supplement this Indenture, the Notes or the Note Guarantees without notice to or consent of any Holder: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; -88- (3) to provide for the assumption of the Issuer's obligations to the Holders in the case of a merger, consolidation or sale of all or substantially all of the assets, in accordance with Article Five; (4) to release any Guarantor from any of its obligations under its Note Guarantee or this Indenture (to the extent permitted by this Indenture); (5) to add any Subsidiary of the Issuer as a Guarantor; (6) to make any change that would not materially adversely affect the rights of any Holder; or (7) in the case of this Indenture, to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; PROVIDED that the Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. WITH CONSENT OF HOLDERS. (a) Subject to Sections 6.07 and 9.03, the Issuer, the Guarantors and the Trustee, together, with the written consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holder or Holders of at least a majority in aggregate principal amount of the Notes then outstanding may amend or supplement this Indenture, the Notes or the Note Guarantees, without notice to any other Holders. Subject to Sections 6.07 and 9.03, the Holder or Holders of a majority in aggregate principal amount of the outstanding Notes may waive compliance with any provision of this Indenture, the Notes or the Note Guarantees without notice to any other Holders; (b) Notwithstanding Section 9.02(a), without the consent of each Holder affected, no amendment or waiver may: (1) reduce, or change the maturity, of the principal of any Note; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce any premium payable upon optional redemption of the Notes, or change the date on, or the circumstances under, which any Notes are subject to redemption (other than provisions of Section 4.09 and Section 4.13, except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected); -89- (4) make any Note payable in money or currency other than that stated in the Notes; (5) modify or change any provision of this Indenture or the related definitions affecting the subordination of the Notes or any Note Guarantee in a manner that adversely affects the Holders; (6) reduce the percentage of Holders necessary to consent to an amendment or waiver to this Indenture or the Notes; (7) waive a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the Holders thereof as provided in this Indenture and a waiver of the payment default that resulted from such acceleration); (8) impair the rights of Holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement of any payment on the Notes; or (9) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or this Indenture, except as permitted by this Indenture; or (10) make any change in these amendment and waiver provisions. (c) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver but it shall be sufficient if such consent approves the substance thereof. (d) A consent to any amendment, supplement or waiver under this Indenture by any Holder given in connection with an exchange (in the case of an exchange offer) or a tender (in the case of a tender offer) of such Holder's Notes will not be rendered invalid by such tender or exchange. (e) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. SECTION 9.03. EFFECT ON SENIOR DEBT. No amendment of, or supplement or waiver to, this Indenture shall adversely affect the rights of any holder of Senior Debt or Guarantor Senior Debt under Article Ten and Section 11.02 and the defined terms as used therein without the consent of such holder or its Representative or, in accordance with the terms of such Senior Debt or Guarantor Senior Debt, the -90- consent of the agent or representative of such holder or the requisite holders of such Senior Debt or Designated Senior Debt. SECTION 9.04. COMPLIANCE WITH THE TRUST INDENTURE ACT. From the date on which this Indenture is qualified under the Trust Indenture Act, every amendment, waiver or supplement of this Indenture, the Notes or the Note Guarantees shall comply with the Trust Indenture Act as then in effect. SECTION 9.05. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of his Note by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence 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 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 120 days after such record date. The Issuer shall inform the Trustee in writing of the fixed record date if applicable. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (1) through (10) of Section 9.02(b), in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; PROVIDED that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of, and interest on, a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.06. NOTATION ON OR EXCHANGE OF NOTES. If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Trustee. The Issuer shall provide the Trustee with an appropriate notation on the Note about the changed terms and cause the Trustee to return it to the Holder at the Issuer's expense. Alternatively, if the Issuer or the Trustee so determines, the Issuer in exchange for the Note shall issue, and the Trustee shall authenticate, a -91- new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.07. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Such Opinion of Counsel shall be at the expense of the Issuer. ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT. Anything herein to the contrary notwithstanding, each of the Issuer, for itself and its successors, and each Holder, by his or her acceptance of Notes, agrees that the payment of all Obligations owing to the Holders in respect of the Notes is subordinated, to the extent and in the manner provided in this Article Ten, to the prior payment in full of all Senior Debt in cash or cash equivalents, whether outstanding on the Issue Date or thereafter incurred. Notwithstanding anything in this Article Ten to the contrary, payments and distributions (A) of Permitted Junior Securities and (B) made relating to the Notes from the trusts established pursuant to Article Eight shall not be so subordinated in right of payment, so long as, with respect to (B), (i) the conditions specified in Article Eight (without any waiver or modification of the requirement that the deposits pursuant thereto do not conflict with the terms of the Credit Facilities or any other Senior Debt) are satisfied on the date of any deposit pursuant to said trust and (ii) such payments and distributions did not violate the provisions of this Article Ten or Section 11.02 of this Indenture when made. This Article Ten shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 10.02. SUSPENSION OF PAYMENT WHEN SENIOR DEBT IS IN DEFAULT. (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or fees with respect to, any Senior Debt (a "PAYMENT DEFAULT"), then no payment or distribution of any kind or character shall be made -92- by the Issuer with respect to any Obligations on or relating to the Notes or to acquire any of the Notes for cash or assets or otherwise. (b) If any other event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "NON-PAYMENT DEFAULT") and if the Representative for the respective issue of Designated Senior Debt gives written notice of the Non-Payment Default to the Trustee stating that such notice is a payment blockage notice (a "PAYMENT BLOCKAGE NOTICE"), then during the period (the "PAYMENT BLOCKAGE PERIOD") beginning upon the delivery of such Payment Blockage Notice and ending on the earliest of (1) the date on which all such nonpayment defaults are cured or waived, (2) 179 days after the date on which the applicable Payment Blockage Notice is received or (3) the date on which the Trustee receives notice from the Representative for such Designated Senior Debt rescinding the Payment Blockage Notice (unless the maturity of any Designated Senior Debt has been accelerated), the Issuer shall not (x) make any payment of any kind or character with respect to any Obligations on or with respect to the Notes or (y) acquire any of the Notes for cash or assets or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 179 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) no new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. For all purposes of this Section 10.02(b), no Non-Payment Default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such Non-Payment Default shall have been cured or waived for a period of not less than 90 consecutive days. Any subsequent action, or any breach of any financial covenants for a period ending after the date of delivery of such Payment Blockage Notice that, in either case, would give rise to a Non-Payment Default pursuant to any provisions under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 10.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (PRO RATA to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts outstanding on the Senior Debt, if any, received from the holders of the Senior Debt (or their Representatives). Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of the Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; PROVIDED that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or cash equivalents before the Holders -93- are entitled to receive any payment of any kind or character with respect to Obligations on the Notes. SECTION 10.03. NOTES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE ISSUER. (a) Upon any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, assignment for the benefit of creditors or marshaling of assets and liabilities of the Issuer or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Issuer or its assets, whether voluntary or involuntary, all Obligations due or to become due on all Senior Debt shall first be paid in full in cash or cash equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on or relating to the Notes, or for the acquisition of any of the Notes for cash or assets or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (PRO RATA to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or cash equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Issuer, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be for purpose of this Article Ten deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of the Issuer's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or cash equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Article Ten, with any turnover of payments as otherwise calculated pursuant to this Article Ten to be made as if no such diminution had occurred. -94- (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, assets or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (PRO RATA to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or cash equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Issuer with, or the merger of the Issuer with or into, another Person or the liquidation or dissolution of the Issuer following the conveyance or transfer of all or substantially all of its assets, to another Person upon the terms and conditions provided in Article Five hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other Person shall, as a part of such consolidation, merger, conveyance or transfer, assume the Issuer's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. PAYMENTS MAY BE MADE ON NOTES. Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Issuer, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of, and interest on, the Notes, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the Notes to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Responsible Officer of the Trustee shall have actually received the written notice provided for in the first sentence of Section 10.02(b) or in Section 10.07 (PROVIDED that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.02 and/or 10.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.02 and Section 10.03). Notwithstanding anything to the contrary contained in this Article Ten or elsewhere in this Indenture, payments and distributions from the funds deposited pursuant to Article Eight will be permitted to be made and will not be subject to the provisions of this Article Ten so long as such funds were deposited in accordance with the provisions of Article Eight and did not violate the provisions of this Article Ten when such funds were so deposited. The Issuer shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Issuer, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. -95- SECTION 10.05. HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR DEBT. Subject to the payment in full of all Senior Debt in cash or cash equivalents, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, assets or securities of the Issuer applicable to the Senior Debt until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Issuer, or by or on behalf of the Holders by virtue of this Article Ten, which otherwise would have been made to the Holders shall, as between the Issuer and the Holders, be deemed to be a payment by the Issuer to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 10.06. OBLIGATIONS OF THE ISSUER UNCONDITIONAL. Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Issuer, and the Holders, the obligation of the Issuer, which is absolute and unconditional, to pay to the Holders the principal of, and any interest on, the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Issuer other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Note or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, of the holders of Senior Debt in respect of cash, assets or securities of the Issuer received upon the exercise of any such remedy. SECTION 10.07. NOTICE TO TRUSTEE. The Issuer shall give prompt written notice to the Trustee of any fact known to the Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Issuer, or from a holder of Senior Debt or a Representative therefor and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 10.07 to establish that such notice has been given by a holder of Senior Debt (or a Representative thereof). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence -96- to the satisfaction of the Trustee as to the amounts of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon any payment or distribution of assets of the Issuer referred to in this Article Ten, the Trustee, subject to the provisions of Article Seven hereof, and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders of the Notes, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. SECTION 10.09. TRUSTEE'S RELATION TO SENIOR DEBT. The Trustee and any agent of the Issuer or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. SECTION 10.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE ISSUER OR HOLDERS OF SENIOR DEBT. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuer with the terms of this Indenture, regardless of any knowledge thereof, which any such holder may have or otherwise be charged with. -97- Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Issuer and any other Person. SECTION 10.11. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF NOTES. Each Holder of the Notes by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders of the Notes, the subordination provided in this Article Ten, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Issuer (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Issuer, the filing of a claim for the unpaid balance of its Notes and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize, consent to, 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 or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.12. THIS ARTICLE TEN NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment on account of principal of, or interest on, the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. -98- SECTION 10.13. TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in this Article Ten will apply to amounts due to the Trustee (other than payments of Obligations owing to Holders in respect of the Notes) pursuant to other Sections of this Indenture. ARTICLE ELEVEN NOTE GUARANTEE SECTION 11.01. UNCONDITIONAL GUARANTEE. Subject to the provisions of this Article Eleven, each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuers or any other Guarantors to the Holders or the Trustee hereunder or thereunder: (a) (x) the due and punctual payment of the principal of, premium, if any, and interest on the Notes when and as the same shall become due and payable, whether at maturity, upon redemption or repurchase, by acceleration or otherwise, (y) the due and punctual payment of interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and (z) the due and punctual payment and performance of all other obligations of the Issuers and all other obligations of the other Guarantors (including under the Note Guarantees), in each case, to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 7.07 hereof), all in accordance with the terms hereof and thereof (collectively, the "GUARANTEE OBLIGATIONS"); and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the due and punctual payment and performance of Guarantee Obligations in accordance with the terms of the extension or renewal, whether at maturity, upon redemption or repurchase, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Issuers to the Holders under this Indenture or under the Notes, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. A Default under this Indenture or the Notes shall constitute an event of default under the Note Guarantees, and shall entitle the Holders of Notes to accelerate the obligations of the Guarantors thereunder in the same manner and to the same extent as the obligations of the Issuers. Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability 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 Guarantor, the recovery of any judgment against the Issuers, any action to enforce the same, whether or not a Note Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. To the fullest extent permitted by law, each of the Guarantors 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 Issuers, any right to require a proceeding first against the Issuers, protest, notice and all demands -99- whatsoever and covenants that its Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Note Guarantee. This Note Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Issuers or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Issuers or such Guarantor, any amount paid by the Issuers or such Guarantor to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. SECTION 11.02. SUBORDINATION OF NOTE GUARANTEE. The obligations of each Guarantor under its Note Guarantee pursuant to this Article Eleven shall be junior and subordinated to the prior payment in full of the Guarantor Senior Debt of such Guarantor in cash or cash equivalents on the same basis as the Notes are junior and subordinated to Senior Debt of the Issuers. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article Ten hereof. SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal, foreign or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of such Guarantor under its Note Guarantee and this Article Eleven shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including any guarantee under the Credit Agreement) that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Guarantor under this Article Eleven, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Each Subsidiary Guarantor that makes a payment for distribution under its Note Guarantee is entitled to a contribution from each other Subsidiary Guarantor in a PRO RATA amount based on the adjusted net assets of each Subsidiary Guarantor. -100- SECTION 11.04. EXECUTION AND DELIVERY OF NOTE GUARANTEE. To further evidence its Note Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Note Guarantee, substantially in the form of EXHIBIT F hereto, shall be endorsed on each Note authenticated and delivered by the Trustee. Such Note Guarantee shall be executed on behalf of each Guarantor by either manual or facsimile signature of one Officer or other person duly authorized by all necessary corporate action of each Guarantor who shall have been duly authorized to so execute by all requisite corporate action. The validity and enforceability of any Note Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Each of the Guarantors hereby agrees that its Note Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Note Guarantee is endorsed or at any time thereafter, such Guarantor's Note Guarantee of such Note shall nevertheless be valid. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Note Guarantee set forth in this Indenture on behalf of each Guarantor. SECTION 11.05. RELEASE OF A SUBSIDIARY GUARANTOR. A Subsidiary Guarantor shall be released from its obligations under its Note Guarantee and its obligations under this Indenture and the Registration Rights Agreement: (1) in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Equity Interests of such Subsidiary Guarantor then held by the Issuer and the Restricted Subsidiaries; or (2) if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of this Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or (3) if such Subsidiary Guarantor shall not guarantee any Indebtedness under any Credit Facility (other than if such Subsidiary Guarantor no longer guarantees any Indebtedness under any Credit Facility as a result of payment under any guarantee of any such Indebtedness by any Subsidiary Guarantor); PROVIDED that a Subsidiary Guarantor shall not be permitted to be released from its Note Guarantee if it is an obligor with respect to Indebtedness that would not, under Section 4.10, be permitted to be incurred by a Restricted Subsidiary that is not a Guarantor. -101- The Trustee shall execute an appropriate instrument prepared by the Issuers evidencing the release of a Guarantor from its obligations under its Note Guarantee upon receipt of a request by the Issuers or such Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel certifying as to the compliance with this Section 11.05; PROVIDED, HOWEVER, that the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers' Certificates of the Issuers. Except as set forth in Articles Four and Five and this Section 11.05, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Issuers or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Issuers or another Guarantor. SECTION 11.06. WAIVER OF SUBROGATION. Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Issuers that arise from the existence, payment, performance or enforcement of the Issuers' obligations under the Notes or this Indenture and such Guarantor's obligations under this Note Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Issuers, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Issuers, directly or indirectly, in cash or other assets or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Notes under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.06 is knowingly made in contemplation of such benefits. SECTION 11.07. IMMEDIATE PAYMENT. Each Guarantor agrees to make immediate payment to the Trustee on behalf of the Holders of all Guarantee Obligations owing or payable to the respective Holders upon receipt of a demand for payment therefor by the Trustee to such Guarantor in writing. -102- SECTION 11.08. NO SET-OFF. Each payment to be made by a Guarantor hereunder in respect of the Guarantee Obligations shall be payable in the currency or currencies in which such Guarantee Obligations are denominated, and, to the fullest extent permitted by law, shall be made without set-off, counterclaim, reduction or diminution of any kind or nature. SECTION 11.09. GUARANTEE OBLIGATIONS ABSOLUTE. The obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Note Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof. SECTION 11.10. NOTE GUARANTEE OBLIGATIONS CONTINUING. The obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all such obligations have been paid and satisfied in full. Each Guarantor agrees with the Trustee that it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder. SECTION 11.11. NOTE GUARANTEE OBLIGATIONS NOT REDUCED. The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Notes or this Indenture. SECTION 11.12. NOTE GUARANTEE OBLIGATIONS REINSTATED. The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Issuers or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Issuers or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Issuers or any other Guarantor is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Issuers or such Guarantor, all such -103- Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein. SECTION 11.13. NOTE GUARANTEE OBLIGATIONS NOT AFFECTED. To the fullest extent permitted by law, the obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation: (a) any limitation of status or power, disability, incapacity or other circumstance relating to the Issuers or any other Person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding-up or other proceeding involving or affecting the Issuers or any other Person; (b) any irregularity, defect, unenforceability or invalidity in respect of any indebtedness or other obligation of the Issuers or any other Person under this Indenture, the Notes or any other document or instrument; (c) any failure of the Issuers or any other Guarantor, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture, the Notes or any Note Guarantee, or to give notice thereof to a Guarantor; (d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Issuers or any other Person or their respective assets or the release or discharge of any such right or remedy; (e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Issuers or any other Person; (f) any change in the time, manner or place of payment of, or in any other term of, any of the Notes, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Notes or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Notes; (g) any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Issuers or a Guarantor; (h) any merger or amalgamation of the Issuers or a Guarantor with any Person or Persons; -104- (i) the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the Guarantee Obligations or the obligations of a Guarantor under its Note Guarantee; and (j) any other circumstance, including release of a Guarantor pursuant to Section 11.05 (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of the Issuers under this Indenture or the Notes or of a Guarantor in respect of its Note Guarantee hereunder. SECTION 11.14. WAIVER. Without in any way limiting the provisions of Section 11.01, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Issuers, protest, notice of dishonor or non-payment of any of the Guarantee Obligations, or other notice or formalities to the Issuers or any Guarantor of any kind whatsoever. SECTION 11.15. NO OBLIGATION TO TAKE ACTION AGAINST THE ISSUERS. Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies against the Issuers or any other Person or any property of the Issuers or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Note Guarantees or under this Indenture. SECTION 11.16. DEALING WITH THE ISSUERS AND OTHERS. The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Issuers or any other Person; (b) take or abstain from taking security or collateral from the Issuers or from perfecting security or collateral of the Issuers; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Issuers or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes; (d) accept compromises or arrangements from the Issuers; -105- (e) apply all monies at any time received from the Issuers or from any security upon such part of the Guarantee Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Issuers and all other Persons and any security as the Holders or the Trustee may see fit. SECTION 11.17. DEFAULT AND ENFORCEMENT. If any Guarantor fails to pay in accordance with Section 11.07 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Note Guarantee of any such Guarantor and such Guarantor's obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations. SECTION 11.18. ACKNOWLEDGMENT. Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Notes and consents to and approves of the same. SECTION 11.19. COSTS AND EXPENSES. Each Guarantor shall pay on demand by the Trustee any and all reasonable costs, fees and expenses (including, without limitation, reasonable legal fees on a solicitor and client basis) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Note Guarantee. SECTION 11.20. NO MERGER OR WAIVER; CUMULATIVE REMEDIES. No Note Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Notes, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Notes preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Note Guarantee and under this Indenture, the Notes and any other document or instrument between a Guarantor and/or the Issuers and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privilege provided by law. SECTION 11.21. SURVIVAL OF NOTE GUARANTEE OBLIGATIONS. Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 11.01 shall survive the payment in full of the Guarantee Obligations and shall be enforceable against such Guarantor, to the full- -106- est extent permitted by law, without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Issuers or any Guarantor. SECTION 11.22. NOTE GUARANTEE IN ADDITION TO OTHER GUARANTEE OBLIGATIONS. The obligations of each Guarantor under its Note Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Notes and any guarantees or security at any time held by or for the benefit of any of them. SECTION 11.23. SEVERABILITY. Any provision of this Article Eleven which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Eleven. SECTION 11.24. SUCCESSORS AND ASSIGNS. Each Note Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except that no Guarantor may assign any of its obligations hereunder or thereunder. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the Trust Indenture Act, such required or deemed provision shall control. SECTION 12.02. NOTICES. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by nationally recognized overnight courier service, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: -107- if to the Issuer or a Guarantor: c/o Ply Gem Industries, Inc. 303 West Major Street Kearney, Missouri 64060 Attention: Chief Financial Officer Telephone: (816) 903-8225 Facsimile: (816) 903-4330 if to the Trustee: U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3C St. Paul, MN 55107-2292 Attention: Corporate Trust Department Telephone: (651) 495-3918 Facsimile: (651) 495-8097 Each of the Issuer and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Issuer and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when replied to; when receipt is acknowledged, if telecopied; five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee); and next Business Day if by nationally recognized overnight courier service. Any notice or communication mailed to a Holder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to Trust Indenture Act ss. 312(b) with other Holders with respect to their rights under this Indenture, the Notes or the Note Guarantees. The Issuer, the Trustee, the Registrar and any other Person shall have the protection of Trust Indenture Act ss. 312(c). -108- SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate, in form and substance reasonably satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Issuer, 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 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with or satisfied; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant 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 12.06. RULES BY PAYING AGENT OR REGISTRAR. The Paying Agent or Registrar may make reasonable rules and set reasonable requirements for their functions. SECTION 12.07. LEGAL HOLIDAYS. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day. -109- SECTION 12.08. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Issuer or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator, stockholder, member or manager of the Issuer or any Guarantor shall have any liability for any obligations of the Issuer under the Notes or this Indenture or of any Guarantor under its Note Guarantee or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for issuance of the Notes. SECTION 12.11. SUCCESSORS. All agreements of the Issuer and the Guarantors in this Indenture, the Notes and the Note Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.12. DUPLICATE ORIGINALS. All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 12.13. SEVERABILITY. To the extent permitted by applicable law, in case any one or more of the provisions in this Indenture, in the Notes or in the Note Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. -110- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above. PLY GEM INDUSTRIES, INC., as Issuer By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer PLY GEM HOLDINGS, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer GREAT LAKES WINDOW, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President KROY BUILDING PRODUCTS, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President NAPCO, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President S-1 NAPCO WINDOW SYSTEMS, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President THERMAL-GARD, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President VARIFORM, INC., as Guarantor By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President S-2 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Richard H. Prokosch --------------------------------------- Name: Richard H. Prokosch Title: Vice President S-3 EXHIBIT A --------- [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] PLY GEM INDUSTRIES, INC. 9% Senior Subordinated Notes 2012 CUSIP No. No. $ PLY GEM INDUSTRIES, INC., a Delaware corporation (the "ISSUER"), for value received promise to pay to ____________ or its registered assigns, the principal sum of [or such other amount as is provided in a schedule attached hereto]1 on February 15, 2012. Interest Payment Dates: February 15 and August 15, commencing August 15, 2004. Record Dates: February 1 and August 1. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. - ----------------------------- a This language should be included only if the Note is issued in global form. A-1 IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officer. Dated: February 12, 2004 PLY GEM INDUSTRIES, INC., as Issuer By: --------------------------------------- Name: Title: A-2 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 9% Senior Subordinated Notes due 2012 described in the within-mentioned Indenture. Dated: February 12, 2004 U.S.BANK NATIONAL ASSOCIATION, as Trustee By: --------------------------------------- Authorized Signatory A-3 (Reverse of Note) 9% Senior Subordinated Notes due 2012 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. SECTION 1. INTEREST. Ply Gem Industries, Inc., a Delaware corporation (the "ISSUER") promises to pay interest on the principal amount of this Note at 9% per annum from February 12, 2004 until maturity. The Issuer will pay interest semi-annually on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"), commencing August 15, 2004. 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 original issuance. The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand to the extent lawful at the interest rate applicable to the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be issued in denominations of $1,000 and integral multiples thereof. The Issuer shall pay principal, premium, if any, and interest on the Notes in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts ("U.S. LEGAL TENDER"). Principal, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose except that, at the option of the Issuer, the payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; PROVIDED that for Holders that have given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will make all payments of principal, premium and interest by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Issuer, the Issuer's office or agency in New York will be the office of the Trustee maintained for such purpose. SECTION 3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to any Holder. Except as provided in the Indenture, the Issuer or any of their Subsidiaries may act in any such capacity. SECTION 4. INDENTURE AND SUBORDINATION. The Issuer issued the Notes under an Indenture dated as of February 12, 2004 ("INDENTURE") by and among the Issuer, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made A-4 part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TRUST INDENTURE ACT"). The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt. SECTION 5. OPTIONAL REDEMPTION. Except as set forth in Section 6 hereof, the Notes will not be redeemable at the Issuer's option prior to February 15, 2008 (the "FIRST CALL DATE"). On or after the First Call Date, the Notes will be subject to redemption at any time at the option of the Issuer, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on February 15 of the years indicated below: YEAR PERCENTAGE ---- ---------- 2008............................ 104.50% 2009............................ 102.25% 2010 and thereafter............. 100.00% SECTION 6. REDEMPTION WITH PROCEEDS FROM EQUITY OFFERINGS OR UPON A CHANGE OF CONTROL. (a) At any time prior to February 15, 2007, the Issuer may redeem at its option on any one or more occasions up to 35% of the aggregate principal amount of Notes issued under the Indenture with the net cash proceeds of one or more Qualified Equity Offerings at a redemption price equal to 109% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the Redemption Date; PROVIDED that (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption and (ii) such redemption shall occur within 90 days of the date of the closing of any such Qualified Equity Offering. (b) At any time on or prior to the First Call Date, the Notes may also be redeemed, in whole but not in part, at the Issuer's option, upon the occurrence of a Change of Control, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such redemption or purchase may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the Redemption Date (but in no event more than 90 days after the occurrence of such Change of Control). The Issuer may provide in such notice that payment of such price and performance of the Issuer's obligations with respect to such redemption may be performed by another Person. Any such notice may be given prior to the occurrence of the related Change of Control, and any such redemption or notice may, at the Issuer's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of the related Change of Control. (c) At any time prior to the First Call Date, after the completion of a Change of Control Offer that was accepted by Holders of not less than 75% of the aggregate principal A-5 amount of Notes then outstanding, the Issuer may redeem all, but not less than all, of the Notes not validly tendered in the Change of Control Offer, at a redemption price equal to 101% of the principal amount, and accrued and unpaid interest, if any, to the Redemption Date; PROVIDED that such redemption occurs within 90 days after the completion of such Change of Control Offer. SECTION 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the Redemption Date interest ceases to accrue on Notes or portions thereof called for redemption. SECTION 8. MANDATORY REDEMPTION. For the avoidance of doubt, an offer to purchase pursuant to Section 9 hereof shall not be deemed a redemption. The Issuer shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 9. REPURCHASE AT OPTION OF HOLDER. Upon the occurrence of a Change of Control, and subject to certain conditions set forth in the Indenture, the Issuer will be required to offer to purchase all of the outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase. The Issuer is, subject to certain conditions and exceptions, obligated to make an offer to purchase Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase, with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. SECTION 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer and the Registrar are not required to transfer or exchange any Note selected for redemption. Also, the Issuer and the Registrar are not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. SECTION 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. SECTION 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture and the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture A-6 and the Notes to, among other things, cure any ambiguity, defect or inconsistency in the Indenture, provide for uncertificated Notes in addition to certificated Notes, comply with any requirements of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act, or make any change that does not materially adversely affect the rights of any Holder of a Note. SECTION 13. DEFAULTS AND REMEDIES. If a Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes generally may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of a Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Issuer, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal or interest including an accelerated payment or the failure to make a payment on the Change of Control Payment Date or the Net Proceeds Payment Date pursuant to a Net Proceeds Offer or a Default in complying with the provisions of Article Five of the Indenture) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in the payment of interest on, or the principal of, or the premium on, the Notes. SECTION 14. RESTRICTIVE COVENANTS. The Indenture contains certain covenants that, among other things, limit the ability of the Issuer and its Restricted Subsidiaries to make restricted payments, to incur indebtedness, to create liens, to sell assets, to permit restrictions on dividends and other payments by Restricted Subsidiaries of the Issuer, to consolidate, merge or sell all or substantially all of its assets or to engage in transactions with affiliates. The limitations are subject to a number of important qualifications and exceptions. The Issuer must annually report to the Trustee on compliance with such limitations and other provisions in the Indenture. SECTION 15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator, stockholder, member or manager of the Issuer or any Guarantor shall have any liability for any obligations of the Issuer under the Notes or the Indenture, or of any Guarantor under its Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 16. NOTE GUARANTEES. This Note will be entitled to the benefits of certain Note Guarantees made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. SECTION 17. TRUSTEE DEALINGS WITH THE ISSUER. Subject to certain terms, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or A-7 pledgee of Notes and may otherwise deal with the Issuer, their Subsidiaries or their respective Affiliates as if it were not the Trustee. SECTION 18. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. SECTION 19. 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 entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). SECTION 20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. Pursuant to, but subject to the exceptions in, the Registration Rights Agreement, the Issuer and the Guarantors will be obligated to use their commercially reasonable efforts to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for a 9% Senior Subordinated Note due 2012 of the Issuer which shall have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to this Note (except that such note shall not be entitled to Additional Interest and shall not contain terms with respect to transfer restrictions). The Holders shall be entitled to receive certain Additional Interest in the event such exchange offer is not consummated or the Notes are not offered for resale and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement.2 SECTION 21. CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP and ISIN numbers to be printed on the Notes and the Trustee may use CUSIP or ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. SECTION 22. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. - ----------------------------- a This Section not to appear on Exchange Notes or Private Exchange Notes or Additional Notes unless required by the terms of such Additional Notes. A-8 ASSIGNMENT FORM I or we assign and transfer this Note to ________________________________________________________________________________ ________________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) ________________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _______________________________________ agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. Dated: _________________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: _______________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) In connection with any transfer of this Note occurring prior to the date which is the date following the second anniversary of the original issuance of this Note, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and is making the transfer pursuant to one of the following: [CHECK ONE] (1) ___ to the Issuer or a subsidiary thereof; or (2) ___ to a person who the transferor reasonably believes is a "qualified institutional buyer" pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); or (3) ___ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) ___ outside the United States to a non-"U.S. person" as defined in Rule 902 of Regulation S under the Securities Act in compliance with Rule 904 of Regulation S under the Securities Act; or (5) ___ pursuant to the exemption from registration provided by Rule 144 under the Securities Act or pursuant to another exemption available under the Securities Act; or (6) ___ pursuant to an effective registration statement under the Securities Act. and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Issuer as defined in Rule 144 under the Securities Act (an "Affiliate"): [_] The transferee is an Affiliate of the Issuer. Unless one of the foregoing items (1) through (6) is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; PROVIDED, HOWEVER, that if item (3), (4) or (5) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Issuer has reasonably requested 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. If none of the foregoing items (1) through (6) are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Dated: _________________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: _______________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer 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. -2- Dated: _________________ ________________________________________ NOTICE: To be executed by an executive officer -3- OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.09 or Section 4.13 of the Indenture, check the appropriate box: Section 4.09 [_] Section 4.13 [_] If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.09 or Section 4.13 of the Indenture, state the amount (in denominations of $1,000 and integral multiples thereof): $___________ Dated: _________________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: _______________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) -4- SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE3 The following exchanges of a part of this Global Note for an interest in another Global Note or for a Physical Note, or exchanges of a part of another Global Note or Physical Note for an interest in this Global Note, have been made:
PRINCIPAL AMOUNT OF SIGNATURE OF AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN THIS GLOBAL NOTE AUTHORIZED OFFICER OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF FOLLOWING SUCH DECREASE TRUSTEE OR NOTE DATE OF EXCHANGE THIS GLOBAL NOTE THIS GLOBAL NOTE (OR INCREASE) CUSTODIAN - ---------------- ---------------- ---------------- ------------- ---------
- ----------------------------- a This schedule should be included only if the Note is issued in global form. -5- EXHIBIT B --------- FORM OF LEGENDS Each Global Note and Physical Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until after the second anniversary of the Issue Date, unless otherwise agreed by the Issuer and the Holder thereof or if such legend is no longer required by Section 2.16(g) of the Indenture: THE SECURITY (OR ITS PREDECESSOR) EVIDENCED BY THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S. SECURITIES ACT OF 1933, AND THE SECURITY EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED BY THIS CERTIFICATE (1) BY ITS ACQUISITION OF THE SECURITY REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER AND THE GUARANTORS THAT (X) THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(A) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, OR ANOTHER AVAILABLE EXEMPTION UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS PURCHASING AT LEAST $250,000 OF NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN INSTITUTIONAL ACCREDITED INVESTOR (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (2) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES OR (3) UNDER AN EFFECTIVE REGISTRATION B-1 STATEMENT AND, IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED BY THIS CERTIFICATE OF THE RESALE RESTRICTIONS DESCRIBED IN (X) ABOVE. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY OR 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. Each Global Note authenticated and delivered hereunder shall also bear the following legend: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE 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) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("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 IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS 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. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A B-2 SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE. Each Temporary Regulation S Global Note shall also bear the following legend: "THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW. "NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE." B-3 EXHIBIT C --------- FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS [ ], [ ] U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3C St. Paul, MN 55107-2292 T: (651) 495-3918 F: (651) 495-8097 Attention: Corporate Trust Department Ladies and Gentlemen: In connection with our proposed purchase of 9% Senior Subordinated Notes due 2012 (the "NOTES") of PLY GEM INDUSTRIES, INC., a Delaware corporation (the "ISSUER"), we confirm that: 1. 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 and the Securities Act of 1933, as amended (the "Securities Act"), and all applicable state securities laws. 2. 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, sold, pledged or otherwise transferred except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell, offer, pledge or otherwise transfer any Notes, we will do so only (i) to the Issuer or any of its subsidiaries, (ii) inside the United States in a transaction meeting the requirements of Rule 144A under the Securities Act to a person who we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that is purchasing at least $250,000 of Notes for its own account or for the account of an institutional accredited investor and who, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed 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), (iv) outside the United States to a person that is not a U.S. person (as defined in Rule 902 under the Securities Act) in accordance with Regulation S promulgated under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 C-1 under the Securities Act (if available) or another available exemption under the Securities Act or (vi) pursuant to an effective registration statement under the Securities Act, 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. 3. We are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended) or plan (as defined in Section 4975 of the Internal Revenue Code of 1986, as amended), except as permitted in the section entitled "Notice to Investors" of the Offering Memorandum. 4. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee and the Issuer such certification, legal opinions and other information as the Trustee and the Issuer may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and 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 their investment, as the case may be. 6. We are acquiring the Notes purchased by us for our 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. C-2 You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ________________________________________ Name: Title: C-3 EXHIBIT D --------- FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S ------------------------ [ ], [ ] U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3C St. Paul, MN 55107-2292 T: (651) 495-3918 F: (651) 495-8097 Attention: [Corporate Trust Department] Re: PLY GEM INDUSTRIES, INC. (THE "ISSUER") 9% SENIOR SUBORDINATED NOTES DUE 2012 (THE "NOTES") --------------------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $[ ] aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer 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, or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any inter- D-1 ested 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: ________________________________________ Authorized Signatory D-2 EXHIBIT E --------- FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANS- FERS OF TEMPORARY REGULATION S GLOBAL NOTE ___________________,_______ U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3C St. Paul, MN 55107-2292 T: (651) 495-3918 F: (651) 495-8097 Attention: [Corporate Trust Department] Re: PLY GEM INDUSTRIES, INC. (THE "ISSUER") 9% SENIOR SUBORDINATED NOTES DUE 2012 (THE "NOTES") --------------------------------------------------- Dear Sirs: This letter relates to U.S. $ ______________ principal amount of Notes represented by a certificate (the "LEGENDED CERTIFICATE") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 2.16(c) of the Indenture (the "INDENTURE") dated as of February 12, 2004 relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States (or to an Initial Purchaser (as defined in the Indenture)) to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. You, as Trustee, the Issuer, counsel for the Issuer and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this letter have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ________________________________________ Authorized Signature E-1 EXHIBIT F --------- NOTE GUARANTEE For value received, each of the undersigned (including any successor Person under the Indenture) hereby unconditionally guarantees, jointly and severally, to the extent set forth in the Indenture (as defined below) to the Holder of this Note the payment of principal, premium, if any, and interest on this Note in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note when due, if lawful, and, to the extent permitted by law, the payment or performance of all other obligations of the Issuer under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, the Indenture, including Article Eleven thereof, and this Note Guarantee. This Note Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Note Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of February 12, 2004, among Ply Gem Industries, Inc., a Delaware corporation (the "Issuer"), the Guarantors named therein and U.S. Bank National Association, as trustee (the "Trustee"), as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Note Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee and all of the other provisions of the Indenture to which this Note Guarantee relates. No director, officer, employee, incorporator, stockholder, member or manager of any Guarantor, as such, shall have any liability for any obligations of such Guarantors under such Guarantors' Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligation or its creation. This Note Guarantee is subordinated in right of payment, in the manner and to the extent set forth in Article Eleven of the Indenture, to the prior payment in full in cash or cash equivalents of all Guarantor Senior Debt of the Guarantors, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. THIS NOTE GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note Guarantee is subject to release upon the terms set forth in the Indenture. F-1 IN WITNESS WHEREOF, each Guarantor has caused its Note Guarantee to be duly executed. Date: [ ] By: ________________________________________ Name: Title: F-2 EX-4.3 27 y95660exv4w3.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.3 ----------- ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of February 12, 2004 By and Among PLY GEM INDUSTRIES, INC., the GUARANTORS named herein and UBS SECURITIES LLC and DEUTSCHE BANK SECURITIES INC., CIBC WORLD MARKETS CORP. and MERRIL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Initial Purchasers 9% Senior Subordinated Notes due 2012 ================================================================================ TABLE OF CONTENTS ----------------- PAGE ---- SECTION 1. DEFINITIONS..................................................1 SECTION 2. EXCHANGE OFFER...............................................4 SECTION 3. SHELF REGISTRATION...........................................7 SECTION 4. ADDITIONAL INTEREST..........................................8 SECTION 5. REGISTRATION PROCEDURES......................................9 SECTION 6. REGISTRATION EXPENSES.......................................17 SECTION 7. INDEMNIFICATION.............................................17 SECTION 8. RULES 144 AND 144A..........................................21 SECTION 9. UNDERWRITTEN REGISTRATIONS..................................21 SECTION 10. MISCELLANEOUS...............................................21 (a) NO INCONSISTENT AGREEMENTS..................................21 (b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES.....................21 (c) AMENDMENTS AND WAIVERS......................................21 (d) NOTICES.....................................................22 (e) GUARANTORS..................................................23 (f) SUCCESSORS AND ASSIGNS......................................23 (g) COUNTERPARTS................................................23 (h) HEADINGS....................................................23 (i) GOVERNING LAW...............................................23 (j) SEVERABILITY................................................23 (k) SECURITIES HELD BY THE ISSUERS OR THEIR AFFILIATES..........24 (l) THIRD-PARTY BENEFICIARIES...................................24 (m) ENTIRE AGREEMENT............................................24 SIGNATURES...................................................................S-1 -i- REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is dated as of February 12, 2004, by and among PLY GEM INDUSTRIES, INC., a Delaware corporation (the "COMPANY") and each of the Guarantors (as defined herein) (the Company and the Guarantors are referred to collectively herein as the "ISSUERS"), on the one hand, and UBS SECURITIES LLC (the "REPRESENTATIVE") and DEUTSCHE BANK SECURITIES INC., CIBC WORLD MARKETS CORP. and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (together with the Representative, the "INITIAL PURCHASERS"), on the other hand. This Agreement is entered into in connection with the Purchase Agreement, dated as of February 5, 2004, by and among the Issuers and the Initial Purchasers (the "PURCHASE AGREEMENT"), relating to the offering of $225,000,000 aggregate principal amount of 9% Senior Subordinated Notes due 2012 of the Company (including the guarantees thereof by the Guarantors, the "NOTES"). The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: Section 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: "ACTION" shall have the meaning set forth in Section 7(c) hereof. "ADDITIONAL INTEREST" shall have the meaning set forth in Section 4(a) hereof. "ADVICE" shall have the meaning set forth in Section 5 hereof. "ADDITIONAL INTEREST PAYMENT DATE" shall have the meaning set forth in Section 4(b) hereof. "AGREEMENT" shall have the meaning set forth in the first introductory paragraph hereto. "APPLICABLE PERIOD" shall have the meaning set forth in Section 2(b) hereof. "BOARD OF DIRECTORS" shall have the meaning set forth in Section 5 hereof. "BUSINESS DAY" shall mean a day that is not a Legal Holiday. "COMPANY" shall have the meaning set forth in the introductory paragraph hereto and shall also include the Company's permitted successors and assigns. "COMMISSION" shall mean the Securities and Exchange Commission. -2- "DAY" shall mean a calendar day. "DELAY PERIOD" shall have the meaning set forth in Section 5 hereof. "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 3(b) hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "EXCHANGE NOTES" shall have the meaning set forth in Section 2(a) hereof. "EXCHANGE OFFER" shall have the meaning set forth in Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a) hereof. "GUARANTORS" means each subsidiary of the Company listed on the signature page to this Agreement and each Person who executes and delivers a counterpart of this Agreement after the date hereof pursuant to Section 10(e) hereof. "HOLDER" shall mean any holder of a Registrable Note or Registrable Notes. "INDENTURE" shall mean the Indenture, dated as of February 12, 2004, by and among the Issuers and Trustee, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS" shall have the meaning set forth in the first introductory paragraph hereof. "INSPECTORS" shall have the meaning set forth in Section 5(n) hereof. "ISSUE DATE" shall mean February 12, 2004, the date of original issuance of the Notes. "ISSUERS" shall have the meaning set forth in the first introductory paragraph hereto. "LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on which banking institutions in New York, New York are required by law, regulation or executive order to remain closed. "LOSSES" shall have the meaning set forth in Section 7(a) hereof. "NASD" shall mean National Association of Securities Dealers, Inc. "NOTES" shall have the meaning set forth in the second introductory paragraph hereto. "PARTICIPANT" shall have the meaning set forth in Section 7(a) hereof. "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 2(b) hereof. -3- "PERSON" shall mean an individual, corporation, partnership, joint venture association, joint stock company, trust, unincorporated limited liability company, government or any agency or political subdivision thereof or any other entity. "PRIVATE EXCHANGE" shall have the meaning set forth in Section 2(b) hereof. "PRIVATE EXCHANGE NOTES" shall have the meaning set forth in Section 2(b) hereof. "PROSPECTUS" shall mean the prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "PURCHASE AGREEMENT" shall have the meaning set forth in the second introductory paragraph hereof. "RECORDS" shall have the meaning set forth in Section 5(n) hereof. "REGISTRABLE NOTES" shall mean each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, in each case until (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Note, Exchange Note or Private Exchange Note has been declared effective by the Commission and such Note, Exchange Note or such Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes that may be resold without restriction under state and federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange Note has been sold in compliance with Rule 144 or is salable pursuant to Rule 144(k). "REGISTRATION DEFAULT" shall have the meaning set forth in Section 4(a) hereof. "REGISTRATION STATEMENT" shall mean any appropriate registration statement of the Issuers covering any of the Registrable Notes filed with the Commission under the Securities Act, 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. "REPRESENTATIVE" shall have the meaning set forth in the introductory paragraph hereto. -4- "REQUESTING PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 2(b) hereof. "RULE 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. "RULE 144A" shall mean Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission. "RULE 415" shall mean Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "SHELF FILING EVENT" shall have the meaning set forth in Section 2(c) hereof. "SHELF REGISTRATION" shall have the meaning set forth in Section 3(a) hereof. "TIA" shall mean the Trust Indenture Act of 1939, as amended. "TRUSTEE" shall mean the trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes. "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a registration in which securities of the Issuers are sold to an underwriter for reoffering to the public. Section 2. EXCHANGE OFFER (a) Unless the Exchange Offer would violate applicable law or interpretation of the staff of the Commission, the Issuers shall (i) file a Registration Statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") with the Commission on an appropriate registration form with respect to a registered offer (the "EXCHANGE OFFER") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes (including the guarantees with respect thereto, the "EXCHANGE NOTES") that are identical in all material respects to the Notes (except that the Exchange Notes shall not contain restrictive legends, terms with respect to transfer restrictions or Additional Interest upon a Registration Default), (ii) use their commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act and (iii) use their commercially reasonable efforts to consummate the Exchange Offer within 210 days after the Issue Date (or, if such 210th day is not a Business Day, on or prior to the first Business Day thereafter). Upon the Exchange Offer Registration Statement being declared effective by the Commission, the Issuers will offer the -5- Exchange Notes in exchange for surrender of the Notes. The Issuers shall keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to Holders. Each Holder that participates in the Exchange Offer will be required to represent to the Issuers in writing that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act, (iii) it is not an affiliate of the Company or any Guarantor as defined by Rule 405 of the Securities Act, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes and (v) if such Holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities (a "PARTICIPATING BROKER-DEALER"), it will deliver a prospectus in connection with any resale of such Exchange Notes. (b) The Issuers and the Initial Purchasers acknowledge that the staff of the Commission has taken the position that any Participating Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (other than a resale of an unsold allotment resulting from the original offering of the Notes). The Issuers and the Initial Purchasers also acknowledge that the staff of the Commission has taken the position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Notes, without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Securities Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. In light of the foregoing, if requested by a Participating Broker-Dealer (a "REQUESTING PARTICIPATING BROKER-DEALER"), the Issuers agree to use their commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective for a period necessary to comply with applicable law in connection with such resales but in no event more than 180 days after the date on which the Exchange Offer Registration Statement is declared effective, or such longer period if extended pursuant to any Delay Period in accordance with the last paragraph of Section 5 hereof, or such earlier date as each Requesting Participating Broker-Dealer shall have notified the Company in writing that such Requesting Participating Broker-Dealer has resold all Exchange Notes acquired by it in the Exchange Offer (such period, the "APPLICABLE PERIOD"). The Issuers shall include a plan of distribution in such Exchange Offer Registration Statement that meets the requirements set forth in the preceding paragraph. If, prior to consummation of the Exchange Offer, any Initial Purchaser or any other Holder holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or if any Holder is not entitled to participate -6- in the Exchange Offer, the Issuers upon the request of any such Initial Purchaser or any such Holder, as the case may be, shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchasers or any such Holder, as the case may be, in exchange (the "PRIVATE EXCHANGE") for such Notes held by such Initial Purchaser or any such Holder a like principal amount of notes (the "PRIVATE EXCHANGE NOTES") of the Issuers that are identical in all material respects to the Exchange Notes except that the Private Exchange Notes may be subject to restrictions on transfer and bear a legend to such effect. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes (if permitted by the CUSIP Service Bureau). Upon consummation of the Exchange Offer in accordance with this Section 2, the Issuers shall have no further registration obligations other than the Issuers' continuing registration obligations with respect to (i) Private Exchange Notes, (ii) Exchange Notes held by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which clause (c)(iv) of this Section 2 applies. In connection with the Exchange Offer, the Issuers shall: (1) mail or cause to be mailed to each Holder entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: (1) accept for exchange all Notes validly tendered and not validly withdrawn by the Holders pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver or cause to be delivered to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each such Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Registrable Notes of such Holder so accepted for exchange. -7- The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Company deems necessary for the consummation of the Exchange Offer or Private Exchange. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture (in either case, with such changes as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA and shall provide that (a) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (b) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall 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. (c) In the event that (i) any changes in law or the applicable interpretations of the staff of the Commission do not permit the Issuers to effect the Exchange Offer, (ii) for any reason the Exchange Offer is not consummated within 210 days of the Issue Date, or if such 210th day is not a Business Day, on or prior to the first Business Day thereafter, (iii) any Holder notifies the Company prior to the 30th day following consummation of the Exchange Offer that it is prohibited by law or applicable interpretations of the staff of the Commission from participating in the Exchange Offer, (iv) in the case of any Holder who participates in the Exchange Offer, such Holder notifies the Company prior to the 30th day following the consummation of the Exchange Offer that it did not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of any Issuer within the meaning of the Securities Act) or (v) any Initial Purchaser so requests with respect to Notes or Private Exchange Notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution (each such event referred to in clauses (i) through (v) of this sentence, a "SHELF FILING EVENT"), then the Issuers shall file a Shelf Registration pursuant to Section 3 hereof. Section 3. SHELF REGISTRATION If at any time a Shelf Filing Event shall occur, then: (a) SHELF REGISTRATION. The Issuers shall file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "SHELF REGISTRATION"). The Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them -8- (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration. (b) The Issuers shall use their commercially reasonable efforts (x) to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the 180th day after the occurrence of the applicable Shelf Filing Event and (y) to keep the Shelf Registration continuously effective under the Securities Act for the lesser of two years from the Issue Date and the time period referred to in Rule 144(k) under the Securities Act (the "EFFECTIVENESS PERIOD"), or such shorter period ending when all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration; PROVIDED, HOWEVER, that (i) the Effectiveness Period in respect of the Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and (ii) the Company may suspend the effectiveness of the Shelf Registration by written notice to the Holders solely (A) as a result of the filing of a post-effective amendment to the Shelf Registration to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (B) to the extent and for so long as permitted by the penultimate paragraph of Section 5. (c) SUPPLEMENTS AND AMENDMENTS. The Issuers agree to supplement or make amendments to the Shelf Registration as and when required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration or by the Securities Act or rules and regulations thereunder for shelf registration. Section 4. ADDITIONAL INTEREST (a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree that if: (i) the Exchange Offer is not consummated on or prior to the 210th day following the Issue Date, or, if that day is not a Business Day, the next day that is a Business Day; or (ii) the Shelf Registration is required to be filed but is not declared effective within the time period specified in Section 3(b)(x), or is declared effective by such date but thereafter ceases to be effective or usable (unless the Shelf Registration ceases to be effective or usable as specifically permitted by the penultimate paragraph of Section 5 hereof), (each such event referred to in clauses (i) and (ii) a "REGISTRATION DEFAULT"), additional interest in the form of additional cash interest ("ADDITIONAL INTEREST") will accrue on the Registrable Notes required to be registered on a Shelf Registration. The rate of Additional Interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default, increasing by an additional 0.25% per annum with respect to each subsequent 90-day period up to a maximum amount of Additional Interest of 1.00% per annum, from and including the date on which any such Registra- -9- tion Default shall occur to, but excluding, the earlier of (1) the date on which all Registration Defaults have been cured or (2) the date on which such Registrable Note ceases to be a Registrable Note or otherwise become freely transferable by Holders other than affiliates of the Issuers without further registration under the Securities Act. If, after the cure of all Registration Defaults then in effect, there is a subsequent Registration Default, the rate of Additional Interest for such subsequent Registration Default shall initially be 0.25% regardless of the rate in effect with respect to any prior Registration Default at the time of cure of such Registration Default and shall increase in the manner and be subject to the maximum Additional Interest rate contained in the preceding sentence. Notwithstanding the foregoing, (1) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is pending and (2) a Holder of Registrable Notes that is not entitled to the benefits of the Shelf Registration (E.G., such Holder has not elected to include information with respect to itself in such Shelf Registration) shall not be entitled to Additional Interest with respect to a Registration Default that pertains to the Shelf Registration. (b) So long as Notes remain outstanding, the Company shall notify the Trustee within five Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid. Any amounts of Additional Interest due pursuant to clauses (a)(i) or (a)(ii) of this Section 4 will be payable in cash semi-annually on each February 15 and August 15 (each an "ADDITIONAL INTEREST PAYMENT DATE"), commencing with the first such date occurring after any such Additional Interest commences to accrue, to Holders to whom regular interest is payable on such Additional Interest Payment Date with respect to Notes that are Registrable Notes. The amount of Additional Interest for each Registrable Note will be determined by multiplying the applicable rate of Additional Interest by the aggregate principal amount of such Registrable Note outstanding on the Additional Interest Payment Date following such Registration Default in the case of the first such payment of Additional Interest with respect to a Registration Default (and thereafter at the next succeeding Additional Interest Payment Date until the cure of such Registration Default), and multiplying the product of the foregoing by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. The Initial Purchasers and the Holders acknowledge and agree that the Additional Interest provided by this Section 4 of this Agreement shall be the exclusive monetary remedy available to Holders for any Registration Default. Section 5. REGISTRATION PROCEDURES In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall: (a) Prepare and file with the Commission the Registration Statement or Registration Statements prescribed by Section 2 or 3 hereof, and use their commercially reasonable efforts to cause each such Registration Statement to become effective and remain effective as -10- provided herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel (if requested by any such person) and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed. The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object. (b) Use their reasonable commercial efforts to prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus, in each case, in accordance with the intended methods of distribution set forth in such Registration Statement or Prospectus, as so amended or supplemented. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Company has received written notice that such broker-dealer will be a Participating Broker-Dealer in the applicable Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel (if such counsel is known to the Issuers) and the managing underwriters, if any, as promptly as possible, and, if requested by any such Person, confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or -11- the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(m) hereof cease to be true and correct in all material respects, (iv) of the receipt by any of the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the Company's determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes, as the case may be, for sale in any jurisdiction, and, if any such order is issued, to use their commercially reasonable efforts to obtain the withdrawal of any such order at the earliest practicable moment. (e) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or any Participating Broker-Dealer, as the case may be, (i) promptly incorporate in such Registration Statement or Prospectus a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders or any Participating Broker-Dealer, as the case may be (based upon advice of counsel), determine is reasonably required to be included therein and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that the Issuers shall not be required to take any action hereunder that would violate applicable laws. -12- (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, who so requests, their counsel (if requested by any such person) and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, their respective counsel (if requested) and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or Exchange Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their commercially reasonable efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request; keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of such Exchange Notes or Registrable Notes covered by the applicable Registration Statement; PROVIDED, HOWEVER, that no Issuer shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in any such jurisdiction where it is not then so subject. -13- (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates, consistent with the Indenture, shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may reasonably request a reasonable period of time prior to any sale of such Registrable Notes. (j) Use their commercially reasonable efforts to cause the Registrable Notes or Exchange Notes covered by any Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Notes or Exchange Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) and the penultimate paragraph of this Section 5) file with the Commission, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a 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. (l) On or prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. (m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, whether or not such offering is an underwritten offering, (i) use their commercially reasonable efforts to obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters (and to any Holder that has advised the Company that such Holder may have a "due diligence" defense under Section 11 of the Securities Act) covering the matters customarily covered in opinions requested in underwritten offerings; and (ii) use their commercially reasonable efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance -14- reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters (and to any Holder that has advised the Company that such Holder may have a "due diligence" defense under Section 11 of the Securities Act), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings. (n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, 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 instruments 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 reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose, or use in connection with any market transactions in violation of any applicable securities laws, any Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is necessary or advisable in the opinion of counsel for an Inspector in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or the Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the information in such Records has been made generally available to the public; PROVIDED, HOWEVER, that (i) each Inspector shall agree to provide notice to the Company of the potential disclosure of any information by such Inspector pursuant to clause (i), (ii) or (iii) of this sentence to permit the Issuers to obtain a protective order (or waive the provisions of this paragraph (n)) and (ii) each such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the ex- -15- tent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (o) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes or Exchange Notes, as applicable, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their commercially reasonable efforts to cause such 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 such indenture to be so qualified in a timely manner. (p) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to the Company's securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes or Exchange Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods consistent with the requirements of Rule 158. (q) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes 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, mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; PROVIDED that in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings reasonably required to be made with the NASD. (s) Use their commercially reasonable efforts to take all other steps reasonably necessary or advisable to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes or Exchange Notes as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes or Exchange Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable -16- Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request and in the event of such an exclusion, the Issuers shall have no further obligation under this Agreement (including, without limitation, the obligations under Section 4) with respect to such seller or any subsequent Holder of such Registrable Notes. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make any information previously furnished to the Company by such seller not materially misleading. If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company or the Guarantors, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company or the Guarantors, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the applicable Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes that, upon the Company providing notice to such Holder or Participating Broker-Dealer, as the case may be, (x) of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, or (y) that the Board of Directors of the Company (the "BOARD OF Directors") has resolved that the Company has a BONA FIDE business purpose for doing so, then, upon providing such notice (which shall refer to the penultimate paragraph of this Section 5), the Issuers may delay the filing or the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration (if not then filed or effective, as applicable) and shall not be required to maintain the effectiveness thereof or amend or supplement the Exchange Offer Registration Statement or the Shelf Registration, in all cases, for a period (a "DELAY Period") expiring upon the earlier to occur of (i) in the case of the immediately preceding clause (x), such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto or (ii) in the case of the immediately preceding clause (y), the date which is the earlier of (A) the date on which such business purpose ceases to interfere with the Issuers' obligations to file or maintain the effectiveness of any such Registration Statement pursuant to this Agreement or (B) 60 days after the Company notifies the Holders of such good faith determination. There shall not be more than 60 days of Delay Periods during any 12-month period. The maximum length of the Applicable Period set forth in Section 2(b) shall be extended by a number of days equal to the number of days during any Delay Period. Any Delay Period will not alter the obligations of the Issuers to pay Additional Interest under the circumstances set forth in Section 4 hereof. Each Holder or Participating Broker-Dealer, by its acceptance of any Registrable Note, agrees that during any Delay Period, each Holder or Participating Broker-Dealer will discontinue disposition of such Notes or Exchange Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be. -17- Section 6. REGISTRATION EXPENSES All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions) shall be borne by the Issuers, whether or not the Exchange Offer Registration Statement or the Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of an Exchange Offer, or (y) as provided in Section 5(h) hereof, in the case of a Shelf Registration or in the case of Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses of the Issuers, (iv) fees and disbursements of counsel for the Issuers and the reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Notes in connection with the Shelf Registration not to exceed $20,000 (exclusive of any counsel retained pursuant to Section 7 hereof) selected by the Holders of a majority in aggregate principal amount of Notes, Exchange Notes and Private Exchange Notes being registered and reasonably satisfactory to the Issuers, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(m)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by any of the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (ix) the expense of any annual audit, (x) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable, (xi) any required fees and expenses incurred in connection with any filing required to be made with the NASD and (xii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. Notwithstanding the foregoing or anything to the contrary, each Holder shall pay all underwriting discounts and commissions of any underwriters with respect to any Registrable Notes sold by or on behalf of it. Section 7. INDEMNIFICATION (a) The Issuers, jointly and severally, agree to indemnify and hold harmless each Holder of Registrable Notes included in a Registration Statement and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, each Person, if any, who controls any such Person within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, the agents, employees, officers and directors of each Holder and each such Participating Broker-Dealer -18- and the agents, partners, members, employees, officers, managers and directors of any such controlling Person (each, a "PARTICIPANT") from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including, but not limited to, reasonable attorneys' fees and any and all reasonable expenses actually incurred in investigating or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in settlement of any claim or litigation) (collectively, "LOSSES") to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (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 any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, PROVIDED that (i) the foregoing indemnity shall not be available to any Participant insofar as such Losses (or actions in respect thereof) are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to such Participant furnished to the Company in writing by or on behalf of such Participant expressly for use therein, and (ii) the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Participant from whom the Person asserting such Losses purchased Registrable Notes if (x) it is established in the related proceeding that such Participant failed to send or give a copy of the Prospectus (as amended or supplemented if such amendment or supplement was furnished to such Participant prior to the written confirmation of such sale) to such Person with or prior to the written confirmation of such sale, if required by applicable law, and (y) the untrue statement or omission or alleged untrue statement or omission was corrected in the Prospectus (as amended or supplemented if amended or supplemented as aforesaid). This indemnity agreement will be in addition to any liability that the Issuers may otherwise have, including, but not limited to, liability under this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless each Issuer, each Person, if any, who controls any Issuer within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and each of their respective agents, partners, members, employees, officers and members of the board of directors from and against any Losses to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (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 any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to such Participant furnished in writing to the Company by or on behalf of such Participant expressly for use therein. (c) Promptly after receipt by an indemnified party under subsection 7(a) or 7(b) above of notice of the commencement of any action, suit or proceeding (collectively, an "ACTION"), -19- 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 of such action (but the failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability that it may have under this Section 7 except to the extent that it has been prejudiced in any material respect by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such action, the indemnifying party will be entitled to participate in such action, 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 of such action 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 action, but the reasonable 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 the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the named parties to such action (including any impleaded parties) include such indemnified party and the indemnifying party or parties (or such indemnifying parties have assumed the defense of such action), and such indemnified party or parties shall have reasonably concluded, after consultation with counsel, that there may be defenses available to it or them that are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such reasonable fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the reasonable fees and expenses of more than one counsel (together with appropriate local counsel) at any time for all indemnified parties in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. Any such separate firm for the Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes sold by all such Participants and shall be reasonably acceptable to the Company and any such separate firm for the Issuers, their affiliates, officers, directors, representatives, employees and agents and such control Person of such Issuers shall be designated in writing by such Issuers and shall be reasonably acceptable to the Holders. An indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent may not be unreasonably withheld. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by paragraph (a) or (b) of this Section 7, then the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 60 days' prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (y) 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. -20- (d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 7 is for any reason held to be unavailable from the indemnifying party for any Losses referred to therein, or is insufficient to hold harmless a party indemnified under this Section 7 for any Losses referred to therein, each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such aggregate Losses (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party, on the one hand, and each indemnified party, on the other hand, from the sale of the Notes to the Initial Purchasers or the resale of the Registrable Notes by such Holder, as applicable, or (ii) if such allocation 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 each indemnified party, on the one hand, and each indemnifying party, on the other hand, in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers, on the one hand, and each Participant, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the sale of the Notes to the Initial Purchasers (net of discounts and commissions but before deducting expenses) received by the Issuers are to (y) the total net profit received by such Participant in connection with the sale of the Registrable Notes. The relative fault of the parties 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 Issuers or such Participant and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission. (e) The parties 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 that does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall any Participant be required to contribute any amount in excess of the amount by which the net profit received by such Participant in connection with the sale of the Registrable Notes exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7, notify such 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 or otherwise, except to the extent that it has been prejudiced in any material respect by such failure; PROVIDED, HOWEVER, that no additional notice shall be required with respect to any action for which notice has been given under this Section 7 for purposes of indemnification. Anything in this section to the contrary notwithstanding, no party shall be liable for contribution with respect to any action or claim settled without its written consent, PROVIDED, HOWEVER, that such written consent was not unreasonably withheld. -21- Section 8. RULES 144 AND 144A The Issuers covenant that they will use their commercially reasonable efforts to file the reports required, if any, to be filed by them under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Issuers are not required to file such reports, they will, upon the request of any Holder, or beneficial owner, of Registrable Notes that are "restricted securities" within the meaning of Rule 144 and are not saleable pursuant to Rule 144(k), make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Issuers further covenant that for so long as any Registrable Notes remain outstanding they will take such further action as any Holder of Registrable Notes may reasonably request from time to time to enable such Holder to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Section 9. UNDERWRITTEN REGISTRATIONS If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder if such Holder does not (a) agree to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Section 10. MISCELLANEOUS (a) NO INCONSISTENT AGREEMENTS. The Issuers have not entered, as of the date hereof, and shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not conflict with and are not inconsistent with, in any material respect, the rights granted to the holders of any of the Issuers' other issued and outstanding securities under any such agreements. (b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement other than as contemplated in this Agreement. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given except pursuant to a written agreement duly signed and delivered by (I) the Com- -22- pany (on behalf of all Issuers) and (II) (A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented except pursuant to a written agreement duly signed and delivered by the Issuers and each Holder and each Participating Broker-Dealer (including any Person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification, waiver or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) NOTICES. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to any Issuer, to it c/o Ply Gem Industries, Inc. c/o Caxton-Iseman Capital, Inc. 667 Madison Avenue New York, NY 10021 Fax: (212) 832-9450 Attention: Chief Financial Officer with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019-6064 Fax: (212) 757-3990 Attention: John C. Kennedy, Esq. -23- (iii) if to the Initial Purchasers, at the address as follows: UBS Securities LLC 677 Washington Blvd. Stamford, Connecticut 06901 Fax number: (203) 719-0680 Attention: High Yield Syndicate Department All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by the recipient's telecopier machine, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) GUARANTORS. So long as any Registrable Notes remain outstanding, the Issuers shall cause each Person that becomes a guarantor of the Notes under the Indenture to execute and deliver a counterpart to this Agreement which subjects such Person to the provisions of this Agreement as a Guarantor. Each of the Guarantors agrees to join the Issuers in all of their undertakings hereunder to effect the Exchange Offer for the Exchange Notes and the filing of any Shelf Registration required hereunder. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. (j) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder -24- of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) SECURITIES HELD BY THE ISSUERS OR THEIR AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or any of their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) THIRD-PARTY BENEFICIARIES. Holders and beneficial owners of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. No other Person is intended to be, or shall be construed as, a third-party beneficiary of this Agreement. (m) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. S-1 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer PLY GEM HOLDINGS, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer GUARANTORS: GREAT LAKES WINDOW, INC. KROY BUILDING PRODUCTS, INC. NAPCO, INC. NAPCO WINDOW SYSTEMS, INC. THERMAL-GARD, INC. VARIFORM, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: Vice President S-2 UBS SECURITIES LLC DEUTSCHE BANK SECURITIES INC. CIBC WORLD MARKETS CORP. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: UBS SECURITIES LLC, as Representative of the Initial Purchasers By: /s/ Matthew Stopnik --------------------------------------- Name: Matthew Stopnik Title: Executive Director By: /s/ Kyun Park --------------------------------------- Name: Kyun Park Title: Director EX-10.1 28 y95660exv10w1.txt AMENDED & RESTATED CREDIT AGREEMENT EXHIBIT 10.1 ------------ ================================================================================ $255,000,000 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF FEBRUARY 12, 2004, AMENDED AND RESTATED AS OF MARCH 3, 2004, AMONG PLY GEM INDUSTRIES, INC., AS U.S. BORROWER, CWD WINDOWS AND DOORS, INC. AS CANADIAN BORROWER, PLY GEM HOLDINGS, INC. AND THE OTHER GUARANTORS PARTY HERETO, AS GUARANTORS, THE LENDERS PARTY HERETO, UBS SECURITIES LLC AND DEUTSCHE BANK SECURITIES INC., AS JOINT LEAD ARRANGERS AND BOOKRUNNERS, CIBC WORLD MARKETS CORP. AND MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, AS CO-ARRANGERS, UBS AG, STAMFORD BRANCH, AS ISSUING BANK, ADMINISTRATIVE AGENT AND COLLATERAL AGENT, UBS LOAN FINANCE LLC, AS SWINGLINE LENDER, DEUTSCHE BANK AG NEW YORK BRANCH, AS SYNDICATION AGENT, AND CANADIAN IMPERIAL BANK OF COMMERCE AND MERRILL LYNCH CAPITAL CORPORATION, AS CO-DOCUMENTATION AGENTS Cahill Gordon & Reindel LLP 80 Pine Street New York, NY 10005 ================================================================================ TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I DEFINITIONS SECTION 1.01 Defined Terms...................................................2 SECTION 1.02 Classification of Loans and Borrowings.........................38 SECTION 1.03 Terms Generally................................................38 SECTION 1.04 Accounting Terms; GAAP.........................................39 SECTION 1.05 Resolution of Drafting Ambiguities.............................39 ARTICLE II THE CREDITS SECTION 2.01 Commitments....................................................39 SECTION 2.02 Loans..........................................................39 SECTION 2.03 Borrowing Procedure............................................41 SECTION 2.04 Evidence of Debt; Repayment of Loans...........................41 SECTION 2.05 Fees...........................................................42 SECTION 2.06 Interest on Loans..............................................43 SECTION 2.07 Termination and Reduction of Commitments.......................44 SECTION 2.08 Interest Elections.............................................45 SECTION 2.09 Amortization of Term Borrowings................................46 SECTION 2.10 Optional and Mandatory Prepayments of Loans and Mandatory Offers to Redeem...................................46 SECTION 2.11 Alternate Rate of Interest.....................................51 SECTION 2.12 Increased Costs................................................51 SECTION 2.13 Breakage Payments..............................................52 SECTION 2.14 Payments Generally; Pro Rata Treatment; Sharing of Setoffs.....52 SECTION 2.15 Taxes..........................................................54 SECTION 2.16 Mitigation Obligations; Replacement of Lenders.................56 SECTION 2.17 Swingline Loans................................................56 SECTION 2.18 Letters of Credit..............................................58 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01 Organization; Powers...........................................63 SECTION 3.02 Authorization; Enforceability..................................63 SECTION 3.03 No Conflicts...................................................63 SECTION 3.04 Financial Statements; Projections..............................63 SECTION 3.05 Properties.....................................................64 SECTION 3.06 Intellectual Property..........................................65 SECTION 3.07 Equity Interests and Subsidiaries..............................65 SECTION 3.08 Litigation; Compliance with Laws...............................66 -i- Section Page - ------- ---- SECTION 3.09 Agreements.....................................................66 SECTION 3.10 Federal Reserve Regulations....................................67 SECTION 3.11 Investment Company Act; Public Utility Holding Company Act.....67 SECTION 3.12 Use of Proceeds................................................67 SECTION 3.13 Taxes..........................................................67 SECTION 3.14 No Material Misstatements......................................68 SECTION 3.15 Labor Matters..................................................68 SECTION 3.16 Solvency.......................................................68 SECTION 3.17 Employee Benefit Plans.........................................68 SECTION 3.18 Environmental Matters..........................................69 SECTION 3.19 Insurance......................................................70 SECTION 3.20 Security Documents.............................................70 SECTION 3.21 Acquisition Documents; Representations and Warranties in Acquisition Agreement.....................................72 SECTION 3.22 Anti-Terrorism Law.............................................72 SECTION 3.23 Subordination of Senior Subordinated Notes.....................73 ARTICLE IV CONDITIONS TO CREDIT EXTENSIONS SECTION 4.01 Conditions to Initial Credit Extension.........................73 SECTION 4.02 Conditions to All Credit Extensions............................77 SECTION 4.03 Conditions to Effectiveness of the Amendment and Restatement...78 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01 Financial Statements, Reports, etc.............................79 SECTION 5.02 Litigation and Other Notices...................................81 SECTION 5.03 Existence; Businesses and Properties...........................81 SECTION 5.04 Insurance......................................................82 SECTION 5.05 Obligations and Taxes..........................................83 SECTION 5.06 Employee Benefits..............................................83 SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Annual Meetings..............................................84 SECTION 5.08 Use of Proceeds................................................84 SECTION 5.09 Compliance with Environmental Laws; Environmental Reports......84 SECTION 5.10 Additional Collateral; Additional Guarantors...................84 SECTION 5.11 Security Interests; Further Assurances.........................87 SECTION 5.12 Information Regarding Collateral...............................87 SECTION 5.13 Post-Closing Matters...........................................88 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01 Indebtedness...................................................90 SECTION 6.02 Liens..........................................................92 SECTION 6.03 Sale and Leaseback Transactions................................94 -ii- Section Page - ------- ---- SECTION 6.04 Investment, Loan and Advances..................................94 SECTION 6.05 Mergers and Consolidations.....................................95 SECTION 6.06 Asset Sales....................................................96 SECTION 6.07 Acquisitions...................................................97 SECTION 6.08 Dividends......................................................98 SECTION 6.09 Transactions with Affiliates...................................98 SECTION 6.10 Financial Covenants...........................................100 SECTION 6.11 Prepayments of Other Indebtedness; Modifications of Organizational Documents and Other Documents, etc...........101 SECTION 6.12 Limitation on Certain Restrictions on Subsidiaries............102 SECTION 6.13 Limitation on Issuance of Capital Stock.......................102 SECTION 6.14 Limitation on Creation of Subsidiaries........................103 SECTION 6.15 Business......................................................103 SECTION 6.16 Limitation on Accounting Changes..............................103 SECTION 6.17 Fiscal Year...................................................103 SECTION 6.18 Lease Obligations.............................................103 SECTION 6.19 No Further Negative Pledge....................................103 SECTION 6.20 Anti-Terrorism Law; Anti-Money Laundering.....................104 SECTION 6.21 Embargoed Person..............................................104 ARTICLE VII GUARANTEE SECTION 7.01 The Guarantee.................................................104 SECTION 7.02 Obligations Unconditional.....................................105 SECTION 7.03 Reinstatement.................................................106 SECTION 7.04 Subrogation; Subordination....................................106 SECTION 7.05 Remedies......................................................106 SECTION 7.06 Instrument for the Payment of Money...........................107 SECTION 7.07 Continuing Guarantee..........................................107 SECTION 7.08 General Limitation on Guarantee Obligations...................107 SECTION 7.09 Release of Guarantors.........................................107 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01 Events of Default.............................................107 ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01 Collateral Account............................................110 SECTION 9.02 Proceeds of Destruction, Taking and Collateral Dispositions.....................................111 SECTION 9.03 Application of Proceeds.......................................111 -iii- Section Page - ------- ---- ARTICLE X THE AGENTS SECTION 10.01 Appointment...................................................112 SECTION 10.02 Agent in Its Individual Capacity..............................112 SECTION 10.03 Exculpatory Provisions........................................112 SECTION 10.04 Reliance by Agent.............................................113 SECTION 10.05 Delegation of Duties..........................................113 SECTION 10.06 Successor Agent...............................................113 SECTION 10.07 Non-Reliance on Agent and Other Lenders.......................114 SECTION 10.08 Name Agents...................................................114 SECTION 10.09 Indemnification...............................................114 ARTICLE XI MISCELLANEOUS SECTION 11.01 Notices.......................................................114 SECTION 11.02 Waivers; Amendment............................................115 SECTION 11.03 Expenses; Indemnity...........................................119 SECTION 11.04 Successors and Assigns........................................121 SECTION 11.05 Survival of Agreement.........................................123 SECTION 11.06 Counterparts; Integration; Effectiveness......................123 SECTION 11.07 Severability..................................................124 SECTION 11.08 Right of Setoff...............................................124 SECTION 11.09 Governing Law; Jurisdiction; Consent to Service of Process..........................................124 SECTION 11.10 Waiver of Jury Trial..........................................124 SECTION 11.11 Headings......................................................125 SECTION 11.12 Confidentiality...............................................125 SECTION 11.13 Interest Rate Limitation......................................125 SECTION 11.14 Lender Addendum...............................................126 SECTION 11.15 Obligations Absolute..........................................126 SECTION 11.16 Judgment Currency.............................................126 -v- ANNEXES Annex I Applicable Margin Annex II Amortization Table SCHEDULES Schedule 1.01(a) Assumed Debt Schedule 1.01(b) Consolidated EBITDA Adjustments Schedule 1.01(c) Material Indebtedness Schedule 1.01(d) Mortgaged Property Schedule 1.01(e) Refinancing Indebtedness to Be Repaid Schedule 1.01(f) U.S. Subsidiary Guarantors Schedule 3.03 Governmental Approvals; Compliance with Laws Schedule 3.05(b) Real Property Schedule 3.07(a) Subsidiaries -iv- Schedule 3.07(c) Corporate Organizational Chart Schedule 3.09(c) Material Agreements Schedule 3.17 Employee Benefit Plans Schedule 3.18 Environmental Matters Schedule 3.19 Insurance Schedule 3.21 Acquisition Documents Schedule 4.01(g) Local Counsel Schedule 4.01(n)(vi) Landlord Access Agreements Schedule 4.01(o)(iii) Title Insurance Amounts Schedule 5.13(c) Post-Closing Matters Schedule 6.01(b) Existing Indebtedness Schedule 6.02(c) Existing Liens Schedule 6.04(b) Existing Investments Schedule 6.09(n) Existing Affiliate Agreements EXHIBITS Exhibit A Form of Administrative Questionnaire Exhibit B Form of Assignment and Assumption Exhibit C-1 Form of U.S. Borrowing Request Exhibit C-2 Form of Canadian Borrowing Request Exhibit D Form of Compliance Certificate Exhibit E Form of Interest Election Request Exhibit F Form of Joinder Agreement Exhibit G-1 Form of U.S. Landlord Access Agreement Exhibit G-2 Form of Canadian Landlord Access Agreement Exhibit H Form of LC Request Exhibit I Form of Lender Addendum Exhibit J-1 Form of Mortgage Exhibit J-2 Form of Canadian Mortgage Exhibit J-3 Form of Leasehold Mortgage Exhibit K-1 Form of U.S. Term Note Exhibit K-2 Form of Canadian Term Note Exhibit K-3 Form of Revolving Note Exhibit K-4 Form of Swingline Note Exhibit L-1 Form of Perfection Certificate Exhibit L-2 Form of Perfection Certificate Supplement Exhibit M-1 Form of U.S. Security Agreement Exhibit M-2 Form of Canadian Security Agreement Exhibit N-1 Form of Opinion of Company Counsel Exhibit N-2 Form of Opinion of Local Counsel Exhibit N-3 Form of Opinion of Canadian Counsel Exhibit O Form of Solvency Certificate Exhibit P-1 Form of U.S. Intercompany Note Exhibit P-2 Form of Canadian Intercompany Note Exhibit Q Form of U.S. Tax Compliance Certificate -v- CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") dated as of February 12, 2004, amended and restated as of March 3, 2004, among PLY GEM INDUSTRIES, INC., a Delaware corporation ("U.S. Borrower"), CWD Windows and Doors, Inc., a corporation organized under the federal laws of Canada ("CANADIAN BORROWER" and, together with U.S. Borrower, each a "BORROWER" and collectively the "BORROWERS"), PLY GEM HOLDINGS, INC., a Delaware corporation ("PARENT"), the Subsidiary Guarantors (such term and each other capitalized term used but not defined herein having the meaning given to it in ARTICLE I), the Lenders, UBS SECURITIES LLC and DEUTSCHE BANK SECURITIES INC., as joint lead arrangers and bookrunners (in such capacity, "JOINT LEAD ARRANGERS"), CIBC WORLD MARKETS CORP. and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as co-arrangers (in such capacities, "CO-ARRANGERS"), CANADIAN IMPERIAL BANK OF COMMERCE and MERRILL LYNCH CAPITAL CORPORATION, as co-documentation agents (in such capacities, "CO-DOCUMENTATION AGENTS"), DEUTSCHE BANK AG NEW YORK BRANCH, as syndication agent (in such capacity, "SYNDICATION AGENT"), UBS LOAN FINANCE LLC, as swingline lender (in such capacity, "SWINGLINE LENDER"), and UBS AG, STAMFORD BRANCH, as issuing bank (in such capacity, "ISSUING BANK"), as administrative agent (in such capacity, "ADMINISTRATIVE AGENT") for the Lenders and as collateral agent (in such capacity, "COLLATERAL AGENT") for the Secured Parties and the Issuing Bank. WITNESSETH: WHEREAS, Holdings entered into a stock purchase agreement, dated as of December 19, 2003, as amended on January 23, 2004 and February 12, 2004 (as further amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof, the "ACQUISITION AGREEMENT"), with Nortek Inc., a Delaware corporation, and WDS LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Nortek, Inc. (collectively, the "SELLER"), to acquire (the "ACQUISITION") all of the capital stock of U.S. Borrower, and on the Closing Date, Holdings transferred its rights and obligations under the Acquisition Agreement to Parent. WHEREAS, the Refinancing, the Acquisition, the issuance of the Senior Subordinated Notes and the Equity Financing were consummated on the Closing Date. WHEREAS, the Borrowers, the Agents and the Lenders entered into this Agreement on February 12, 2004 and desire to amend and restate this Agreement as herein set forth. WHEREAS, U.S. Borrower requested the U.S. Lenders to extend credit in the form of (a) U.S. Term Loans on the Closing Date, in an aggregate principal amount not in excess of $160.0 million, which U.S. Term Loans were made on the Closing Date and (b) Revolving Loans at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $65.0 million, of which no more than $3.0 million was drawn on the Closing Date. WHEREAS, U.S. Borrower has requested the U.S. Lenders to extend credit in the form of additional U.S. Term Loans on the Amendment Effectiveness Date, in aggregate principal amount not in excess of $10.0 million and has requested that the aggregate amount of the Lenders' Revolving Commitment be reduced to $55.0 million on the Amendment Effectiveness Date. WHEREAS, Canadian Borrower requested the Canadian Term Loan Lenders to extend credit in the form of Canadian Term Loans on the Closing Date, in an aggregate principal amount not in excess of $30.0 million, which Canadian Term Loans were made on the Closing Date. WHEREAS, U.S. Borrower requested the Swingline Lender to make Swingline Loans, at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $10.0 million. WHEREAS, U.S. Borrower requested the Issuing Bank to issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $35.0 million, for the account of U.S. Borrower and its Subsidiaries. WHEREAS, U.S. Borrower has requested that the LC Commitment be reduced to $25.0 million on the Amendment Effectiveness Date. WHEREAS, the proceeds of the Loans are to be used in accordance with SECTION 3.12. NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrowers and the Issuing Bank is willing to issue letters of credit for the account of U.S. Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR," when used in reference to any Loan or Borrowing, is used when such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any ABR Term Loan or ABR Revolving Loan. "ABR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of ARTICLE II. "ABR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of ARTICLE II. "ACQUISITION" shall have the meaning assigned to such term in the first recital hereto. "ACQUISITION AGREEMENT" shall have the meaning assigned to such term in the first recital hereto. "ACQUISITION CONSIDERATION" shall mean the purchase consideration for any Permitted Acquisition and all other payments by Parent or any of its Subsidiaries in exchange for, or as part of, or in connection with, any Permitted Acquisition (other than fees and expenses related to such Permitted Acquisition), whether paid in cash or by exchange of Equity Interests or of properties or otherwise and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at -2- any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments representing the purchase price and any assumptions of Indebtedness, "earn-outs" and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business; PROVIDED that any such future payment that is subject to a contingency shall be considered Acquisition Consideration only to the extent of the reserve, if any, required under GAAP at the time of such sale to be established in respect thereof by Parent or any of its Subsidiaries. "ACQUISITION DOCUMENTS" shall mean the collective reference to the Acquisition Agreement and the other documents listed on SCHEDULE 3.21. "ADDITIONAL TERM LOANS" shall have the meaning assigned to such term in SECTION 11.02(d). "ADJUSTED LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, (a) an interest rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) determined by the Administrative Agent to be equal to the LIBOR Rate for such Eurodollar Borrowing in effect for such Interest Period divided by (b) 1 MINUS the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest Period. "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the preamble hereto and includes each other person appointed as the successor pursuant to ARTICLE X. "ADMINISTRATIVE AGENT FEES" shall have the meaning assigned to such term in SECTION 2.05(b). "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire in the form of EXHIBIT A, or such other form as may be supplied from time to time by the Administrative Agent. "ADVISORY SERVICES AGREEMENT" means the advisory services agreement, dated as of February 12, 2004, among U.S. Borrower and Sponsor. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; PROVIDED, HOWEVER, that, for purposes of SECTION 6.09, the term "Affiliate" shall also include (i) any person that directly or indirectly owns more than 10% of any class of Equity Interests of the person specified or (ii) any person that is an executive officer or director of the person specified. "AGENTS" shall mean the Arrangers, the Co-Documentation Agents, the Syndication Agent, the Administrative Agent and the Collateral Agent; and "AGENT" shall mean any of them. "AGREEMENT" shall have the meaning assigned to such term in the preamble hereto. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) equal to the greater of (a) the Base Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day PLUS 0.50%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the cir- -3- cumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Effective Rate, respectively. "AMENDMENT EFFECTIVENESS DATE" shall have the meaning assigned to such term in SECTION 4.03. "ANTI-TERRORISM LAWS" shall have the meaning assigned to such term in SECTION 3.22. "APPLICABLE FEE" shall mean, for any day, with respect to any Commitment, the applicable percentage set forth in ANNEX I under the caption "Applicable Fee". "APPLICABLE MARGIN" shall mean, for any day, with respect to any (i) Term Loan, (x) 2.50% for Eurodollar Loans and (y) 1.50% for ABR Loans, and (ii) Revolving Loan, the applicable percentage set forth in ANNEX I. "ARRANGERS" shall mean the Joint Lead Arrangers and the Co-Arrangers. "ASSET SALE" shall mean (a) any conveyance, sale, lease, sublease, assignment, transfer or other disposition (including by way of merger or consolidation and including any Sale and Leaseback Transaction) of any property excluding sales of inventory and dispositions of cash equivalents, in each case, in the ordinary course of business, by Parent or any of its Subsidiaries and (b) any issuance or sale of any Equity Interests of any Subsidiary of Parent, in each case, to any person other than (i) either Borrower, (ii) any Subsidiary Guarantor or (iii) other than for purposes of SECTION 6.06, any other Subsidiary. "ASSIGNMENT AND ASSUMPTION" shall mean an assignment and assumption entered into by a Lender and an assignee, and accepted by the Administrative Agent, substantially in the form of EXHIBIT B, or such other form as shall be approved by the Administrative Agent. "ASSUMED DEBT" shall mean the Indebtedness set forth on SCHEDULE 1.01(a) hereto. "BAILEE LETTER" shall have the meaning assigned thereto in the Security Agreement. "BASE RATE" shall mean, for any day, a rate per annum that is equal to the corporate base rate of interest established by the Administrative Agent in the United States for dollars from time to time; each change in the Base Rate shall be effective on the date such change is effective. The corporate base rate is not necessarily the lowest rate charged by the Administrative Agent to its customers. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BOARD OF DIRECTORS" shall mean, with respect to any person, (i) in the case of any corporation, the board of directors of such person, (ii) in the case of any limited liability company, the board of managers of such person, (iii) in the case of any partnership, the Board of Directors of the general partner of such person and (iv) in any other case, the functional equivalent of the foregoing. "BORROWER" shall have the meaning assigned to such term in the preamble hereto. "BORROWING" shall mean (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan. -4- "BORROWING REQUEST" shall mean either a U.S. Borrowing Request or a Canadian Borrowing Request as the context shall require. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which banks in New York City are authorized or required by law to close; PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "BUTLER PROPERTY" shall have the meaning assigned to such term in SECTION 5.13(a). "CALCULATION PERIOD" shall have the meaning assigned to such term in SECTION 2.06(f). "CANADIAN BORROWER" shall have the meaning assigned to such term in the preamble hereto. "CANADIAN BORROWING REQUEST" shall mean a request by Canadian Borrower in accordance with the terms of SECTION 2.03 and substantially in the form of EXHIBIT C-2, or such other form as shall be approved by the Administrative Agent. "CANADIAN COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained by the Collateral Agent for the benefit of the Canadian Secured Parties, in accordance with the provisions of SECTION 9.01. "CANADIAN GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in SECTION 7.01. "CANADIAN GUARANTORS" shall have the meaning assigned to such term in SECTION 7.01. "CANADIAN INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of EXHIBIT P-2. "CANADIAN LOAN PARTIES" shall mean Canadian Borrower and the Canadian Guarantors; PROVIDED that Parent and U.S. Borrower shall only constitute Canadian Loan Parties in their capacities as Canadian Guarantors. "CANADIAN MORTGAGED PROPERTY" shall mean the Mortgaged Property owned or leased by the Canadian Loan Parties. "CANADIAN OBLIGATIONS" shall mean (a) obligations of Canadian Borrower and the other Canadian Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Canadian Term Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Canadian Borrower and the other Canadian Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of Canadian Borrower and the other Canadian Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obli- -5- gations of Canadian Borrower and the other Canadian Loan Parties under each Hedging Agreement relating to either the Canadian Term Loans or foreign currency exchange rates entered into with any counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (provided that each shall provide that it terminates or expires upon, or prior to, the repayment of all Loans hereunder) (each, a "PERMITTED CANADIAN HEDGING AGREEMENT") and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any Canadian Term Loan Lender, any Affiliate of a Canadian Term Loan Lender, the Administrative Agent or the Collateral Agent arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds, in each case, with respect to Canadian Term Loans. "CANADIAN SECURED PARTIES" shall mean, collectively, the Administrative Agent, the Collateral Agent, each other Agent, the Lenders and each party to a Permitted Canadian Hedging Agreement if such person executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such person (i) appoints the Collateral Agent as its agent under the applicable Loan Documents and (ii) agrees to be bound by the provisions of SECTIONS 11.03 and 11.09. "CANADIAN SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of EXHIBIT M-2 among the Canadian Loan Parties and Collateral Agent for the benefit of the Canadian Secured Parties. "CANADIAN SECURITY AGREEMENT COLLATERAL" shall mean all property pledged or granted as collateral pursuant to the Canadian Security Agreement delivered on the Closing Date or thereafter pursuant to SECTION 5.10. "CANADIAN SECURITY DOCUMENTS" shall mean the Canadian Security Agreement, the Mortgages entered into by the Canadian Loan Parties and each other security document or pledge agreement delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Canadian Obligations, and all financing statements or instruments of perfection required by this Agreement, the Canadian Security Agreement or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the Canadian Security Agreement and any other document or instrument utilized to pledge as collateral for the Canadian Obligations any property. "CANADIAN SUBSIDIARY" shall mean a Subsidiary of Canadian Borrower. "CANADIAN SUBSIDIARY GUARANTOR" shall mean a Canadian Subsidiary that is or becomes a party to this Agreement pursuant to SECTION 5.10. "CANADIAN TERM LOAN" shall mean the term loans made by the Canadian Term Loan Lenders to Canadian Borrower pursuant to SECTION 2.01(b). Each Canadian Term Loan shall be either an ABR Term Loan or a Eurodollar Term Loan. "CANADIAN TERM LOAN COMMITMENT" shall mean, with respect to each Canadian Term Loan Lender, the commitment, if any, of such Canadian Term Loan Lender to make a Canadian Term Loan hereunder on the Closing Date in the amount set forth on Schedule I to the Lender Addendum executed and delivered by such Canadian Term Loan Lender. The aggregate amount of the Lenders' Canadian Term Loan Commitments is $30.0 million. "CANADIAN TERM LOAN LENDERS" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum that provide Canadian Term Loan Commitments or -6- make Canadian Term Loans and (b) any financial institution that has become a party hereto pursuant to an Assignment and Assumption that provides Canadian Term Loan Commitments or makes Canadian Term Loans, other than, in each case, any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Assumption. "CAPEX CARRYFOWARD AMOUNT" shall have the meaning assigned to such term in SECTION 6.10(c). "CAPITAL EXPENDITURES" shall mean, for any period, without duplication, the increase during that period in the gross property, plant or equipment account in the consolidated balance sheet of U.S. Borrower and its Subsidiaries, determined in accordance with GAAP, whether such increase is due to purchase of properties for cash or financed by the incurrence of Indebtedness, but excluding (i) expenditures made in connection with the replacement, substitution or restoration of property pursuant to SECTION 2.10(f) and (ii) any portion of such increase attributable solely to acquisitions of property, plant and equipment in Permitted Acquisitions. "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CASH EQUIVALENTS" shall mean, as to any person, (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or Canada or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States or Canada is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person; (b) time deposits and certificates of deposit of (1) any Lender or Agent or (2) any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States or Canada, any state or province thereof or the District of Columbia having, capital and surplus aggregating in excess of $500.0 million and a rating of "A" (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such person; (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, which repurchase obligations are secured by a valid perfected security interest in the underlying securities; (d) commercial paper issued by any person incorporated in the United States or Canada rated at least A-1 or the equivalent thereof by Standard & Poor's Rating Service or at least P-1 or the equivalent thereof by Moody's Investors Service Inc., and in each case maturing not more than one year after the date of acquisition by such person; (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above; and (f) demand deposit accounts maintained in the ordinary course of business. "CASH INTEREST EXPENSE" shall mean, for any period, Consolidated Interest Expense for such period, LESS the sum of (a) interest on any debt paid by the increase in the principal amount of such debt including by issuance of additional debt of such kind and (b) items described in clause (c) or, other than to the extent paid in cash, clauses (f) and (g) of the definition of "Consolidated Interest Expense." "CASUALTY EVENT" shall mean any loss of title or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of Parent or any of its Subsidiaries. "Casualty Event" shall include but not be limited to any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent -7- domain proceedings pursuant to any law, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, civil or military, or any settlement in lieu thereof. "CDC" shall have the meaning assigned to such term in SECTION 5.13(a). "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq. A "CHANGE IN CONTROL" shall be deemed to have occurred if: (a) Parent at any time ceases to own 100% of the Equity Interests of U.S. Borrower or, prior to an IPO at Parent, Holdings ceases to own 100% of the Equity Interests of Parent; (b) at any time a change of control (as defined in the documentation for any Material Indebtedness) shall occur; (c) prior to an IPO, (i) the Permitted Holders cease to own (directly or indirectly), or to have the power to vote or direct the voting of, Voting Stock of U.S. Borrower representing a majority of the voting power of the total outstanding Voting Stock of U.S. Borrower or (ii) the Permitted Holders cease to own (directly or indirectly) Equity Interests representing a majority of the total economic interests of the Equity Interests of U.S. Borrower; (d) following an IPO, (i) the Permitted Holders shall fail to own (directly or indirectly), or to have the power to vote or direct the voting of, Voting Stock of U.S. Borrower representing more than 35% of the voting power of the total outstanding Voting Stock of U.S. Borrower, (ii) the Permitted Holders cease to own (directly or indirectly) Equity Interests representing more than 35% of the total economic interests of the Equity Interests of U.S. Borrower or (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock of U.S. Borrower representing more than the voting power of the Voting Stock of U.S. Borrower owned by the Permitted Holders; or (e) following an IPO, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the IPO Entity (together with any new directors whose election to such Board of Directors or whose nomination for election was approved by a vote of a majority of the members of the Board of Directors of the IPO Entity, which members comprising such majority are then still in office and 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 IPO Entity. For purposes of this definition, a person shall not be deemed to have beneficial ownership of Equity Interests subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement. "CHANGE IN LAW" shall mean (a) the adoption of any law, treaty, order, policy, rule or regulation or any interpretation or application thereof by any Governmental Authority after the date of this Agreement, (b) any change in any law, treaty, order, policy, rule or regulation or in the interpretation -8- or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or Issuing Bank (or for purposes of SECTION 2.12(b), by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "CHARGES" shall have the meaning assigned to such term in SECTION 11.13. "CLASS," when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, U.S. Term Loans, Canadian Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, U.S. Term Loan Commitment, Canadian Term Loan Commitment or Swingline Commitment, in each case, under this Agreement as originally in effect or pursuant to SECTIONS 11.02(d) or (f), of which such Loan, Borrowing or Commitment shall be a part. "CLOSING DATE" shall mean February 12, 2004. "CO-ARRANGERS" shall have the meaning assigned to such term in the preamble hereto. "CO-DOCUMENTATION AGENTS" shall have the meaning assigned to such term in the preamble hereto. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL" shall mean, collectively, all of the U.S. Security Agreement Collateral, the Canadian Security Agreement Collateral, the Mortgaged Property and all other property of whatever kind and nature pledged as collateral under any Security Document. "COLLATERAL ACCOUNT" shall mean the Canadian Collateral Account or the U.S. Collateral Account, as applicable. "COLLATERAL AGENT" shall have the meaning assigned to such term in the preamble hereto. "COMMERCIAL LETTER OF CREDIT" shall mean any letter of credit or similar instrument issued for the purpose of providing credit support in connection with the purchase of materials, goods or services by U.S. Borrower or any of its Subsidiaries in the ordinary course of their businesses. "COMMITMENT" shall mean, with respect to any Lender, such Lender's Revolving Commitment, U.S. Term Loan Commitment, Canadian Term Loan Commitment or Swingline Commitment, and any Commitment to make Term Loans of a new Class extended by such Lender as provided in SECTION 11.02(d). "COMMITMENT FEE" shall have the meaning assigned to such term in SECTION 2.05(a). "COMPANIES" shall mean Parent and its Subsidiaries; and "COMPANY" shall mean any one of them. "COMPLIANCE CERTIFICATE" shall mean a certificate of a Financial Officer substantially in the form of EXHIBIT D. -9- "CONFIDENTIAL INFORMATION MEMORANDUM" shall mean that certain confidential information memorandum dated as of January 2004 relating to U.S. Borrower and its subsidiaries. "CONSOLIDATED AMORTIZATION EXPENSE" shall mean, for any period, the amortization expense of U.S. Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CURRENT ASSETS" shall mean, as at any date of determination, the total assets of U.S. Borrower and its Subsidiaries which may properly be classified as current assets on a consolidated balance sheet of U.S. Borrower and its Subsidiaries in accordance with GAAP. "CONSOLIDATED CURRENT LIABILITIES" shall mean, as at any date of determination, the total liabilities of U.S. Borrower and its Subsidiaries which may properly be classified as current liabilities (other than the current portion of any Loans) on a consolidated balance sheet of U.S. Borrower and its Subsidiaries in accordance with GAAP. "CONSOLIDATED DEPRECIATION EXPENSE" shall mean, for any period, the depreciation expense of U.S. Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBITDA" shall mean, for any period, Consolidated Net Income for such period, adjusted by (x) ADDING THERETO, in each case only to the extent (and in the same proportion) deducted in determining such Consolidated Net Income (and with respect to the portion of Consolidated Net Income attributable to any Subsidiary of U.S. Borrower (other than any Foreign Subsidiary or any U.S. Subsidiary Guarantor) only if a corresponding amount would be permitted at the date of determination to be distributed to U.S. Borrower by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its Organizational Documents and all agreements (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds), instruments, judgments, decrees, orders, statutes, rules and regulations applicable to such Subsidiary or its equityholders): (a) Consolidated Interest Expense for such period, (b) Consolidated Amortization Expense for such period, (c) Consolidated Depreciation Expense for such period, (d) Consolidated Tax Expense for such period, (e) costs and expenses directly incurred in connection with the Transactions during such period (not to exceed $30.0 million) to the extent actually incurred and expensed within one year of the Closing Date, (f) the aggregate amount of all other non-cash items reducing Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, (g) the amount of management fees paid to Sponsor for such period pursuant to the Advisory Services Agreement in accordance with SECTION 6.09(e), -10- (h) Restructuring Expenses in an aggregate amount not to exceed $10.0 million in any Test Period and any Restructuring Expenses in connection with the disposition of Thermal-Gard, Inc., and (y) SUBTRACTING THEREFROM the aggregate amount of all non-cash items increasing Consolidated Net Income (other than the accrual of revenue or recording of receivables in the ordinary course of business) for such period, and (z) ADDING THERETO OR SUBTRACTING THEREFROM, without duplication of amounts included as Restructuring Expenses, with respect to any part of a Test Period, the adjustments to Consolidated EBITDA set forth on SCHEDULE 1.01(b). Other than for purposes of calculating Excess Cash Flow, Consolidated EBITDA shall be calculated on a Pro Forma Basis (including any Pro Forma Cost Savings) to give effect to the Acquisition, any Permitted Acquisition, each Permitted Sale and Leaseback Transaction and other Asset Sales for consideration individually or in the aggregate in excess of $3.0 million during any Test Period consummated at any time on or after the first day of the Test Period thereof as if the Acquisition and each such Permitted Acquisition had been effected on the first day of such period and as if each such Permitted Sale and Leaseback Transaction and other Asset Sale had been consummated on the day prior to the first day of such period. Notwithstanding the foregoing, Consolidated EBITDA for each of the first three fiscal quarters of 2003 shall be increased by the amounts indicated on SCHEDULE 1.01(b) to account for the items described thereon to the extent any such amounts were deducted in computing Consolidated Net Income. "CONSOLIDATED INDEBTEDNESS" shall mean, as at any date of determination, without duplication, (x) the aggregate amount of all Indebtedness of U.S. Borrower and its Subsidiaries less (y) cash and Cash Equivalents on hand of U.S. Borrower and its Subsidiaries in excess of $2.0 million other than restricted cash that is not held in a Collateral Account (but including, without regard to such $2.0 million threshold, cash held in the Ply Gem LC Restricted Account), determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO" shall mean, for any Test Period, the ratio of (x) Consolidated EBITDA for such Test Period to (y) Cash Interest Expense for such Test Period. "CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the total consolidated interest expense (less interest income) of U.S. Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP PLUS, without duplication: (a) imputed interest on Capital Lease Obligations of U.S. Borrower and its Subsidiaries for such period; (b) commissions, discounts and other fees and charges owed by U.S. Borrower or any of its Subsidiaries with respect to letters of credit securing financial obligations, bankers' acceptance financing and receivables financings for such period; (c) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses incurred by U.S. Borrower or any of its Subsidiaries for such period; (d) cash contributions to any employee stock ownership plan or similar trust made by U.S. Borrower or any of its Subsidiaries to the extent such contributions are used by such plan or trust to pay interest or fees to any person (other than U.S. Borrower or a Wholly Owned Subsidiary) in connection with Indebtedness incurred by such plan or trust for such period; -11- (e) all interest paid or payable with respect to discontinued operations of U.S. Borrower or any of its Subsidiaries for such period; (f) the interest portion of any deferred payment obligations of U.S. Borrower or any of its Subsidiaries for such period; and (g) all interest on any Indebtedness of U.S. Borrower or any of its Subsidiaries of the type described in clause (f) or (j) of the definition of "Indebtedness" for such period; PROVIDED that (A) to the extent directly related to the Transactions, debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded from the calculation of Consolidated Interest Expense and (B) the amortization during such period of other capitalized financing costs shall be excluded from the calculation of Consolidated Interest Expense; PROVIDED that in the case of clause (B) the aggregate amount of amortization relating to such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5% of the aggregate amount of the financing giving rise thereto. Consolidated Interest Expense shall be calculated on a Pro Forma Basis (including any Pro Forma Cost Savings) to give effect to any Indebtedness incurred, assumed or permanently repaid or extinguished during the relevant Test Period in connection with the Acquisition, any Permitted Acquisitions, each Permitted Sale and Leaseback Transaction and other Asset Sales for consideration individually or in the aggregate in excess of $3.0 million during any Test Period as if such incurrence, assumption, repayment or extinguishing had been effected on the first day of such period. "CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated net income (or loss) of U.S. Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP; PROVIDED that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (a) the net income (or loss) of any person (other than a Subsidiary of U.S. Borrower) in which any person other than U.S. Borrower and its Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by U.S. Borrower or (subject to clause (b) below) any of its Subsidiaries during such period; (b) the net income of any Subsidiary of U.S. Borrower (other than a Foreign Subsidiary or a U.S. Subsidiary Guarantor) during such period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is not permitted by operation of the terms of its Organizational Documents or any agreement (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds), instrument, judgment, decree, order, statute, rule or regulation applicable to that Subsidiary during such period, except that U.S. Borrower's equity in net loss of any such Subsidiary for such period, other than any non-cash loss that does not result in an accrual or reserve for cash charges in any future period, shall be included in determining Consolidated Net Income; (c) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by U.S. Borrower or any of its Subsidiaries upon (i) any Asset Sale (other than any dispositions in the ordinary course of business) by U.S. Borrower or any of its Subsidiaries, (ii) the disposition of any Cash Equivalents or (iii) the repayment or cancellation of any Indebtedness of U.S. Borrower or any of its Subsidiaries; -12- (d) gains and losses due solely to fluctuations in currency values and the related tax effects determined in accordance with GAAP for such period; (e) earnings resulting from any reappraisal, revaluation or write-up of assets; (f) unrealized gains and losses with respect to Hedging Obligations for such period; (g) other than for purposes of the definition of Excess Cash Flow, any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such gain (or the tax effect of any such loss), recorded or recognized by U.S. Borrower or any of its Subsidiaries during such period; PROVIDED that such nonrecurring losses shall not exceed $5.0 million in any Test Period; (h) any expenses or reserves for liabilities to the extent that the U.S. Borrower or any of its Subsidiaries is entitled to indemnification therefore under binding agreements; PROVIDED that any liabilities for which the U.S. Borrower or such Subsidiary is not actually indemnified shall reduce Consolidated Net Income in the period in which it is determined that the U.S. Borrower or such Subsidiary will not be indemnified; and (i) the net income (or loss) of Thermal-Gard, Inc., so long as U.S. Borrower is using commercially reasonable efforts to dispose of it or discontinue its operations. For purposes of this definition of "Consolidated Net Income," "NONRECURRING" means any gain or loss as of any date that is not reasonably likely to recur within two years following such date; PROVIDED that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring and (2) Consolidated Net Income shall be reduced (to the extent not already reduced thereby) by the amount of any payments to or on behalf of Parent made pursuant to SECTIONS 6.08(c) and (d). "CONSOLIDATED SENIOR INDEBTEDNESS" shall mean, as at any date of determination, the difference of Consolidated Indebtedness on such date less the aggregate amount of all Subordinated Indebtedness of the Borrowers and the Subsidiary Guarantors determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TAX EXPENSE" shall mean, for any period, the tax expense of U.S. Borrower and its Subsidiaries, for such period, determined on a consolidated basis in accordance with GAAP. "CONTESTED COLLATERAL LIEN CONDITIONS" shall mean, with respect to any Permitted Lien of the type described in clauses (a), (b), (e) and (f) of SECTION 6.02, the following conditions: (a) any proceeding instituted contesting such Lien shall operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (b) to the extent such Lien is in an amount in excess of $1,000,000, the appropriate Loan Party shall maintain cash reserves in accordance with GAAP; and (c) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents. -13- "CONTINGENT OBLIGATION" shall mean, as to any person, any obligation, agreement, understanding or arrangement of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including any obligation of such person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers' acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises (which reimbursement obligation shall constitute Indebtedness); or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term "Contingent Obligation" shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. "CONTROL AGREEMENT" shall have the meaning assigned to such term in the U.S. Security Agreement. "CREDIT EXTENSION" shall mean, as the context may require, (i) the making of a Loan by a Lender or (ii) the issuance of any Letter of Credit, or the amendment, extension or renewal of any existing Letter of Credit, by the Issuing Bank. "DEBT ISSUANCE" shall mean the incurrence by Parent or any of its Subsidiaries of any Indebtedness after the Closing Date (other than as permitted by SECTION 6.01). "DEBT SERVICE" shall mean, for any period, Cash Interest Expense for such period plus scheduled principal amortization of all Indebtedness for such period. "DEFAULT" shall mean any event, occurrence or condition which is, or upon notice, lapse of time or both would constitute, an Event of Default. "DEFAULT RATE" shall have the meaning assigned to such term in SECTION 2.06(c). "DISQUALIFIED CAPITAL STOCK" shall mean 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), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Final Maturity Date, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in (a) above, in each case at any time on or prior -14- to the first anniversary of the Final Maturity Date, or (c) contains any repurchase obligation which may come into effect prior to payment in full of all Obligations; PROVIDED, FURTHER, HOWEVER, that any Equity Interests that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests is convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the first anniversary of the Final Maturity Date shall not constitute Disqualified Capital Stock if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the repayment in full of the Obligations. "DIVIDEND" with respect to any person shall mean that such person has declared or paid a dividend or returned any equity capital to the holders of its Equity Interests or authorized or made any other distribution, payment or delivery of property (other than Qualified Capital Stock of such person) or cash to the holders of its Equity Interests as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any of its Equity Interests outstanding (or any options or warrants issued by such person with respect to its Equity Interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any of the Equity Interests of such person outstanding (or any options or warrants issued by such person with respect to its Equity Interests). Without limiting the foregoing, "Dividends" with respect to any person shall also include all payments made or required to be made by such person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "DOLLARS" or "$" shall mean lawful money of the United States. "DOMESTIC SUBSIDIARY" shall mean any Subsidiary that is organized or existing under the laws of the United States, any state thereof or the District of Columbia. "EMBARGOED PERSON" shall have the meaning assigned to such term in SECTION 6.21. "ENVIRONMENT" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources, the workplace or as otherwise defined in any Environmental Law. "ENVIRONMENTAL CLAIM" shall mean any claim, notice, demand, order, action, suit, proceeding or other communication alleging liability for investigation, remediation, removal, cleanup, response, corrective action, damages to natural resources, personal injury, property damage, fines, penalties or other costs resulting from, related to or arising out of (i) the presence, Release or threatened Release in or into the Environment of Hazardous Material at any location or (ii) any violation of Environmental Law, and shall include any claim seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from, related to or arising out of the presence, Release or threatened Release of Hazardous Material or alleged injury or threat of injury to health, safety or the Environment. "ENVIRONMENTAL LAW" shall mean any and all applicable present and future treaties, laws, statutes, ordinances, regulations, rules, decrees, orders, judgments, consent orders, consent decrees, code or other binding requirements, and the common law and judicial or agency interpretation, policy or guidance, relating to protection of public health or the Environment, the Release or threatened Release of Hazardous Material, natural resources or natural resource damages, or occupational safety or health. "ENVIRONMENTAL PERMIT" shall mean any permit, license, approval, consent or other authorization required by or from a Governmental Authority under Environmental Law. -15- "EQUIPMENT" shall have the meaning assigned to such term in the U.S. Security Agreement. "EQUITY FINANCING" shall mean the cash contribution of approximately $136.7 million by Sponsor, its affiliates and certain members of U.S. Borrower's management to Holdings in return for Equity Interests in Holdings, and the contribution of such cash by Holdings to Parent in connection with the funding of the Acquisition. "EQUITY INTEREST" shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of property of, such partnership, whether outstanding on the Closing Date or issued after the Closing Date, but excluding debt securities convertible or exchangeable into such equity. "EQUITY INVESTORS" shall mean Sponsor and one or more investors reasonably satisfactory to the Administrative Agent and the Arrangers. "EQUITY ISSUANCE" shall mean, without duplication, (i) any issuance or sale by Parent or Holdings after the Closing Date of any Equity Interests in Parent or Holdings (including any Equity Interests issued upon exercise of any warrant or option), as applicable, or any warrants or options to purchase such Equity Interests or (ii) any contribution to the capital of Parent or Holdings; PROVIDED, HOWEVER, that an Equity Issuance shall not include (x) any Preferred Stock Issuance or Debt Issuance, (y) any such sale or issuance by Holdings of its Equity Interests (including its Equity Interests issued upon exercise of any warrant or option or warrants or options to purchase its Equity Interests but excluding Disqualified Capital Stock), in each case, to directors, officers or employees of any Company and (z) any Excluded Issuance. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean, with respect to any person, any trade or business (whether or not incorporated) that, together with such person, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA EVENT" shall mean (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) except as set forth on SCHEDULE 3.17, the incurrence by any Company or any of its ERISA Affiliates of -16- any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (g) except as set forth on SCHEDULE 3.17, the receipt by any Company or its ERISA Affiliates of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security; and (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to any Company. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan. "EURODOLLAR REVOLVING BORROWING" shall mean a Borrowing comprised of Eurodollar Revolving Loans. "EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of ARTICLE II. "EURODOLLAR TERM BORROWING" shall mean a Borrowing comprised of Eurodollar Term Loans. "EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of ARTICLE II. "EVENT OF DEFAULT" shall have the meaning assigned to such term in ARTICLE VIII. "EXCESS AMOUNT" shall have the meaning assigned to such term in SECTION 2.10(h)(ii). "EXCESS CASH FLOW" shall mean, for any Excess Cash Flow Period, Consolidated EBITDA for such Excess Cash Flow Period, MINUS, without duplication: (a) Debt Service for such Excess Cash Flow Period actually paid during such Excess Cash Flow Period; (b) Capital Expenditures during such Excess Cash Flow Period (excluding Capital Expenditures made in such Excess Cash Flow Period where a certificate in the form contemplated by the following clause (c) was previously delivered) that are paid in cash; (c) (x) Capital Expenditures that U.S. Borrower or any of its Subsidiaries shall, during such Excess Cash Flow Period, become obligated to make but that are not made during such Excess Cash Flow Period; provided that U.S. Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such Excess Cash Flow Period, signed by a Responsible Officer of U.S. Borrower and certifying that such Capital Expenditures will be made in the following Excess Cash Flow Period or (y) the CapEx Carryforward Amount for such Excess Cash Flow Period less the CapEx Carryforward Amount from the prior Excess Cash Flow Period that is not used in such Excess Cash Flow Period; (d) the aggregate amount of investments made in cash during such period pursuant to SECTIONS 6.04(e), (i), (j), (k) and (m) (other than investments made with Excluded Issuances); -17- (e) taxes of U.S. Borrower and its Subsidiaries that were paid in cash during such Excess Cash Flow Period or will be paid within six months after the end of such Excess Cash Flow Period and for which reserves have been established; (f) Permitted Tax Distributions that are paid during the respective Excess Cash Flow Period or will be paid within six months after the close of such Excess Cash Flow Period; (g) the absolute value of the difference, if negative, of the amount of Net Working Capital at the end of the prior Excess Cash Flow Period over the amount of Net Working Capital at the end of such Excess Cash Flow Period; (h) losses excluded from the calculation of Consolidated Net Income by operation of clause (c) or (g) of the definition thereof that are paid in cash during such Excess Cash Flow Period; (i) to the extent added to determine Consolidated EBITDA, all items that did not result from a cash payment to U.S. Borrower or any of its Subsidiaries on a consolidated basis during such Excess Cash Flow Period; and (j) permanent repayments and prepayments of Indebtedness (other than the Obligations) made by U.S. Borrower and its Subsidiaries during such fiscal year to the extent funded with internally generated funds; PROVIDED that any amount deducted pursuant of any of the foregoing clauses that will be paid after the close of such Excess Cash Flow Period shall not be deducted again in a subsequent Excess Cash Flow Period; PLUS, without duplication: (i) the difference, if positive, of the amount of Net Working Capital at the end of the prior Excess Cash Flow Period over the amount of Net Working Capital at the end of such Excess Cash Flow Period; (ii) all proceeds received during such Excess Cash Flow Period of any Indebtedness to the extent used to finance any Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such borrowings); (iii) to the extent any permitted Capital Expenditures referred to in (c) above do not occur in the Excess Cash Flow Period specified in the certificate of U.S. Borrower provided pursuant to (c) above, such amounts of Capital Expenditures that were not so made in the Excess Cash Flow Period specified in such certificates; (iv) any return of capital on or in respect of investments received in cash during such period other than proceeds of an Asset Sale, which investments were made pursuant to SECTION 6.04(e), (i), (j), (k) or (m) (other than investments made from Excluded Issuances); (v) income or gain excluded from the calculation of Consolidated Net Income by operation of clause (c) or (g) of the definition thereof that is realized in cash during such Excess Cash Flow Period (except to the extent such gain is subject to SECTION 2.10); (vi) if deducted in the computation of Consolidated EBITDA, interest income; and -18- (vii) to the extent subtracted in determining Consolidated EBITDA, all items that did not result from a cash payment by U.S. Borrower or any of its Subsidiaries on a consolidated basis during such Excess Cash Flow Period; PROVIDED FURTHER that Excess Cash Flow for the fiscal year of U.S. Borrower ending on December 31, 2004 shall be deemed to be Excess Cash Flow as calculated above multiplied by 3/4. "EXCESS CASH FLOW PERIOD" shall mean each fiscal year of U.S. Borrower. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXCLUDED ISSUANCE" shall mean an issuance and sale of Qualified Capital Stock of Holdings to the Permitted Holders and any corresponding issuance and sale of Qualified Capital Stock of Parent to Holdings financed with the net proceeds thereof. "EXCLUDED TAXES" shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient (each a "RECIPIENT," and collectively the "RECIPIENTS") of any payment to be made by or on account of any obligation of either Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income as a result of a present or former connection between the Recipient and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Recipient having executed, delivered or performed its obligations or received a payment under, or enforced, or otherwise in connection with, this Agreement or any other Loan Document), (b) in the case of a Foreign Lender, any U.S. federal withholding taxes that are attributable to such Foreign Lender's failure to comply with the requirements of SECTION 2.15(e), (c) Taxes that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, immediately prior to such assignment, to receive additional amounts or indemnification from either Borrower with respect to such withholding taxes pursuant to SECTION 2.15 (or would have been so entitled had the assignor's tax status (residence, etc.) immediately before such assignment been the same as the assignee's tax status immediately after such assignment) and (d) U.S. federal withholding taxes that are imposed as a result of an event occurring after the Lender becomes a Lender other than a Change in Law or regulation or interpretation thereof. "EXECUTIVE ORDER" shall have the meaning assigned to such term in SECTION 3.22. "EXECUTIVE ORDERS" shall have the meaning assigned to such term in SECTION 6.21. "EXISTING LIEN" shall have the meaning assigned to such term in SECTION 6.02(c). "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System of the United States arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" shall mean the confidential Fee Letter, dated December 31, 2003, among Holdings, the Arrangers, UBS Loan Finance LLC, Deutsche Bank AG Cayman Islands Branch, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation. -19- "FEES" shall mean the Commitment Fees, the Administrative Agent Fees, the LC Participation Fees and the Fronting Fees. "FINAL MATURITY DATE" shall mean the latest of the Revolving Maturity Date and the Term Loan Maturity Date. "FINANCIAL OFFICER" of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person. "FIRREA" shall mean the Federal Institutions Reform, Recovery and Enforcement Act of 1989, as amended. "FOREIGN LENDER" shall mean any Lender that is not, for United States federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation or partnership or entity treated as a corporation or partnership created or organized in or under the laws of the United States, or any political subdivision thereof, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust. "FOREIGN PLAN" shall mean any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by any Company with respect to employees employed outside the United States. "FOREIGN SUBSIDIARY" shall mean a Subsidiary that is organized under the laws of a jurisdiction other than the United States or any state thereof or the District of Columbia. "FRONTING FEE" shall have the meaning assigned to such term in SECTION 2.05(c). "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis; PROVIDED that with respect to Canadian Borrower and any Canadian Subsidiaries organized under the laws of Canada or a province thereof, for purposes of Sections 3.13, 5.05, 5.07 and 5.09 "GAAP" shall mean generally accepted accounting principles in Canada applied on a consistent basis. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, provincial, local or foreign court, central bank or governmental agency, authority, instrumentality or regulatory body or any subdivision thereof. "GOVERNMENTAL REAL PROPERTY DISCLOSURE REQUIREMENTS" shall mean any Requirement of Law of any Governmental Authority requiring notification of the buyer, lessee, mortgagee, assignee or other transferee of any Real Property, facility, establishment or business, or notification, registration or filing to or with any Governmental Authority, in connection with the sale, lease, mortgage, assignment or other transfer (including any transfer of control) of any Real Property, facility, establishment or business, of the actual or threatened presence or Release in or into the Environment, or the use, disposal or handling of Hazardous Material on, at, under or near the Real Property, facility, establishment or business to be sold, leased, mortgaged, assigned or transferred. "GUARANTEED OBLIGATIONS" shall mean the U.S. Guaranteed Obligations and/or the Canadian Guaranteed Obligations, as applicable. -20- "GUARANTEES" shall mean the guarantees issued pursuant to ARTICLE VII by Parent and the Subsidiary Guarantors. "GUARANTORS" shall mean Parent and the Subsidiary Guarantors. "HAZARDOUS MATERIALS" shall mean the following: hazardous substances; hazardous wastes; polychlorinated biphenyls ("PCBs") or any substance or compound containing PCBs; asbestos or any asbestos-containing materials in any form or condition; radon or any other radioactive materials including any source, special nuclear or by-product material; petroleum, crude oil or any fraction thereof; and any other pollutant or contaminant or chemicals, wastes, materials, compounds, constituents or substances, subject to regulation or which can give rise to liability under any Environmental Laws. "HEDGING AGREEMENT" shall mean any swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies. "HEDGING OBLIGATIONS" shall mean obligations under or with respect to Hedging Agreements. "HOLDINGS" shall mean Ply Gem Investment Holdings, Inc. (formerly known as CI Investment Holdings, Inc.), a Delaware corporation. "HOLDINGS SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of Holdings owing to any Permitted Holder issued pursuant to the Subordinated Note Purchase Agreement attached hereto as EXHIBIT R. "INCREMENTAL REVOLVING COMMITMENT" shall have the meaning assigned to such term in SECTION 11.02(f). "INDEBTEDNESS" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or advances; (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such person upon which interest charges are customarily paid or accrued; (d) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business on normal trade terms and not overdue by more than 90 days); (f) all Indebtedness of others secured by any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, but limited to the fair market value of such property; (g) all Capital Lease Obligations, Purchase Money Obligations and synthetic lease obligations of such person; (h) all Hedging Obligations to the extent required to be reflected on a balance sheet of such person; (i) all obligations of such person (not including any contingent obligations) for the reimbursement of any obligor in respect of letters of credit, letters of guaranty, bankers' acceptances and similar credit transactions; and (j) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person's ownership interest in or other relationship with such entity, except to the extent that terms of such Indebtedness expressly provide that such person is not liable therefor. "INDEMNIFIED TAXES" shall mean all Taxes other than Excluded Taxes. -21- "INDEMNITEE" shall have the meaning assigned to such term in SECTION 11.03(b). "INFORMATION" shall have the meaning assigned to such term in SECTION 11.12. "INSTALLMENT CONTRACT" shall have the meaning assigned to such term in SECTION 5.13(a). "INSURANCE POLICIES" shall mean the insurance policies and coverages required to be maintained by each Loan Party which is an owner of Mortgaged Property with respect to the applicable Mortgaged Property pursuant to SECTION 5.04 and all renewals and extensions thereof. "INSURANCE REQUIREMENTS" shall mean, collectively, all provisions of the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon each Loan Party which is an owner of Mortgaged Property and applicable to the Mortgaged Property or any use or condition thereof. "INTELLECTUAL PROPERTY" shall have the meaning assigned to such term in SECTION 3.06(a). "INTERCOMPANY NOTE" shall mean the U.S. Intercompany Note and the Canadian Intercompany Note. "INTEREST ELECTION REQUEST" shall mean a request by either Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with SECTION 2.08(b), substantially in the form of EXHIBIT E. "INTEREST PAYMENT DATE" shall mean (a) with respect to any ABR Loan (including Swingline Loans), the last Business Day of each March, June, September and December to occur during any period in which such Loan is outstanding, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (c) with respect to any Revolving Loan or Swingline Loan, the Revolving Maturity Date or such earlier date on which the Revolving Commitments are terminated and (d) with respect to any Term Loan, the Term Loan Maturity Date. "INTEREST PERIOD" shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, if each affected Lender so agrees, nine months) thereafter, as the applicable Borrower may elect; PROVIDED that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing; PROVIDED, HOWEVER, that an Interest Period shall be limited to the extent required under SECTION 2.03(e). "INVESTMENTS" shall have the meaning assigned to such term in SECTION 6.04. -22- "IPO" shall mean the first underwritten public offering by Parent or Holdings of its Equity Interests after the Closing Date pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act. "IPO ENTITY" shall mean whichever of Parent or Holdings effects an IPO. "ISSUING BANK" shall mean, as the context may require, (a) UBS AG, Stamford Branch, with respect to Letters of Credit issued by it; (b) any other Lender that may become an Issuing Bank pursuant to SECTIONS 2.18(j) and (k) with respect to Letters of Credit issued by such Lender; or (c) collectively, all of the foregoing. "JOINDER AGREEMENT" shall mean a joinder agreement substantially in the form of EXHIBIT F. "JOINT LEAD ARRANGERS" shall have the meaning assigned to such term in the preamble hereto. "JUDGMENT CURRENCY" shall have the meaning assigned to such term in SECTION 11.16. "JUDGMENT CURRENCY CONVERSION DATE" shall have the meaning assigned to such term in SECTION 11.16. "LANDLORD ACCESS AGREEMENT" shall mean (x) with respect to a Real Property located in the United States, a U.S. Landlord Access Agreement, substantially in the form of EXHIBIT G-1 and (y) with respect to a Real Property located in Canada, a Canadian Landlord Access Agreement, substantially in the form of Exhibit G-2, or, in either case, a landlord access agreement in such other form as may reasonably be acceptable to the Collateral Agent. "LC COMMITMENT" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to SECTION 2.18, as the same shall be reduced from time to time pursuant to SECTION 2.07 or SECTION 2.18. The amount of the LC Commitment shall be $25.0 million as of the Amendment Effectiveness Date, but in no event exceed the Revolving Commitments. "LC DISBURSEMENT" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. "LC EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate principal amount of all Reimbursement Obligations outstanding at such time; PROVIDED that the amount in clause (a) will be reduced by (x) for any purpose other than calculating a fee due under this Agreement, the amount of industrial or economic revenue bonds issued in connection with the Assumed Debt and held by a remarketing agent or trustee for the benefit of the Collateral Agent and (y) the amount of cash deposited by U.S. Borrower in the Ply Gem LC Restricted Account. The LC Exposure of any Revolving Lender at any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at such time. "LC PARTICIPATION FEE" shall have the meaning assigned to such term in SECTION 2.05(c). "LC REQUEST" shall mean a request by U.S. Borrower in accordance with the terms of SECTION 2.18(b) and substantially in the form of EXHIBIT H, or such other form as shall be approved by the Administrative Agent. -23- "LC SUB-ACCOUNT" shall have the meaning assigned to such term in SECTION 9.01(d). "LEASES" shall mean any and all leases, subleases, tenancies, options, concession agreements, rental agreements, occupancy agreements, franchise agreements, access agreements and any other agreements (including all amendments, extensions, replacements, renewals, modifications and/or guarantees thereof), whether or not of record and whether now in existence or hereafter entered into, affecting the use or occupancy of all or any portion of any Real Property. "LENDER ADDENDUM" shall mean with respect to any Lender on the Closing Date or the Amendment Effectiveness Date, a lender addendum in the form of EXHIBIT I, to be executed and delivered by such Lender on the Closing Date or the Amendment Effectiveness Date as provided in SECTION 11.14. "LENDER AFFILIATE" shall mean with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such advisor. "LENDERS" shall mean the U.S. Lenders and the Canadian Term Loan Lenders. "LETTER OF CREDIT" shall mean any (i) Standby Letter of Credit and (ii) Commercial Letter of Credit, in each case, issued or to be issued by an Issuing Bank for the account of U.S. Borrower pursuant to SECTION 2.18. "LETTER OF CREDIT EXPIRATION DATE" shall mean the date which is fifteen days prior to the Revolving Maturity Date. "LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period therefor, the rate per annum determined by the Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for deposits in dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such Interest Period; PROVIDED, HOWEVER, that (i) if no comparable term for an Interest Period is available, the LIBOR Rate shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such Interest Period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "LIBOR Rate" shall mean, with respect to each day during each Interest Period pertaining to Eurodollar Borrowings comprising part of the same Borrowing, the rate per annum equal to the rate at which the Administrative Agent is offered deposits in dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to its portion of the amount of such Eurodollar Borrowing to be outstanding during such Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market). "LIEN" shall mean, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation, security interest or encumbrance of any kind or any arrangement to provide priority or preference or any filing of any financing statement under the UCC or any other similar notice of Lien under any similar notice or recording statute of any Governmental Authority, including any easement, right-of-way or other encumbrance on title to Real Property, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the -24- foregoing; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "LOAN DOCUMENTS" shall mean this Agreement, each LC Request or application, the Notes (if any), the Security Documents, each Permitted U.S. Hedging Agreement, each Permitted Canadian Hedging Agreement and, solely for purposes of SECTION 8.01(e) hereof, the Fee Letter. "LOAN PARTIES" shall mean Parent, the Borrowers and the Subsidiary Guarantors. "LOANS" shall mean, as the context may require, a Revolving Loan, a U.S. Term Loan, a Canadian Term Loan or a Swingline Loan (and shall include any Loans contemplated by SECTIONS 11.02(d) or (f)). "MARGIN STOCK" shall have the meaning assigned to such term in Regulation U. "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect on the condition (financial or otherwise), business, operations, assets, liabilities or prospects of Parent and its Subsidiaries, taken as a whole; (b) material impairment of the ability of the Loan Parties to fully and timely perform any of their obligations under any Loan Document; (c) material impairment of the rights of or benefits or remedies available to the Lenders or the Collateral Agent under any Loan Document; or (d) a material adverse effect on the Liens in favor of the Collateral Agent (for its benefit and for the benefit of the other Secured Parties) on the Collateral or the priority of such Liens. "MATERIAL INDEBTEDNESS" shall mean (a) the Indebtedness listed on SCHEDULE 1.01(c) and (b) any other Indebtedness (other than the Loans and Letters of Credit) or Hedging Obligations of Parent or any of its Subsidiaries in an aggregate outstanding principal amount exceeding $10.0 million. For purposes of determining Material Indebtedness, the "principal amount" in respect of any Hedging Obligations of any Loan Party at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party would be required to pay if the related Hedging Agreement were terminated at such time. "MAXIMUM RATE" shall have the meaning assigned to such term in SECTION 11.13. "MORTGAGE" shall mean an agreement, including, but not limited to, a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Mortgaged Property, which (i) in the case of Real Property owned in fee by a U.S. Loan Party, shall be substantially in the form of EXHIBIT J-1, (ii) in the case of Real Property owned in fee by a Canadian Loan Party, shall be substantially in the form of EXHIBIT J-2, and (iii) in the case of leased Real Property, shall be substantially in the form of EXHIBIT J-3, or, in each case, another form reasonably satisfactory to the Collateral Agent, and, in each case, with such schedules and including such provisions as shall be necessary to conform such document to applicable local or foreign law or as shall be customary under applicable local or foreign law. "MORTGAGED PROPERTY" shall mean (a) each Real Property identified on SCHEDULE 1.01(d) hereto and (b) each Real Property, if any, which shall be subject to a Mortgage delivered after the Closing Date pursuant to SECTION 5.10(d) or (e) or SECTION 5.13. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA (a) to which any Company or any ERISA Affiliate is then making or accruing an obligation to make contributions; (b) to which any Company or any ERISA Affili- -25- ate has within the preceding five plan years made contributions; or (c) with respect to which any Company could incur liability. "NET CASH PROCEEDS" shall mean: (a) with respect to any Asset Sale (other than any issuance or sale of Equity Interests), the cash proceeds received by Parent or any of its Subsidiaries (including cash proceeds subsequently received (as and when received by Parent or any of its Subsidiaries) in respect of non-cash consideration initially received) net of (i) selling expenses (including reasonable brokers' fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes and U.S. Borrower's good faith estimate of income taxes paid or payable in connection with such sale); (ii) amounts provided as a reserve, in accordance with GAAP, against (x) any liabilities under any indemnification obligations associated with such Asset Sale or (y) any other liabilities retained by Parent or any of its Subsidiaries associated with the properties sold in such Asset Sale (PROVIDED that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds); (iii) U.S. Borrower's good faith estimate of payments required to be made with respect to unassumed liabilities relating to the properties sold within 90 days of such Asset Sale (PROVIDED that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 90 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds); and (iv) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money which is secured by a Lien on the properties sold in such Asset Sale (so long as such Lien was permitted to encumber such properties under the Loan Documents at the time of such sale) and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such properties); (b) with respect to any Debt Issuance, any Equity Issuance or any other issuance or sale of Equity Interests by Holdings or any of its Subsidiaries, the cash proceeds thereof, net of customary fees, commissions, costs and other expenses incurred in connection therewith; and (c) with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received in respect thereof, net of all reasonable costs and expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event. "NET WORKING CAPITAL" shall mean, at any time, Consolidated Current Assets at such time minus Consolidated Current Liabilities at such time. "NON-GUARANTOR SUBSIDIARY" shall mean each Subsidiary that is not a Subsidiary Guarantor. "NOTES" shall mean any notes evidencing the Term Loans, Revolving Loans or Swingline Loans issued pursuant to this Agreement, if any, substantially in the form of EXHIBIT K-1, K-2, K-3 or K-4. "OBLIGATIONS" shall mean the Canadian Obligations and the U.S. Obligations. "OFAC" shall have the meaning assigned to such term in SECTION 3.22. "OFFER TO REDEEM" shall have the meaning assigned to such term in SECTION 2.10(j). -26- "OFFICERS' CERTIFICATE" shall mean a certificate executed by the chairman of the Board of Directors (if an officer), the chief executive officer or the president and one of the Financial Officers, each in his or her official (and not individual) capacity. "ORGANIZATIONAL DOCUMENTS" shall mean, with respect to any person, (i) in the case of any corporation, the certificate of incorporation and by-laws (or similar documents) of such person, (ii) in the case of any limited liability company, the certificate of formation and operating agreement (or similar documents) of such person, (iii) in the case of any limited partnership, the certificate of formation and limited partnership agreement (or similar documents) of such person, (iv) in the case of any general partnership, the partnership agreement (or similar document) of such person and (v) in any other case, the functional equivalent of the foregoing. "OTHER LIST" shall have the meaning assigned to such term in SECTION 6.21. "OTHER TAXES" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including all interest, fines, penalties and additions to tax and related expenses with regard thereto) arising from any payment made or required to be made under any Loan Document or from the execution, delivery, registration or enforcement of, or otherwise with respect to, any Loan Document. "PARENT" shall have the meaning assigned to such term in the preamble hereto. "PARTICIPANT" shall have the meaning assigned to such term in SECTION 11.04(e). "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "PERFECTION CERTIFICATE" shall mean a certificate in the form of EXHIBIT L-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise. "PERFECTION CERTIFICATE SUPPLEMENT" shall mean a certificate supplement in the form of EXHIBIT L-2 or any other form approved by the Collateral Agent. "PERMITTED ACQUISITION" shall mean any transaction or series of related transactions for the direct or indirect (a) acquisition of all or substantially all of the property of any person, or of any business or division of any person; (b) acquisition of in excess of 50% of the Equity Interests of any person, and otherwise causing such person to become a Subsidiary of such person; or (c) merger or consolidation or any other combination with any person (other than (x) among U.S. Borrower and/or its Subsidiaries as permitted by SECTIONS 6.05(c) and (d) and (y) between Parent and Holdings in connection with an IPO), if each of the following conditions is met: (i) no Default then exists or would result therefrom; (ii) after giving effect to such transaction on a Pro Forma Basis, (A) U.S. Borrower shall be in compliance with all covenants set forth in SECTION 6.10 as of the most recent Test Period (assuming, for purposes of SECTION 6.10, that such transaction, and all other Permitted Acquisitions consummated since the first day of the relevant Test Period for each of the financial covenants set forth in SECTION 6.10 ending on or prior to the date of such transaction, had occurred on the first day of such relevant Test Period), and (B) unless expressly approved by the Administra- -27- tive Agent, the person or business to be acquired shall have generated positive cash flow for the Test Period most recently ended prior to the date of consummation of such acquisition; (iii) no Company shall, in connection with any such transaction, assume or remain liable with respect to any Indebtedness or other liability (including any material tax or ERISA liability) of the related seller or the business, person or properties acquired, except (A) to the extent permitted under SECTION 6.01 and (B) obligations not constituting Indebtedness incurred in the ordinary course of business and necessary or desirable to the continued operation of the underlying properties, and any other such liabilities or obligations not permitted to be assumed or otherwise supported by any Company hereunder shall be paid in full or released as to the business, persons or properties being so acquired on or before the consummation of such acquisition; (iv) the person or business to be acquired shall be, or shall be engaged in, a business of the type that U.S. Borrower and its Subsidiaries are permitted to be engaged in under SECTION 6.15 and the property acquired in connection with any such transaction shall be made subject to the Lien of the Security Documents to the extent required by SECTION 5.10 and shall be free and clear of any Liens, other than Permitted Collateral Liens; (v) the Board of Directors of the person to be acquired shall not have indicated publicly its opposition to the consummation of such acquisition (which opposition has not been publicly withdrawn); (vi) all transactions in connection therewith shall be consummated in accordance with all applicable laws of all applicable Governmental Authorities; (vii) with respect to any transaction involving Acquisition Consideration of more than $10.0 million, unless the Administrative Agent shall otherwise agree, U.S. Borrower shall have provided the Administrative Agent and the Lenders with (A) historical financial statements for the last three fiscal years (or, if less, the number of years since formation) of the person or business to be acquired (audited if available and, in the case of a transaction involving Acquisition Consideration of more than $20.0 million, if available without undue cost or delay) and unaudited financial statements thereof for the most recent interim period which are available, (B) reasonably detailed projections for the succeeding five years pertaining to the person or business to be acquired and updated projections for U.S. Borrower after giving effect to such transaction, (C) a reasonably detailed description of all material information relating thereto and copies of all material documentation pertaining to such transaction, and (D) all such other information and data relating to such transaction or the person or business to be acquired as may be reasonably requested by the Administrative Agent or the Required Lenders; and (viii) at least 5 Business Days prior to the proposed date of consummation of the transaction, U.S. Borrower shall have delivered to the Agents and the Lenders an Officers' Certificate certifying that (A) such transaction complies with this definition (which shall have attached thereto reasonably detailed backup data and calculations showing such compliance), and (B) such transaction could not reasonably be expected to result in a Material Adverse Effect. "PERMITTED CANADIAN HEDGING AGREEMENT" shall have the meaning assigned to such term in the definition of "Canadian Obligations." "PERMITTED COLLATERAL LIENS" means (i) Contested Liens (as defined in the Security Agreement), (ii) the Liens described in clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (m) and (n) of SECTION 6.02 and (iii) in the case of Mortgaged Property, "Permitted Collateral Liens" shall mean the -28- Liens described in clauses (a), (b), (c), (d), (e), (g), (k) and (n) of SECTION 6.02; PROVIDED, HOWEVER upon the Closing Date or upon the date of delivery of each additional Mortgage under SECTION 5.10, 5.11 or 5.13, Permitted Collateral Liens shall mean only those Liens set forth in Schedule B to the applicable Mortgage. "PERMITTED HOLDERS" shall mean (1) Sponsor, Caxton Associates, LLC, Caxton-Iseman (Ply Gem) L.P., Frederick J. Iseman, Lee D. Meyer, John Wayne, Shawn Poe, Mark Watson, Bryan Sveinson, David S. McCready, Robert A. Ferris, Steven M. Lefkowitz and any other person that is a controlled Affiliate of any of the foregoing and (2) any Related Party of any of the foregoing; PROVIDED that in no event shall any operating portfolio company or any holding company for any operating portfolio company (other than U.S. Borrower) be a Permitted Holder. "PERMITTED LIENS" shall have the meaning assigned to such term in SECTION 6.02. "PERMITTED SALE AND LEASEBACK TRANSACTION" means a refinancing by U.S. Borrower or its Subsidiaries (other than Canadian Borrower or any Canadian Subsidiary) following the Closing Date of all or a portion of the Assumed Debt with the proceeds of one or more Sale and Leaseback Transactions effected as operating leases involving the applicable properties securing the Assumed Debt; PROVIDED that (i) at the time of and immediately after giving effect to such Permitted Sale and Leaseback Transaction and the application of the proceeds thereof, no Default shall have occurred and be continuing and (ii) the proceeds of up to 525% of the aggregate operating lease payments in respect of such Permitted Sale and Leaseback Transaction (such amount, the "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT") are used (x) first, to repay the applicable Assumed Debt being so refinanced and (y) second, are applied in accordance with Section 2.10(c) (it being understood that, to the extent a prepayment deposit is required by the terms of the Assumed Debt, U.S. Borrower may use proceeds of Revolving Loans to fund such prepayment deposit and use proceeds of the Sale and Leaseback Transaction to repay such Revolving Loans without any Commitment reduction). "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT" shall have the meaning assigned to such term in the definition of "Permitted Sale and Leaseback Transaction." "PERMITTED TAX DISTRIBUTIONS" means payments, dividends or distributions by U.S. Borrower to Holdings or Parent or Parent to Holdings in order to pay consolidated or combined federal, state or local taxes not payable directly by U.S. Borrower or its Subsidiaries which payments by U.S. Borrower are not in excess of the tax liabilities that would have been payable by U.S. Borrower and its Subsidiaries on a stand-alone basis. "PERMITTED U.S. HEDGING AGREEMENT" shall have the meaning assigned to such term in the definition of "U.S. Obligations." "PERSON" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership or government, or any agency or political subdivision thereof, in any case, whether acting in a personal, fiduciary or other capacity. "PLAN" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is maintained or contributed to by any Company or its ERISA Affiliate or with respect to which any Company could incur liability (including under Section 4069 of ERISA). "PLY GEM LC RESTRICTED ACCOUNT" shall mean a restricted deposit account held at the Collateral Agent the amounts in which serve to cash collateralize outstanding Letters of Credit. By its -29- execution of this Agreement, U.S. Borrower consents to and authorizes the establishment and maintenance of such account by the Collateral Agent and pledges and grants to the Collateral Agent for the benefit of the Secured Parties, a lien on and security interest in, such account and all funds therein. It is understood and agreed that the funds in such account shall be invested only in overnight investments denominated in U.S. dollars. "PPSA" shall mean the Personal Property Security Act as in effect from time to time (except as otherwise specified) in any applicable Province of Canada. "PREFERRED STOCK" shall mean, with respect to any person, any and all preferred or preference Equity Interests (however designated) of such person whether now outstanding or issued after the Closing Date. "PREFERRED STOCK ISSUANCE" shall mean the issuance or sale by Holdings or any of its Subsidiaries of any Preferred Stock after the Closing Date (other than (x) as permitted by SECTION 6.01 or (y) any Excluded Issuance). "PREMISES" shall have the meaning assigned thereto in the applicable Mortgage. "PRO FORMA BASIS" shall mean on a basis reasonably satisfactory to the Administrative Agent. "PRO FORMA COST SAVINGS" shall mean, with respect to any Test Period, the reductions in costs that occurred during the Test Period that are (1) directly attributable to an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X or (2) implemented, committed to be implemented or the commencement of implementation of which has begun in good faith by the business that was the subject of any such asset acquisition within six months of the date of the asset acquisition and that are supportable and quantifiable by the underlying records of such business, as if, in the case of each of clauses (1) and (2), all such reductions in costs had been effected as of the beginning of such period, decreased by any incremental expenses incurred or to be incurred during the Test Period in order to achieve such reduction in costs. "PRO RATA PERCENTAGE" of any Revolving Lender at any time shall mean the percentage of the total Revolving Commitments of all Revolving Lenders represented by such Lender's Revolving Commitment. "PROPERTY" shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any person and whether now in existence or owned or hereafter entered into or acquired, including all Real Property. "PURCHASE MONEY OBLIGATION" shall mean, for any person, the obligations of such person in respect of Indebtedness (including Capital Lease Obligations) incurred for the purpose of financing all or any part of the purchase price of any property (including Equity Interests of any person) or the cost of installation, construction or improvement of any property and any refinancing thereof; PROVIDED, HOWEVER, that (i) such Indebtedness is incurred within one year after such acquisition of such property by such person and (ii) the amount of such Indebtedness does not exceed 100% of the cost of such acquisition, installation, construction or improvement, as the case may be. "QUALIFIED CAPITAL STOCK" of any person shall mean any Equity Interests of such person that are not Disqualified Capital Stock. -30- "REAL PROPERTY" shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned, leased or operated by any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof. "REFINANCING" shall mean the repayment in full, and the termination of any commitment to make extensions of credit in connection with, all of the outstanding indebtedness of Parent or any of its Subsidiaries listed on SCHEDULE 1.01(e). "REGISTER" shall have the meaning assigned to such term in SECTION 11.04(c). "REGULATION D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION S-X" shall mean Regulation S-X promulgated under the Securities Act. "REGULATION T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REIMBURSEMENT OBLIGATIONS" shall mean U.S. Borrower's obligations under SECTION 2.18(e) to reimburse LC Disbursements. "RELATED PARTY" means, with respect to any person, (1) any controlling stockholder, controlling member, general partner, Subsidiary, or spouse or immediate family member (in the case of an individual), of such person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of any person referred to in the immediately preceding clause (2), acting solely in such capacity. "RELEASE" shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment. "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans, LC Exposure and unused Revolving and Term Loan Commitments representing more than 50% of the sum of all Loans outstanding, LC Exposure and unused Revolving and Term Loan Commitments at such time. "REQUIREMENTS OF LAW" shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, ordinances, rules, regulations or similar statutes or case law. -31- "RESPONSE" shall mean (a) "response" as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above. "RESPONSIBLE OFFICER" of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof with responsibility for the administration of the obligations of such person in respect of this Agreement. "RESTRUCTURING EXPENSES" shall mean losses, expenses and charges incurred in connection with restructuring by U.S. Borrower and/or one or more of its Subsidiaries, including in connection with integration of acquired businesses or persons, disposition of one or more Subsidiaries or businesses, exiting of one or more lines of businesses and relocation or consolidation of facilities, including severance, lease termination and other non-ordinary-course, non-operating costs and expenses in connection therewith. "REVOLVING AVAILABILITY PERIOD" shall mean the period from and including the Closing Date to but excluding the earlier of (i) the Business Day preceding the Revolving Maturity Date and (ii) the date of termination of the Revolving Commitments. "REVOLVING BORROWING" shall mean a Borrowing comprised of Revolving Loans. "REVOLVING COMMITMENT" shall mean, with respect to each U.S. Lender, the commitment, if any, of such U.S. Lender to make Revolving Loans hereunder up to the amount set forth on Schedule I to the Lender Addendum executed and delivered by such U.S. Lender or by an amendment to this Agreement pursuant to SECTION 11.02(f), or in the Assignment and Assumption pursuant to which such U.S. Lender assumed its Revolving Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to SECTION 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such U.S. Lender pursuant to SECTION 11.04. The aggregate amount of the Lenders' Revolving Commitments as of the Amendment Effectiveness Date is $55.0 million. "REVOLVING EXPOSURE" shall mean, with respect to any U.S. Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such U.S. Lender, PLUS the aggregate amount at such time of such Lender's LC Exposure, PLUS the aggregate amount at such of such Lender's Swingline Exposure. "REVOLVING LENDER" shall mean a U.S. Lender with a Revolving Commitment. "REVOLVING LOAN" shall mean a Loan made by the U.S. Lenders to U.S. Borrower pursuant to SECTION 2.01(c). Each Revolving Loan shall either be an ABR Revolving Loan or a Eurodollar Revolving Loan. "REVOLVING MATURITY DATE" shall mean the date which is five years after the Closing Date or, if such date is not a Business Day, the first Business Day thereafter. "ROLLOVER EQUITY" shall mean the phantom equity interest of certain existing equityholders of Seller in Holdings valued at $4.3 million on terms and conditions satisfactory to the Administrative Agent in its reasonable judgment. -32- "SALE AND LEASEBACK TRANSACTION" has the meaning assigned to such term in SECTION 6.03. "SDN LIST" shall have the meaning assigned to such term in SECTION 6.21. "SECURED PARTIES" shall mean the U.S. Secured Parties and the Canadian Secured Parties. "SECURITIES ACT" shall mean the Securities Act of 1933. "SECURITIES COLLATERAL" shall have the meaning assigned to such term in the U.S. Security Agreement or the Canadian Security Agreement, as applicable. "SECURITY AGREEMENT" shall mean the U.S. Security Agreement or the Canadian Security Agreement, as applicable. "SECURITY DOCUMENTS" shall mean the U.S. Security Documents and the Canadian Security Documents. "SELLER" shall have the meaning assigned to such term in the first recital hereto. "SENIOR LEVERAGE RATIO" shall mean, at any date of determination, the ratio of Consolidated Senior Indebtedness on such date to Consolidated EBITDA for the Test Period then most recently ended. "SENIOR SUBORDINATED NOTE AGREEMENT" shall mean any indenture, note purchase agreement or other agreement pursuant to which the Senior Subordinated Notes are issued as in effect on the Closing Date and thereafter amended from time to time subject to the requirements of this Agreement. "SENIOR SUBORDINATED NOTE DOCUMENTS" shall mean the Senior Subordinated Notes, the Senior Subordinated Note Agreement, the Senior Subordinated Note Guarantees and all other documents executed and delivered with respect to the Senior Subordinated Notes or the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTE GUARANTEES" shall mean the guarantees of Parent and the U.S. Subsidiary Guarantors pursuant to the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTES" shall mean U.S. Borrower's 9.0% Senior Subordinated Notes due 2014 issued pursuant to the Senior Subordinated Note Agreement and any registered notes issued by U.S. Borrower in exchange for, and as contemplated by, such notes with substantially identical terms as such notes. "SPONSOR" shall mean Caxton-Iseman Capital, Inc. "STANDBY LETTER OF CREDIT" shall mean any standby letter of credit or similar instrument issued for the purpose of supporting (a) workers' compensation liabilities of U.S. Borrower or any of its Subsidiaries, (b) the obligations of third-party insurers of U.S. Borrower or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third-party insurers to obtain such letters of credit, (c) performance, payment, deposit or surety obligations of U.S. Borrower or any of its Subsidiaries if required by law or governmental rule or regulation or in accordance with custom and practice in the industry, (d) Indebtedness of U.S. Borrower or any of its Subsidiaries permitted to be incurred under SECTION 6.01 or (e) any other purpose not prohibited hereunder and acceptable to the Issuing Bank. -33- "STATUTORY RESERVES" shall mean for any Interest Period for any Eurodollar Borrowing, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the United States Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurodollar liabilities" (as such term is used in Regulation D). Eurodollar Borrowings shall be deemed to constitute Eurodollar liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Lender under Regulation D. "SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of either Borrower or any Guarantor that is by its terms subordinated in right of payment to the Obligations of such Borrower and such Guarantor, as applicable, including the Senior Subordinated Notes. "SUBSIDIARY" shall mean, with respect to any person (the "PARENT") at any date, (i) any person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date and (ii) any other corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are, as of such date, owned, controlled or held by the parent and/or one or more subsidiaries of the parent. Unless the context requires otherwise, "Subsidiary" refers to a Subsidiary of U.S. Borrower. "SUBSIDIARY GUARANTOR" shall mean each U.S. Subsidiary Guarantor and each Canadian Subsidiary Guarantor. "SUCCESSFUL SYNDICATION" shall have the meaning given to such term in the Fee Letter. "SURVEY" shall mean a survey of any Mortgaged Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Property, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Property and issue the endorsements of the type required by SECTION 4.01(o)(iii) or (b) otherwise acceptable to the Collateral Agent. "SWINGLINE COMMITMENT" shall mean the commitment of the Swingline Lender to make loans pursuant to SECTION 2.17, as the same may be reduced from time to time pursuant to SECTION 2.07 or SECTION 2.17. The amount of the Swingline Commitment shall initially be $10.0 million, but in no event exceed the Revolving Commitments. -34- "SWINGLINE EXPOSURE" shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time. "SWINGLINE LENDER" shall have the meaning assigned to such term in the preamble hereto. "SWINGLINE LOAN" shall mean any loan made by the Swingline Lender pursuant to SECTION 2.17. "SYNDICATION AGENT" shall have the meaning assigned to such term in the preamble hereto. "TAX RETURN" shall mean all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes. "TAXES" shall mean (i) any and all present or future taxes, duties, levies, imposts, assessments, deductions, withholdings or other similar charges imposed by the U.S. Internal Revenue Service or any other taxing authority (whether domestic or foreign and including any federal, state, U.S. possession, county, local, provincial or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing, and (ii) any transferee, successor, joint and several, contractual or other liability (including liability pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. law)) in respect of any item described in clause (i). "TERM BORROWING" shall mean a Borrowing comprised of Term Loans. "TERM LOAN COMMITMENTS" shall mean the U.S. Term Loan Commitments and the Canadian Term Loan Commitments. "TERM LOAN LENDER" shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan. "TERM LOAN MATURITY DATE" shall mean the date which is seven years after the Closing Date or, if such date is not a Business Day, the first Business Day thereafter. "TERM LOAN REPAYMENT DATE" shall have the meaning assigned to such term in SECTION 2.09(a). "TERM LOANS" shall mean the U.S. Term Loans and the Canadian Term Loans. "TEST PERIOD" shall mean, at any time, the four consecutive fiscal quarters of U.S. Borrower then last ended (in each case taken as one accounting period) for which financial statements have been or are required to be delivered pursuant to SECTION 5.01(a) or (b). "TITLE COMPANY" shall mean any title insurance company as shall be retained by U.S. Borrower and reasonably acceptable to the Administrative Agent. "TITLE POLICY" shall have the meaning assigned to such term in SECTION 4.01(o)(iii). -35- "TOTAL LEVERAGE RATIO" shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test Period then most recently ended. "TRANSACTION DOCUMENTS" shall mean the Acquisition Documents, the Senior Subordinated Note Documents and the Loan Documents. "TRANSACTIONS" shall mean, collectively, the transactions to occur on or prior to the Closing Date pursuant to the Transaction Documents, including (a) the consummation of the Acquisition; (b) the execution, delivery and performance of the Loan Documents and the initial borrowings hereunder; (c) the Refinancing; (d) the Equity Financing; (e) the issuance of the Senior Subordinated Notes; (f) the issuance of the Rollover Equity; and (g) the payment of all fees and expenses to be paid on or prior to the Closing Date and owing in connection with the foregoing. "TRANSFERRED GUARANTOR" shall have the meaning assigned to such term in SECTION 7.09. "TYPE," when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR Rate or the Alternate Base Rate. "UCC" shall mean the Uniform Commercial Code as in effect from time to time (except as otherwise specified) in any applicable state or jurisdiction. "UNITED STATES" shall mean the United States of America. "U.S. BORROWER" shall have the meaning assigned to such term in the preamble hereto. "U.S. BORROWING REQUEST" shall mean a request by U.S. Borrower in accordance with the terms of SECTION 2.03 and substantially in the form of EXHIBIT C-1, or such other form as shall be approved by the Administrative Agent. "U.S. COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained by the Collateral Agent for the benefit of the U.S. Secured Parties, in accordance with the provisions of SECTION 9.01. "U.S. GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in SECTION 7.01. "U.S. GUARANTORS" shall have the meaning assigned to such term in SECTION 7.01. "U.S. INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of EXHIBIT P-1. "U.S. LENDERS" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum that make U.S. Loans or provide Commitments to U.S. Borrower and (b) any financial institution that has become a party hereto pursuant to an Assignment and Assumption that makes U.S. Loans or provides a Commitment to U.S. Borrower, other than, in each case, any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Assumption. Unless the context clearly indicates otherwise, the term "U.S. Lenders" shall include the Swingline Lender. -36- "U.S. LOAN PARTIES" shall mean Parent, U.S. Borrower and the U.S. Subsidiary Guarantors. "U.S. LOANS" shall mean all Loans other than the Canadian Term Loans. "U.S. MORTGAGED PROPERTY" shall mean the Mortgaged Properties owned or leased by the U.S. Loan Parties. "U.S. OBLIGATIONS" shall mean (a) obligations of U.S. Borrower and the other U.S. Loan Parties from time to time arising (including by way of Article VII) under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the U.S. Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by U.S. Borrower and the other U.S. Loan Parties under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of U.S. Borrower and the other U.S. Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of U.S. Borrower and the other U.S. Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of U.S. Borrower and the other U.S. Loan Parties under each Hedging Agreement relating to either the U.S. Loans or foreign currency exchange rates entered into with any counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (provided that each shall provide that it terminates or expires upon, or prior to, the repayment of all Loans hereunder) (each, a "PERMITTED U.S. HEDGING AGREEMENT") and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any U.S. Lender, any Affiliate of a U.S. Lender, the Administrative Agent or the Collateral Agent arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds, in each case, with respect to U.S. Loans. "U.S. SECURED PARTIES" shall mean, collectively, the Administrative Agent, the Collateral Agent, each other Agent, the U.S. Lenders and each party to a Permitted U.S. Hedging Agreement if such person executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such person (i) appoints the Collateral Agent as its agent under the applicable Loan Documents and (ii) agrees to be bound by the provisions of SECTIONS 11.03 and 11.09. "U.S. SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of EXHIBIT M-1 among the U.S. Loan Parties and Collateral Agent for the benefit of the Secured Parties. "U.S. SECURITY AGREEMENT COLLATERAL" shall mean all property pledged or granted as collateral pursuant to the U.S. Security Agreement delivered on the Closing Date or thereafter pursuant to SECTION 5.10. "U.S. SECURITY DOCUMENTS" shall mean the U.S. Security Agreement, the Mortgages entered into by the U.S. Loan Parties and each other security document or pledge agreement delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Obligations, and all UCC or other financing statements or instruments of perfection -37- required by this Agreement, the U.S. Security Agreement, any Mortgage or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the U.S. Security Agreement or any Mortgage and any other document or instrument utilized to pledge as collateral for the Obligations any property. "U.S. SUBSIDIARIES" shall mean all Subsidiaries of U.S. Borrower other than Canadian Borrower and Canadian Subsidiaries. "U.S. SUBSIDIARY GUARANTOR" shall mean each U.S. Subsidiary listed on SCHEDULE 1.01(f), and each other U.S. Subsidiary that is or becomes a party to this Agreement pursuant to SECTION 5.10. "U.S. TERM LOAN" shall mean the term loans made by the U.S. Lenders to U.S. Borrower pursuant to SECTION 2.01(a). Each U.S. Term Loan shall be either an ABR Term Loan or a Eurodollar Term Loan. "U.S. TERM LOAN COMMITMENT" shall mean, with respect to each U.S. Lender, the commitment, if any, of such U.S. Lender to make a U.S. Term Loan hereunder on the Closing Date and on the Amendment Effectiveness Date in the amount set forth on Schedule I to the Lender Addendum executed and delivered by such U.S. Lender. The aggregate amount of the Lenders' U.S. Term Loan Commitments as of the Amendment Effectivenss Date is $170.0 million. "VOTING STOCK" shall mean, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such person. "WHOLLY OWNED SUBSIDIARY" shall mean, as to any person, (a) any corporation 100% of whose capital stock (other than directors' qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this Agreement, Loans may be classified and referred to by Class (E.G., a "REVOLVING LOAN") or by Type (E.G., a "EURODOLLAR LOAN") or by Class and Type (E.G., a "EURODOLLAR REVOLVING LOAN"). Borrowings also may be classified and referred to by Class (e.g., a "REVOLVING BORROWING," "BORROWING OF U.S. TERM LOANS") or by Type (E.G., a "EURODOLLAR BORROWING") or by Class and Type (E.G., a "EURODOLLAR REVOLVING BORROWING"). SECTION 1.03 TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any Loan Document, agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such -38- amendments, supplements or modifications set forth herein), (b) any reference herein to any person shall be construed to include such person's successors and assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, unless otherwise indicated. SECTION 1.04 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect on the Closing Date unless otherwise agreed to by U.S. Borrower and the Required Lenders. SECTION 1.05 RESOLUTION OF DRAFTING AMBIGUITIES. Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof and thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof. ARTICLE II THE CREDITS SECTION 2.01 COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly: (a) to make a U.S. Term Loan to U.S. Borrower on the Closing Date in the principal amount not to exceed its U.S. Term Loan Commitment on the Closing Date; and (b) to make a Canadian Term Loan to Canadian Borrower on the Closing Date in the principal amount not to exceed its Canadian Term Loan Commitment; and (c) to make Revolving Loans to U.S. Borrower, at any time and from time to time on or after the Closing Date until the earlier of the Revolving Maturity Date and the termination of the Revolving Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment; PROVIDED that Borrower may only borrow $2.7 million of Revolving Loans on the Closing Date; and (d) to make a U.S. Term Loan to U.S. Borrower on the Amendment Effectiveness Date in the principal amount not to exceed its U.S. Term Loan Commitment on the Amendment Effectiveness Date. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. Within the limits set forth in clause (b) above and subject to the terms, conditions and limitations set forth herein, U.S. Borrower may borrow, pay or prepay and reborrow Revolving Loans. SECTION 2.02 LOANS. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; PROVIDED that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be -39- responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to SECTION 2.18(e)(ii), (x) ABR Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $500,000 and not less than $2.5 million or (ii) equal to the remaining available balance of the applicable Commitments and (y) the Eurodollar Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $500,000 and not less than $2.5 million or (ii) equal to the remaining available balance of the applicable Commitments. (b) Subject to SECTIONS 2.11 and 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request pursuant to SECTION 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; PROVIDED that the Borrowers shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Except with respect to Loans made pursuant to SECTION 2.18(e)(ii), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 12:00 noon, New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account as directed by U.S. Borrower in the applicable U.S. Borrowing Request maintained with the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. on the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, each of such Lender and such Borrower severally agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of either Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement, and such Borrower's obligation to repay the Administrative Agent such corresponding amount pursuant to this SECTION 2.02(d) shall cease. (e) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date or Term Loan Maturity Date, as applicable. -40- SECTION 2.03 BORROWING PROCEDURE. To request a Revolving Borrowing or Term Borrowing, the applicable Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Borrowing Request to the Administrative Agent (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each Borrowing Request shall be irrevocable and shall specify the following information in compliance with SECTION 2.02: (a) whether the requested Borrowing is to be a Borrowing of Revolving Loans, U.S. Term Loans or Canadian Term Loans; (b) the aggregate amount of such Borrowing; (c) the date of such Borrowing, which shall be a Business Day; (d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (e) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; PROVIDED that until the earlier of (x) the date on which the Syndication Agent shall have notified U.S. Borrower that a Successful Syndication has been achieved and (y) 60 days after the Closing Date, the Interest Period shall be seven days; (f) the location and number of the applicable Borrower's account to which funds are to be disbursed, which shall comply with the requirements of SECTION 2.02(c); and (g) that the conditions set forth in SECTIONS 4.02(b) THROUGH (d) have been satisfied as of the date of the notice. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso in clause (e) above). Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04 EVIDENCE OF DEBT; REPAYMENT OF LOANS. (a) U.S. Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each U.S. Term Loan Lender, the principal amount of each U.S. Term Loan of such U.S. Term Loan Lender as provided in SECTION 2.09, (ii) to the Administrative Agent for the account of each Revolving Lender, the then unpaid principal amount of each Revolving Loan of such Revolving Lender on the Revolving Maturity Date and (iii) to the Swingline Lender, the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; PROVIDED that on each date that a Revolving Borrowing is made, U.S. Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested. (b) Canadian Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Canadian Term Loan Lender, the principal amount of each Canadian Term Loan of such Canadian Term Loan Lender as provided in SECTION 2.09. -41- (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (d) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type and Class thereof and the Interest Period applicable thereto; (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder; and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (e) The entries made in the accounts maintained pursuant to paragraphs (c) and (d) above shall be PRIMA facie evidence of the existence and amounts of the obligations therein recorded; PROVIDED that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrowers to repay the Loans in accordance with their terms. (f) Any Lender by written notice to the applicable Borrower (with a copy to the Administrative Agent) may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in the form of EXHIBIT K-I, K-2, K-3 or K-4, as the case may be. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to SECTION 11.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.05 FEES. (a) COMMITMENT FEE. Each Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (a "COMMITMENT FEE") equal to the Applicable Fee per annum on the average daily unused amount of each Commitment of such Lender to such Borrower during the period from and including the Closing Date to but excluding the date on which such Commitment terminates. Accrued Commitment Fees shall be payable in arrears (A) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (B) on the date on which such Commitment terminates. Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing Commitment Fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose). (b) ADMINISTRATIVE AGENT FEES. U.S. Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter or such other fees payable in the amounts and at the times separately agreed upon between U.S. Borrower and the Administrative Agent (the "ADMINISTRATIVE AGENT FEES"). (c) LC AND FRONTING FEES. U.S. Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee ("LC PARTICIPATION FEE") with respect to its participations in Letters of Credit, which shall accrue at a rate equal to the Applicable Margin from time to time used to determine the interest rate on Eurodollar Revolving Loans pursuant to SEC- -42- TION 2.06 on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations) during the period from and including the Closing Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee ("FRONTING FEE"), which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations) during the period from and including the Closing Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's customary fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued LC Participation Fees and Fronting Fees shall be payable in arrears (i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which the Revolving Commitments terminate. Any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand therefor. All LC Participation Fees and Fronting Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that U.S. Borrower shall pay the Fronting Fees directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06 INTEREST ON LOANS. (a) Subject to the provisions of SECTION 2.06(c), the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time. (b) Subject to the provisions of SECTION 2.06(c), the Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by either Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall, to the extent permitted by applicable law, bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal and premium, if any, of or interest on any Loan, 2% PLUS the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this SECTION 2.06 or (ii) in the case of any other amount, 2% PLUS the rate applicable to ABR Revolving Loans as provided in SECTION 2.06(a) (in either case, the "DEFAULT RATE"). (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; PROVIDED that (i) interest accrued pursuant to SECTION 2.06(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or a Swingline Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of -43- days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBOR Rate shall be determined by the Administrative Agent in accordance with the provisions of this Agreement and such determination shall be conclusive absent manifest error. (f) For purposes of the Interest Act (Canada), whenever interest payable pursuant to this Agreement is calculated with respect to any monetary Obligation relating to the Canadian Term Loans on the basis of a period other than a calendar year (the "CALCULATION PERIOD"), each rate of interest determined pursuant to such calculation expressed as an annual rate is equivalent to such rate as so determined, MULTIPLIED by the actual number of days in the calendar year in which the same is to be ascertained and DIVIDED by the number of days in the Calculation Period. (g) The principle of deemed reinvestment of interest with respect to any monetary Obligation relating to the Canadian Term Loans shall not apply to any interest calculation under this Agreement. (h) The rates of interest with respect to any monetary Obligation relating to the Canadian Term Loans stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. SECTION 2.07 TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Amendment Effectiveness Date. The Revolving Commitments, the Swingline Commitment and the LC Commitment shall automatically terminate on the Revolving Maturity Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on March 31, 2004, if the initial Credit Extension shall not have occurred by such time. (b) At its option, the applicable Borrower may at any time terminate, or from time to time permanently reduce, the Commitments of any Class; PROVIDED that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1.0 million and not less than $5.0 million and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with SECTION 2.10, the aggregate amount of Revolving Exposures would exceed the aggregate amount of Revolving Commitments. (c) The applicable Borrower shall notify the Administrative Agent in writing of any election to terminate or reduce the Commitments under SECTION 2.07(b) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by a Borrower pursuant to this Section shall be irrevocable; PROVIDED that a notice of termination of the Commitments delivered by a Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by a Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. (d) The LC Commitment shall automatically be reduced on a dollar for dollar basis by the face amount of letters of credit terminated in connection with any Permitted Sale and Leaseback Transaction one Business Day after the receipt of such proceeds; PROVIDED that the LC Commitment shall not be reduced below $10.0 million pursuant to this SECTION 2.07(d). -44- SECTION 2.08 INTEREST ELECTIONS. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the applicable Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding anything to the contrary, the Borrowers shall not be entitled to request any conversion or continuation that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any one time. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. Any interest or conversion election pursuant to this Agreement does not constitute a new Borrowing but simply an adjustment of the basis on which interest payable to the applicable Lenders will be calculated. (b) To make an election pursuant to this Section, the applicable Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Interest Election Request to the Administrative Agent not later than the time that a Borrowing Request would be required under SECTION 2.03 if such Borrower were requesting a Revolving Borrowing or Term Borrowing of the Type resulting from such election to be made on the effective date of such election. Each Interest Election Request shall be irrevocable. (c) Each Interest Election Request shall specify the following information in compliance with SECTION 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, or if outstanding Borrowings are being combined, allocation to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period"; PROVIDED that until the earlier of (x) the date on which the Syndication Agent shall have notified U.S. Borrower that a Successful Syndication has been achieved and (y) 60 days after the Closing Date, the Interest Period shall be seven days. If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso in clause (iv) above). (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. -45- (e) If an Interest Election Request with respect to a Eurodollar Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing, the Administrative Agent or the Required Lenders may require, by notice to U.S. Borrower, that (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.09 AMORTIZATION OF TERM BORROWINGS. (a) U.S. Borrower shall pay to the Administrative Agent, for the account of the U.S. Lenders, on the dates set forth on ANNEX II, or if any such date is not a Business Day, on the immediately preceding Business Day (each such date, a "TERM LOAN REPAYMENT DATE"), a principal amount of the U.S. Term Loans equal to the amount set forth on ANNEX II for such date (as adjusted from time to time pursuant to SECTION 2.10(h)), together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment. (b) Canadian Borrower shall pay to the Administrative Agent, for the account of the Canadian Term Loan Lenders, on the Term Loan Repayment Dates, a principal amount of the Canadian Term Loans equal to the amount set forth on ANNEX II for such date (as adjusted from time to time pursuant to SECTION 2.10(h)), together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment. (c) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date. SECTION 2.10 OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS AND MANDATORY OFFERS TO REDEEM. (a) OPTIONAL PREPAYMENTS. Each Borrower shall have the right at any time and from time to time to prepay any Borrowing made by such Borrower, in whole or in part, subject to the requirements of this SECTION 2.10; PROVIDED that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $2.5 million. (b) REVOLVING LOAN PREPAYMENTS. (i) In the event of the termination of all the Revolving Commitments, U.S. Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Borrowings and all outstanding Swingline Loans and replace all outstanding Letters of Credit or cash collateralize all outstanding Letter of Credit in accordance with the procedures set forth in SECTION 2.18(i). (ii) In the event of any partial reduction of the Revolving Commitments, then (x) at or prior to the effective date of such reduction, the Administrative Agent shall notify U.S. Borrower and the Revolving Lenders of the sum of the Revolving Exposures after giving effect thereto and (y) if the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments after giving effect to such reduction, then U.S. Borrower shall, on the date of such reduction, FIRST, repay or prepay Swingline Loans, SECOND, repay or prepay Revolving Borrowings and THIRD, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (iii) In the event that the sum of all Lenders' Revolving Exposures exceeds the Revolving Commitments then in effect, U.S. Borrower shall, without notice or demand, immediately FIRST, -46- repay or prepay Revolving Borrowings, and SECOND, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (iv) In the event that the aggregate LC Exposure exceeds the LC Commitment then in effect, U.S. Borrower shall, without notice or demand, immediately replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (c) ASSET SALES. (I) Not later than three Business Days following the receipt of any Net Cash Proceeds from a Permitted Sale and Leaseback Transaction, U.S. Borrower shall utilize the portion of the Permitted Sale and Leaseback Transaction Amount which has not been applied towards the prepayment of the Assumed Debt being refinanced or the repayment of Revolving Loans made to fund any prepayment deposit required by the terms of the Assumed Debt being refinanced to make an Offer to Redeem, in accordance with SECTIONS 2.10(h), (i) and (j), the maximum principal amount of Borrowings that may be redeemed by applying an aggregate amount equal to 100% of the portion of the Permitted Sale and Leaseback Transaction Amount not so applied. (II) Not later than three Business Days following the receipt of any Net Cash Proceeds from an Asset Sale pursuant to SECTION 6.06(h), U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to such Offer to Redeem in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED that (x) notwithstanding anything to the contrary in SECTION 2.10(h) such amount shall first be applied to redeem the Canadian Term Loans on behalf of the Canadian Borrower and (y) any such amount remaining after the redemption in full of the Canadian Term Loans shall be applied in accordance with SECTION 2.10(c)(III). (III) Not later than three Business Days following the receipt of any Net Cash Proceeds of any Asset Sale (other than a Permitted Sale and Leaseback Transaction or an Asset Sale pursuant to SECTION 6.06(h)) by Parent, U.S. Borrower or any U.S. Subsidiary, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); and not later than one Business Day following the receipt of any Net Cash Proceeds of any Asset Sale by Canadian Borrower or any Canadian Subsidiary, the Borrowers shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED, in each case, that: (i) so long as no Default shall then exist or would arise therefrom, no such Offer to Redeem shall be required under this SECTION 2.10(c)(III)(i) with respect to (A) any Asset Sale permitted by SECTION 6.06(a), (B) the disposition of property which constitutes a Casualty Event, or (C) Asset Sales for fair market value resulting in no more than $250,000 in Net Cash Proceeds per Asset Sale (or series of related Asset Sales) and less than $1.5 million in Net Cash Proceeds in any fiscal year; PROVIDED that clause (C) shall not apply in the case of any Asset Sale described in clause (b) of the definition thereof or to an Asset Sale pursuant to SECTION 6.06(h); and (ii) so long as no Default shall then exist or would arise therefrom and the aggregate of Net Cash Proceeds of Asset Sales shall not exceed $20.0 million in any fiscal year of U.S. Borrower (not including for purposes of this limit only, Net Cash Proceeds of Permitted Sale and Leaseback Transactions or an Asset Sale pursuant to SECTION 6.06(h)), no Offer to Redeem shall be required on such date to the extent that (A) U.S. Borrower shall have delivered an Officers' -47- Certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds are expected to be reinvested in fixed or capital assets within 365 days following the date of such Asset Sale (which Officers' Certificate shall set forth the estimates of the proceeds to be so expended); and (B) all Net Cash Proceeds in respect of all Asset Sales (other than those referred to in clause (C) of SECTION 2.10(c)(III)(i)) in excess of $10.0 million in the aggregate at any time shall be held in the applicable Collateral Account and released therefrom only in accordance with the provisions of ARTICLE IX; PROVIDED that if all or any portion of such Net Cash Proceeds is not so reinvested within such 365-day period, such unused portion shall be applied to make an Offer to Redeem on the last day of such period as provided in this SECTION 2.10(c)(III); and PROVIDED, FURTHER, that if the property subject to such Asset Sale constituted Collateral, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with SECTIONS 5.10 and 5.11. (d) DEBT ISSUANCE. Not later than one Business Day following the receipt of any Net Cash Proceeds of any Debt Issuance by Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j). Not later than one Business Day following the receipt of any Net Cash Proceeds of any Debt Issuance by Canadian Borrower or any Canadian Subsidiary, the Borrowers, shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j). (e) EQUITY ISSUANCE OR PREFERRED STOCK ISSUANCE. Not later than one Business Day following the receipt of any Net Cash Proceeds of any Equity Issuance, U.S. Borrower shall apply an amount equal to 50% of such Net Cash Proceeds to make prepayments in accordance with SECTIONS 2.10(h) and (i). Not later than one Business Day following the receipt of any Net Cash Proceeds of any Preferred Stock Issuance by Holdings, Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to make prepayments in accordance with SECTIONS 2.10(h) and (i). (f) CASUALTY EVENTS. Not later than one Business Day following the receipt of any Net Cash Proceeds from a Casualty Event by Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); and not later than one Business Day following the receipt of any Net Cash Proceeds from a Casualty Event by Canadian Borrower or any Canadian Subsidiary, the Borrowers, shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED, in each case, that: (i) so long as no Default shall then exist or arise therefrom, no Offer to Redeem shall be required on such date to the extent that U.S. Borrower shall have delivered an Officers' Certificate to the Administrative Agent on or prior to such date stating that such proceeds are expected to be used to repair, replace or restore any property in respect of which such Net Cash Proceeds were paid or to invest in other fixed or capital assets, no later than 365 days (or such longer period as may be approved by the Administrative Agent) following the date of receipt of such proceeds; PROVIDED that if the property subject to such Casualty Event constituted Collateral under the Security Documents, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Docu- -48- ments in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with SECTIONS 5.10 and 5.11; (ii) all Net Cash Proceeds in respect of all Casualty Events in excess of $10.0 million in the aggregate shall be held in the applicable Collateral Account and released therefrom only in accordance with the provisions of ARTICLE IX; and (iii) if any portion of such Net Cash Proceeds shall not be so applied within such 365-day (or longer) period, such unused portion shall be applied to make an Offer to Redeem on the last day of such period as provided in this SECTION 2.10(f). (g) EXCESS CASH FLOW. No later than the earlier of (i) 90 days after the end of each Excess Cash Flow Period and (ii) the date on which the financial statements with respect to such fiscal year in which such Excess Cash Flow Period occurs are delivered pursuant to SECTION 5.01(a), U.S. Borrower shall make prepayments in accordance with SECTIONS 2.10(h) and (i) in an aggregate amount equal to the excess of (x) 50% of Excess Cash Flow for the Excess Cash Flow Period then ended less (y) any voluntary prepayments of Term Loans and any permanent voluntary reductions to the Revolving Commitments to the extent that an equal amount of the Revolving Loans simultaneously is repaid, in each case so long as such amounts are not already reflected in Debt Service, during such Excess Cash Flow Period; PROVIDED that only 25% of Excess Cash Flow for the Excess Cash Flow Period then ended need be applied pursuant to this SECTION 2.10(g) if the Senior Leverage Ratio is less than 1.5:1.0 as of the end of such Excess Cash Flow Period. (h) APPLICATION OF PREPAYMENTS AND REDEMPTIONS. (i) Prior to any optional (subject to SECTION 2.10(a)) or mandatory prepayment or redemption pursuant to any Offer to Redeem hereunder, the applicable Borrower shall select the Borrowing or Borrowings to be prepaid or redeemed and shall specify such selection in the notice of such prepayment or Offer to Redeem pursuant to SECTION 2.10(i), subject to the provisions of this Section 2.10(h). Subject to SECTION 2.10(h)(iii), any prepayments or redemptions of Term Loans pursuant to SECTION 2.10(a), (c), (d), (e), (f) or (g) shall be applied to reduce scheduled prepayments required under SECTIONS 2.09(a) and (b) on a PRO RATA basis among the prepayments remaining to be made on each Term Loan Repayment Date and shall be applied, in the case of prepayments or redemptions to be made solely by U.S. Borrower, FIRST, to U.S. Term Loans and SECOND if all U.S. Term Loans have been repaid, to Canadian Term Loans on behalf of Canadian Borrower, and, in the case of prepayments or redemptions by the Borrowers, FIRST, by Canadian Borrower to Canadian Term Loans and SECOND, if all Canadian Term Loans have been repaid, by U.S. Borrower to U.S. Term Loans. After application of redemptions and mandatory prepayments described above in this SECTION 2.10(h) and to the extent there are redemption or mandatory prepayment amounts remaining after such application, the Revolving Commitments shall be permanently reduced ratably among the Revolving Lenders in accordance with their applicable Revolving Commitments in an aggregate amount equal to such excess, and U.S. Borrower shall comply with SECTION 2.10(b). (ii) Amounts to be applied pursuant to this SECTION 2.10 to the prepayment or redemption of Term Loans and Revolving Loans shall be applied, as applicable, first to reduce outstanding ABR Term Loans and ABR Revolving Loans, respectively. Any amounts remaining after each such application shall be applied to prepay or redeem Eurodollar Term Loans or Eurodollar Revolving Loans, as applicable. Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this SECTION 2.10 shall be in excess of the amount of the ABR Loans at the time outstanding (an "EXCESS AMOUNT"), only the portion of the amount of such prepayment or redemption as is equal to the amount of such outstanding ABR Loans shall be immediately prepaid or redeemed and, at the election of the applicable Borrower, the balance of such required prepayment shall be either (A) deposited in the applicable Collateral Account and applied to the prepayment or redemption of Eurodollar Loans on the last day of -49- the then next-expiring Interest Period for Eurodollar Loans; PROVIDED that (i) interest in respect of such Excess Amount shall continue to accrue thereon at the rate provided hereunder for the Loans which such Excess Amount is intended to repay until such Excess Amount shall have been used in full to repay such Loans and (ii) at any time while a Default has occurred and is continuing, the Administrative Agent may, and upon written direction from the Required Lenders shall, apply any or all proceeds then on deposit in either Collateral Account to the payment of such Loans in an amount equal to such Excess Amount or (B) prepaid immediately, together with any amounts owing to the Lenders under SECTION 2.13. (iii) Notwithstanding SECTIONS 2.10(e) and 2.10(g), the aggregate amount of all prepayments by the Borrowers with respect to each Canadian Term Loan pursuant to SECTIONS 2.10(e) and 2.10(g) and SECTION 2.09 as in effect on the Closing Date within the first five years following the Closing Date shall not exceed 25% of the initial principal amount of that Canadian Term Loan, except for payments required as a result of an acceleration of the Obligations of the Borrowers pursuant to ARTICLE VIII. For greater certainty and notwithstanding any other provision of this Agreement, the failure of the Borrowers to make any prepayment of the Canadian Term Loans contemplated in SECTIONS 2.10(e) and 2.10(g) or SECTION 2.09 solely as a consequence of the immediately preceding sentence shall not constitute a Default. Nothing in this SECTION 2.10(h)(iii) shall affect prepayments of U.S. Loans pursuant to SECTIONS 2.10(e) and 2.10(g) or SECTION 2.09. (i) NOTICE OF PREPAYMENT OR OFFER TO REDEEM. The applicable Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by written notice of any prepayment or Offer to Redeem hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment, (iii) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., New York City time, on the date of prepayment and (iv) in the case of an Offer to Redeem, five Business Days prior to the proposed date of redemption. Each such notice shall be irrevocable; PROVIDED that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by SECTION 2.07, then such notice of prepayment may be revoked if such termination is revoked in accordance with SECTION 2.07. Each such notice shall specify the prepayment or redemption date, the principal amount of each Borrowing or portion thereof to be prepaid or redeemed and, in the case of a mandatory prepayment or Offer to Redeem, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Such notice to the Lenders may be by electronic communication. Each partial prepayment or Offer to Redeem of any Borrowing shall be in an amount that would be permitted in the case of a Credit Extension of the same Type as provided in SECTION 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment or Offer to Redeem of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing and otherwise in accordance with this SECTION 2.10. Prepayments and Offers to Redeem shall be accompanied by accrued interest to the extent required by SECTION 2.06. The Administrative Agent shall advise the applicable Borrower if an Offer to Redeem is accepted or declined by the Lenders on the Business Day prior to the proposed redemption date. If an Offer to Redeem is declined all funds that were to be used to redeem Borrowings shall revert to the applicable Borrower. (j) MANDATORY OFFERS TO REDEEM. When required by SECTIONS 2.10(c), (d) and (f), each Borrower shall make an offer to redeem Borrowings made by the Borrowers in accordance with the terms of SECTION 2.10(i), which offer may be accepted or declined by the Lenders in accordance with SECTION 11.02(e) (an "OFFER TO REDEEM"). If any Offer to Redeem is accepted, all redemptions shall be made in accordance with SECTION 2.10(h). -50- SECTION 2.11 ALTERNATE RATE OF INTEREST. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be final and conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or (b) the Administrative Agent is advised in writing by the Required Lenders that the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give written notice thereof to U.S. Borrower and the Lenders as promptly as practicable thereafter and, until the Administrative Agent notifies U.S. Borrower and the Lenders that the circumstances giving rise to such notice no longer exist (which the Administrative Agent agrees to use its commercially reasonable efforts to do promptly after it learns such circumstances cease to exist), (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.12 INCREASED COSTS. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against property of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank; or (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition or expense affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, the Issuing Bank or such Lender's or the Issuing Bank's holding company, if any, of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered, it being understood that, to the extent duplicative of the provisions of SECTION 2.15, this SECTION 2.12 shall not apply to Taxes. (b) If any Lender or the Issuing Bank determines (in good faith, but in its sole absolute discretion) that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compen- -51- sate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this SECTION 2.12 shall be delivered to the applicable Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Such Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this SECTION 2.12 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; PROVIDED that neither Borrower shall be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies such Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; PROVIDED, FURTHER, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall not begin earlier than the date of effectiveness of the Change in Law. SECTION 2.13 BREAKAGE PAYMENTS. In the event of (a) the payment or prepayment, whether optional or mandatory, of any principal of any Eurodollar Loan earlier than the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto as a result of a request by a Borrower pursuant to SECTION 2.16, then, in any such event, such Borrower shall compensate each Lender for the loss (other than lost profit or spread), cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this SECTION 2.13 shall be delivered to the applicable Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Such Borrower shall pay such Lender the amount shown as due on any such certificate within 5 days after receipt thereof. SECTION 2.14 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS. (a) Each Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or Reimbursement Obligations, or of amounts payable under SECTION 2.12, 2.13 or 2.15, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff, deduction or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at -52- 677 Washington Boulevard, Stamford, Connecticut, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to SECTIONS 2.12, 2.13, 2.15 and 11.03 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, unless specified otherwise, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars, except as expressly specified otherwise. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, Reimbursement Obligations, interest and fees then due hereunder, such funds shall be applied (i) FIRST, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) SECOND, towards payment of principal and Reimbursement Obligations then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and Reimbursement Obligations then due to such parties. (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise (including by exercise of its rights under SECTION 9.1 of the Security Agreement), obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; PROVIDED that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by either Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to U.S. Borrower or any of its Subsidiaries or Affiliates (as to which the provisions of this paragraph shall apply). Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation. If under applicable bankruptcy, insolvency or any similar law any Secured Party receives a secured claim in lieu of a setoff or counterclaim to which this SECTION 2.14(c) applies, such Secured Party shall to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights to which the Secured Party is entitled under this SECTION 2.14(c) to share in the benefits of the recovery of such secured claim. (d) Unless the Administrative Agent shall have received notice from the applicable Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reli- -53- ance upon such assumption, distribute to the Lenders the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to SECTION 2.02(c), 2.14(d), 2.17(d), 2.18(d), 2.18(e) or 11.03(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.15 TAXES. (a) Any and all payments by or on account of any obligation of either Borrower hereunder or under any other Loan Document shall be made without setoff, counterclaim or other defense and free and clear of and without deduction or withholding for any and all Indemnified Taxes; PROVIDED that if either Borrower or any Secured Party shall be required by law to deduct or pay any Indemnified Taxes from or in respect of such payments, then (i) the sum payable shall be increased as necessary so that after making or allowing for all required deductions and payments (including deductions, withholdings or payments applicable to additional sums payable under this SECTION 2.15) the Administrative Agent, any Lender or the Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions, withholdings or payments been required, (ii) such Borrower shall make such deductions or withholdings, as are required to be made by it and (iii) such Borrower shall pay the full amount deducted or withheld by it to the relevant Governmental Authority in accordance with applicable law. (b) In addition, such Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Each Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of such Borrower hereunder or under any other Loan Document, or otherwise with regard to any Loan Document, (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this SECTION 2.15) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to either Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes and in any event within 30 days of any such payment being due, by either Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Each Foreign Lender shall deliver to the Borrowers and the Administrative Agent two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Ex- -54- hibit Q and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Foreign Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrowers under this Agreement and the other Loan Documents. Such forms shall be delivered by each Foreign Lender on or before the date it becomes a party to this Agreement. In addition, each Foreign Lender shall deliver such forms within ten (10) Business Days after receipt of a written notification from the Borrowers that any form previously delivered by such Foreign Lender is invalid or is due to expire or to become obsolete. Each Foreign Lender shall promptly notify the Borrowers at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrowers (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Foreign Lender shall not be required to deliver any form pursuant to this paragraph that such Foreign Lender is not legally able to deliver. (f) If the Administrative Agent or a Lender determines in its reasonable discretion that it is entitled to claim a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this SECTION 2.15, it promptly shall notify the applicable Borrower of the availability of such refund claim. Upon receipt of a written request from a Borrower, such Administrative Agent or Lender shall use reasonable efforts to file a timely claim to such taxation authority for such refund, solely at the Borrower's expense. If the Administrative Agent or a Lender receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) or in respect of any Indemnified Taxes or Other Taxes with respect to which a Borrower has paid additional amounts pursuant to this SECTION 2.15, it shall within 30 days from the date of such receipt pay over the amount of such refund to the applicable Borrower, net of all reasonable out-of-pocket expenses of such Administrative Agent or Lender (as determined in the Administrative Agent's or Lender's reasonable discretion) and without interest (other than interest paid by the relevant taxation authority with respect to such refund); PROVIDED, HOWEVER, that (i) each Borrower, upon the request of the Administrative Agent or such Lender (or assignee), agrees to repay the amount paid over to such Borrower (PLUS any penalties, interest or other charges (including Taxes) imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender (or assignee) within a reasonable time (not to exceed 20 days) after receipt of written notice that the Administrative Agent or such Lender (or assignee) is required to repay such refund to such Governmental Authority and (ii) such Administrative Agent or Lender shall not be required to make any payment under this SECTION 2.15(f) if an Event of Default shall have occurred and be continuing. Nothing contained in this SECTION 2.15(f) shall require the Administrative Agent or any Lender (or assignee) to make available its Tax Returns or any other information which it deems confidential to a Borrower or any other person. Notwithstanding anything to the contrary, in no event will any Lender be required to pay any amount to a Borrower the payment of which would place such Lender in a less favorable net after-tax position than such Lender would have been in if the additional amounts giving rise to such refund of any Indemnified Taxes had never been paid. (g) The Administrative Agent and each Lender agrees, upon written request from a Borrower, to use reasonable efforts (subject to overall policy considerations of the Administrative Agent or such Lender, as the case may be, and legal and regulatory restrictions) to avoid or minimize any amounts that might otherwise be payable by a Borrower pursuant to this SECTION 2.15; provided that such effort shall not impose on the Administrative Agent or any Lender any additional costs or any other economic, legal, regulatory or other disadvantage, as determined in the Administrative Agent's or such Lender's sole discretion; provided, further, that nothing in this SECTION 2.15(g) shall affect or postpone any of the obligations of a Borrower or the rights of any Administrative Agent or Lender pursuant to this SECTION 2.15. -55- (h) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.16 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) MITIGATION OF OBLIGATIONS. If any Lender requests compensation under SECTION 2.12, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 2.12 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers, as applicable, hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. A certificate setting forth such costs and expenses in reasonable detail submitted by such Lender to the Administrative Agent shall be conclusive absent manifest error. (b) REPLACEMENT OF LENDERS. If any Lender requests compensation under SECTION 2.12, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.15, or any Lender is a non-consenting Lender under Section 11.02(c), or if any Lender defaults in its obligation to fund Loans hereunder, then the applicable Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in SECTION 11.04), all of its interests, rights and obligations under this Agreement to an assignee selected by such Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); PROVIDED that (i) such Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consents shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (assuming for this purpose that the Loans of such Lender were being prepaid) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under SECTION 2.12 or payments required to be made pursuant to SECTION 2.15, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling a Borrower to require such assignment and delegation cease to apply. SECTION 2.17 SWINGLINE LOANS. (a) SWINGLINE COMMITMENT. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to U.S. Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $10.0 million or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; PROVIDED that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, U.S. Borrower may borrow, repay and reborrow Swingline Loans. -56- (b) SWINGLINE LOANS. To request a Swingline Loan, U.S. Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed U.S. Borrowing Request to the Administrative Agent and the Swingline Lender, not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested Swingline Loan. Each Swingline Loan shall be an ABR Loan. The Swingline Lender shall make each Swingline Loan available to U.S. Borrower by means of a credit to the general deposit account of U.S. Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in SECTION 2.18(E), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan. U.S. Borrower shall not request a Swingline Loan if at the time of or immediately after giving effect to the Extension of Credit contemplated by such request a Default has occurred and is continuing or would result therefrom. Swingline Loans shall be made in minimum amounts of $500,000 and integral multiples of $250,000 above such amount. (c) PREPAYMENT. U.S. Borrower shall have the right at any time and from time to time to repay any Swingline Loan, in whole or in part, upon giving written notice to the Swingline Lender and the Administrative Agent before 12:00 (noon), New York City time, on the proposed date of repayment. (d) PARTICIPATIONS. The Swingline Lender may at any time in its discretion by written notice given to the Administrative Agent (PROVIDED such notice requirement shall not apply if the Swingline Lender and the Administrative Agent are the same entity) not later than 11:00 A.M., New York City time, on the next succeeding Business Day following such notice require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans then outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (so long as such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in SECTION 2.02(c) with respect to Loans made by such Lender (and SECTION 2.02 shall apply, MUTATIS MUTANDIS, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify U.S. Borrower of any participations in any Swingline Loan acquired by the Revolving Lenders pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from U.S. Borrower (or other party on behalf of U.S. Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent. Any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve U.S. Borrower of any default in the payment thereof. -57- SECTION 2.18 LETTERS OF CREDIT (a) GENERAL. Subject to the terms and conditions set forth herein, U.S. Borrower may request the Issuing Bank, and the Issuing Bank agrees, to issue Letters of Credit for its own account or the account of a Subsidiary in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (PROVIDED that U.S. Borrower shall be a co-applicant, and be jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary). The Issuing Bank shall have no obligation to issue, and U.S. Borrower shall not request the issuance of, any Letter of Credit at any time if after giving effect to such issuance, the LC Exposure would exceed the LC Commitment or the total Revolving Exposure would exceed the total Revolving Commitments. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by U.S. Borrower to, or entered into by U.S. Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) REQUEST FOR ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS. To request the issuance of a Letter of Credit or the amendment, renewal or extension of an outstanding Letter of Credit, U.S. Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) an LC Request to the Issuing Bank and the Administrative Agent not later than 11:00 a.m. on the third Business Day preceding the requested date of issuance, amendment, renewal or extension (or such later date and time as is acceptable to the Issuing Bank). A request for an initial issuance of a Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank: (i) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (ii) the amount thereof; (iii) the expiry date thereof (which shall not be later than the close of business on the Letter of Credit Expiration Date); (iv) the name and address of the beneficiary thereof; (v) whether the Letter of Credit is to be issued for its own account or for the account of one of its Subsidiaries (PROVIDED that U.S. Borrower shall be a co-applicant, and therefore jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary); (vi) the documents to be presented by such beneficiary in connection with any drawing thereunder; (vii) the full text of any certificate to be presented by such beneficiary in connection with any drawing thereunder; and (viii) such other matters as the Issuing Bank may require. A request for an amendment, renewal or extension of any outstanding Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank: -58- (i) the Letter of Credit to be amended, renewed or extended; (ii) the proposed date of amendment, renewal or extension thereof (which shall be a Business Day); (iii) the nature of the proposed amendment, renewal or extension; and (iv) such other matters as the Issuing Bank may require. If requested by the Issuing Bank, U.S. Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and, upon issuance, amendment, renewal or extension of each Letter of Credit, U.S. Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed the LC Commitment, (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments and (iii) the conditions set forth in ARTICLE IV in respect of such issuance, amendment, renewal or extension shall have been satisfied. Unless the Issuing Bank shall agree otherwise, no Letter of Credit shall be in an initial amount less than $100,000, in the case of a Commercial Letter of Credit, or $500,000, in the case of a Standby Letter of Credit, or is to be denominated in a currency other than Dollars. (c) EXPIRATION DATE. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) in the case of a Standby Letter of Credit, (x) the date which is no later than one year after the date of the issuance of such Standby Letter of Credit (or, in the case of any renewal or extension thereof, no later than one year after such renewal or extension) and (y) the Letter of Credit Expiration Date and (ii) in the case of a Commercial Letter of Credit, (x) the date that is no later than 180 days after the date of issuance of such Commercial Letter of Credit (or, in the case of any renewal or extension thereof, no later than 180 days after such renewal or extension) and (y) the Letter of Credit Expiration Date. (d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby irrevocably grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Lender's Pro Rata Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by U.S. Borrower on the date due as provided in SECTION 2.18(e), or of any reimbursement payment required to be refunded to U.S. Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit, the occurrence and continuance of a Default, reduction or termination of the Commitments, or expiration, termination or cash collateralization of any Letter of Credit and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) REIMBURSEMENT. (i) If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, U.S. Borrower shall reimburse such LC Disbursement by paying to the Issuing Bank an amount equal to such LC Disbursement not later than 3:00 p.m., New York City time, on the date that such LC Disbursement is made if U.S. Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, if such notice has not been received -59- by U.S. Borrower prior to such time on such date, then not later than 3:00 p.m., New York City time, on the Business Day immediately following the day that U.S. Borrower receives such notice; PROVIDED that U.S. Borrower may, subject to the conditions to borrowing set forth herein, request (x) in accordance with SECTION 2.03 that such payment be financed with ABR Revolving Loans in an equivalent amount and, to the extent so financed, U.S. Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Loans or (y) that such payment be satisfied with the proceeds of Term Loans held in the Ply Gem LC Restricted Account. (ii) If U.S. Borrower fails to make such payment when due, the Issuing Bank shall notify the Administrative Agent and the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from U.S. Borrower in respect thereof and such Revolving Lender's Pro Rata Percentage thereof. Each Revolving Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Lender shall have received such notice later than 12:00 noon, New York City time, on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Revolving Lender's Pro Rata Percentage of the unreimbursed LC Disbursement in the same manner as provided in SECTION 2.02(c) with respect to Revolving Loans made by such Revolving Lender, and the Administrative Agent will promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from U.S. Borrower pursuant to the above paragraph prior to the time that any Revolving Lender makes any payment pursuant to the preceding sentence and any such amounts received by the Administrative Agent from U.S. Borrower thereafter will be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made such payments and to the Issuing Bank, as appropriate. (iii) If any Revolving Lender shall not have made its Pro Rata Percentage of such LC Disbursement available to the Administrative Agent as provided above, each of such Revolving Lender and U.S. Borrower severally agrees to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with the foregoing to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of U.S. Borrower, the rate per annum set forth in SECTION 2.18(h) and (ii) in the case of such Lender, at a rate determined by the Administrative Agent in accordance with banking industry rules or practices on interbank compensation. (f) OBLIGATIONS ABSOLUTE. The Reimbursement Obligation of U.S. Borrower as provided in SECTION 2.18(e) shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any draft or other document presented under a Letter of Credit being proved to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that fails to comply with the terms of such Letter of Credit; (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this SECTION 2.18, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of U.S. Borrower hereunder; (v) the fact that a Default shall have occurred and be continuing; or (vi) any material adverse change in the business, property, results of operations, prospects or condition, financial or otherwise, of U.S. Borrower and its Subsidiaries. None of the Agents, the Lenders, the Issuing Bank or any of their Affiliates shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communica- -60- tion under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; PROVIDED that the foregoing shall not be construed to excuse the Issuing Bank from liability to U.S. Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by U.S. Borrower to the extent permitted by applicable law) suffered by U.S. Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly give written notice to the Administrative Agent and U.S. Borrower of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; PROVIDED that any failure to give or delay in giving such notice shall not relieve U.S. Borrower of its Reimbursement Obligation to the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such Reimbursement Obligation set forth in SECTION 2.18(e)). (h) INTERIM INTEREST. If the Issuing Bank shall make any LC Disbursement, then, unless U.S. Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest payable on demand, for each day from and including the date such LC Disbursement is made to but excluding the date that U.S. Borrower reimburses such LC Disbursement, at the rate per annum determined pursuant to SECTION 2.06(a) until the day after U.S. Borrower is notified of such LC Disbursement and thereafter pursuant to SECTION 2.06(c). Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to SECTION 2.18(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) CASH COLLATERALIZATION. If any Event of Default shall occur and be continuing, on the Business Day that U.S. Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, U.S. Borrower shall deposit in the LC Sub-Account, in the name of the Collateral Agent and for the benefit of the Revolving Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; PROVIDED that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to U.S. Borrower described in paragraph (g) or (h) of ARTICLE VIII. Funds in the LC Sub-Account shall be applied by the Collateral Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of outstanding Reimbursement Obligations or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other Obligations of U.S. Borrower under this Agreement. If U.S. Borrower is required to provide -61- an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount PLUS any accrued interest or realized profits with respect to such amounts (to the extent not applied as aforesaid) shall be returned to U.S. Borrower within three Business Days after all Events of Default have been cured or waived. (j) ADDITIONAL ISSUING BANKS. U.S. Borrower may, at any time and from time to time, designate one or more additional Revolving Lenders to act as an issuing bank under the terms of this Agreement, with the consent of the Administrative Agent (which consent shall not be unreasonable withheld), the Issuing Bank and such Revolving Lender(s). Any Lender designated as an issuing bank pursuant to this paragraph (j) shall be deemed (in addition to being a Revolving Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Revolving Lender, and all references herein and in the other Loan Documents to the term "Issuing Bank" shall, with respect to such Letters of Credit, be deemed to refer to such Revolving Lender in its capacity as Issuing Bank, as the context shall require. (k) RESIGNATION OR REMOVAL OF THE ISSUING BANK. The Issuing Bank may resign as Issuing Bank hereunder at any time upon at least 30 days' prior notice to the Lenders, the Administrative Agent and U.S. Borrower. The Issuing Bank may be replaced at any time by written agreement among U.S. Borrower, each Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such resignation or replacement shall become effective, U.S. Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to SECTION 2.05(c). From and after the effective date of any such resignation or replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, U.S. Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit. (l) OTHER. The Issuing Bank shall be under no obligation to issue any Letter of Credit if (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; or (ii) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank. -62- The Issuing Bank shall be under no obligation to amend any Letter of Credit if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Loan Party represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders (with references to the Companies being references thereto after giving effect to the Transactions unless otherwise expressly stated) that: SECTION 3.01 ORGANIZATION; POWERS. Each Company (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted and to own and lease its property and (c) is qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so qualify or be in good standing, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. There is no existing default under any Organizational Document of any Company or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder. SECTION 3.02 AUTHORIZATION; ENFORCEABILITY. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action on the part of such Loan Party. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03 NO CONFLICTS. Except as set forth on SCHEDULE 3.03, the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created by the Loan Documents and (iii) consents, approvals, registrations, filings, permits or actions the failure to obtain or perform which could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate the Organizational Documents of any Company or any law, judgment, decree or order of any Governmental Authority, (c) will not violate or result in a default or require any consent or approval under any indenture, agreement, Organizational Document or other instrument binding upon any Company or its property, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any property of any Company, except Liens created by the Loan Documents and Permitted Liens. SECTION 3.04 FINANCIAL STATEMENTS; PROJECTIONS. (a) U.S. Borrower has heretofore delivered to the Lenders the consolidated balance sheets and related statements of income, stockholders' equity and cash flows of U.S. Borrower (i) as of and for the fiscal years ended December 31, 2000, December 31, 2001 and December 31, 2002, audited by and accompanied by the unqualified opinion of Ernst & Young, LLP, independent public accountants, and (y) as of and for the nine-month period -63- ended September 30, 2003 and for the comparable period of the preceding fiscal year, in each case, certified by the chief financial officer of U.S. Borrower. Such financial statements and all financial statements delivered pursuant to SECTIONS 5.01(a) and (b) have been prepared in accordance with GAAP and present fairly and accurately, in all material respects, the financial condition and results of operations and cash flows of U.S. Borrower as of the dates and for the periods to which they relate. Except as set forth in such financial statements, there are no liabilities of any Company of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, which could reasonably be expected to result in a Material Adverse Effect, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than liabilities under the Loan Documents and the Senior Subordinated Note Documents. (b) U.S. Borrower has heretofore delivered to the Lenders U.S. Borrower's unaudited PRO FORMA consolidated balance sheet and statements of income and cash flows and PRO FORMA EBITDA for the fiscal year ended December 31, 2002, and as of and for the nine-month period ended September 30, 2003 and for the four-quarter period ended September 30, 2003, in each case after giving effect to the Transactions as if they had occurred on such date in the case of the balance sheet and as of the beginning of all periods presented in the case of the statements of income and cash flows. Such PRO FORMA financial statements have been prepared in good faith by the Loan Parties, based on the assumptions stated therein (which assumptions are believed by the Loan Parties on the date hereof and on the Closing Date to be reasonable), are based on the best information available to the Loan Parties as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions, and present fairly in all material respects the PRO FORMA consolidated financial position and results of operations of U.S. Borrower as of such date and for such periods, assuming that the Transactions had occurred at such dates. (c) The forecasts of financial performance of Parent and its subsidiaries furnished to the Lenders have been prepared in good faith by U.S. Borrower and based on assumptions believed by U.S. Borrower to reasonable. (d) Since December 31, 2002, there has been no event, change, circumstance or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect. SECTION 3.05 PROPERTIES. (a) Each Company has good title to, or valid leasehold interests in, all its property material to its business, free and clear of all Liens except for, in the case of Collateral, Permitted Collateral Liens and, in the case of all other material property, Permitted Liens and minor irregularities or deficiencies in title that, individually or in the aggregate, do not interfere with its ability to conduct its business as currently conducted or to utilize such property for its intended purpose. The property of the Companies, taken as a whole, (i) is in good operating order, condition and repair (ordinary wear and tear excepted), except to the extent that the failure to be in such condition could not reasonably be expected to result in a Material Adverse Effect, and (ii) constitutes all the property which is required for the business and operations of the Companies as presently conducted. (b) SCHEDULE 3.05(B) contains a true and complete list of each interest in Real Property (i) owned by any Company as of the date hereof and describes the type of interest therein held by such Company and (ii) leased, subleased or otherwise occupied or utilized by any Company, as lessee, sublessee, franchisee or licensee, as of the date hereof and describes the type of interest therein held by such Company and whether such lease, sublease or other instrument requires the consent of the landlord thereunder or other parties thereto to the Transactions. -64- (c) No Company has received any notice of, nor has any knowledge of, the occurrence or pendency or contemplation of any Casualty Event in excess of $5.0 million affecting all or any portion of its property. No Mortgage encumbers improved Real Property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained in accordance with SECTION 5.04. (d) Each Company owns or has rights to use all of the Collateral and all material rights with respect to any of the foregoing used in, necessary for or material to each Company's business as currently conducted. The use by each Company of such Collateral and all such rights with respect to the foregoing do not infringe on the rights of any person other than such infringement which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No claim has been made and remains outstanding that any Company's use of any Collateral does or may violate the rights of any third party that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (e) The Equipment of each Company is in good repair, working order and condition, reasonable wear and tear excepted. Each Company shall cause the Equipment to be maintained and preserved in good repair, working order and condition, reasonable wear and tear excepted, and shall as quickly as commercially practicable make or cause to be made all repairs, replacements and other improvements which are necessary or appropriate in the conduct of each Company's business. SECTION 3.06 INTELLECTUAL PROPERTY. (a) OWNERSHIP/NO CLAIMS. Each Loan Party owns, or is licensed to use, all patents, patent applications, trademarks, trade names, servicemarks, copyrights, technology, trade secrets, proprietary information, domain names, know-how and processes necessary for the conduct of its business as currently conducted (the "INTELLECTUAL PROPERTY"), except for those the failure to own or license which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim has been asserted and is pending by any person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does any Loan Party know of any valid basis for any such claim. To the knowledge of the Loan Parties, the use of such Intellectual Property by each Loan Party does not infringe the rights of any person, except for such claims and infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (b) REGISTRATIONS. Except pursuant to licenses and other user agreements entered into by each Loan Party in the ordinary course of business that are listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate, on and as of the date hereof (i) each Loan Party owns and possesses the right to use, and has taken no affirmative action to authorize or enable any other person to use, any copyright, patent or trademark (as such terms are defined in the U.S. Security Agreement) listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate and (ii) all registrations listed in SCHEDULES 14(A) and 14(B) to the Perfection Certificate are valid and in full force and effect. (c) NO VIOLATIONS OR PROCEEDINGS. To each Loan Party's knowledge, on and as of the date hereof, there is no material violation by others of any right of such Loan Party with respect to any copyright, patent or trademark listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate, respectively, pledged by it under the name of such Loan Party. SECTION 3.07 EQUITY INTERESTS AND SUBSIDIARIES. (a) SCHEDULE 3.07(a) sets forth a list of (i) all the Subsidiaries of Parent and their jurisdiction of organization as of the Closing Date and -65- (ii) the number of each class of its Equity Interests authorized, and the number outstanding, on the Closing Date and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All Equity Interests of each Company owned by Parent and its Subsidiaries are duly and validly issued and are fully paid and non-assessable, and, other than the Equity Interests of U.S. Borrower, are owned by U.S. Borrower, directly or indirectly through Subsidiaries. All Equity Interests of U.S. Borrower are owned directly by Parent (or, after an IPO, the IPO Entity) and, prior to an IPO, all Equity Interests of Parent are owned directly by Holdings. Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Equity Interests pledged by it under the U.S. Security Agreement, free of any and all Liens, rights or claims of other persons, except the security interest created by the U.S. Security Agreement and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such Equity Interests. (b) No consent of any person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or reasonably desirable (from the perspective of a secured party) in connection with the creation, perfection or first priority status of the security interest of the Collateral Agent in any Equity Interests pledged to the Collateral Agent for the benefit of the Secured Parties under the Security Agreement or the exercise by the Collateral Agent of the voting or other rights provided for in the Security Agreement or the exercise of remedies in respect thereof. (c) An accurate organization chart, showing the ownership structure of Parent, U.S. Borrower and each Subsidiary on the Closing Date, and after giving effect to the Transactions, is set forth on SCHEDULE 3.07(c). SECTION 3.08 LITIGATION; COMPLIANCE WITH LAWS. (a) There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the knowledge of any Company, threatened against or affecting any Company or any business, property or rights of any Company (i) that involve any Loan Document or any of the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) Except for matters covered by SECTION 3.18, no Company or any of its property is in violation of, nor will the continued operation of its property as currently conducted violate, any Requirements of Law (including any zoning or building ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting any Company's Real Property or is in default with respect to any judgment, writ, injunction, decree, rule or order of any Governmental Authority, where such violation or default, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.09 AGREEMENTS. (a) No Company is a party to any agreement or instrument or subject to any corporate or other constitutional restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) No Company is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other agreement or instrument to which it is a party or by which it or any of its property is or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default. -66- (c) SCHEDULE 3.09(C) accurately and completely lists all material agreements (other than leases of Real Property set forth on SCHEDULE 3.05(b)) to which any Company is a party which are in effect on the date hereof in connection with the operation of the business conducted thereby and U.S. Borrower has delivered to the Administrative Agent complete and correct copies of all such material agreements, including any amendments, supplements or modifications with respect thereto, and as of the date hereof all such agreements are in full force and effect. SECTION 3.10 FEDERAL RESERVE REGULATIONS. (a) No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. The pledge of the Securities Collateral pursuant to the Security Agreement does not violate such regulations. SECTION 3.11 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. No Company is (a) an "investment company" or a company "controlled" by a person required to register as an "investment company," as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) a "holding company," an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. SECTION 3.12 USE OF PROCEEDS. The Borrowers used the proceeds of the Term Loans extended on the Closing Date to effect the Acquisition and the Refinancing and pay related fees and expenses. The Borrowers will use the proceeds of (a) the Revolving Loans after the Closing Date for general corporate purposes (and up to $3.0 million was used on the Closing Date to effect the Acquisition and the Refinancing and pay related fees and expenses), (b) the Swingline Loans after the Closing Date for general corporate purposes and (c) the Term Loans extended on the Amendment Effectiveness Date to effect the cash collateralization of outstanding Letters of Credit by placing $10.0 million in the Ply Gem LC Restricted Account, subject to withdrawal, so long as no Default or Event of Default has occurred and is continuing, for general corporate purposes. SECTION 3.13 TAXES. Each Company has (a) timely filed or caused to be timely filed all federal Tax Returns and all state, local and foreign Tax Returns or materials required to have been filed by it and all such Tax Returns are true and correct in all material respects and (b) duly and timely paid, collected or remitted or caused to be duly and timely paid, collected or remitted all Taxes (whether or not shown on any Tax Return) due and payable, collectible or remittable by it and all assessments received by it, except Taxes (i) that are being contested in good faith by appropriate proceedings and for which such Company has set aside on its books adequate reserves in accordance with GAAP and (ii) which could not, individually or in the aggregate, have a Material Adverse Effect. Each Company has made adequate provision in accordance with GAAP for all Taxes not yet due and payable. Each Company is unaware of any proposed or pending tax assessments, deficiencies or audits that could be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect. No Company has ever been a party to any understanding or arrangement constituting a "tax shelter" within the meaning of Section 6111(c), Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code, or has ever "participated" in a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4, except as could not be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect. -67- SECTION 3.14 NO MATERIAL MISSTATEMENTS. No information, report, financial statement, certificate, Borrowing Request, LC Request, exhibit or schedule furnished by or on behalf of any Company to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Confidential Information Memorandum), taken as a whole, contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading as of the date such information is dated or certified; PROVIDED that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each Company represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. SECTION 3.15 LABOR MATTERS. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against any Company pending or, to the knowledge of any Company, threatened. The hours worked by and payments made to employees of any Company have not been in violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable federal, state, local or foreign law dealing with such matters in any manner which could reasonably be expected to result in a Material Adverse Effect. All payments due from any Company, or for which any claim may be made against any Company, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Company except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Company is bound. SECTION 3.16 SOLVENCY. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the properties of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will not have unreasonably small capital with which to conduct its business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. SECTION 3.17 EMPLOYEE BENEFIT PLANS. (a) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Company and its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect or the imposition of a Lien on any of the property of any Company. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $10.0 million the fair market value of the property of all such underfunded Plans. Except as set forth on SCHEDULE 3.17, using actuarial assumptions and computation methods consistent with subpart I of subtitle E of Title IV of ERISA, the aggregate liabilities of each Company or its ERISA Affiliates to all Multiemployer Plans in -68- the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, could not reasonably be expected to result in a Material Adverse Effect. (b) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, to the extent applicable, each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. No Company has incurred any material unpaid obligation in connection with the termination of or withdrawal from any Foreign Plan. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is funded, determined as of the end of the most recently ended fiscal year of the respective Company on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the property of such Foreign Plan, and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued. SECTION 3.18 ENVIRONMENTAL MATTERS. (a) Except as set forth in SCHEDULE 3.18 and except as, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect: (i) The Companies and their businesses, operations and Real Property are and in the last six years have been in compliance with, and the Companies have no liability under, Environmental Law; (ii) The Companies have obtained all Environmental Permits required for the conduct of their businesses and operations, and the ownership, operation and use of their property, under Environmental Law, all such Environmental Permits are valid and in good standing; (iii) There has been no Release or threatened Release of Hazardous Material on, at, under or from any Real Property or facility presently or formerly owned, leased or operated by the Companies or their predecessors in interest that could result in liability by the Companies under Environmental Law; (iv) There is no Environmental Claim pending or, to the knowledge of the Companies, threatened against the Companies, or relating to the Real Property currently or formerly owned, leased or operated by the Companies or relating to the operations of the Companies, and to the knowledge of the Companies, there are no actions, activities, circumstances, conditions, events or incidents that could form the basis of such an Environmental Claim; (v) No person with an indemnity or contribution obligation to the Companies relating to compliance with or liability under Environmental Law is in default with respect to such obligation; and (vi) No Company is obligated to perform any action or otherwise incur any expense under Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound or has assumed by contract or agreement, and no Company is conducting or financing any Response pursuant to any Environmental Law with respect to any Real Property or any other location. -69- (b) Except as set forth in SCHEDULE 3.18: (i) No Real Property or facility owned, operated or leased by the Companies and, to the knowledge of the Companies, no Real Property or facility formerly owned, operated or leased by the Companies or any of their predecessors in interest is (i) listed or proposed for listing on the National Priorities List promulgated pursuant to CERCLA or (ii) listed on the Comprehensive Environmental Response, Compensation and Liability Information System promulgated pursuant to CERCLA or (iii) included on any similar list maintained by any Governmental Authority including any such list relating to petroleum; (ii) No Lien has been recorded or, to the knowledge of any Company, threatened under any Environmental Law with respect to any Real Property or property of the Companies; (iii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require any notification, registration, filing, reporting, disclosure, investigation, remediation or cleanup pursuant to any Governmental Real Property Disclosure Requirements or any other Environmental Law; and (iv) The Companies have made available to the Lenders all material records and files in the possession, custody or control of, or otherwise reasonably available to, the Companies concerning compliance with or liability under Environmental Law, including those concerning the existence of Hazardous Material at Real Property or facilities currently or formerly owned, operated, leased or used by the Companies. SECTION 3.19 INSURANCE. SCHEDULE 3.19 sets forth a true, complete and correct description of all insurance maintained by each Company as of the Closing Date. All insurance maintained by the Companies is in full force and effect, all premiums have been duly paid, no Company has received notice of violation or cancellation thereof, the Premises, and the use, occupancy and operation thereof, comply in all material respects with all Insurance Requirements, and there exists no material default under any Insurance Requirement. Each Company has insurance in such amounts and covering such risks and liabilities as are customary for companies of a similar size engaged in similar businesses in similar locations. SECTION 3.20 SECURITY DOCUMENTS. (a) The U.S. Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the U.S. Security Agreement Collateral and (i) when financing statements and other filings in appropriate form are filed in the offices specified on SCHEDULE 7 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of the U.S. Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the U.S. Security Agreement), the Liens created by the U.S. Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the U.S. Security Agreement Collateral (other than (A) the Intellectual Property Collateral (as defined in the U.S. Security Agreement) and (B) such U.S. Security Agreement Collateral in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Collateral Liens. (b) The Canadian Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Canadian Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Canadian Security Agreement Collateral and (i) when financing statements and other fil- -70- ings in appropriate form are filed in the offices specified on SCHEDULE 7 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of the Canadian Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Canadian Security Agreement), the Liens created by the Canadian Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Canadian Security Agreement Collateral (other than (A) the Intellectual Property Collateral (as defined in the Canadian Security Agreement) and (B) such Canadian Security Agreement Collateral in which a security interest cannot be perfected under the PPSA as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Collateral Liens. (c) When the U.S. Security Agreement or a short form thereof is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Liens created by such U.S. Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Intellectual Property Collateral (as defined in such Security Agreement) in which a security interest may be perfected under applicable U.S. law, in each case subject to no Liens other than Permitted Collateral Liens. (d) Each Mortgage granted by a U.S. Loan Party is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable first priority Liens on, and security interests in, all of such U.S. Loan Party's right, title and interest in and to the U.S. Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent, and when such Mortgages are filed in the offices specified on Schedule 1.01(d) (or, in the case of any such Mortgage executed and delivered after the date thereof in accordance with the provisions of SECTIONS 5.10, 5.11 and 5.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of SECTIONS 5.10, 5.11 and 5.13), such Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the U.S. Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage. (e) Each Mortgage granted by a Canadian Loan Party is effective to create, in favor of the Collateral Agent or its sub-agent, for its benefit and the benefit of the Canadian Secured Parties, legal, valid and enforceable first priority Liens on, and security interests in, all of such Canadian Loan Party's right, title and interest in and to the Canadian Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent, and when such Mortgages are filed in the offices specified on SCHEDULE 1.01(d) (or, in the case of any such Mortgage executed and delivered after the date thereof in accordance with the provisions of SECTIONS 5.10 and 5.11, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of SECTIONS 5.10 and 5.11), such Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the Canadian Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage. (f) Each Security Document delivered pursuant to SECTIONS 5.10, 5.11 and 5.13 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent, for the benefit of the applicable Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the Loan Parties' right, title and interest in and to the Collateral thereunder, and when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law, such Security Document will constitute fully perfected Liens on, and security interests in, all right, title and interest of -71- the Loan Parties in such Collateral, in each case subject to no Liens other than the applicable Permitted Collateral Liens. SECTION 3.21 ACQUISITION DOCUMENTS; REPRESENTATIONS AND WARRANTIES IN ACQUISITION AGREEMENT. (a) SCHEDULE 3.21 lists (i) each exhibit, schedule, annex or other attachment to the Acquisition Agreement and (ii) each agreement, certificate, instrument, letter or other document contemplated by the Acquisition Agreement or any item referred to in clause (i) to be entered into, executed or delivered or to become effective in connection with the Acquisition or otherwise entered into, executed or delivered in connection with the Acquisition. The Lenders have been furnished true and complete copies of each Acquisition Document to the extent executed and delivered on or prior to the Closing Date. (b) All representations and warranties of each Company set forth in the Acquisition Agreement were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. SECTION 3.22 ANTI-TERRORISM LAW. (a) No Loan Party and, to the knowledge of the Loan Parties, none of its Affiliates is in violation of any laws relating to terrorism or money laundering ("ANTI-TERRORISM LAWS"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "EXECUTIVE ORDER"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) No Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or other agent of any Loan Party acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or (v) a person that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control ("OFAC") at its official website or any replacement website or other replacement official publication of such list. (c) No Loan Party and, to the knowledge of the Loan Parties, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or con- -72- spires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. SECTION 3.23 SUBORDINATION OF SENIOR SUBORDINATED NOTES. The Obligations are "Senior Debt," the U.S. Guaranteed Obligations are "Guarantor Senior Debt" and the Obligations and U.S. Guaranteed Obligations are "Designated Senior Debt," in each case, within the meaning of the Senior Subordinated Note Documents. ARTICLE IV CONDITIONS TO CREDIT EXTENSIONS SECTION 4.01 CONDITIONS TO INITIAL CREDIT EXTENSION. The obligation of each Lender and, if applicable, each Issuing Bank to fund the initial Credit Extension requested to be made by it was subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this SECTION 4.01. (a) LOAN DOCUMENTS. All legal matters incident to this Agreement, the Credit Extensions hereunder and the other Loan Documents shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to the Administrative Agent and there shall have been delivered to the Administrative Agent an executed counterpart of each of the Loan Documents and the Perfection Certificate. (b) CORPORATE DOCUMENTS. The Administrative Agent shall have received: (i) a certificate of the secretary or assistant secretary of each Loan Party dated the Closing Date, certifying (A) that attached thereto is a true and complete copy of each Organizational Document of such Loan Party certified (to the extent applicable) as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of each Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect and (C) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the secretary or assistant secretary executing the certificate in this clause (i)); (ii) a certificate as to the good standing of each Loan Party (in so-called "long-form" if available) as of a recent date, from such Secretary of State (or other applicable Governmental Authority); and (iii) such other documents as the Lenders, the Issuing Bank or the Administrative Agent may reasonably request. (c) OFFICERS' CERTIFICATE. The Administrative Agent shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of U.S. Borrower, confirming compliance with the conditions precedent set forth in this SECTION 4.01 and SECTIONS 4.02(b), (c) and (d). (d) FINANCINGS AND OTHER TRANSACTIONS, ETC. (i) The Transactions shall have been consummated or shall be consummated simultaneously on the Closing Date, in each case in all material -73- respects in accordance with the terms hereof and the terms of the Transaction Documents, without the waiver or amendment of any such terms not approved by the Joint Lead Arrangers (such consent not to be unreasonably withheld). (ii) U.S. Borrower shall have received not less than $225.0 million in gross proceeds from the issuance and sale of the Senior Subordinated Notes, and the Senior Subordinated Note Agreement shall be in form and substance reasonably satisfactory to the Lenders. (iii) The Equity Financing shall have been consummated. The terms of the Equity Financing and the Rollover Equity shall not require any payments or other distributions of cash or property in respect thereof other than payments in kind, or any purchases, redemptions or other acquisitions thereof for cash or property other than payments in kind, in each case prior to the payment in full of all obligations under the Loan Documents and the Senior Subordinated Notes, except as permitted by the Loan Documents. (iv) The Refinancing shall have been consummated in full to the reasonable satisfaction of the Lenders with all liens in favor of the existing lenders being unconditionally released; the Administrative Agent shall have received a "pay-off" letter in form and substance reasonably satisfactory to the Administrative Agent with respect to all debt being refinanced in the Refinancing; and the Administrative Agent shall have received from any person holding any Lien securing any such debt, such UCC termination statements, mortgage releases, releases of assignments of leases and rents, releases of security interests in Intellectual Property and other instruments, in each case in proper form for recording, as the Administrative Agent shall have reasonably requested to release and terminate of record the Liens securing such debt. (e) FINANCIAL STATEMENTS, PRO FORMA BALANCE SHEET; PROJECTIONS. The Lenders shall have received and shall be reasonably satisfied with the form and substance of the financial statements described in SECTION 3.04(b) and with the forecasts of the financial performance of Parent and its Subsidiaries. (f) INDEBTEDNESS AND MINORITY INTERESTS. After giving effect to the Transactions and the other transactions contemplated hereby, no Company shall have outstanding any Indebtedness or preferred stock other than (i) the Loans and Credit Extensions hereunder, (ii) the Senior Subordinated Notes, (iii) the Indebtedness listed on SCHEDULE 6.01(b), (iv) the Assumed Debt and (v) Indebtedness owed to either Borrower or any Guarantor. (g) OPINIONS OF COUNSEL. The Administrative Agent shall have received, on behalf of itself, the other Agents, the Arrangers, the Lenders and the Issuing Bank, a favorable written opinion of (i) Paul Weiss, Rifkind, Wharton & Garrison LLP, special counsel for the Loan Parties, substantially to the effect set forth in Exhibit N-1, (ii) each local counsel listed on SCHEDULE 4.01(g), substantially to the effect set forth in EXHIBIT N-2, and (iii) Bennett Jones LLP, Canadian counsel for the Loan Parties, substantially to the effect set forth in EXHIBIT N-3, in each case (A) dated the Closing Date and (B) addressed to the Agents, the Issuing Bank and the Lenders, and (iii) a copy of each legal opinion delivered under the other Transaction Documents, accompanied by reliance letters from the party delivering such opinion authorizing the Agents, Lenders and the Issuing Bank to rely thereon as if such opinion were addressed to them. (h) SOLVENCY CERTIFICATE. The Administrative Agent shall have received a solvency certificate in the form of EXHIBIT O, dated the Closing Date and signed by the treasurer or the chief financial officer of U.S. Borrower. -74- (i) REQUIREMENTS OF LAW. The Lenders shall be satisfied that Parent, its Subsidiaries and the Transactions shall be in full compliance with all material Requirements of Law, including Regulations T, U and X of the Board, and shall have received reasonably satisfactory evidence of such compliance reasonably requested by them. (j) CONSENTS. The Lenders shall be reasonably satisfied that all requisite Governmental Authorities and third parties shall have approved or consented to the Transactions, and there shall be no governmental or judicial action, actual or threatened, that has or would have, singly or in the aggregate, a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Transactions or the other transactions contemplated hereby. (k) LITIGATION. There shall be no litigation, public or private, or administrative proceedings, governmental investigation or other legal or regulatory developments, actual or threatened, that, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or could materially and adversely affect the ability of Holdings, Parent, U.S. Borrower and their respective Subsidiaries to fully and timely perform their respective obligations under the Transaction Documents, or the ability of the parties to consummate the financings contemplated hereby or the other Transactions. (l) SOURCES AND USES. The sources and uses of the Loans shall be as set forth in SECTION 3.12. (m) FEES. The Arrangers and the Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including the legal fees and expenses of Cahill Gordon & Reindel LLP, special counsel to the Agents, and the fees and expenses of any local counsel, foreign counsel, appraisers, consultants and other advisors) required to be reimbursed or paid by either Borrower hereunder or under any other Loan Document. (n) PERSONAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) all certificates, agreements or instruments representing or evidencing the Securities Collateral accompanied by instruments of transfer and stock powers undated and endorsed in blank; (ii) the Intercompany Note executed by and among Parent and each of its Subsidiaries (other than Canadian Borrower) and the Canadian Intercompany Note executed by and among Canadian Borrower, Parent and each of its Subsidiaries, each accompanied by instruments of transfer undated and endorsed in blank; (iii) all other certificates, agreements, including control agreements, or instruments necessary to perfect the Collateral Agent's security interest in all Chattel Paper, all Instruments, all Deposit Accounts and all Investment Property of each Loan Party (as each such term is defined in either Security Agreement and to the extent required by either Security Agreement); (iv) financing statements in appropriate form for filing under the UCC and PPSA, filings with the United States Patent and Trademark Office, and the United States Copyright Office and such other documents under applicable Requirements of Law in each jurisdiction as may be necessary or appropriate or, in the opinion of the Collateral Agent, desirable to perfect the Liens created, or purported to be created, by the Security Documents under the laws of the United States, Canada or any State or Province thereof and, with respect to all UCC financing statements required to be filed pursuant to the Loan Documents, evidence satisfactory to the Administrative -75- Agent that U.S. Borrower has retained, at its sole cost and expense, a service provider acceptable to the Administrative Agent for the tracking of all such financing statements and notification to the Administrative Agent, of, among other things, the upcoming lapse or expiration thereof; (v) certified copies of UCC, PPSA, United States Patent and Trademark Office, United States Copyright Office, tax and judgment lien searches, bankruptcy and pending lawsuit searches or equivalent reports or searches, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Loan Party as debtor and that are filed in those state and county jurisdictions in which any property of any Loan Party is located and the state and county jurisdictions in which any Loan Party is organized or maintains its principal place of business and such other searches that the Collateral Agent deems necessary or appropriate, none of which encumber the Collateral covered or intended to be covered by the Security Documents (other than Permitted Collateral Liens or any other Liens acceptable to the Collateral Agent); (vi) with respect to each location set forth on SCHEDULE 4.01(n)(vi), a Landlord Access Agreement or Bailee Letter, as applicable; PROVIDED that no such Landlord Access Agreement shall be required with respect to any Real Property that could not be obtained after the Loan Party that is the lessee or owner of the inventory or other personal property Collateral stored with the bailee thereof, as applicable, shall have used all commercially reasonable efforts to do so; and (vii) evidence acceptable to the Collateral Agent of payment or arrangements for payment by the Loan Parties of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Security Documents. (o) REAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) a Mortgage, encumbering each Mortgaged Property in favor of the Collateral Agent, for the benefit of the applicable Secured Parties, duly executed and acknowledged by each Loan Party that is the owner of or holder of any interest in such Mortgaged Property, and otherwise in form for recording in the recording office of each applicable political subdivision where each such Mortgaged Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a lien under applicable law, and such financing statements and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction, all of which shall be in form and substance reasonably satisfactory to Collateral Agent; (ii) with respect to each Mortgaged Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as necessary to consummate the Transactions or as shall reasonably be deemed necessary by the Collateral Agent in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Property to grant the Lien contemplated by the Mortgage with respect to such Mortgaged Property; (iii) with respect to each Mortgage, a policy of title insurance (or marked up title insurance commitment having the effect of a policy of title insurance) insuring the Lien of such Mortgage as a valid first mortgage Lien on the Mortgaged Property and fixtures described therein in the amount equal to not less than 115% of the fair market value of such Mortgaged Property and fixtures, which fair market value is set forth on SCHEDULE 4.01(o)(iii), which policy (or such marked-up commitment) (each, a "TITLE POLICY") shall (A) be issued by the Title Company, (B) to the extent necessary, include such reinsurance arrangements (with provisions for direct access, if necessary) as shall be reasonably acceptable to the Collateral Agent, (C) contain a "tie-in" or -76- "cluster" endorsement, if available under applicable law (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (D) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to the Collateral Agent) as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, environmental lien, subdivision, separate tax lot revolving credit, and so-called comprehensive coverage over covenants and restrictions), and (E) contain no exceptions to title other than Permitted Collateral Liens and exceptions acceptable to the Collateral Agent; (iv) with respect to each Mortgaged Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including a so-called "gap" indemnification) as shall be required to induce the Title Company to issue the Title Policy/ies and endorsements contemplated above; (v) evidence reasonably acceptable to the Collateral Agent of payment by U.S. Borrower of all Title Policy premiums, search and examination charges, escrow charges and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to above; (vi) with respect to each Real Property or Mortgaged Property, copies of all Leases in which U.S. Borrower or any Subsidiary holds the lessor's interest or other agreements relating to possessory interests, if any. To the extent any of the foregoing affect any Mortgaged Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement, and shall otherwise be acceptable to the Collateral Agent; (vii) with respect to each Mortgaged Property, each Company shall have made all notifications, registrations and filings, to the extent required by, and in accordance with, all Governmental Real Property Disclosure Requirements applicable to such Mortgaged Property; and (viii) Surveys with respect to each Mortgaged Property. (p) INSURANCE. The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by SECTION 5.04 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable or mortgagee endorsement (as applicable) and shall name the Collateral Agent, on behalf of the Secured Parties, as additional insured, in form and substance satisfactory to the Administrative Agent. (q) NO MATERIAL CHANGE. No change shall have occurred since October 4, 2003, and no additional information shall be disclosed to or discovered by the Administrative Agent (including, without limitation, information contained in any review or report required to be provided to it in connection with this Agreement), which the Administrative Agent determines has had or could reasonably be expected to have a material adverse effect on the business, results of operations, condition (financial or otherwise), assets or liabilities of Parent, U.S. Borrower and their respective subsidiaries taken as a whole. SECTION 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each Lender and each Issuing Bank to make any Credit Extension (including the initial Credit Extension) shall be subject to, and to the satisfaction of, each of the conditions precedent set forth below. -77- (a) NOTICE. The Administrative Agent shall have received a Borrowing Request as required by SECTION 2.03 (or such notice shall have been deemed given in accordance with SECTION 2.03) if Loans are being requested or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by SECTION 2.18(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a U.S. Borrowing Request as required by SECTION 2.17(b). (b) NO DEFAULT. The Borrowers and each other Loan Party shall be in compliance in all material respects with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and, at the time of and immediately after giving effect to such Credit Extension and the application of the proceeds thereof, no Default shall have occurred and be continuing on such date. (c) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by any Loan Party set forth in ARTICLE III hereof (other than, in the case of the initial Credit Extension only, SECTION 3.04(d)) or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (d) NO LEGAL BAR. No order, judgment or decree of any Governmental Authority shall purport to restrain any Lender from making any Loans to be made by it. No injunction or other restraining order shall have been issued, shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by this Agreement or the making of Loans hereunder. Each of the delivery of a Borrowing Request or notice requesting the issuance, amendment, extension or renewal of a Letter of Credit and the acceptance by a Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by such Borrower and each other Loan Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the conditions contained in this SECTION 4.02 have been satisfied. Each Borrower shall provide such information (including calculations in reasonable detail of the covenants in SECTION 6.10) as the Administrative Agent may reasonably request to confirm that the conditions in this SECTION 4.02 have been satisfied. SECTION 4.03 CONDITIONS TO EFFECTIVENESS OF THE AMENDMENT AND RESTATEMENT. The effectiveness of this Agreement shall be subject to, and occur upon the date of (the "AMENDMENT EFFECTIVENESS DATE"), the satisfaction of each of the conditions precedent set forth below. (a) NO DEFAULT. No Default shall have occurred and be continuing on the Amendment Effectiveness Date. (b) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by any Loan Party set forth in ARTICLE III hereof or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the Amendment Effectiveness Date with the same effect as though made on and as of -78- such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) EXPENSES. All of the reasonable fees and expenses of one special counsel for the Agents in connection with the amendment and restatement shall have been paid in full. ARTICLE V AFFIRMATIVE COVENANTS Each Loan Party warrants, covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each Loan Party will, and will cause each of its Subsidiaries to: SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. Furnish to the Administrative Agent and each Lender: (a) ANNUAL REPORTS. As soon as available and in any event within 90 days after the end of each fiscal year (but no later than the date on which Parent would be required to file a Form 10-K under the Exchange Act if it were subject to Section 15 and 13(d) of the Exchange Act), (i) the consolidated balance sheet of Parent as of the end of such fiscal year and related consolidated statements of income, cash flows and stockholders' equity for such fiscal year, in comparative form with such financial statements as of the end of, and for, the preceding fiscal year, and notes thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out Parent, U.S. Borrower and the Subsidiaries), all prepared in accordance with Regulation S-X and accompanied by an opinion of Ernst & Young LLP or other independent public accountants of recognized national standing reasonably satisfactory to the Administrative Agent (which opinion shall not be qualified as to scope or contain any going concern or other qualification), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Parent as of the dates and for the periods specified in accordance with GAAP and (ii) a management's discussion and analysis of the financial condition and results of operations for such fiscal year, including a discussion of sales by product category, as compared to the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-K); (b) QUARTERLY REPORTS. As soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year (but no later than the date on which Parent would be required to file a Form 10-Q under the Exchange Act if it were subject to Section 15 and 13(d) of the Exchange Act), (i) the consolidated balance sheet of Parent as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and notes thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out Parent, U.S. Borrower and the Subsidiaries), all prepared in accordance with Regulation S-X under the Securities Act and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Parent as of the date and for -79- the periods specified in accordance with GAAP consistently applied, and on a basis consistent with audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments and (ii) a management's discussion and analysis of the financial condition and results of operations for such fiscal quarter and the then elapsed portion of the fiscal year, including a discussion of sales by product category, as compared to the comparable periods in the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-Q); (c) FINANCIAL OFFICER'S CERTIFICATE. (i) Concurrently with any delivery of financial statements under SECTION 5.01(a) or (b) above, a Compliance Certificate certifying that no Default has occurred or, if such a Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (ii) concurrently with any delivery of financial statements under SECTION 5.01 (a) or (b) above, a Compliance Certificate setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in SECTIONS 6.07(f) and 6.10 (including the aggregate amount of Excluded Issuances for such period and the uses therefor) and, in the case of SECTION 5.01(a) above, setting forth U.S. Borrower's calculation of Excess Cash Flow; and (iii) in the case of SECTION 5.01(a) above, a report of the accounting firm opining on or certifying such financial statements stating that in the course of its regular audit of the financial statements of Parent and its Subsidiaries, which audit was conducted in accordance with GAAP, such accounting firm obtained no knowledge that any Default insofar as it relates to financial or accounting matters has occurred or, if in the opinion of such accounting firm such a Default has occurred, specifying the nature and extent thereof; (d) FINANCIAL OFFICER'S CERTIFICATE REGARDING COLLATERAL. Concurrently with any delivery of financial statements under SECTION 5.01(a) above, a certificate of a Financial Officer setting forth the information required pursuant to the Perfection Certificate Supplement or confirming that there has been no change in such information since the date of the Perfection Certificate or latest Perfection Certificate Supplement; (e) PUBLIC REPORTS. Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Company with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor), as the case may be; (f) MANAGEMENT LETTERS. Promptly after the receipt thereof by any Company, a copy of any final "management letter" received by any such person from its certified public accountants and the management's responses thereto; (g) BUDGETS. No later than 30 days after the first day of each fiscal year of Parent and U.S. Borrower, a budget in form reasonably satisfactory to the Administrative Agent (including budgeted statements of income for each of U.S. Borrower's business units and sources and uses of cash and balance sheets and a projection of sales by product category) prepared by each of Parent and U.S. Borrower, respectively, for each quarter of such fiscal year prepared in summary form, in each case, of Parent, Borrower and their respective subsidiaries, with appropriate presentation and discussion of the principal assumptions upon which such budgets are based, accompanied by the statement of a Financial Officer of each of Parent and U.S. Borrower to the effect that the budget of Parent and U.S. Borrower, respectively, is a reasonable estimate for the period covered thereby and, promptly when available, any significant revisions of such budget; -80- (h) ORGANIZATION. Within 90 days after the close of each fiscal year of Parent, Parent shall deliver an accurate organization chart as required by SECTION 3.07(c), or confirm that there are no changes to SCHEDULE 3.07(c); (i) ORGANIZATIONAL DOCUMENTS. Promptly provide copies of any Organizational Documents that have been amended or modified in accordance with the terms hereof and deliver a copy of any notice of default given or received by any Company under any Organizational Document within 15 days after such Company gives or receives such notice; and (j) OTHER INFORMATION. Promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Company, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02 LITIGATION AND OTHER NOTICES. Furnish to the Administrative Agent and each Lender written notice of the following promptly (and, in any event, within three Business Days of any Company becoming aware thereof): (a) any Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against any Company or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document; (c) any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of a Casualty Event in excess of $5.0 million; and (e) (i) the incurrence of any material Lien (other than Permitted Collateral Liens) on, or claim asserted against any of the Collateral or (ii) the occurrence of any other event which could materially affect the value of the Collateral. SECTION 5.03 EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence, except as otherwise expressly permitted under SECTION 6.05 or SECTION 6.06 or, in the case of any Subsidiary, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, privileges, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply with all applicable Requirements of Law (including any and all zoning, building, Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the -81- failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; pay and perform its obligations under all Leases and Transaction Documents except, in the case of all such documents other than the Loan Documents, where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; and at all times maintain, preserve and protect all property material to the conduct of such business and keep such property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business) and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; PROVIDED that nothing in this SECTION 5.03(b) shall prevent (i) sales of property, consolidations or mergers by or involving any Company in accordance with SECTION 6.05 or SECTION 6.06; (ii) the withdrawal by any Company of its qualification as a foreign corporation in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; or (iii) the abandonment by any Company of any rights, franchises, licenses, trademarks, trade names, copyrights or patents that such person reasonably determines are not useful to its business or no longer commercially desirable. SECTION 5.04 INSURANCE. (a) Keep its insurable property adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations, including insurance with respect to Mortgaged Properties and other properties material to the business of the Companies against such casualties and contingencies and of such types and in such amounts with such deductibles as is customary in the case of similar businesses operating in the same or similar locations, including (i) physical hazard insurance on an "all risk" basis, (ii) commercial general liability against claims for bodily injury, death or property damage covering any and all insurable claims, (iii) explosion insurance in respect of any boilers, machinery or similar apparatus constituting Collateral, (iv) business interruption insurance, (v) worker's compensation insurance and such other insurance as may be required by any Requirement of Law and (vi) such other insurance against risks as the Administrative Agent may from time to time require (such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Administrative Agent and the Collateral Agent); PROVIDED that with respect to physical hazard insurance, neither the Collateral Agent nor the applicable Company shall agree to the adjustment of any claim thereunder without the consent of the other (such consent not to be unreasonably withheld or delayed); PROVIDED, FURTHER, that no consent of any Company shall be required during an Event of Default. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof, (ii) name the Collateral Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the applicable Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable, (iii) if reasonably requested by the Collateral Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Collateral Agent. (c) Notify the Administrative Agent and the Collateral Agent immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this SECTION 5.04 is taken out by any Company; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies. (d) With respect to each U.S. Mortgaged Property, obtain flood insurance in such total amount as the Administrative Agent or the Required Lenders may from time to time require, if at any time the area in which any improvements located on any Mortgaged Property is designated a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time. -82- (e) Deliver to the Administrative Agent and the Collateral Agent and the Lenders a report of a reputable insurance broker with respect to such insurance and such supplemental reports with respect thereto as the Administrative Agent or the Collateral Agent may from time to time reasonably request. (f) No Loan Party that is an owner of Mortgaged Property shall take any action that is reasonably likely to be the basis for termination, revocation or denial of any insurance coverage required to be maintained under such Loan Party's respective Mortgage or that could be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises, and each Loan Party shall otherwise comply in all material respects with all Insurance Requirements in respect of the Premises; PROVIDED, HOWEVER, that each Loan Party may, at its own expense and after written notice to the Administrative Agent, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, the prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under this SECTION 5.04 or (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of this SECTION 5.04. SECTION 5.05 OBLIGATIONS AND TAXES. (a) Pay its material Indebtedness and other material obligations promptly and in accordance with their terms and pay and discharge promptly when due all Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, services, materials and supplies or otherwise that, if unpaid, might give rise to a Lien other than a Permitted Lien upon such properties or any part thereof; PROVIDED that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings timely instituted and diligently conducted and the applicable Company shall have set aside on its books adequate reserves or other appropriate provisions with respect thereto in accordance with GAAP and such contested amounts, individually or in the aggregate, are not reasonably expected to have a Material Adverse Effect, (ii) such contest operates to suspend collection of the contested obligation, Tax, assessment or charge and enforcement of a Lien other than a Permitted Lien and (iii) in the case of Collateral, the applicable Company shall have otherwise complied with the Contested Collateral Lien Conditions. (b) Timely and correctly file all material Tax Returns required to be filed by it. Withhold, collect and remit all Taxes that it is required to collect, withhold or remit. (c) U.S. Borrower does not intend to treat the Loans as being a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4. In the event U.S. Borrower determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof. SECTION 5.06 EMPLOYEE BENEFITS. (a) Comply in all material respects with the applicable provisions of ERISA and the Code and (b) furnish to the Administrative Agent (x) as soon as possible after, and in any event within 10 days after any Responsible Officer of any Company or any ERISA Affiliates of any Company knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in liability of the Companies or any of their ERISA Affiliates in an aggregate amount exceeding $1.0 million or the imposition of a Lien, a statement of a Financial Officer of U.S. Borrower setting forth details as to such ERISA Event and the action, if any, that the Companies propose to take with respect thereto, and (y) upon request by the Administrative Agent, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Company or any ERISA Affiliate with the Internal Revenue Service with respect to each Plan; (ii) the most recent actuarial valuation report for each Plan; (iii) all notices received -83- by any Company or any ERISA Affiliate from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan (or employee benefit plan sponsored or contributed to by any Company) as the Administrative Agent shall reasonably request. SECTION 5.07 MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS; ANNUAL MEETINGS. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law are made of all dealings and transactions in relation to its business and activities. Each Company will permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the property of such Company at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances, accounts and condition of any Company with the officers and employees thereof and advisors therefor (including independent accountants). (b) Within 120 days after the close of each fiscal year of the Companies, at the request of the Administrative Agent or Required Lenders, hold a meeting (at a mutually agreeable location and time or, at the option of the Administrative Agent, by conference call) with all Lenders who choose to attend such meeting at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Companies and the budgets presented for the current fiscal year of the Companies. SECTION 5.08 USE OF PROCEEDS. Use the proceeds of the Loans only for the purposes set forth in SECTION 3.12 and request the issuance of Letters of Credit only for the purposes set forth in the definition of Commercial Letter of Credit or Standby Letter of Credit, as the case may be. SECTION 5.09 COMPLIANCE WITH ENVIRONMENTAL LAWS; ENVIRONMENTAL REPORTS. (a) Comply, and cause all lessees and other persons occupying Real Property owned, operated or leased by any Company to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and Real Property; obtain and renew all material Environmental Permits applicable to its operations and Real Property; and conduct all Responses required by, and in accordance with, Environmental Laws; PROVIDED that no Company shall be required to undertake any Response to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP. (b) If a Default caused by reason of a breach of SECTION 3.18 or SECTION 5.09(a) shall have occurred and be continuing for more than 20 days without the Companies commencing activities reasonably likely to cure such Default, at the written request of the Administrative Agent or the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of U.S. Borrower, an environmental assessment report regarding the matters which are the subject of such Default, including, where appropriate, any soil and/or groundwater sampling, prepared by an environmental consulting firm and, in the form and substance, reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Response to address them. (c) Each Loan Party that is an owner of Mortgaged Property shall not install nor permit to be installed in the Mortgaged Property any Hazardous Materials, other than in compliance with applicable Environmental Laws. SECTION 5.10 ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS. (a) Subject to this SECTION 5.10, with respect to any property acquired after the Closing Date by any Loan Party that is -84- intended to be subject to the Lien created by any of the Security Documents but is not so subject, promptly (and in any event within 30 days after the acquisition thereof) (i) execute and deliver to the Administrative Agent and the Collateral Agent such amendments or supplements to the relevant Security Documents or such other documents as the Administrative Agent or the Collateral Agent shall deem reasonably necessary or advisable to grant to the Collateral Agent, for its benefit and for the benefit of the other applicable Secured Parties, a Lien on such property subject to no Liens other than Permitted Collateral Liens, and (ii) take all actions necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. The Borrowers shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of the Security Documents against such after-acquired properties. (b) With respect to any person that is or becomes a U.S. Subsidiary after the Closing Date, promptly (and in any event within 30 days after such person becomes a U.S. Subsidiary) (i) deliver to the Collateral Agent the certificates, if any, representing all of the Equity Interests of such U.S. Subsidiary owned by Parent or any of its Subsidiaries, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the holder(s) of such Equity Interests, and all intercompany notes owing from such U.S. Subsidiary to any Loan Party together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (ii) cause such new U.S. Subsidiary (A) to execute a Joinder Agreement or such comparable documentation to become a U.S. Subsidiary Guarantor and a joinder agreement to the U.S. Security Agreement, substantially in the form annexed thereto or, in the case of a Foreign Subsidiary (other than a Canadian Subsidiary), execute a security agreement compatible with the laws of such Foreign Subsidiary's jurisdiction in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable in the opinion of the Administrative Agent or the Collateral Agent to cause the Lien created by the U.S. Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent. Notwithstanding the foregoing, (1) the Equity Interests required to be delivered to the Collateral Agent pursuant to clause (i) of this SECTION 5.10(b) shall not include any Equity Interests of a Foreign Subsidiary created or acquired after the Closing Date and (2) no Foreign Subsidiary shall be required to take the actions specified in clause (ii) of this SECTION 5.10(b), if, in the case of either clause (1) or (2), doing so would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Code, which investment would or could reasonably be expected to trigger a NON DE MINIMIS increase in the net income of a United States shareholder of such Subsidiary pursuant to Section 951 (or a successor provision) of the Code, as reasonably determined by the Administrative Agent; PROVIDED that this exception shall not apply to (A) Voting Stock of any Subsidiary which is a first-tier controlled foreign corporation (as defined in Section 957(a) of the Code) representing 65% of the total voting power of all outstanding Voting Stock of such Subsidiary and (B) 100% of the Equity Interests not constituting Voting Stock of any such Subsidiary, except that any such Equity Interests constituting "stock entitled to vote" within the meaning of Treasury Regulation Section 1.956-2(c)(2) shall be treated as Voting Stock for purposes of this SECTION 5.10(b). (c) With respect to any person that is or becomes a Canadian Subsidiary after the Closing Date, promptly (and in any event within 30 days after such person becomes a Canadian Subsidiary) (i) deliver to the Collateral Agent, a pledge agreement in a form reasonably satisfactory to the Collateral Agent, the certificates, if any, representing all of the Equity Interests of such Canadian Subsidiary owned by Canadian Borrower or a Canadian Subsidiary, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the -85- holder(s) of such Equity Interests, and all intercompany notes owing from such Canadian Subsidiary to any Loan Party together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (ii) cause such new Subsidiary (A) to execute a Joinder Agreement or such comparable documentation to become a Canadian Subsidiary Guarantor and a joinder agreement to the Canadian Security Agreement, substantially in the form annexed thereto or, in the case of a Subsidiary not organized under the laws of Canada, execute a security agreement compatible with the laws of such Subsidiary's jurisdiction in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable in the opinion of the Administrative Agent or the Collateral Agent to cause the Lien created by such security document to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent. (d) Promptly grant to the Collateral Agent, within 60 days of the acquisition thereof, a security interest in and Mortgage on (i) each Real Property owned in fee by such U.S. Loan Party as is acquired by such U.S. Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $1.0 million, and (ii) unless the Collateral Agent otherwise consents, each leased Real Property of such U.S. Loan Party which lease individually has a fair market value of at least $1.0 million, in each case, as additional security for the Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by SECTION 6.02). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such U.S. Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy, a Survey and local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage). (e) Promptly grant to the Collateral Agent, within 60 days of the acquisition thereof, a security interest in and Mortgage creating a Lien on (i) each Real Property owned in fee by such Canadian Loan Party as is acquired by such Canadian Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $1.0 million, and (ii) unless the Collateral Agent otherwise consents, each leased Real Property of such Canadian Loan Party which lease individually has a fair market value of at least $1.0 million, in each case, as additional security for the Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by SECTION 6.02). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such Canadian Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy (if available in the relevant jurisdiction), Survey and local counsel opinion (including as to -86- title if a Title Policy is unavailable and otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage). (f) The parties hereto agree that the provisions of this SECTION 5.10 (other than this Section 5.10(f)) shall not apply to Non-Guarantor Subsidiaries. Either Borrower may designate any of its Subsidiaries acquired or formed after the Closing Date as a Non-Guarantor Subsidiary by written notice to the Administrative Agent; PROVIDED, HOWEVER, that if at any time any Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate (other than any Foreign Subsidiary that is not required to take the actions specified in SECTION 5.10(b)(ii) by operation of the last sentence of SECTION 5.10(b)) not otherwise subject to SECTION 5.10(b) has assets with either a book value or fair market value in excess of $1.0 million, then such Borrower shall, and shall cause one or more of such Subsidiaries to, comply with SECTION 5.10(b) within the time frames set forth therein so that no Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate holds property having either a book value or fair market value in excess of $1.0 million. SECTION 5.11 SECURITY INTERESTS; FURTHER ASSURANCES. Promptly, upon the reasonable request of the Administrative Agent, the Collateral Agent or any Lender, at U.S. Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by the Administrative Agent or the Collateral Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby subject to no other Liens except as permitted by the applicable Security Document, or obtain any consents or waivers as may be necessary or appropriate in connection therewith. Deliver or cause to be delivered to the Administrative Agent and the Collateral Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent as the Administrative Agent and the Collateral Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by the Administrative Agent, the Collateral Agent or the Required Lenders of any power, right, privilege or remedy pursuant to any Loan Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority execute and deliver all applications, certifications, instruments and other documents and papers that the Administrative Agent, the Collateral Agent or the Required Lenders may require. If the Administrative Agent, the Collateral Agent or the Required Lenders reasonably determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of any Loan Party constituting Collateral, the Borrowers shall provide to the Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA or other applicable law and are otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent. SECTION 5.12 INFORMATION REGARDING COLLATERAL. (a) Not effect any change (i) in any Loan Party's legal name, (ii) in the location of any Loan Party's chief executive office, (iii) in any Loan Party's identity or organizational structure, (iv) in any Loan Party's Federal Taxpayer Identification Number or organizational identification number, if any, (v) in any Loan Party's jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or organizing in any other jurisdiction) or (vi) in the case of tangible personal property in Canada, the Province in which such property is located, unless a PPSA financing statement has already been filed in respect of the Loan Party in the province to which the property is re-located until (A) it shall have given the Collateral Agent and the Administrative Agent not less than 30 days' prior written notice (in the form of an Officers' Certificate), or such lesser notice period agreed to by the Collateral Agent, of its intention so to do, clearly describing such change and providing such other information in connection therewith as the Collateral Agent or the Administrative Agent may reasonably request -87- and (B) it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the perfection and priority of the security interest of the Collateral Agent for the benefit of the Secured Parties in the Collateral, if applicable. Each Loan Party agrees to promptly provide the Collateral Agent with certified Organizational Documents reflecting any of the changes described in the preceding sentence. Each Loan Party also agrees to promptly notify the Collateral Agent of any change in the location of any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral is located (including the establishment of any such new office or facility), other than changes in location to a Mortgaged Property or a leased property subject to a Landlord Access Agreement. (b) Concurrently with the delivery of financial statements pursuant to SECTION 5.01(a), deliver to the Administrative Agent and the Collateral Agent a Perfection Certificate Supplement and a certificate of a Financial Officer and the chief legal officer of U.S. Borrower certifying that all UCC financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction necessary to protect and perfect the security interests and Liens under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). SECTION 5.13 POST-CLOSING MATTERS. (a) The applicable Loan Parties shall use their commercially reasonable efforts to obtain and deliver to the Collateral Agent (unless waived or extended by the Collateral Agent in its discretion), within the time periods set forth below, to the extent such items have not provided as of the Closing Date, the following: (i) Landlord Access Agreements for the Real Properties located at 10228 Governor Lane Boulevard, Williamsport, MD; 1600 N. State Rte 291, Carefree Industrial Park, Independence, MO; 6th Avenue SW, Medicine Hat, Alberta, Canada; and 666 Henderson Drive, Regina, Saskatoon, Saskatchewan, Canada, each in form and substance reasonably acceptable to the Collateral Agent, unless the Collateral Agent, in its reasonable judgment, waives such delivery, with respect to each of the leased Real Properties set forth in this clause (i), within forty-five (45) days after the Closing Date; (ii) the property owners' consents to leasehold mortgage financing, on terms and conditions reasonably satisfactory to the Collateral Agent, with respect to the property located at 1274 Industrial Boulevard, Jasper, TN, within forty five (45) days after the Closing Date, and if such consent is so obtained, the applicable Loan Party will deliver to Collateral Agent, within thirty (30) days thereafter, with respect to the same, the following: (1) a duly executed and acknowledged Mortgage, financing statements and other instruments meeting the requirements of Section 4.01(o)(i) hereof; (2) such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as required by Section 4.01(o)(ii); (3) a policy of title insurance meeting the requirements of Section 4.01(o)(iii); (4) policies or certificates of insurance as required by Section 4.01(p); (5) a Survey meeting the requirements of the definition of "Survey" contained in this Agreement; -88- (6) such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as required by Section 4.01(o)(iv); (7) evidence of payment of all applicable premiums, charges, costs, taxes, etc. as required by Section 4.01(o)(v); (8) copies of all leases or other agreements, and subordination of such, as required by Section 4.01(o)(vi); (9) the notices, registration and filings required by Section 4.01(o)(vii); and (10) favorable written opinions of local counsel in the states in which each such Real Property is located, as required by Section 4.01(g); and if such consent to leasehold mortgage financing, set forth in this Section 5.13(a)(ii), is so obtained, the Mortgage and policy of title insurance referred to in clauses (1) and (3), respectively, shall be in the amount of $1,109,750; and (iii) consents to mortgage, or other secured, financing (which consents shall be in form and substance reasonably satisfactory to the Collateral Agent) of Napco, Inc.'s interest, as contract purchaser, under that certain Installment Sale Agreement dated April 16, 1996 between Napco, Inc. and the Community Development Corporation of Butler County, Pennsylvania ("CDC") (as seller thereunder) providing for the sale of certain premises (the "BUTLER PROPERTY") located in Butler, Pennsylvania and more particularly described in a Memorandum of Installment Sale Agreement dated April 16, 1996 and recorded in the Recorder's Office of Butler County, Pennsylvania on April 19, 1996 in Book 2618 at Page 629 (the "INSTALLMENT CONTRACT"), from (x) CDC under the Installment Contract and any related documentation, (y) The Pennsylvania Industrial Development Authority, as holder of one or more mortgages encumbering the Butler Property and (z) any other secured lender which has a mortgage or other security interest in the Butler Property or the Installment Contract, with ninety (90) days after the Closing Date, and if such consents are so obtained, Napco Inc. will deliver to Collateral Agent, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section; PROVIDED that the Collateral Agent, in its sole judgment, may require a collateral assignment of, or other security interest in, the Installment Contract in lieu of the Mortgage set forth in subsection (a)(ii)(1), but in such case the applicable Loan Party shall not be required to seek a second consent thereto. (b) If the applicable Loan Party which is the tenant under that certain lease for the Real Property located at 2121 Woodville Road, Oregon, Ohio, more particularly described in SCHEDULE 3.05(b), does not terminate such lease and vacate such Real Property on or before June 30, 2004, such Loan Party shall use commercially reasonable efforts to obtain within forty five (45) days thereafter, the property owner's consent to leasehold mortgage financing on terms and conditions reasonably satisfactory to Collateral Agent), and if such consent is so obtained, the applicable Loan Party shall deliver to Collateral Agent, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section. (c) If while any Obligations are outstanding, the mortgage(s) or deed(s) of trust encumbering, as of the Closing Date, any of the Real Properties identified on SCHEDULE 5.13(c) (which mortgage(s) or deed(s) of trust are more particularly described in the applicable title commitments referred to in SCHEDULE 6.02(c)) are satisfied or released, the applicable Loan Party shall deliver to Collat- -89- eral Agent with respect to any such Real Property, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section. (d) The applicable Loan Party shall obtain and deliver to the Collateral Agent, within ten (10) Business Days after the Closing Date, unless waived or extended by the Collateral Agent in its discretion (x) a survey for the Mortgaged Property located at 15159 Andrew Jackson Highway, Fair Bluff, North Carolina and (y) if not issued by Title Company on the Closing Date, endorsements to the Title Policy respecting such Mortgaged Real Property, removing the standard survey exception and providing the comprehensive and survey endorsements thereto within fifteen (15) Business Days after the delivery to the Collateral Agent of such Survey. ARTICLE VI NEGATIVE COVENANTS Each Loan Party warrants, covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, no Loan Party will, nor will they cause or permit any Subsidiaries to: SECTION 6.01 INDEBTEDNESS. Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except (a) Indebtedness incurred under this Agreement and the other Loan Documents; (b) (i) Indebtedness outstanding on the Closing Date and listed on SCHEDULE 6.01(b), (ii) refinancings or renewals thereof or of the Indebtedness under clauses (iii) and (iv) below; PROVIDED that (A) any such refinancing Indebtedness is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being renewed or refinanced, PLUS the amount of any premiums required to be paid thereon and reasonable fees and expenses associated therewith, (B) such refinancing Indebtedness has a later or equal final maturity and longer or equal weighted average life than the Indebtedness being renewed or refinanced and (C) the covenants, events of default, subordination and other provisions thereof (including any guarantees thereof) shall be, in the aggregate in all material respects, no less favorable to the Lenders than those contained in the Indebtedness being renewed or refinanced; (iii) the Senior Subordinated Notes and Senior Subordinated Note Guarantees issued on the Closing Date (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Subordinated Notes and Senior Subordinated Note Guarantees); and (iv) additional Senior Subordinated Notes and Senior Subordinated Note Guarantees issued after the Closing Date (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Subordinated Notes and Senior Subordinated Note Guarantees) in an aggregate amount not to exceed $50.0 million less the aggregate amount of any Additional Term Loans and additional Senior Subordinated Note Guarantees issued after the Closing Date in accordance with the indenture governing the Senior Subordinated Notes by any Subsidiary Guarantor formed or acquired after the Closing Date; (c) Indebtedness under Hedging Obligations that are designed to protect against fluctuations in interest rates, foreign currency exchange rates or commodity prices, in each case not -90- entered into for speculative purposes; PROVIDED that if such Hedging Obligations relate to interest rates, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by the Loan Documents and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate; (d) Indebtedness permitted by SECTION 6.04(f); (e) Indebtedness in respect of Purchase Money Obligations and Capital Lease Obligations, and refinancings or renewals thereof, in an aggregate amount not to exceed $10.0 million at any time outstanding; (f) Indebtedness incurred by Foreign Subsidiaries in an aggregate amount not to exceed $15.0 million (not including the Canadian Intercompany Note) at any time outstanding; (g) Indebtedness in respect of bid, performance or surety bonds, workers' compensation claims, self-insurance obligations and bankers acceptances issued for the account of any Company in the ordinary course of business, including guarantees or obligations of any Company with respect to letters of credit supporting such bid, performance or surety bonds, workers' compensation claims, self-insurance obligations and bankers acceptances (in each case other than for an obligation for money borrowed), in an aggregate amount not to exceed $10.0 million at any time outstanding; (h) Contingent Obligations of any Loan Party in respect of Indebtedness otherwise permitted under this SECTION 6.01; (i) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is extinguished within five Business Days of incurrence; (j) the Canadian Intercompany Note; (k) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; (l) unsecured Indebtedness of any Company in an aggregate amount not to exceed $20.0 million at any time outstanding; (m) Indebtedness assumed in connection with any Permitted Acquisition, and refinancing or renewals thereof, in an aggregate amount not to exceed $20.0 million at any time outstanding; (n) indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or property of U.S. Borrower or any Subsidiary of U.S. Borrower or Equity Interests of any Subsidiary of U.S. Borrower, other than guarantees of Indebtedness incurred by any person acquiring all or any portion of such business, property or Equity Interests for the purpose of financing any such acquisition; PROVIDED that the maximum aggregate liability in respect of all such obligations outstanding under this clause (n) shall at no time exceed (a) in the case of an acquisition, $10.0 million (PROVIDED that the amount of such liability shall be deemed to be the amount thereof, if -91- any, reflected on the balance sheet of U.S. Borrower or any Subsidiary (E.G., the amount of such liability shall be deemed to be zero if no amount is reflected on such balance sheet)) and (b) in the case of a disposition, the gross proceeds actually received by U.S. Borrower and its Subsidiaries in connection with such disposition; and (o) Indebtedness incurred in the ordinary course of business under guarantees of Indebtedness of suppliers, licensees, franchisees or customers in an aggregate amount, together with the aggregate amount of Investments made pursuant to SECTION 6.04(j), not to exceed $5.0 million at any time outstanding. SECTION 6.02 LIENS. Create, incur, assume or permit to exist, directly or indirectly, any Lien on any property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, the "PERMITTED LIENS"): (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, (ii) in the case of any such charge or claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iii) individually or in the aggregate, could not reasonably expected to have a Material Adverse Effect; (b) Liens in respect of property of any Company imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the property of the Companies, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Companies, taken as a whole, (ii) which, if they secure obligations that are then due and unpaid, are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, and (iii) in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (c) any Lien in existence on the Closing Date and set forth on SCHEDULE 6.02(c) and any Lien granted as a replacement or substitute therefor; PROVIDED that any such replacement or substitute Lien (i) except as permitted by SECTION 6.01(b)(ii)(A), does not secure an aggregate amount of Indebtedness, if any, greater than that secured on the Closing Date and (ii) does not encumber any property other than the property subject thereto on the Closing Date (any such Lien, an "EXISTING LIEN"); (d) easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such Real Property or (iii) individually or in the aggregate materially interfering with the ordinary conduct of the business of the Companies at such Real Property; -92- (e) Liens arising out of judgments, attachments or awards not resulting in a Default and in respect of which such Company shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings and, in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (f) Liens (other than any Lien imposed by ERISA) (x) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation, (y) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; PROVIDED that (i) with respect to clauses (x), (y) and (z) of this paragraph (f), such Liens are for amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings for orders entered in connection with such proceedings have the effect of preventing the forfeiture or sale of the property subject to any such Lien, (ii) to the extent such Liens are not imposed by law, such Liens shall in no event encumber any property other than cash and Cash Equivalents, (iii) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iv) the aggregate amount of deposits at any time pursuant to clause (y) and clause (z) of this paragraph (f) shall not exceed $2.5 million in the aggregate; (g) Leases of the properties of any Company, in each case entered into in the ordinary course of such Company's business so long as such Leases are subordinate in all respects to the Liens granted and evidenced by the Security Documents and do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of any Company or (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto; (h) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Company in the ordinary course of business; (i) Liens securing Indebtedness incurred pursuant to SECTION 6.01(e); PROVIDED that any such Liens attach only to the property being financed pursuant to such Indebtedness and do not encumber any other property of any Company; (j) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Company, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; PROVIDED that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; -93- (k) Liens on property of a person existing at the time such person is acquired or merged with or into or consolidated with any Company to the extent permitted hereunder (and not created in anticipation or contemplation thereof); PROVIDED that such Liens do not extend to property not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than such existing Lien; (l) Liens granted pursuant to the Security Documents to secure the Obligations; (m) licenses of Intellectual Property granted by any Company in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Companies; (n) the filing of UCC or PPSA financing statements solely as a precautionary measure in connection with operating leases or consignment of goods; (o) Liens securing Indebtedness incurred pursuant to SECTION 6.01(f); PROVIDED that (i) such Liens do not extend to, or encumber, property which constitutes Collateral and (ii) such Liens extend only to the property (or Equity Interests) of the Foreign Subsidiary incurring such Indebtedness; (p) the existence of the "equal and ratable" clause in the Senior Subordinated Note Documents (but not any security interests granted pursuant thereto); and (q) Liens incurred in the ordinary course of business of any Company with respect to obligations that do not in the aggregate exceed $5.0 million at any time outstanding, so long as such Liens, to the extent covering any Collateral, are junior to the Liens granted pursuant to the Security Documents; PROVIDED, HOWEVER, that no consensual Liens shall be permitted to exist, directly or indirectly, on any Securities Collateral, other than Liens granted pursuant to the Security Documents. SECTION 6.03 SALE AND LEASEBACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a "SALE AND LEASEBACK TRANSACTION") (other than a Permitted Sale and Leaseback Transaction) unless (i) the sale of such property is permitted by SECTION 6.06 and (ii) any Liens arising in connection with its use of such property are permitted by SECTION 6.02. SECTION 6.04 INVESTMENT, LOAN AND ADVANCES. Directly or indirectly, lend money or credit (by way of guarantee or otherwise) or make advances to any person, or purchase or acquire any stock, bonds, notes, debentures or other obligations or securities of, or any other interest in, or make any capital contribution to, any other person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (all of the foregoing, collectively, "INVESTMENTS"), except that the following shall be permitted: (a) the Companies may consummate the Transactions in accordance with the provisions of the Transaction Documents; (b) Investments outstanding on the Closing Date and identified on SCHEDULE 6.04(b); -94- (c) the Companies may (i) acquire and hold accounts receivables owing to any of them if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms, (ii) invest in, acquire and hold cash and Cash Equivalents, (iii) endorse negotiable instruments held for collection in the ordinary course of business or (iv) make lease, utility and other similar deposits in the ordinary course of business; (d) Hedging Obligations incurred pursuant to SECTION 6.01(c); (e) loans and advances to directors, employees and officers of U.S. Borrower and the Subsidiaries for BONA FIDE business purposes and to purchase Equity Interests of Holdings, in aggregate amount not to exceed $5.0 million at any time outstanding; (f) Investments (i) by Parent, U.S. Borrower or any U.S. Subsidiary Guarantor in U.S. Borrower or any U.S. Subsidiary Guarantor, (ii) by Canadian Borrower or any Canadian Subsidiary Guarantor in Canadian Borrower or any Canadian Subsidiary Guarantor and (iii) by a Subsidiary that is not a Subsidiary Guarantor in any other Subsidiary that is not a Subsidiary Guarantor; PROVIDED that any Investment in the form of a loan or advance by or in a Loan Party shall be evidenced by an Intercompany Note and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral pursuant to the Security Documents; (g) Investments in securities of trade creditors or customers in the ordinary course of business received upon foreclosure or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (h) Investments made by U.S. Borrower or any Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with SECTION 6.06; (i) (x) Investments in Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million at any time outstanding, after taking into account amounts returned in cash (including upon disposition) and (y) Investments in Foreign Subsidiaries with the proceeds of Excluded Issuances to the extent such proceeds have not been utilized for any other purpose; PROVIDED that any such Investment made in the form of a loan or advance shall be evidenced by an Intercompany Note and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral pursuant to the Security Documents; (j) loans and advances to suppliers, licensees, franchisees or customers of U.S. Borrower or any of its Subsidiaries made in the ordinary course of business in an aggregate amount, together with the aggregate amount of Indebtedness incurred pursuant to SECTION 6.01(o), not to exceed $5.0 million at any time outstanding; (k) Investments in Subsidiaries as a result of the consummation of Permitted Acquisitions; (l) Guarantees of Indebtedness not prohibited by SECTION 6.01; and (m) other investments in an aggregate amount not to exceed $20.0 million at any time outstanding. SECTION 6.05 MERGERS AND CONSOLIDATIONS. Wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation (or agree to do any of the foregoing at any future time), except that the following shall be permitted: -95- (a) Asset Sales in compliance with SECTION 6.06; (b) acquisitions in compliance with SECTION 6.07; (c) (x) any Company (other than Canadian Borrower or any Canadian Subsidiaries) may merge or consolidate with or into U.S. Borrower or any U.S. Subsidiary Guarantor (as long as U.S. Borrower or a U.S. Subsidiary Guarantor is the surviving person in such merger or consolidation and remains a Wholly Owned Subsidiary of Parent); PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable and (y) any Non-Guarantor Subsidiary may transfer property or lease to or acquire or lease property from any Non-Guarantor Subsidiary or may be merged into any other Non-Guarantor Subsidiary; and (d) Canadian Borrower or any Canadian Subsidiaries may merge or consolidate with or into Canadian Borrower or any Canadian Subsidiary Guarantor (as long as Canadian Borrower or a Canadian Subsidiary Guarantor is the surviving person in such merger or consolidation and remains a Wholly Owned Subsidiary of Parent); PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable; and (e) any Subsidiary (other than Canadian Borrower) may dissolve, liquidate or wind up its affairs at any time; PROVIDED that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect; and (f) Holdings may merge with or into or consolidate with or into Parent in connection with any IPO, as long as the surviving person assumes all of the obligations of Parent under the Loan Documents and no Default shall have occurred and be continuing. To the extent the Required Lenders waive the provisions of this SECTION 6.05 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this SECTION 6.05, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing. SECTION 6.06 ASSET SALES. Effect any Asset Sale, or agree to effect any Asset Sale, except that the following shall be permitted subject to SECTION 2.10(c): (a) disposition of used, worn out, obsolete or surplus property by any Loan Party in the ordinary course of business and the abandonment or other disposition of Intellectual Property that is, in the reasonable judgment of U.S. Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Companies taken as a whole; (b) Asset Sales (other than Asset Sales of Equity Interests in Canadian Borrower); PROVIDED that the aggregate consideration received in respect of all Asset Sales pursuant to this clause (b) shall not exceed $25.0 million in any four consecutive fiscal quarters of U.S. Borrower; (c) leases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents; (d) the Transactions as contemplated by the Transaction Documents; -96- (e) mergers and consolidations in compliance with SECTION 6.05; (f) Investments in compliance with SECTION 6.04; (g) Permitted Sale and Leaseback Transactions; (h) the sale of (i) all, but not less than all, of the Equity Interests in Canadian Borrower, or (ii) all or substantially all of the assets of Canadian Borrower; PROVIDED that, in the case of (ii), all Canadian Term Loans and Obligations related thereto are repaid prior to or simultaneously with such Asset Sale; (i) U.S. Borrower and the Subsidiaries may sell Cash Equivalents in the ordinary course of business; (j) sales, transfers and dispositions of accounts receivable in connection with the compromise, settlement or collection thereof; and (k) within 365 days after the consummation of a Permitted Acquisition, the sale, transfer or disposition for cash, and for fair market value, of assets acquired in connection with such Permitted Acquisition and not required in the operation of the business of U.S. Borrower or any of the Subsidiaries. To the extent the Required Lenders waive the provisions of this SECTION 6.06 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this SECTION 6.06, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing. SECTION 6.07 ACQUISITIONS. Purchase or otherwise acquire (in one or a series of related transactions) any part of the property (whether tangible or intangible) of any person (or agree to do any of the foregoing at any future time), except that the following shall be permitted: (a) Capital Expenditures by U.S. Borrower and the Subsidiaries shall be permitted to the extent permitted by SECTION 6.10(c); (b) purchases and other acquisitions of inventory, materials, equipment and intangible property in the ordinary course of business; (c) Investments in compliance with SECTION 6.04; (d) leases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents; (e) the Transactions as contemplated by the Transaction Documents; (f) Permitted Acquisitions; and (g) mergers and consolidations in compliance with SECTION 6.05; PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable. -97- SECTION 6.08 DIVIDENDS. Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company, except that the following shall be permitted: (a) Dividends by any Company to U.S. Borrower, Canadian Borrower or any Subsidiary of U.S. Borrower and to minority equityholders of any Subsidiary paid ratably; (b) payments by U.S. Borrower or by Holdings to permit Holdings or Parent, and which are used by Holdings or Parent, to redeem Equity Interests of U.S. Borrower, Holdings or Parent held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; PROVIDED that the aggregate cash consideration paid for all such redemptions shall not exceed the sum of (A) $5.0 million during any calendar year (with unused amounts being available to be used in the following calendar year, but not in any succeeding calendar year) plus (B) the amount of any Net Cash Proceeds received by or contributed to U.S. Borrower from the issuance and sale after the Closing Date of Qualified Capital Stock of Parent, Holdings or U.S. Borrower to its officers, directors or employees that have not been applied to the payment of Dividends pursuant to this clause (b), plus (C) the Net Cash Proceeds of any "key-man" life insurance policies that have not been applied to the payment of Dividends pursuant to this clause (b); (c) (A) to the extent actually used by Parent and Holdings to pay such taxes, costs and expenses, payments by U.S. Borrower to or on behalf of Parent and Holdings in an amount sufficient to pay franchise taxes and other fees required to maintain the legal existence of Parent and Holdings and (B) payments by U.S. Borrower to or on behalf of Parent and Holdings in an amount sufficient to pay out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead of Parent and Holdings, in the case of clauses (A) and (B) in an aggregate amount not to exceed $500,000 in any fiscal year; (d) Permitted Tax Distributions by U.S. Borrower to Parent or Holdings, so long as Parent or Holdings uses such distributions to pay its taxes; (e) to the extent that the Net Cash Proceeds of any Permitted Sale and Leaseback Transaction exceed the Permitted Sale and Leaseback Transaction Amount, payments of such excess amount to Holdings to permit Holdings to pay a Dividend to the holders of Equity Interests of Holdings or a distribution to the holders of Indebtedness of Holdings; and (f) distributions to Parent in order to enable Parent or Holdings to pay, and which are used by Parent or Holdings to pay, customary and reasonable costs and expenses of an offering of securities of Parent or Holdings that is not consummated. SECTION 6.09 TRANSACTIONS WITH AFFILIATES. Enter into, directly or indirectly, any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of any Company (other than between or among U.S. Borrower and one or more U.S. Subsidiary Guarantors or between or among Canadian Borrower and one or more Canadian Subsidiary Guarantors), other than on terms and conditions at least as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm's-length transaction with a person other than an Affiliate, except that the following shall be permitted: (a) Dividends permitted by SECTION 6.08; -98- (b) Investments permitted by SECTIONS 6.04(e), (f), (i) and, to the extent such Investments are in Subsidiaries, (m); (c) reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification, compensation, employment and severance agreements, in each case approved by the Board of Directors; (d) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and otherwise not prohibited by the Loan Documents; (e) so long as no Default exists, the payment of regular management fees and transaction fees payable upon acquisitions, divestitures and the sale of Parent, to Sponsor in the amounts and at the times specified in the Advisory Services Agreement, as in effect on the Closing Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material respect than such agreement as it was in effect on the Closing Date; (f) sales or issuances of Qualified Capital Stock to Affiliates of U.S. Borrower not otherwise prohibited by the Loan Documents and the granting of registration and other customary rights in connection therewith; (g) any transaction with an Affiliate where the only consideration paid by any Loan Party is Qualified Capital Stock; (h) the Transactions as contemplated by the Transaction Documents; (i) the entering into of a tax sharing agreement, or payments pursuant thereto, between U.S. Borrower and/or one or more Subsidiaries, on the one hand, and any other person with which U.S. Borrower or such Subsidiaries are required or permitted to file a consolidated tax return or with which U.S. Borrower or such Subsidiaries are part of a consolidated group for tax purposes, on the other hand, which payments by U.S. Borrower and its Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis; (j) entering into an agreement that provides registration rights to the shareholders of U.S. Borrower, Holdings or Parent or amending any such agreement with shareholders of U.S. Borrower, Holdings or Parent and the performance of such agreements; (k) any transaction with a joint venture or similar entity which would constitute a transaction with an Affiliate solely because U.S. Borrower or any of its Subsidiaries owns an equity interest in or otherwise controls such joint venture or similar entity; PROVIDED that no Affiliate of U.S. Borrower or any of its Subsidiaries other than U.S. Borrower or any Subsidiary of U.S. Borrower shall have a beneficial interest in such joint venture or similar entity; (l) any merger, consolidation or reorganization of U.S. Borrower with an Affiliate, solely for the purposes of (a) reorganizing to facilitate an IPO of securities of U.S. Borrower, Holdings, Parent or other holding company, (b) forming a holding company or (c) reincorporating U.S. Borrower in a new jurisdiction; -99- (m) sales of inventory between or among U.S. Borrower and/or one or more of its Subsidiaries in the ordinary course of business; and (n) (i) any agreement in effect on the Closing Date listed on SCHEDULE 6.09(n), as in effect on the Closing Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material respect than such agreement as it was in effect on the Closing Date or (ii) any transaction pursuant to any agreement referred to in the immediately preceding clause (i). SECTION 6.10 FINANCIAL COVENANTS.(a) (a) MAXIMUM TOTAL LEVERAGE RATIO. Permit the Total Leverage Ratio, at any date during any period set forth in the table below, to exceed the ratio set forth opposite such period in the table below: ----------------------------------------------------------------------- TEST PERIOD LEVERAGE RATIO ----------- -------------- ----------------------------------------------------------------------- Closing Date - March 31, 2005 6.25 to 1.0 ----------------------------------------------------------------------- April 1, 2005 - June 30, 2005 5.95 to 1.0 ----------------------------------------------------------------------- July 1, 2005 - March 31, 2006 5.75 to 1.0 ----------------------------------------------------------------------- April 1, 2006 - September 30, 2006 5.50 to 1.0 ----------------------------------------------------------------------- October 1, 2006 - March 31, 2007 5.25 to 1.0 ----------------------------------------------------------------------- April 1, 2007 - June 30, 2007 5.00 to 1.0 ----------------------------------------------------------------------- July 1, 2007 - December 31, 2007 4.75 to 1.0 ----------------------------------------------------------------------- January 1, 2008 - June 30, 2008 4.50 to 1.0 ----------------------------------------------------------------------- July 1, 2008 - September 30, 2008 4.25 to 1.0 ----------------------------------------------------------------------- October 1, 2008 and thereafter 4.00 to 1.0 ----------------------------------------------------------------------- (b) MINIMUM INTEREST COVERAGE RATIO. Permit the Consolidated Interest Coverage Ratio, for any Test Period ending during any period set forth in the table below, to be less than the ratio set forth opposite such period in the table below: ----------------------------------------------------------------------- INTEREST TEST PERIOD COVERAGE RATIO ----------- -------------- ----------------------------------------------------------------------- Closing Date - December 31, 2004 1.90 to 1.0 ----------------------------------------------------------------------- January 1, 2005 - March 31, 2006 2.00 to 1.0 ----------------------------------------------------------------------- April 1, 2006 - December 31, 2006 2.10 to 1.0 ----------------------------------------------------------------------- January 1, 2007 - June 30, 2007 2.25 to 1.0 ----------------------------------------------------------------------- July 1, 2007 - December 31, 2007 2.35 to 1.0 ----------------------------------------------------------------------- January 1, 2008 - September 30, 2008 2.50 to 1.0 ----------------------------------------------------------------------- October 1, 2008 and thereafter 2.75 to 1.0 ----------------------------------------------------------------------- -100- (c) LIMITATION ON CAPITAL EXPENDITURES. Permit the aggregate amount of Capital Expenditures made in any period set forth below, to exceed the amount set forth opposite such period below: ----------------------------------------------------------------------- PERIOD AMOUNT (IN MILLIONS) ------ -------------------- ----------------------------------------------------------------------- Closing Date - December 31, 2004 $15.0 ----------------------------------------------------------------------- January 1, 2005 - December 31, 2005 $15.0 ----------------------------------------------------------------------- January 1, 2006 - December 31, 2006 $15.0 ----------------------------------------------------------------------- January 1, 2007 - December 31, 2007 $16.0 ----------------------------------------------------------------------- January 1, 2008 - December 31, 2008 $16.0 ----------------------------------------------------------------------- Each calendar year ending after 2008 $16.0 ----------------------------------------------------------------------- ; PROVIDED, HOWEVER, that (x) if the aggregate amount of Capital Expenditures made in any fiscal year shall be less than the maximum amount of Capital Expenditures permitted under this SECTION 6.10(c) for such fiscal year (before giving effect to any carryover), then an amount of such shortfall not exceeding 50% of such maximum amount (without giving effect to clause (z) below) (the "CAPEX CARRYFORWARD AMOUNT") may be added to the amount of Capital Expenditures permitted under this SECTION 6.10(c) for the immediately succeeding (but not any other) fiscal year, (y) in determining whether any amount is available for carryover, the amount expended in any fiscal year shall first be deemed to be from the amount allocated to such fiscal year (before giving effect to any carryover) and (z) the amount set forth in the table above for any period may be increased by the amount of Net Cash Proceeds of Excluded Issuances designated for Capital Expenditures for such period during such period. SECTION 6.11 PREPAYMENTS OF OTHER INDEBTEDNESS; MODIFICATIONS OF ORGANIZATIONAL DOCUMENTS AND OTHER DOCUMENTS, ETC. Directly or indirectly: (a) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Indebtedness outstanding under the Senior Subordinated Notes or any other Subordinated Indebtedness, except as otherwise permitted by this Agreement; (b) amend or modify, or permit the amendment or modification of, any provision of any Transaction Document in any manner that is adverse in any material respect to the interests of the Lenders; (c) terminate, amend, modify (including electing to treat any Pledged Interests (as defined in the U.S. Security Agreement) as a "security" under Section 8-103 of the UCC) or change any of its Organizational Documents (including by the filing or modification of any certificate of designation) or any agreement to which it is a party with respect to its Equity Interests (including any stockholders' agreement), or enter into any new agreement with respect to its Equity Interests, other than any such amendments, modifications or changes or such new agreements which are not adverse in any material respect to the interests of the Lenders; PROVIDED that Parent may issue such Equity Interests, so long as such issuance is not prohibited by SECTION 6.13 or any other provision of this Agreement, and may amend its Organizational Documents to authorize any such Equity Interests; or -101- (d) cause or permit any other obligation (other than the Obligations and the Guaranteed Obligations) to constitute Designated Senior Debt (as defined in the Senior Subordinated Note Documents). SECTION 6.12 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by U.S. Borrower or any Subsidiary, or pay any Indebtedness owed to U.S. Borrower or a Subsidiary, (b) make loans or advances to U.S. Borrower or any Subsidiary or (c) transfer any of its properties to U.S. Borrower or any Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable law; (ii) this Agreement and the other Loan Documents; (iii) the Senior Subordinated Note Documents as in effect on the Closing Date; (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Subsidiary; (v) customary provisions restricting assignment of any agreement entered into by a Subsidiary in the ordinary course of business; (vi) any Lien permitted by SECTION 6.02 restricting the transfer of the property subject thereto; (vii) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under SECTION 6.06 pending the consummation of such sale; (viii) any agreement applicable to such Subsidiary in effect at the time such Subsidiary becomes a Subsidiary of U.S. Borrower, so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Subsidiary of U.S. Borrower; (ix) customary provisions in partnership agreements, limited liability company organizational governance documents, asset sales and stock sale agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company or similar person; (x) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business; (xi) any instrument governing Indebtedness assumed in connection with any Permitted Acquisition, which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person or the properties or assets of the person so acquired; (xii) in the case of any joint venture which is not a Loan Party in respect of any matters referred to in clauses (b) and (c) above, restrictions in such person's Organizational Documents or pursuant to any joint venture agreement or stockholders agreements solely to the extent of the Equity Interests of or property held in the subject joint venture or other entity; (xiii) any encumbrances or restrictions imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clauses (iii), (viii) or (xi) above; PROVIDED that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing; or (xiv) encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries, or municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds, permitted to be incurred under this Agreement; PROVIDED that any such encumbrances or restrictions are ordinary and customary with respect to the type of Indebtedness being incurred under the relevant circumstances and do not, in the good faith judgment of the Board of Directors of U.S. Borrower, materially impair either Borrower's ability to make payment on the Obligations when due. SECTION 6.13 LIMITATION ON ISSUANCE OF CAPITAL STOCK. (a) With respect to Parent, issue any Equity Interest that is not Qualified Capital Stock. (b) With respect to U.S. Borrower or any Subsidiary, issue any Equity Interest (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, any Equity Interest, except (i) for stock splits, stock dividends and additional issuances of Equity Interests which do not decrease the percentage ownership of U.S. Borrower or any Subsidiaries in any class of the Equity Interest of such Subsidiary; (ii) Subsidiaries of U.S. Borrower formed after the Closing Date in accordance with SECTION 6.14 may issue Equity Interests to U.S. Borrower or the Subsidiary of -102- Borrower which is to own such Equity Interests; and (iii) U.S. Borrower may issue common stock that is Qualified Capital Stock to Parent. All Equity Interests issued in accordance with this SECTION 6.13(b) shall, to the extent required by SECTIONS 5.10 and 5.11 or any Security Document, be delivered to the Collateral Agent for pledge pursuant to the applicable Security Document. SECTION 6.14 LIMITATION ON CREATION OF SUBSIDIARIES. Establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; PROVIDED that, without such consent, U.S. Borrower may (i) establish or create one or more Wholly Owned Subsidiaries of U.S. Borrower, (ii) establish, create or acquire one or more Subsidiaries in connection with an Investment made pursuant to SECTIONS 6.04(f), (k) or (m) or (iii) acquire one or more Subsidiaries in connection with a Permitted Acquisition, so long as, in each case, SECTION 5.10(b) shall be complied with. SECTION 6.15 BUSINESS. (a) With respect to Parent, engage in any business activities or have any properties or liabilities, other than (i) its ownership of the Equity Interests of U.S. Borrower, (ii) obligations under the Loan Documents and the Senior Subordinated Note Documents and (iii) activities and properties incidental, ancillary or complementary to the foregoing clauses (i) and (ii). (b) With respect to U.S. Borrower and the Subsidiaries, engage (directly or indirectly) in any business other than those businesses in which U.S. Borrower and its Subsidiaries are engaged on the Closing Date as described in the Confidential Information Memorandum (or, in the good faith judgment of the Board of Directors, which are substantially related thereto or are reasonable extensions thereof). SECTION 6.16 LIMITATION ON ACCOUNTING CHANGES. Make or permit, any significant change in accounting policies or reporting practices, without the consent of the Administrative Agent, which consent shall not be unreasonably withheld, except changes that are required by GAAP. SECTION 6.17 FISCAL YEAR. Change its fiscal year-end to a date other than December 31. SECTION 6.18 LEASE OBLIGATIONS. Create, incur, assume or suffer to exist any obligations as lessee for the rental or hire of real or personal property of any kind under leases or agreements to lease having an original term of one year or more other than (1) such obligations existing on the Closing Date, (2) such obligations acquired in connection with a Permitted Acquisition that are not incurred in anticipation of such Permitted Acquisition and are obligations only of any legal entities acquired in such Permitted Acquisition and (3) with respect to other obligations, created, incurred, assumed or suffered to exist after the Closing Date, such obligations that would cause the direct and contingent liabilities of U.S. Borrower and its Subsidiaries, on a consolidated basis, in respect of all such obligations created, incurred, assumed or suffered to exist after the Closing Date not to exceed the sum of (i) $5.0 million and (ii) amounts payable in respect of leases entered into in connection with Permitted Sale and Leaseback Transactions, payable in any period of 12 consecutive months. SECTION 6.19 NO FURTHER NEGATIVE PLEDGE. Enter into any agreement, instrument, deed or lease which prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of their respective properties or revenues, whether now owned or hereafter acquired, or which requires the grant of any security for an obligation if security is granted for another obligation, except the following: (1) this Agreement and the other Loan Documents; (2) covenants in documents creating Liens permitted by SECTION 6.02 prohibiting further Liens on the properties encumbered thereby; (3) the Senior Subordinated Note Documents as in effect on the Closing Date; (4) any other agreement that does not restrict in any manner (directly or indirectly) Liens created pursuant to the Loan Documents on any Collateral securing the Obligations and does not require the direct or indirect -103- granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of property of any Loan Party to secure the Obligations; and (5) any prohibition or limitation that (a) exists pursuant to applicable law, (b) consists of customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under SECTION 6.06 pending the consummation of such sale, (c) restricts subletting or assignment of any lease governing a leasehold interest of U.S. Borrower or a Subsidiary, (d) exists in any agreement in effect at the time such Subsidiary becomes a Subsidiary of U.S. Borrower, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary or (e) is imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clause (3) or (5)(e); PROVIDED that such amendments and refinancings are no more materially restrictive with respect to such prohibitions and limitations than those prior to such amendment or refinancing. SECTION 6.20 ANTI-TERRORISM LAW; ANTI-MONEY LAUNDERING. (a) Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in SECTION 3.22, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties' compliance with this SECTION 6.20). (b) Cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of law. SECTION 6.21 EMBARGOED PERSON. Cause or permit (a) any of the funds or properties of the Loan Parties that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law ("EMBARGOED PERSON" or "EMBARGOED Persons") that is identified on (1) the "List of Specially Designated Nationals and Blocked Persons" (the "SDN LIST") maintained by OFAC and/or on any other similar list ("OTHER LIST") maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders (collectively, "EXECUTIVE ORDERS"), or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law. ARTICLE VII GUARANTEE SECTION 7.01 THE GUARANTEE. Parent and each U.S. Subsidiary Guarantor (the "U.S. GUARANTORS") hereby, jointly and severally guarantee, as a primary obligor and not as a surety to each U.S. Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code after any bankruptcy or insolvency petition under Ti- -104- tle 11 of the United States Code) on the Loans made by the Lenders to, and the Notes held by each Lender of, U.S. Borrower, and all other U.S. Obligations from time to time owing to the Secured Parties by any U.S. Loan Party under any Loan Document in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "U.S. GUARANTEED OBLIGATIONS"). Parent, the U.S. Borrower and each Canadian Subsidiary Guarantor (the "CANADIAN GUARANTORS") hereby, jointly and severally guarantee, as a primary obligor and not as a surety to each Canadian Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code or other applicable bankruptcy or insolvency legislation after any bankruptcy or insolvency petition under Title 11 of the United States Code or other applicable bankruptcy or insolvency legislation) on the Loans made by the Lenders to, and the Notes held by each Lender of, Canadian Borrower, and all other Canadian Obligations from time to time owing to the Canadian Secured Parties by any Canadian Loan Party under any Loan Document in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "CANADIAN GUARANTEED OBLIGATIONS"). The U.S. Guarantors hereby jointly and severally agree that if U.S. Borrower or other U.S. Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the U.S. Guaranteed Obligations, the U.S. Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the U.S. Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. The Canadian Guarantors hereby jointly and severally agree that if Canadian Borrower or other Canadian Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Canadian Guaranteed Obligations, the Canadian Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Canadian Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 7.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under SECTION 7.01 shall constitute a guaranty of payment and to the fullest extent permitted by applicable law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrowers under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or -105- waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien or security interest granted to, or in favor of, Issuing Bank or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or (v) the release of any other Guarantor pursuant to SECTION 7.09. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against either Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between the Borrowers and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against either Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. SECTION 7.03 REINSTATEMENT. The obligations of the Guarantors under this ARTICLE VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrowers or other Loan Party in respect of the applicable Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the applicable Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. SECTION 7.04 SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all applicable Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in SECTION 7.01, whether by subrogation or otherwise, against either Borrower or any other Guarantor of any of the applicable Guaranteed Obligations or any security for any of the applicable Guaranteed Obligations. Any Indebtedness of any Loan Party permitted pursuant to SECTION 6.01(d) shall be subordinated to such Loan Party's Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness. SECTION 7.05 REMEDIES. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of either Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in ARTICLE VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in said ARTICLE VIII) for purposes of SECTION 7.01, notwithstanding any stay, injunction or other prohibition preventing such -106- declaration (or such obligations from becoming automatically due and payable) as against either Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by either Borrower) shall forthwith become due and payable by the applicable Guarantors for purposes of SECTION 7.01. SECTION 7.06 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges that the guarantee in this ARTICLE VII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213. SECTION 7.07 CONTINUING GUARANTEE. The guarantee in this ARTICLE VII is a continuing guarantee of payment, and shall apply to all applicable Guaranteed Obligations whenever arising. SECTION 7.08 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under SECTION 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under SECTION 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. SECTION 7.09 RELEASE OF GUARANTORS. If, in compliance with the terms and provisions of the Loan Documents, all or substantially all of the Equity Interests or property of any Guarantor are sold or otherwise transferred (a "TRANSFERRED GUARANTOR") to a person or persons, none of which is U.S. Borrower or a Subsidiary, such Transferred Guarantor shall, upon the consummation of such sale or transfer, be released from its obligations under this Agreement (including under SECTION 11.03 hereof) and its obligations to pledge and grant any Collateral owned by it pursuant to any Security Document and, in the case of a sale of all or substantially all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the Collateral Agent pursuant to the Security Documents shall be released, and the Collateral Agent shall take such actions as are necessary to effect each release described in this SECTION 7.09 in accordance with the relevant provisions of the Security Documents. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01 EVENTS OF DEFAULT. Upon the occurrence and during the continuance of the following events ("EVENTS OF DEFAULT"): (a) default shall be made in the payment of any principal of any Loan or any Reimbursement Obligation when and as the same shall become due and payable, whether at the due date thereof (including a Term Loan Repayment Date) or at a date fixed for prepayment (whether voluntary or mandatory) thereof or by acceleration thereof or otherwise; (b) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in paragraph (a) above) due under any Loan -107- Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days; (c) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (d) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in SECTION 5.02, 5.03(a) or 5.08 or in ARTICLE VI; (e) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (a), (b) or (d) immediately above) and such default shall continue unremedied or shall not be waived for a period of 30 days after written notice thereof from the Administrative Agent or the Required Lenders to U.S. Borrower; (f) any Company shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations), when and as the same shall become due and payable beyond any applicable grace period, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee or other representative on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity or become subject to a mandatory offer purchase by the obligor; PROVIDED that it shall not constitute an Event of Default pursuant to this paragraph (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) exceeds $10.0 million at any one time (PROVIDED that, in the case of Hedging Obligations, the amount counted for this purpose shall be the amount payable by all Companies if such Hedging Obligations were terminated at such time); (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Company, or of a substantial part of the property of any Company, under Title 11 of the Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; or (iii) the winding-up or liquidation of any Company; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) any Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (g) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general -108- assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate; (i) one or more judgments, orders or decrees for the payment of money in an aggregate amount in excess of $10.0 million shall be rendered against any Company or any combination thereof and the same shall remain undischarged, unvacated or unbonded for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon properties of any Company to enforce any such judgment; (j) one or more ERISA Events or with respect to Foreign Plans noncompliance with applicable legal requirements or Foreign Plan underfunding shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other such ERISA Events and with respect to Foreign Plans noncompliance with applicable legal requirements or Foreign Plan underfunding that have occurred, could reasonably be expected to result in a Material Adverse Effect or the imposition of a Lien on any properties of a Company; (k) any security interest and Lien purported to be created by any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent, for the benefit of the applicable Secured Parties, the Liens, rights, powers and privileges purported to be created and granted under such Security Documents (including a perfected first priority security interest in and Lien on, all of the Collateral thereunder (except as otherwise expressly provided in such Security Document)) in favor of the Collateral Agent, or shall be asserted by U.S. Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby; (l) any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Loan Party or any other person, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Loan Party shall repudiate or deny any portion of its liability or obligation for the Obligations; (m) there shall have occurred a Change in Control; (n) the Acquisition shall not have occurred on the Closing Date in accordance with the terms and conditions of the Acquisition Agreement; or (o) the failure by either Borrower to make an Offer to Redeem when and as required by SECTION 2.10. then, and in every such event (other than an event with respect to Parent or either Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowers, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans and Reimbursement Obligations then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans and Reimbursement Obligations so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become -109- forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event, with respect to Parent or either Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans and Reimbursement Obligations then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding. ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01 COLLATERAL ACCOUNT. (a) The Collateral Agent is hereby authorized to establish and maintain at its office at 677 Washington Boulevard, Stamford, Connecticut 06901, in the name of the Collateral Agent, a restricted deposit account designated "Ply Gem Industries, Inc. U.S. Collateral Account." Each U.S. Loan Party shall deposit into the U.S. Collateral Account from time to time (i) the cash proceeds of any of the U.S. Security Agreement Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Loan Document, (ii) the cash proceeds of any Casualty Event with respect to U.S. Security Agreement Collateral, to the extent contemplated herein or in any other Loan Document, and (iii) any cash such U.S. Loan Party is required to pledge as additional collateral security hereunder pursuant to the Loan Documents. The Collateral Agent is hereby authorized to establish and maintain at its office at 677 Washington Boulevard, Stamford, Connecticut 06901, in the name of the Collateral Agent, a restricted deposit account designated "CWD Windows and Doors, Inc. Canadian Collateral Account." Each Canadian Loan Party shall deposit into the Canadian Collateral Account from time to time (i) the cash proceeds of any of the Canadian Security Agreement Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Loan Document, (ii) the cash proceeds of any Casualty Event with respect to Canadian Security Agreement Collateral, to the extent contemplated herein or in any other Loan Document, and (iii) any cash such Canadian Loan Party is required to pledge as additional collateral security hereunder pursuant to the Loan Documents. (b) The balance from time to time in either Collateral Account shall constitute part of the relevant Collateral and shall not constitute payment of the Obligations until applied as hereinafter provided. So long as no Event of Default has occurred and is continuing or will result therefrom, the Collateral Agent shall within two Business Days of receiving a request of the applicable Loan Party for release of cash proceeds (i) from the Collateral Account constituting Net Cash Proceeds relating to any Casualty Event or Asset Sale remit such cash proceeds on deposit in either Collateral Account to or upon the order of such Loan Party, so long as such Loan Party has satisfied the conditions relating thereto set forth in SECTION 9.02 and (ii) with respect to the LC Sub-Account, remit such Net Cash Proceeds on deposit in the LC Sub-Account to or upon the order of such U.S. Loan Party (x) at such time as all Letters of Credit shall have been terminated and all of the liabilities in respect of the Letters of Credit have been paid in full or (y) otherwise in accordance with SECTION 2.18(i). At any time following the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of either Collateral Account to the payment of the applicable Obligations in the manner specified in SECTION 9.03 hereof subject, however, in the case of amounts deposited in the LC Sub-Account, to the provisions of SECTIONS 2.18(i) and 9.03. The -110- Loan Parties shall have no right to withdraw, transfer or otherwise receive any funds deposited in either Collateral Account except to the extent specifically provided herein. (c) Amounts on deposit in either Collateral Account shall be invested and reinvested from time to time in Cash Equivalents as the applicable Loan Party (or, after the occurrence and during the continuance of an Event of Default, the Collateral Agent) shall determine by written instruction to the Collateral Agent, or if no such instructions are given, then as the Collateral Agent, in its sole discretion, shall determine which Cash Equivalents shall be held in the name and be under the control of the Collateral Agent (or any sub-agent); PROVIDED that at any time after the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Cash Equivalents and to apply or cause to be applied the proceeds thereof to the payment of the applicable Obligations in the manner specified in SECTION 9.03 hereof subject, however, in the case of amounts deposited in the LC Sub-Account, to the provisions of SECTION 2.18(i). (d) Amounts deposited into the U.S. Collateral Account as cover for liabilities in respect of Letters of Credit under any provision of this Agreement requiring such cover shall be held by the Administrative Agent in a separate sub-account designated as the "LC Sub-Account" (the "LC SUB-ACCOUNT") and, subject to SECTION 2.18(i), all amounts held in the LC Sub-Account shall constitute collateral security to be applied in accordance with SECTION 2.18(i). (e) Earnings on the amounts deposited in any Collateral Account shall be for the account of the applicable Loan Party and absent any Default will be released to the applicable Borrower upon its request. SECTION 9.02 PROCEEDS OF DESTRUCTION, TAKING AND COLLATERAL DISPOSITIONS. So long as no Event of Default shall have occurred and be continuing, in the event the applicable Loan Party elects to reinvest Net Cash Proceeds in respect of any Asset Sale or Casualty Event in accordance with the provisions of SECTIONS 2.10(c) and 2.10(f) as applicable, the Collateral Agent shall receive at least 10 days' prior notice of each request for payment and shall not release any part of such Net Cash Proceeds, until the applicable Loan Party has furnished to the Collateral Agent (i) an Officers' Certificate setting forth: (A) a brief description of the reinvestment to be made, (B) the dollar amount of the expenditures to be made, or costs incurred by such Loan Party in connection with such reinvestment and (C) evidence that the properties acquired in connection with such reinvestment have a fair market value at least equal to the amount of such Net Cash Proceeds requested to be released from the applicable Collateral Account and (ii) all security agreements and Mortgages and other items required by the provisions of SECTIONS 5.10 and 5.11 to, among other things, subject such reinvestment properties to the Lien of the Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties. SECTION 9.03 APPLICATION OF PROCEEDS. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, in full or in part, together with any other sums then held by the Collateral Agent pursuant to this Agreement, promptly by the Collateral Agent as follows: (a) FIRST, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including compensation to the Collateral Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith and all amounts for which the Collateral Agent is entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each -111- such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; (b) SECOND, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including compensation to the other applicable Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other applicable Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; (c) THIRD, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in cash, PRO RATA, of interest and other amounts constituting applicable Obligations (other than principal and Reimbursement Obligations) in each case equally and ratably in accordance with the respective amounts thereof then due and owing; (d) FOURTH, to the indefeasible payment in full in cash, PRO RATA, of principal amount of the applicable Obligations (including Reimbursement Obligations); and (e) FIFTH, the balance, if any, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct. In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (e) of this SECTION 9.03, the applicable Loan Parties shall remain liable, jointly and severally, for any deficiency. ARTICLE X THE AGENTS SECTION 10.01 APPOINTMENT. Each Lender hereby irrevocably designates and appoints each of the Administrative Agent and the Collateral Agent as an agent of such Lender under this Agreement and the other Loan Documents. Each Lender irrevocably authorizes each Agent, in such capacity, through its agents or employees, to take such actions on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. SECTION 10.02 AGENT IN ITS INDIVIDUAL CAPACITY. Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with U.S. Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. SECTION 10.03 EXCULPATORY PROVISIONS. No Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in SEC- -112- TION 11.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose or shall be liable for the failure to disclose, any information relating to U.S. Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in SECTION 11.02) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by a Borrower or a Lender, and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in ARTICLE IV or elsewhere in any Loan Document. SECTION 10.04 RELIANCE BY AGENT. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by a proper person. Each Agent also may rely upon any statement made to it orally and believed by it to be made by a proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for either Borrower), independent accountants and other advisors selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or advisors. SECTION 10.05 DELEGATION OF DUTIES. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. SECTION 10.06 SUCCESSOR AGENT. Each Agent may resign as such at any time upon at least 30 days' prior notice to the Lenders, the Issuing Bank and U.S. Borrower. Upon any such resignation, the Required Lenders shall have the right, with, if no Default shall have occurred and be continuing, the consent of Borrower (such consent not to be unreasonably withheld), to appoint a successor Agent from among the Lenders. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent, which successor shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, in each case, having combined capital and surplus of at least $250 million; PROVIDED that if such retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor Agent. Upon the acceptance of its appointment as an Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees -113- payable by U.S. Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between U.S. Borrower and such successor. After an Agent's resignation hereunder, the provisions of this ARTICLE X and SECTION 11.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent. SECTION 10.07 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. SECTION 10.08 NAME AGENTS. The parties hereto acknowledge that the Co-Documentation Agents and the Syndication Agent hold such titles in name only, and that such titles confer no additional rights or obligations relative to those conferred on any Lender hereunder. SECTION 10.09 INDEMNIFICATION. The Lenders severally agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrowers or the Guarantors and without limiting the obligation of the Borrowers or the Guarantors to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this SECTION 10.09 (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans and Reimbursement Obligations shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans and Reimbursement Obligations) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; PROVIDED that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. ARTICLE XI MISCELLANEOUS SECTION 11.01 NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: -114- (a) if to any Loan Party, to U.S. Borrower at: Ply Gem Industries, Inc. 303 West Major Kearney, Missouri 64060 Attention: Chief Financial Officer Telecopy No.: (816) 903-4330; (b) if to the Administrative Agent, the Collateral Agent or the Issuing Bank, to it at: UBS AG, Stamford Branch 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Vladimira Holeckova Telecopy No.: (203) 719-4176; (c) if to a Lender, to it at its address (or telecopy number) set forth on the applicable Lender Addendum or in the Assignment and Assumption pursuant to which such Lender shall have become a party hereto; and (d) if to the Swingline Lender, to it at: UBS Loan Finance LLC 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Vladimira Holeckova Telecopy No.: (203) 719-4176. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or by certified or registered mail, in each case delivered, sent or mailed (properly addressed) to such party as provided in this SECTION 11.01 or in accordance with the latest unrevoked direction from such party given in accordance with this SECTION 11.01, and failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices and other communications. SECTION 11.02 WAIVERS; AMENDMENT. (a) No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. -115- (b) Except as provided in paragraph (d) below, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended, supplemented or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent, the Collateral Agent (in the case of any Security Document) and the Loan Party or Loan Parties that are parties thereto, in each case with the written consent of the Required Lenders; PROVIDED that no such agreement shall: (i) increase the Commitment of any Lender without the written consent of such Lender; (ii) reduce the principal amount or premium of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any Fees payable hereunder, or change the currency of payment of any Obligation, without the written consent of each Lender affected thereby; (iii) postpone or extend the maturity of any Loan, or any scheduled date of payment of or the installment otherwise due on the principal amount of any Term Loan under SECTION 2.09, or the required date of payment of any Reimbursement Obligation, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment (except interest payable under SECTION 2.06(c)), or postpone the scheduled date of expiration of any Commitment or postpone the scheduled date of expiration of any Letter of Credit beyond the Revolving Maturity Date, without the written consent of each Lender affected thereby; (iv) change SECTION 2.14(b) or (c) in a manner that would alter the PRO RATA sharing of payments or setoffs required thereby, without the written consent of each Lender; (v) change the percentage set forth in the definition of "Required Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be); (vi) release any Guarantor from its Guarantee (except as expressly provided in ARTICLE VII), or limit its liability in respect of such Guarantee, without the written consent of each Lender; (vii) release all or a substantial portion of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Obligations), in each case without the written consent of each Lender; (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; (ix) without the consent of the Required Lenders and Term Loan Lenders holding more than 50% of the principal amount of the outstanding Term Loans, reduce the amount of, or extend the date of, any scheduled payment on the Term Loans required to be made under SECTION 2.09, change the order of application of prepayments among Term Loans and Revolving -116- Commitments under SECTION 2.10(h) or change the application of prepayments of Term Loans set forth in SECTION 2.10(h) to the remaining scheduled amortization payments to be made thereon under SECTION 2.09; or (x) without the consent of Term Loan Lenders holding more than 50% of the principal amount of each of the outstanding U.S. Term Loans and Canadian Term Loans, change the order of application of prepayments amounts of the U.S. Term Loans and the Canadian Term Loans under SECTION 2.10(h); PROVIDED, FURTHER, that (1) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, (2) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Loan Lenders), the Term Loan Lenders (but not the Revolving Lenders), or one Class of Term Loan Lenders (but no other Lenders) may be effected by an agreement or agreements in writing entered into by the Borrowers and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time, and (3) any waiver, amendment or modification prior to the completion of the primary syndication of the Commitments and Loans (as determined by the Administrative Agent) may not be effected without the written consent of the Administrative Agent. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Borrowers, the Required Lenders and the Administrative Agent (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (x) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (y) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of, premium, if any, and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. (c) If, in connection with any proposed change, waiver, discharge or termination of the provisions of this Agreement as contemplated by SECTION 11.02(b), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrowers shall have the right to replace all, but not less than all, of such non-consenting Lender or Lenders (so long as all non-consenting Lenders are so replaced) with one or more persons pursuant to SECTION 2.16 so long as at the time of such replacement each such new Lender consents to the proposed change, waiver, discharge or termination. (d) Notwithstanding anything in SECTION 11.02(b) to the contrary, this Agreement and the other Loan Documents may be amended at any time and from time to time to increase the aggregate principal amount of U.S. Term Loans or to establish additional Classes of U.S. Term Loans (collectively, "ADDITIONAL TERM LOANS") by an agreement in writing entered into by the Borrowers, the Administrative Agent, the Collateral Agent and each person (including any Lender) that shall agree to make an Additional Term Loan (and each such person that shall not already be a Lender shall be reasonably acceptable to the Administrative Agent and shall, at the time such agreement becomes effective, become a Lender with the same effect as if it had originally been a Lender under this Agreement with the Term Loans set forth in such agreement); PROVIDED that (1) no more than an amount equal to $50.0 million of Additional Term Loans less the principal amount of all Senior Subordinated Notes issued after the Closing Date pursuant to SECTION 6.01(b) may be established pursuant to this SECTION 11.02(d) without the consent of the Required Lenders, (2) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto, (3) the covenants in SECTION 6.10 would be satisfied on a Pro Forma Basis on the date of any such amendment and for the most recent Test Period, after giving effect to -117- such Additional Term Loans, and (4) the Senior Leverage Ratio would not be greater than 2.5:1.0 after giving effect thereto. Any such agreement shall be reasonably satisfactory to the Administrative Agent, shall amend the provisions of this Agreement and the other Loan Documents and shall set forth the terms of the Additional Term Loans established thereby (including the amount and final maturity thereof (which shall not be earlier than the Term Loan Maturity Date), any provisions relating to the amortization or mandatory prepayment thereof (which shall be no more than ratable or PARI PASSU, as applicable, with the Term Loans), the interest to accrue and be payable thereon and any fees to be payable in respect thereof (PROVIDED that the Applicable Margins with respect to any Additional Term Loans shall not be more than 25 basis points higher than the Applicable Margins with respect to the Term Loans and that all other payment rights shall be pari passu with the Term Loans)) and effect such other changes (including changes to the provisions of this Section, SECTION 2.14 and the definition of "Required Lenders") as U.S. Borrower and the Administrative Agent shall deem necessary or advisable in connection with the Additional Term Loans; PROVIDED that no such agreement shall (i) effect any change described in SECTION 11.02(b)(i) through (ix) without the consent of each person required to consent to such change under such clause (it being agreed, however, that the Additional Term Loans will not, of themselves, be deemed to effect any of the changes described in SECTION 11.02(b)(vi) THROUGH (viii) and (1)), (ii) amend ARTICLE V, VI or VIII to establish any affirmative or negative covenant, Event of Default or remedy that by its terms benefits one or more Classes, but not all Classes, of Loans or Borrowings without the prior written consent of Lenders holding a majority in interest of the Loans and Commitments of each Class not so benefited (it being agreed that no provision requiring either Borrower to prepay Term Loans of one or more Classes pursuant to SECTIONS 2.10(c) through (h) shall be deemed to violate this clause) or (iii) change any other provision of this Agreement or any other Loan Document that creates rights in favor of Lenders holding Loans or Commitments of any existing Class, other than as necessary or advisable in the judgment of the Administrative Agent to cause such provision to take into account, or to make the benefits of such provision available to, Lenders holding Additional Term Loans. The Loans and Borrowings established pursuant to this paragraph shall constitute Loans and Borrowings under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guarantees and security interests created by the Security Documents. The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Security Documents continue to be perfected under the UCC or otherwise after the establishment of any such Additional Term Loans. (e) Notwithstanding anything in this Agreement to the contrary, any Offer to Redeem shall be accepted by all Lenders to which such Offer to Redeem was made unless three Business Days prior to the proposed redemption date the Required Lenders give their consent for such Offer to Redeem to be declined by all such Lenders. (f) Notwithstanding anything in SECTION 11.02(b) to the contrary, this Agreement and the other Loan Documents may be amended at any time and from time to time to increase the aggregate principal amount of the Revolving Commitment by up to $10.0 million in the aggregate (the "INCREMENTAL REVOLVING COMMITMENT") by an agreement in writing entered into by the Borrowers, the Administrative Agent, the Collateral Agent and each person (including any Lender) that shall agree to commit to a portion of the Incremental Revolving Commitment (and each such person that shall not already be a Lender shall be reasonably acceptable to the Administrative Agent and shall, at the time such agreement becomes effective, become a Lender with the same effect as if it had originally been a Lender under this Agreement with the Revolving Commitment set forth in such agreement); provided that (1) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto and (2) the covenants in SECTION 6.10 would be satisfied on a Pro Forma Basis on the date of any such amendment and for the most recent Test Period, after giving effect to any Revolving Loans made on such date pursuant to the Incremental Revolving Commitment. Any such agreement shall be reasonably satisfactory to the Administrative Agent, shall amend the provisions of this Agreement and the other Loan -118- Documents and shall set forth the terms of the Revolving Loans to be made pursuant to the Incremental Revolving Commitment established thereby (which shall be the same as those of the Revolving Loans under this Agreement) and effect such other changes (including changes to the provisions of this Section, SECTION 2.14 and the definition of "Required Lenders") as U.S. Borrower and the Administrative Agent shall deem necessary or advisable in connection with the Incremental Revolving Commitment; PROVIDED that no such agreement shall (i) effect any change described in SECTION 11.02(b)(i) through (ix) without the consent of each person required to consent to such change under such clause (it being agreed, however, that the Incremental Revolving Commitment and any Revolving Loans made pursuant thereto will not, of themselves, be deemed to effect any of the changes described in SECTION 11.02(b)(vi) THROUGH (viii) and (1)), (ii) amend ARTICLE V, VI or VIII to establish any affirmative or negative covenant, Event of Default or remedy that by its terms benefits one or more Classes, but not all Classes, of Loans or Borrowings without the prior written consent of Lenders holding a majority in interest of the Loans and Commitments of each Class not so benefited or (iii) change any other provision of this Agreement or any other Loan Document that creates rights in favor of Lenders holding Loans or Commitments of any existing Class, other than as necessary or advisable in the judgment of the Administrative Agent to cause such provision to take into account, or to make the benefits of such provision available to, Lenders holding a portion of the Incremental Revolving Commitment. The Loans and Borrowings established pursuant to the Incremental Revolving Commitment shall constitute Loans and Borrowings under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guarantees and security interests created by the Security Documents. The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Security Documents continue to be perfected under the UCC or otherwise after the establishment of such Incremental Revolving Commitment. SECTION 11.03 EXPENSES; INDEMNITY. (a) The Loan Parties agree, jointly and severally, to pay, promptly upon demand: (i) all reasonable costs and expenses incurred by the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, including the reasonable fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, in connection with the syndication of the Loans and Commitments, the preparation, execution and delivery of the Loan Documents, the administration of the Loans and Commitments, the perfection and maintenance of the Liens securing the Collateral and any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated); (ii) all costs and expenses incurred by the Administrative Agent or the Collateral Agent, including the reasonable fees, charges and disbursements of Advisors for the Administrative Agent and the Collateral Agent, in connection with any action, suit or other proceeding affecting the Collateral or any part thereof, in which action, suit or proceeding the Administrative Agent or the Collateral Agent is made a party or participates or in which the right to use the Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Administrative Agent or the Collateral Agent to defend or uphold the Liens granted by the Security Documents (including any action, suit or proceeding to establish or uphold the compliance of the Collateral with any Requirements of Law); (iii) all costs and expenses incurred by the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, including the reasonable fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the -119- Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, incurred in connection with the enforcement or protection of its rights under the Loan Documents, including its rights under this SECTION 11.03(a), or in connection with the Loans made or Letters of Credit issued hereunder and the collection of the Obligations, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the Obligations; and (iv) all documentary and similar taxes and charges in respect of the Loan Documents. For purposes of this SECTION 11.03(a), "ADVISORS" shall mean legal counsel (including local counsel), auditors, accountants, consultants, appraisers or other advisors; PROVIDED that (x) in the case of clause (i), the engagement of any Advisors other than legal counsel (including local counsel) shall be subject to approval by U.S. Borrower (which approval shall not be unreasonably withheld) and (y) in the case of clause (iii), the engagement of any Advisors other than one firm of legal counsel by any Lender shall be subject to approval by the Administrative Agent. (b) The Loan Parties agree, jointly and severally, to indemnify the Agents, each Lender, the Issuing Bank and the Swingline Lender, each Affiliate of any of the foregoing persons and each of their respective partners, controlling persons, directors, officers, trustees, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, all reasonable out-of-pocket costs and any and all losses, claims, damages, liabilities, penalties, judgments, suits and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution, delivery, performance, administration or enforcement of the Loan Documents, (ii) any actual or proposed use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release or threatened Release of Hazardous Materials, on, at, under or from any property owned, leased or operated by any Company at any time, or any Environmental Claim related in any way to any Company; PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted solely from the gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this SECTION 11.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of the Loans and Reimbursement Obligations, the release of all or any portion of the Collateral, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Agents, the Issuing Bank or any Lender. All amounts due under this SECTION 11.03 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. (d) To the extent that either Borrower fails to promptly pay any amount required to be paid by it to the Agents, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Agents, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's PRO RATA share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; PROVIDED that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against any of the Agents, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "PRO RATA share" shall be determined based upon its share of the sum of the total Revolving Exposure, outstanding Term Loans and unused Commitments at the time. -120- SECTION 11.04 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that the Borrowers may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent, the Collateral Agent, the Issuing Lender, the Swingline Lender and each Lender (and any attempted assignment or transfer by either Borrower without such consent shall be null and void). Nothing in this Agreement, express or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender shall have the right at any time to assign to one or more banks, insurance companies, investment companies or funds or other institutions (other than the Borrowers, Parent or any Subsidiary thereof) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); PROVIDED that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, the Administrative Agent and U.S. Borrower (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give its prior written consent to such assignment (which consents shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, any assignment made in connection with the syndication of the Commitments and Loans by the Arrangers or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) with respect to Term Loan Commitments and Term Loans, $1.0 million and (y) with respect to Revolving Commitments and Revolving Loans, $2.5 million, unless each of U.S. Borrower and the Administrative Agent otherwise consents, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans other than an assignment of any rights and obligations with respect to any Term Loans which may be assigned only on a PRO RATA basis between U.S. Term Loans and Canadian Term Loans (I.E., an assignment of U.S. Term Loans representing a percentage of the total principal amount of U.S. Term Loans then outstanding shall be accompanied by an assignment of Canadian Term Loans representing the same percentage of the total principal amount of Canadian Term Loans then outstanding), (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and (vi) in the case of an assignment to an Affiliate of Parent, such Affiliate hereby agrees that, unless it holds all Loans of the applicable Class, its Loans and Commitments shall be disregarded for purposes of determining the requisite percentage or number of Lenders (or Lenders of any Class) required to waive, amend or modify any rights under any Loan Document or make any determination or grant any consent thereunder; and PROVIDED, FURTHER, that any consent of U.S. Borrower otherwise required under this paragraph shall not be required if a Default has occurred and is continuing or during the primary syndication of the Commitments. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement (PROVIDED that any liability of either Borrower to such assignee under SECTION 2.12 or 2.13 shall be limited to the amount, if any, that would have been payable thereunder by such Borrower in the absence of such assignment, except to the -121- extent any such amounts are attributable to a Change in Law occurring after the date of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of SECTIONS 2.12, 2.13, 2.15 and 11.03). (c) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be conclusive in the absence of manifest error, and the Borrowers, the Administrative Agent, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers, the Issuing Bank, the Collateral Agent, the Swingline Lender and any Lender (with respect to its own interest only), at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender shall have the right at any time, without the consent of either Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, to sell participations to one or more banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); PROVIDED that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; PROVIDED that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i), (ii) or (iii) of the first proviso to SECTION 11.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of SECTIONS 2.12, 2.13 and 2.15, so long as such Participant complies with the requirements of each such Section, to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of SECTION 11.08 as though it were a Lender; PROVIDED that such Participant agrees in writing to be subject to SECTION 2.14(c) as though it were a Lender. Each Lender shall, acting for this purpose as an agent of the Borrowers, maintain at one of its offices a register for the recordation of the names and addresses of its Participants, and the amount and terms of its participations; PROVIDED that no Lender shall be required to disclose or share the information contained in such register with the Borrowers or any other party, except as required by applicable law. -122- (f) A Participant shall not be entitled to receive any greater payment under SECTION 2.12, 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the prior written consent of the applicable Borrower (which consent shall not be unreasonably withheld or delayed). (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; PROVIDED that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrowers or the Administrative Agent, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities. SECTION 11.05 SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agents, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of SECTIONS 2.12, 2.14, 2.15 and 11.03 and ARTICLE X shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the payment of the Reimbursement Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 11.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and the Fee Letter constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when the conditions precedent set forth in SECTION 4.03 have been met and when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Borrowers, the Guarantors, the Agents and the Lenders agree that (a) all obligations under the original credit agreement executed on the Closing Date, that is amended and restated hereby, shall continue to exist under and be evidenced by this Agreement and the other Loan Documents and shall constitute Obligations and (b) except as expressly stated herein or amended, the other Loan Documents are ratified and confirmed as remaining unmodified and in full force and effect with respect to all Obligations. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. -123- SECTION 11.07 SEVERABILITY. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 11.08 RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of either Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 11.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction. (b) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction. (c) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in SECTION 11.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in any action or proceeding arising out of or relating to any Loan Document, in the manner provided for notices (other than telecopy) in SECTION 11.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable law. SECTION 11.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR -124- INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 11.11 HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 11.12 CONFIDENTIALITY. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' and Lender Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this SECTION 11.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the applicable Borrower and its obligations or (iii) any rating agency for the purpose of obtaining a credit rating applicable to any Loan or Loan Party, (g) with the consent of U.S. Borrower or (h) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than U.S. Borrower or any Subsidiary. For the purposes of this Section, "INFORMATION" means all information received from U.S. Borrower or any Subsidiary relating to U.S. Borrower or any Subsidiary or its business that is clearly identified at the time of delivery as confidential, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by U.S. Borrower or any Subsidiary. Any person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information. SECTION 11.13 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively, the "CHARGES"), shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans -125- or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 11.14 LENDER ADDENDUM. Each Lender to become a party to this Agreement on the Closing Date or the Amendment Effectiveness Date shall do so by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the applicable Borrower and the Administrative Agent. SECTION 11.15 OBLIGATIONS ABSOLUTE. To the fullest extent permitted by applicable law, all obligations of the Loan Parties hereunder shall be absolute and unconditional irrespective of: (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Loan Party; (b) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto against any Loan Party; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument relating thereto; (d) any exchange, release or non-perfection of any other Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations; (e) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof or any Loan Document; or (f) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Loan Parties, except for the defense of payment or performance of such obligations. SECTION 11.16 JUDGMENT CURRENCY. (a) Each Borrower's obligation hereunder and under the other Loan Documents to make payments in dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than dollars, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the respective Lender of the full amount of dollars expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against a Borrower in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than dollars (such other currency being hereinafter referred to as the "JUDGMENT CURRENCY") an amount due in dollars, the conversion shall be made at the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "JUDGMENT CURRENCY CONVERSION DATE"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, each Borrower covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) -126- as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining any rate of exchange for this SECTION 11.16, such amounts shall include any premium and costs payable in connection with the purchase of dollars. [Signature Pages Follow] -127- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PLY GEM INDUSTRIES, INC. By: /s/ Shawn K. Poe ----------------------------------- Name: Shawn K. Poe Title: Vice President, Chief Financial Officer, Treasurer and Secretary CWD WINDOWS AND DOORS, INC. By: /s/ Shawn K. Poe ----------------------------------- Name: Shawn K. Poe Title: Vice President, Treasurer and Secretary PLY GEM HOLDINGS, INC. By: /s/ Shawn K. Poe ----------------------------------- Name: Shawn K. Poe Title: Vice President, Chief Financial Officer, Treasurer and Secretary GREAT LAKES WINDOW, INC. KROY BUILDING PRODUCTS, INC. NAPCO, INC. NAPCO WINDOW SYSTEMS, INC. THERMAL-GARD, INC. VARIFORM, INC. By: /s/ Shawn K. Poe ----------------------------------- Name: Shawn K. Poe Title: Vice President, Treasurer and Secretary S-1 UBS SECURITIES LLC, as a Joint Lead Arranger By: /s/ David A. Jugo ----------------------------------- Name: David A. Jugo Title: Managing Director By: /s/ Oliver O. Trumbo II ----------------------------------- Name: Oliver O. Trumbo II Title: Director DEUTSCHE BANK SECURITIES INC., as a Joint Lead Arranger By: /s/ Alexander Richarz ----------------------------------- Name: Alexander Richarz Title: Vice President CIBC WORLD MARKETS CORP., as a Co-Arranger By: /s/ Gerald Girardi ----------------------------------- Name: Gerald Girardi Title: Executive Director CIBC World Markets Corp., as Agent MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as a Co-Arranger By: /s/ Tanya Kim-Johnson ----------------------------------- Name: Tanya Kim-Johnson Title: Vice President S-2 UBS AG, STAMFORD BRANCH, as Issuing Bank, Administrative Agent and Collateral Agent By: /s/ Wilfred V. Saint ----------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services US By: /s/ Joselin Fernandes ----------------------------------- Name: Joselin Fernandes Title: Associate Director Banking Products Services US DEUTSCHE BANK AG NEW YORK BRANCH, as Syndication Agent By: /s/ Paul O'Leary ----------------------------------- Name: Paul O'Leary Title: Vice President By: /s/ Carin Keegan ----------------------------------- Name: Carin Keegan Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE, as Co-Documentation Agent By: /s/ Gerald Girardi ----------------------------------- Name: Gerald Girardi Title: Executive Director CIBC World Markets Corp., as Agent MERRILL LYNCH CAPITAL CORPORATION, as Co-Documentation Agent By: /s/ Nancy E. Meadows ----------------------------------- Name: Nancy E. Meadows Title: Assistant Vice President S-3 UBS LOAN FINANCE LLC, as Swingline Lender By: /s/ Wilfred V. Saint ----------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services US By: /s/ Joselin Fernandes ----------------------------------- Name: Joselin Fernandes Title: Associate Director Banking Products Services US Accepted and agreed: DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, By: /s/ Paul O'Leary ----------------------------------- Name: Paul O'Leary Title: Vice President By: /s/ Carin Keegan ----------------------------------- Name: Carin Keegan Title: Vice President S-4 ANNEX I Applicable Margin REVOLVING LOANS TOTAL ------------------------ APPLICABLE LEVERAGE RATIO EURODOLLAR ABR FEE ------------------ ---------- ----------- ---------- Level I 2.50% 1.50% 0.50% ------- >4.50:1.0 Level II 2.25% 1.25% 0.50% -------- <4.50:1.0 but >3.75:1.0 Level III 2.00% 1.00% 0.375% --------- <3.75:1.0 but >3.00:1.0 Level IV 1.75% 0.75% 0.375% -------- <3.00:1.0 Each change in the Applicable Margin or Applicable Fee resulting from a change in the Total Leverage Ratio shall be effective with respect to all Loans and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c), respectively, indicating such change until the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, the Leverage Ratio shall be deemed to be in Level I (i) from the Closing Date to the date of delivery to the Administrative Agent of the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c) for the fiscal period ended at least six months after the Closing Date, (ii) at any time during which U.S. Borrower has failed to deliver the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c), respectively, and (iii) at any time during the existence of an Event of Default. ANNEX II Amortization Table - ------------------------------------------------------------------------------ U.S. TERM LOAN CANADIAN TERM LOAN DATE AMOUNT AMOUNT - ------------------------------------------------------------------------------ June 30, 2004 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2004 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2004 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2005 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2005 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2005 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2005 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2006 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2006 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2006 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2006 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2007 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2007 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2007 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2007 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2008 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2008 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2008 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2008 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2009 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2009 $425,000 $75,000 - ------------------------------------------------------------------------------ September 30, 2009 $425,000 $75,000 - ------------------------------------------------------------------------------ December 31, 2009 $425,000 $75,000 - ------------------------------------------------------------------------------ March 31, 2010 $425,000 $75,000 - ------------------------------------------------------------------------------ June 30, 2010 $39,950,000 $7,050,000 - ------------------------------------------------------------------------------ September 30, 2010 $39,950,000 $7,050,000 - ------------------------------------------------------------------------------ December 31, 2010 $39,950,000 $7,050,000 - ------------------------------------------------------------------------------ February 12, 2011 $39,950,000 $7,050,000 - ------------------------------------------------------------------------------ Total $170,000,000 $30,000,000 - ------------------------------------------------------------------------------ SCHEDULE 1.01(b) ---------------- CONSOLIDATED EBITDA ADDBACKS (IN $ MILLIONS)
Q1 Q2 Q3 Q4 2003 2003 2003 2003 - ----------------------------------------------------------------------------------------------------------- Elimination of Nortek's corporate charge 3,142 2,093 3,732 3,732* Non-cash write-off of inventory 1,373 14 0 0 Thermal Gard Window and Other (Discontinued Operations) 178 34 77 284 PVC resin price renegotiation 1,035 816 0 0 Kroy-Lowes start up 1,720 203 0 0 Savings from the Butler, Pennsylvania facility closure 758 501 0 0 Butler facility closure one-time costs 478 129 149 85 One-time GLW management charges 188 237 163 65 Kroy balance sheet adjustments 291 313 467 1,029 TOTAL ADDBACKS 9,163 4,340 4,588 5,195
* To be finalized along with the 2003 audit. SCHEDULE 5.13(c) ---------------- 1. 30499 Tracy Road, Toledo, Ohio 2. 2719 N. Division Avenue, York, NE 3. 91 Variform Drive, Martinsburg, WV 4. 7501 Orr Road, Charlotte, NC EX-10.2 29 y95660exv10w2.txt CREDIT AGREEMENT EXHIBIT 10.2 ------------ ================================================================================ $255,000,000 CREDIT AGREEMENT DATED AS OF FEBRUARY 12, 2004, AMONG PLY GEM INDUSTRIES, INC., AS U.S. BORROWER, CWD WINDOWS AND DOORS, INC. AS CANADIAN BORROWER, PLY GEM HOLDINGS, INC. AND THE OTHER GUARANTORS PARTY HERETO, AS GUARANTORS, THE LENDERS PARTY HERETO, UBS SECURITIES LLC AND DEUTSCHE BANK SECURITIES INC., AS JOINT LEAD ARRANGERS AND BOOKRUNNERS, CIBC WORLD MARKETS CORP. AND MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, AS CO-ARRANGERS, UBS AG, STAMFORD BRANCH, AS ISSUING BANK, ADMINISTRATIVE AGENT AND COLLATERAL AGENT, UBS LOAN FINANCE LLC, AS SWINGLINE LENDER, DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, AS SYNDICATION AGENT, AND CANADIAN IMPERIAL BANK OF COMMERCE AND MERRILL LYNCH CAPITAL CORPORATION, AS CO-DOCUMENTATION AGENTS Cahill Gordon & Reindel LLP 80 Pine Street New York, NY 10005 ================================================================================ TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I DEFINITIONS SECTION 1.01 Defined Terms...................................................2 SECTION 1.02 Classification of Loans and Borrowings.........................38 SECTION 1.03 Terms Generally................................................38 SECTION 1.04 Accounting Terms; GAAP.........................................38 SECTION 1.05 Resolution of Drafting Ambiguities.............................38 ARTICLE II THE CREDITS SECTION 2.01 Commitments....................................................38 SECTION 2.02 Loans..........................................................39 SECTION 2.03 Borrowing Procedure............................................40 SECTION 2.04 Evidence of Debt; Repayment of Loans...........................41 SECTION 2.05 Fees...........................................................42 SECTION 2.06 Interest on Loans..............................................42 SECTION 2.07 Termination and Reduction of Commitments.......................43 SECTION 2.08 Interest Elections.............................................44 SECTION 2.09 Amortization of Term Borrowings................................45 SECTION 2.10 Optional and Mandatory Prepayments of Loans and Mandatory Offers to Redeem...................................46 SECTION 2.11 Alternate Rate of Interest.....................................50 SECTION 2.12 Increased Costs................................................50 SECTION 2.13 Breakage Payments..............................................51 SECTION 2.14 Payments Generally; Pro Rata Treatment; Sharing of Setoffs.....52 SECTION 2.15 Taxes..........................................................53 SECTION 2.16 Mitigation Obligations; Replacement of Lenders.................55 SECTION 2.17 Swingline Loans................................................56 SECTION 2.18 Letters of Credit..............................................57 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01 Organization; Powers...........................................62 SECTION 3.02 Authorization; Enforceability..................................62 SECTION 3.03 No Conflicts...................................................63 SECTION 3.04 Financial Statements; Projections..............................63 SECTION 3.05 Properties.....................................................64 SECTION 3.06 Intellectual Property..........................................64 SECTION 3.07 Equity Interests and Subsidiaries..............................65 SECTION 3.08 Litigation; Compliance with Laws...............................65 -i- Section Page - ------- ---- SECTION 3.09 Agreements.....................................................66 SECTION 3.10 Federal Reserve Regulations....................................66 SECTION 3.11 Investment Company Act; Public Utility Holding Company Act.....66 SECTION 3.12 Use of Proceeds................................................66 SECTION 3.13 Taxes..........................................................67 SECTION 3.14 No Material Misstatements......................................67 SECTION 3.15 Labor Matters..................................................67 SECTION 3.16 Solvency.......................................................67 SECTION 3.17 Employee Benefit Plans.........................................68 SECTION 3.18 Environmental Matters..........................................68 SECTION 3.19 Insurance......................................................69 SECTION 3.20 Security Documents.............................................69 SECTION 3.21 Acquisition Documents; Representations and Warranties in Acquisition Agreement.....................................71 SECTION 3.22 Anti-Terrorism Law.............................................71 SECTION 3.23 Subordination of Senior Subordinated Notes.....................72 ARTICLE IV CONDITIONS TO CREDIT EXTENSIONS SECTION 4.01 Conditions to Initial Credit Extension.........................72 SECTION 4.02 Conditions to All Credit Extensions............................77 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01 Financial Statements, Reports, etc.............................78 SECTION 5.02 Litigation and Other Notices...................................80 SECTION 5.03 Existence; Businesses and Properties...........................80 SECTION 5.04 Insurance......................................................81 SECTION 5.05 Obligations and Taxes..........................................82 SECTION 5.06 Employee Benefits..............................................82 SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Annual Meetings.................. ...........................83 SECTION 5.08 Use of Proceeds................................................83 SECTION 5.09 Compliance with Environmental Laws; Environmental Reports......83 SECTION 5.10 Additional Collateral; Additional Guarantors...................83 SECTION 5.11 Security Interests; Further Assurances.........................86 SECTION 5.12 Information Regarding Collateral...............................86 SECTION 5.13 Post-Closing Matters...........................................87 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01 Indebtedness...................................................89 SECTION 6.02 Liens..........................................................91 SECTION 6.03 Sale and Leaseback Transactions................................93 SECTION 6.04 Investment, Loan and Advances..................................93 -ii- Section Page - ------- ---- SECTION 6.05 Mergers and Consolidations.....................................94 SECTION 6.06 Asset Sales....................................................95 SECTION 6.07 Acquisitions...................................................96 SECTION 6.08 Dividends......................................................97 SECTION 6.09 Transactions with Affiliates...................................97 SECTION 6.10 Financial Covenants............................................99 SECTION 6.11 Prepayments of Other Indebtedness; Modifications of Organizational Documents and Other Documents, etc...........100 SECTION 6.12 Limitation on Certain Restrictions on Subsidiaries............101 SECTION 6.13 Limitation on Issuance of Capital Stock.......................101 SECTION 6.14 Limitation on Creation of Subsidiaries........................102 SECTION 6.15 Business......................................................102 SECTION 6.16 Limitation on Accounting Changes..............................102 SECTION 6.17 Fiscal Year...................................................102 SECTION 6.18 Lease Obligations.............................................102 SECTION 6.19 No Further Negative Pledge....................................102 SECTION 6.20 Anti-Terrorism Law; Anti-Money Laundering.....................103 SECTION 6.21 Embargoed Person..............................................103 ARTICLE VII GUARANTEE SECTION 7.01 The Guarantee.................................................103 SECTION 7.02 Obligations Unconditional.....................................104 SECTION 7.03 Reinstatement.................................................105 SECTION 7.04 Subrogation; Subordination....................................105 SECTION 7.05 Remedies......................................................105 SECTION 7.06 Instrument for the Payment of Money...........................106 SECTION 7.07 Continuing Guarantee..........................................106 SECTION 7.08 General Limitation on Guarantee Obligations...................106 SECTION 7.09 Release of Guarantors.........................................106 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01 Events of Default.............................................106 ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01 Collateral Account............................................109 SECTION 9.02 Proceeds of Destruction, Taking and Collateral Dispositions................................ ...............110 SECTION 9.03 Application of Proceeds.......................................110 -iii- Section Page - ------- ---- ARTICLE X THE AGENTS SECTION 10.01 Appointment...................................................111 SECTION 10.02 Agent in Its Individual Capacity..............................111 SECTION 10.03 Exculpatory Provisions........................................111 SECTION 10.04 Reliance by Agent.............................................112 SECTION 10.05 Delegation of Duties..........................................112 SECTION 10.06 Successor Agent...............................................112 SECTION 10.07 Non-Reliance on Agent and Other Lenders.......................113 SECTION 10.08 Name Agents...................................................113 SECTION 10.09 Indemnification...............................................113 ARTICLE XI MISCELLANEOUS SECTION 11.01 Notices.......................................................113 SECTION 11.02 Waivers; Amendment............................................114 SECTION 11.03 Expenses; Indemnity...........................................117 SECTION 11.04 Successors and Assigns........................................119 SECTION 11.05 Survival of Agreement.........................................121 SECTION 11.06 Counterparts; Integration; Effectiveness......................121 SECTION 11.07 Severability..................................................122 SECTION 11.08 Right of Setoff...............................................122 SECTION 11.09 Governing Law; Jurisdiction; Consent to Service of Process....122 SECTION 11.10 Waiver of Jury Trial..........................................123 SECTION 11.11 Headings......................................................123 SECTION 11.12 Confidentiality...............................................123 SECTION 11.13 Interest Rate Limitation......................................123 SECTION 11.14 Lender Addendum...............................................124 SECTION 11.15 Obligations Absolute..........................................124 SECTION 11.16 Judgment Currency.............................................124 ANNEXES Annex I Applicable Margin Annex II Amortization Table SCHEDULES Schedule 1.01(a) Assumed Debt Schedule 1.01(b) Consolidated EBITDA Adjustments Schedule 1.01(c) Material Indebtedness Schedule 1.01(d) Mortgaged Property Schedule 1.01(e) Refinancing Indebtedness to Be Repaid Schedule 1.01(f) U.S. Subsidiary Guarantors Schedule 3.03 Governmental Approvals; Compliance with Laws Schedule 3.05(b) Real Property Schedule 3.07(a) Subsidiaries -iv- Schedule 3.07(c) Corporate Organizational Chart Schedule 3.09(c) Material Agreements Schedule 3.17 Employee Benefit Plans Schedule 3.18 Environmental Matters Schedule 3.19 Insurance Schedule 3.21 Acquisition Documents Schedule 4.01(g) Local Counsel Schedule 4.01(n)(vi) Landlord Access Agreements Schedule 4.01(o)(iii) Title Insurance Amounts Schedule 5.13(c) Post-Closing Matters Schedule 6.01(b) Existing Indebtedness Schedule 6.02(c) Existing Liens Schedule 6.04(b) Existing Investments Schedule 6.09(n) Existing Affiliate Agreements EXHIBITS Exhibit A Form of Administrative Questionnaire Exhibit B Form of Assignment and Assumption Exhibit C-1 Form of U.S. Borrowing Request Exhibit C-2 Form of Canadian Borrowing Request Exhibit D Form of Compliance Certificate Exhibit E Form of Interest Election Request Exhibit F Form of Joinder Agreement Exhibit G-1 Form of U.S. Landlord Access Agreement Exhibit G-2 Form of Canadian Landlord Access Agreement Exhibit H Form of LC Request Exhibit I Form of Lender Addendum Exhibit J-1 Form of Mortgage Exhibit J-2 Form of Canadian Mortgage Exhibit J-3 Form of Leasehold Mortgage Exhibit K-1 Form of U.S. Term Note Exhibit K-2 Form of Canadian Term Note Exhibit K-3 Form of Revolving Note Exhibit K-4 Form of Swingline Note Exhibit L-1 Form of Perfection Certificate Exhibit L-2 Form of Perfection Certificate Supplement Exhibit M-1 Form of U.S. Security Agreement Exhibit M-2 Form of Canadian Security Agreement Exhibit N-1 Form of Opinion of Company Counsel Exhibit N-2 Form of Opinion of Local Counsel Exhibit N-3 Form of Opinion of Canadian Counsel Exhibit O Form of Solvency Certificate Exhibit P-1 Form of U.S. Intercompany Note Exhibit P-2 Form of Canadian Intercompany Note Exhibit Q Form of U.S. Tax Compliance Certificate -v- CREDIT AGREEMENT This CREDIT AGREEMENT (this "AGREEMENT") dated as of February 12, 2004, among PLY GEM INDUSTRIES, INC., a Delaware corporation ("U.S. BORROWER"), CWD Windows and Doors, Inc., a corporation organized under the federal laws of Canada ("CANADIAN BORROWER" and, together with U.S. Borrower, each a "BORROWER" and collectively the "BORROWERS"), PLY GEM HOLDINGS, INC., a Delaware corporation ("PARENT"), the Subsidiary Guarantors (such term and each other capitalized term used but not defined herein having the meaning given to it in ARTICLE I), the Lenders, UBS SECURITIES LLC and DEUTSCHE BANK SECURITIES INC., as joint lead arrangers and bookrunners (in such capacity, "JOINT LEAD ARRANGERS"), CIBC WORLD MARKETS CORP. and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as co-arrangers (in such capacities, "CO-ARRANGERS"), CANADIAN IMPERIAL BANK OF COMMERCE and MERRILL LYNCH CAPITAL CORPORATION, as co-documentation agents (in such capacities, "CO-DOCUMENTATION AGENTS"), DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as syndication agent (in such capacity, "SYNDICATION AGENT"), UBS LOAN FINANCE LLC, as swingline lender (in such capacity, "SWINGLINE LENDER"), and UBS AG, STAMFORD BRANCH, as issuing bank (in such capacity, "ISSUING BANK"), as administrative agent (in such capacity, "ADMINISTRATIVE AGENT") for the Lenders and as collateral agent (in such capacity, "COLLATERAL AGENT") for the Secured Parties and the Issuing Bank. WITNESSETH: WHEREAS, Holdings has entered into a stock purchase agreement, dated as of December 19, 2003, as amended on January 23, 2004 and February 12, 2004 (as further amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof, the "ACQUISITION Agreement"), with Nortek Inc., a Delaware corporation, and WDS LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Nortek, Inc. (collectively, the "SELLER"), to acquire (the "ACQUISITION") all of the capital stock of U.S. Borrower, and on or prior to the Closing Date, Holdings will transfer its rights and obligations under the Acquisition Agreement to Parent. WHEREAS, the Refinancing, the Acquisition, the issuance of the Senior Subordinated Notes and the Equity Financing shall be consummated simultaneously herewith. WHEREAS, U.S. Borrower has requested the U.S. Lenders to extend credit in the form of (a) U.S. Term Loans on the Closing Date, in an aggregate principal amount not in excess of $160.0 million, and (b) Revolving Loans at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $65.0 million, of which no more than $3.0 million may be drawn on the Closing Date. WHEREAS, Canadian Borrower has requested the Canadian Term Loan Lenders to extend credit in the form of Canadian Term Loans on the Closing Date, in an aggregate principal amount not in excess of $30.0 million. WHEREAS, U.S. Borrower has requested the Swingline Lender to make Swingline Loans, at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $10.0 million. WHEREAS, U.S. Borrower has requested the Issuing Bank to issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $35.0 million, for the account of U.S. Borrower and its Subsidiaries. WHEREAS, the proceeds of the Loans are to be used in accordance with SECTION 3.12. NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrowers and the Issuing Bank is willing to issue letters of credit for the account of U.S. Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR," when used in reference to any Loan or Borrowing, is used when such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any ABR Term Loan or ABR Revolving Loan. "ABR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of ARTICLE II. "ABR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of ARTICLE II. "ACQUISITION" shall have the meaning assigned to such term in the first recital hereto. "ACQUISITION AGREEMENT" shall have the meaning assigned to such term in the first recital hereto. "ACQUISITION CONSIDERATION" shall mean the purchase consideration for any Permitted Acquisition and all other payments by Parent or any of its Subsidiaries in exchange for, or as part of, or in connection with, any Permitted Acquisition (other than fees and expenses related to such Permitted Acquisition), whether paid in cash or by exchange of Equity Interests or of properties or otherwise and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments representing the purchase price and any assumptions of Indebtedness, "earn-outs" and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business; PROVIDED that any such future payment that is subject to a contingency shall be considered Acquisition Consideration only to the extent of the reserve, if any, required under GAAP at the time of such sale to be established in respect thereof by Parent or any of its Subsidiaries. "ACQUISITION DOCUMENTS" shall mean the collective reference to the Acquisition Agreement and the other documents listed on SCHEDULE 3.21. "ADDITIONAL TERM LOANS" shall have the meaning assigned to such term in SECTION 11.02(d). -2- "ADJUSTED LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, (a) an interest rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) determined by the Administrative Agent to be equal to the LIBOR Rate for such Eurodollar Borrowing in effect for such Interest Period divided by (b) 1 MINUS the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest Period. "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the preamble hereto and includes each other person appointed as the successor pursuant to ARTICLE X. "ADMINISTRATIVE AGENT FEES" shall have the meaning assigned to such term in SECTION 2.05(b). "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire in the form of EXHIBIT A, or such other form as may be supplied from time to time by the Administrative Agent. "ADVISORY SERVICES AGREEMENT" means the advisory services agreement, dated as of February 12, 2004, among U.S. Borrower and Sponsor. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; PROVIDED, HOWEVER, that, for purposes of SECTION 6.09, the term "Affiliate" shall also include (i) any person that directly or indirectly owns more than 10% of any class of Equity Interests of the person specified or (ii) any person that is an executive officer or director of the person specified. "AGENTS" shall mean the Arrangers, the Co-Documentation Agents, the Syndication Agent, the Administrative Agent and the Collateral Agent; and "AGENT" shall mean any of them. "AGREEMENT" shall have the meaning assigned to such term in the preamble hereto. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) equal to the greater of (a) the Base Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day PLUS 0.50%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Effective Rate, respectively. "ANTI-TERRORISM LAWS" shall have the meaning assigned to such term in SECTION 3.22. "APPLICABLE FEE" shall mean, for any day, with respect to any Commitment, the applicable percentage set forth in ANNEX I under the caption "Applicable Fee". "APPLICABLE MARGIN" shall mean, for any day, with respect to any (i) Term Loan, (x) 2.75% for Eurodollar Loans and (y) 1.75% for ABR Loans, and (ii) Revolving Loan, the applicable percentage set forth in ANNEX I. "ARRANGERS" shall mean the Joint Lead Arrangers and the Co-Arrangers. -3- "ASSET SALE" shall mean (a) any conveyance, sale, lease, sublease, assignment, transfer or other disposition (including by way of merger or consolidation and including any Sale and Leaseback Transaction) of any property excluding sales of inventory and dispositions of cash equivalents, in each case, in the ordinary course of business, by Parent or any of its Subsidiaries and (b) any issuance or sale of any Equity Interests of any Subsidiary of Parent, in each case, to any person other than (i) either Borrower, (ii) any Subsidiary Guarantor or (iii) other than for purposes of SECTION 6.06, any other Subsidiary. "ASSIGNMENT AND ASSUMPTION" shall mean an assignment and assumption entered into by a Lender and an assignee, and accepted by the Administrative Agent, substantially in the form of EXHIBIT B, or such other form as shall be approved by the Administrative Agent. "ASSUMED DEBT" shall mean the Indebtedness set forth on SCHEDULE 1.01(a) hereto. "BAILEE LETTER" shall have the meaning assigned thereto in the Security Agreement. "BASE RATE" shall mean, for any day, a rate per annum that is equal to the corporate base rate of interest established by the Administrative Agent in the United States for dollars from time to time; each change in the Base Rate shall be effective on the date such change is effective. The corporate base rate is not necessarily the lowest rate charged by the Administrative Agent to its customers. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BOARD OF DIRECTORS" shall mean, with respect to any person, (i) in the case of any corporation, the board of directors of such person, (ii) in the case of any limited liability company, the board of managers of such person, (iii) in the case of any partnership, the Board of Directors of the general partner of such person and (iv) in any other case, the functional equivalent of the foregoing. "BORROWER" shall have the meaning assigned to such term in the preamble hereto. "BORROWING" shall mean (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan. "BORROWING REQUEST" shall mean either a U.S. Borrowing Request or a Canadian Borrowing Request as the context shall require. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which banks in New York City are authorized or required by law to close; PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "BUTLER PROPERTY" shall have the meaning assigned to such term in SECTION 5.13(a). "CALCULATION PERIOD" shall have the meaning assigned to such term in SECTION 2.06(f). "CANADIAN BORROWER" shall have the meaning assigned to such term in the preamble hereto. -4- "CANADIAN BORROWING REQUEST" shall mean a request by Canadian Borrower in accordance with the terms of SECTION 2.03 and substantially in the form of EXHIBIT C-2, or such other form as shall be approved by the Administrative Agent. "CANADIAN COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained by the Collateral Agent for the benefit of the Canadian Secured Parties, in accordance with the provisions of SECTION 9.01. "CANADIAN GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in SECTION 7.01. "CANADIAN GUARANTORS" shall have the meaning assigned to such term in SECTION 7.01. "CANADIAN INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of EXHIBIT P-2. "CANADIAN LOAN PARTIES" shall mean Canadian Borrower and the Canadian Guarantors; PROVIDED that Parent and U.S. Borrower shall only constitute Canadian Loan Parties in their capacities as Canadian Guarantors. "CANADIAN MORTGAGED PROPERTY" shall mean the Mortgaged Property owned or leased by the Canadian Loan Parties. "CANADIAN OBLIGATIONS" shall mean (a) obligations of Canadian Borrower and the other Canadian Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Canadian Term Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Canadian Borrower and the other Canadian Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of Canadian Borrower and the other Canadian Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of Canadian Borrower and the other Canadian Loan Parties under each Hedging Agreement relating to either the Canadian Term Loans or foreign currency exchange rates entered into with any counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (provided that each shall provide that it terminates or expires upon, or prior to, the repayment of all Loans hereunder) (each, a "PERMITTED CANADIAN HEDGING AGREEMENT") and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any Canadian Term Loan Lender, any Affiliate of a Canadian Term Loan Lender, the Administrative Agent or the Collateral Agent arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds, in each case, with respect to Canadian Term Loans. "CANADIAN SECURED PARTIES" shall mean, collectively, the Administrative Agent, the Collateral Agent, each other Agent, the Lenders and each party to a Permitted Canadian Hedging Agreement if such person executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such person (i) appoints the -5- Collateral Agent as its agent under the applicable Loan Documents and (ii) agrees to be bound by the provisions of SECTIONS 11.03 and 11.09. "CANADIAN SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of EXHIBIT M-2 among the Canadian Loan Parties and Collateral Agent for the benefit of the Canadian Secured Parties. "CANADIAN SECURITY AGREEMENT COLLATERAL" shall mean all property pledged or granted as collateral pursuant to the Canadian Security Agreement delivered on the Closing Date or thereafter pursuant to SECTION 5.10. "CANADIAN SECURITY DOCUMENTS" shall mean the Canadian Security Agreement, the Mortgages entered into by the Canadian Loan Parties and each other security document or pledge agreement delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Canadian Obligations, and all financing statements or instruments of perfection required by this Agreement, the Canadian Security Agreement or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the Canadian Security Agreement and any other document or instrument utilized to pledge as collateral for the Canadian Obligations any property. "CANADIAN SUBSIDIARY" shall mean a Subsidiary of Canadian Borrower. "CANADIAN SUBSIDIARY GUARANTOR" shall mean a Canadian Subsidiary that is or becomes a party to this Agreement pursuant to SECTION 5.10. "CANADIAN TERM LOAN" shall mean the term loans made by the Canadian Term Loan Lenders to Canadian Borrower pursuant to SECTION 2.01(b). Each Canadian Term Loan shall be either an ABR Term Loan or a Eurodollar Term Loan. "CANADIAN TERM LOAN COMMITMENT" shall mean, with respect to each Canadian Term Loan Lender, the commitment, if any, of such Canadian Term Loan Lender to make a Canadian Term Loan hereunder on the Closing Date in the amount set forth on Schedule I to the Lender Addendum executed and delivered by such Canadian Term Loan Lender. The aggregate amount of the Lenders' Canadian Term Loan Commitments is $30.0 million. "CANADIAN TERM LOAN LENDERS" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum that provide Canadian Term Loan Commitments or make Canadian Term Loans and (b) any financial institution that has become a party hereto pursuant to an Assignment and Assumption that provides Canadian Term Loan Commitments or makes Canadian Term Loans, other than, in each case, any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Assumption. "CAPEX CARRYFOWARD AMOUNT" shall have the meaning assigned to such term in SECTION 6.10(c). "CAPITAL EXPENDITURES" shall mean, for any period, without duplication, the increase during that period in the gross property, plant or equipment account in the consolidated balance sheet of U.S. Borrower and its Subsidiaries, determined in accordance with GAAP, whether such increase is due to purchase of properties for cash or financed by the incurrence of Indebtedness, but excluding (i) expenditures made in connection with the replacement, substitution or restoration of property pursuant -6- to SECTION 2.10(f) and (ii) any portion of such increase attributable solely to acquisitions of property, plant and equipment in Permitted Acquisitions. "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CASH EQUIVALENTS" shall mean, as to any person, (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or Canada or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States or Canada is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person; (b) time deposits and certificates of deposit of (1) any Lender or Agent or (2) any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States or Canada, any state or province thereof or the District of Columbia having, capital and surplus aggregating in excess of $500.0 million and a rating of "A" (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such person; (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, which repurchase obligations are secured by a valid perfected security interest in the underlying securities; (d) commercial paper issued by any person incorporated in the United States or Canada rated at least A-1 or the equivalent thereof by Standard & Poor's Rating Service or at least P-1 or the equivalent thereof by Moody's Investors Service Inc., and in each case maturing not more than one year after the date of acquisition by such person; (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above; and (f) demand deposit accounts maintained in the ordinary course of business. "CASH INTEREST EXPENSE" shall mean, for any period, Consolidated Interest Expense for such period, LESS the sum of (a) interest on any debt paid by the increase in the principal amount of such debt including by issuance of additional debt of such kind and (b) items described in clause (c) or, other than to the extent paid in cash, clauses (f) and (g) of the definition of "Consolidated Interest Expense." "CASUALTY EVENT" shall mean any loss of title or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of Parent or any of its Subsidiaries. "Casualty Event" shall include but not be limited to any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, civil or military, or any settlement in lieu thereof. "CDC" shall have the meaning assigned to such term in SECTION 5.13(a). "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. section 9601 et seq. A "CHANGE IN CONTROL" shall be deemed to have occurred if: (a) Parent at any time ceases to own 100% of the Equity Interests of U.S. Borrower or, prior to an IPO at Parent, Holdings ceases to own 100% of the Equity Interests of Parent; -7- (b) at any time a change of control (as defined in the documentation for any Material Indebtedness) shall occur; (c) prior to an IPO, (i) the Permitted Holders cease to own (directly or indirectly), or to have the power to vote or direct the voting of, Voting Stock of U.S. Borrower representing a majority of the voting power of the total outstanding Voting Stock of U.S. Borrower or (ii) the Permitted Holders cease to own (directly or indirectly) Equity Interests representing a majority of the total economic interests of the Equity Interests of U.S. Borrower; (d) following an IPO, (i) the Permitted Holders shall fail to own (directly or indirectly), or to have the power to vote or direct the voting of, Voting Stock of U.S. Borrower representing more than 35% of the voting power of the total outstanding Voting Stock of U.S. Borrower, (ii) the Permitted Holders cease to own (directly or indirectly) Equity Interests representing more than 35% of the total economic interests of the Equity Interests of U.S. Borrower or (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock of U.S. Borrower representing more than the voting power of the Voting Stock of U.S. Borrower owned by the Permitted Holders; or (e) following an IPO, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the IPO Entity (together with any new directors whose election to such Board of Directors or whose nomination for election was approved by a vote of a majority of the members of the Board of Directors of the IPO Entity, which members comprising such majority are then still in office and 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 IPO Entity. For purposes of this definition, a person shall not be deemed to have beneficial ownership of Equity Interests subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement. "CHANGE IN LAW" shall mean (a) the adoption of any law, treaty, order, policy, rule or regulation or any interpretation or application thereof by any Governmental Authority after the date of this Agreement, (b) any change in any law, treaty, order, policy, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or Issuing Bank (or for purposes of SECTION 2.12(b), by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "CHARGES" shall have the meaning assigned to such term in SECTION 11.13. "CLASS," when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, U.S. Term Loans, Canadian Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, U.S. Term Loan Commitment, Canadian Term Loan Commitment or Swingline Commitment, in each case, under this Agreement as originally in effect or pursuant to SECTION 11.02(d), of which such Loan, Borrowing or Commitment shall be a part. -8- "CLOSING DATE" shall mean the date of the initial Credit Extension hereunder. "CO-ARRANGERS" shall have the meaning assigned to such term in the preamble hereto. "CO-DOCUMENTATION AGENTS" shall have the meaning assigned to such term in the preamble hereto. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL" shall mean, collectively, all of the U.S. Security Agreement Collateral, the Canadian Security Agreement Collateral, the Mortgaged Property and all other property of whatever kind and nature pledged as collateral under any Security Document. "COLLATERAL ACCOUNT" shall mean the Canadian Collateral Account or the U.S. Collateral Account, as applicable. "COLLATERAL AGENT" shall have the meaning assigned to such term in the preamble hereto. "COMMERCIAL LETTER OF CREDIT" shall mean any letter of credit or similar instrument issued for the purpose of providing credit support in connection with the purchase of materials, goods or services by U.S. Borrower or any of its Subsidiaries in the ordinary course of their businesses. "COMMITMENT" shall mean, with respect to any Lender, such Lender's Revolving Commitment, U.S. Term Loan Commitment, Canadian Term Loan Commitment or Swingline Commitment, and any Commitment to make Term Loans or Revolving Loans of a new Class extended by such Lender as provided in SECTION 11.02(d). "COMMITMENT FEE" shall have the meaning assigned to such term in SECTION 2.05(a). "COMPANIES" shall mean Parent and its Subsidiaries; and "COMPANY" shall mean any one of them. "COMPLIANCE CERTIFICATE" shall mean a certificate of a Financial Officer substantially in the form of EXHIBIT D. "CONFIDENTIAL INFORMATION MEMORANDUM" shall mean that certain confidential information memorandum dated as of January 2004 relating to U.S. Borrower and its subsidiaries. "CONSOLIDATED AMORTIZATION EXPENSE" shall mean, for any period, the amortization expense of U.S. Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CURRENT ASSETS" shall mean, as at any date of determination, the total assets of U.S. Borrower and its Subsidiaries which may properly be classified as current assets on a consolidated balance sheet of U.S. Borrower and its Subsidiaries in accordance with GAAP. "CONSOLIDATED CURRENT LIABILITIES" shall mean, as at any date of determination, the total liabilities of U.S. Borrower and its Subsidiaries which may properly be classified as current liabilities (other than the current portion of any Loans) on a consolidated balance sheet of U.S. Borrower and its Subsidiaries in accordance with GAAP. -9- "CONSOLIDATED DEPRECIATION EXPENSE" shall mean, for any period, the depreciation expense of U.S. Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBITDA" shall mean, for any period, Consolidated Net Income for such period, adjusted by (x) ADDING THERETO, in each case only to the extent (and in the same proportion) deducted in determining such Consolidated Net Income (and with respect to the portion of Consolidated Net Income attributable to any Subsidiary of U.S. Borrower (other than any Foreign Subsidiary or any U.S. Subsidiary Guarantor) only if a corresponding amount would be permitted at the date of determination to be distributed to U.S. Borrower by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its Organizational Documents and all agreements (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds), instruments, judgments, decrees, orders, statutes, rules and regulations applicable to such Subsidiary or its equityholders): (a) Consolidated Interest Expense for such period, (b) Consolidated Amortization Expense for such period, (c) Consolidated Depreciation Expense for such period, (d) Consolidated Tax Expense for such period, (e) costs and expenses directly incurred in connection with the Transactions during such period (not to exceed $30.0 million) to the extent actually incurred and expensed within one year of the Closing Date, (f) the aggregate amount of all other non-cash items reducing Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, (g) the amount of management fees paid to Sponsor for such period pursuant to the Advisory Services Agreement in accordance with SECTION 6.09(e), (h) Restructuring Expenses in an aggregate amount not to exceed $10.0 million in any Test Period and any Restructuring Expenses in connection with the disposition of Thermal-Gard, Inc., and (y) SUBTRACTING THEREFROM the aggregate amount of all non-cash items increasing Consolidated Net Income (other than the accrual of revenue or recording of receivables in the ordinary course of business) for such period, and (z) ADDING THERETO OR SUBTRACTING THEREFROM, without duplication of amounts included as Restructuring Expenses, with respect to any part of a Test Period, the adjustments to Consolidated EBITDA set forth on SCHEDULE 1.01(b). Other than for purposes of calculating Excess Cash Flow, Consolidated EBITDA shall be calculated on a Pro Forma Basis (including any Pro Forma Cost Savings) to give effect to the Acquisition, any Permitted Acquisition, each Permitted Sale and Leaseback Transaction and other Asset Sales for consideration individually or in the aggregate in excess of $3.0 million during any Test Period consummated at any time on or after the first day of the Test Period thereof as if the Acquisition and each such Permitted Acquisition had been effected on the first day of such period and as if each such Permitted Sale and -10- Leaseback Transaction and other Asset Sale had been consummated on the day prior to the first day of such period. Notwithstanding the foregoing, Consolidated EBITDA for each of the first three fiscal quarters of 2003 shall be increased by the amounts indicated on SCHEDULE 1.01(b) to account for the items described thereon to the extent any such amounts were deducted in computing Consolidated Net Income. "CONSOLIDATED INDEBTEDNESS" shall mean, as at any date of determination, without duplication, (x) the aggregate amount of all Indebtedness of U.S. Borrower and its Subsidiaries less (y) cash and Cash Equivalents on hand of U.S. Borrower and its Subsidiaries in excess of $2.0 million other than restricted cash that is not held in a Collateral Account, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST COVERAGE RATIO" shall mean, for any Test Period, the ratio of (x) Consolidated EBITDA for such Test Period to (y) Cash Interest Expense for such Test Period. "CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the total consolidated interest expense (less interest income) of U.S. Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP PLUS, without duplication: (a) imputed interest on Capital Lease Obligations of U.S. Borrower and its Subsidiaries for such period; (b) commissions, discounts and other fees and charges owed by U.S. Borrower or any of its Subsidiaries with respect to letters of credit securing financial obligations, bankers' acceptance financing and receivables financings for such period; (c) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses incurred by U.S. Borrower or any of its Subsidiaries for such period; (d) cash contributions to any employee stock ownership plan or similar trust made by U.S. Borrower or any of its Subsidiaries to the extent such contributions are used by such plan or trust to pay interest or fees to any person (other than U.S. Borrower or a Wholly Owned Subsidiary) in connection with Indebtedness incurred by such plan or trust for such period; (e) all interest paid or payable with respect to discontinued operations of U.S. Borrower or any of its Subsidiaries for such period; (f) the interest portion of any deferred payment obligations of U.S. Borrower or any of its Subsidiaries for such period; and (g) all interest on any Indebtedness of U.S. Borrower or any of its Subsidiaries of the type described in clause (f) or (j) of the definition of "Indebtedness" for such period; PROVIDED that (A) to the extent directly related to the Transactions, debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded from the calculation of Consolidated Interest Expense and (B) the amortization during such period of other capitalized financing costs shall be excluded from the calculation of Consolidated Interest Expense; PROVIDED that in the case of clause (B) the aggregate amount of amortization relating to such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5% of the aggregate amount of the financing giving rise thereto. -11- Consolidated Interest Expense shall be calculated on a Pro Forma Basis (including any Pro Forma Cost Savings) to give effect to any Indebtedness incurred, assumed or permanently repaid or extinguished during the relevant Test Period in connection with the Acquisition, any Permitted Acquisitions, each Permitted Sale and Leaseback Transaction and other Asset Sales for consideration individually or in the aggregate in excess of $3.0 million during any Test Period as if such incurrence, assumption, repayment or extinguishing had been effected on the first day of such period. "CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated net income (or loss) of U.S. Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP; PROVIDED that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (a) the net income (or loss) of any person (other than a Subsidiary of U.S. Borrower) in which any person other than U.S. Borrower and its Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by U.S. Borrower or (subject to clause (b) below) any of its Subsidiaries during such period; (b) the net income of any Subsidiary of U.S. Borrower (other than a Foreign Subsidiary or a U.S. Subsidiary Guarantor) during such period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is not permitted by operation of the terms of its Organizational Documents or any agreement (other than any municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds), instrument, judgment, decree, order, statute, rule or regulation applicable to that Subsidiary during such period, except that U.S. Borrower's equity in net loss of any such Subsidiary for such period, other than any non-cash loss that does not result in an accrual or reserve for cash charges in any future period, shall be included in determining Consolidated Net Income; (c) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by U.S. Borrower or any of its Subsidiaries upon (i) any Asset Sale (other than any dispositions in the ordinary course of business) by U.S. Borrower or any of its Subsidiaries, (ii) the disposition of any Cash Equivalents or (iii) the repayment or cancellation of any Indebtedness of U.S. Borrower or any of its Subsidiaries; (d) gains and losses due solely to fluctuations in currency values and the related tax effects determined in accordance with GAAP for such period; (e) earnings resulting from any reappraisal, revaluation or write-up of assets; (f) unrealized gains and losses with respect to Hedging Obligations for such period; (g) other than for purposes of the definition of Excess Cash Flow, any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such gain (or the tax effect of any such loss), recorded or recognized by U.S. Borrower or any of its Subsidiaries during such period; PROVIDED that such nonrecurring losses shall not exceed $5.0 million in any Test Period; (h) any expenses or reserves for liabilities to the extent that the U.S. Borrower or any of its Subsidiaries is entitled to indemnification therefore under binding agreements; PROVIDED that any liabilities for which the U.S. Borrower or such Subsidiary is not actually indemnified shall -12- reduce Consolidated Net Income in the period in which it is determined that the U.S. Borrower or such Subsidiary will not be indemnified; and (i) the net income (or loss) of Thermal-Gard, Inc., so long as U.S. Borrower is using commercially reasonable efforts to dispose of it or discontinue its operations. For purposes of this definition of "Consolidated Net Income," "NONRECURRING" means any gain or loss as of any date that is not reasonably likely to recur within two years following such date; PROVIDED that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring and (2) Consolidated Net Income shall be reduced (to the extent not already reduced thereby) by the amount of any payments to or on behalf of Parent made pursuant to SECTIONS 6.08(c) and (d). "CONSOLIDATED SENIOR INDEBTEDNESS" shall mean, as at any date of determination, the difference of Consolidated Indebtedness on such date less the aggregate amount of all Subordinated Indebtedness of the Borrowers and the Subsidiary Guarantors determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TAX EXPENSE" shall mean, for any period, the tax expense of U.S. Borrower and its Subsidiaries, for such period, determined on a consolidated basis in accordance with GAAP. "CONTESTED COLLATERAL LIEN CONDITIONS" shall mean, with respect to any Permitted Lien of the type described in clauses (a), (b), (e) and (f) of SECTION 6.02, the following conditions: (a) any proceeding instituted contesting such Lien shall operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (b) to the extent such Lien is in an amount in excess of $1,000,000, the appropriate Loan Party shall maintain cash reserves in accordance with GAAP; and (c) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents. "CONTINGENT OBLIGATION" shall mean, as to any person, any obligation, agreement, understanding or arrangement of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including any obligation of such person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers' acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises (which reimbursement obligation shall constitute Indebtedness); or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term "Contingent Obligation" shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties. The amount of any Contingent Obligation shall be deemed to be an amount equal to the -13- stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. "CONTROL AGREEMENT" shall have the meaning assigned to such term in the U.S. Security Agreement. "CREDIT EXTENSION" shall mean, as the context may require, (i) the making of a Loan by a Lender or (ii) the issuance of any Letter of Credit, or the amendment, extension or renewal of any existing Letter of Credit, by the Issuing Bank. "DEBT ISSUANCE" shall mean the incurrence by Parent or any of its Subsidiaries of any Indebtedness after the Closing Date (other than as permitted by SECTION 6.01). "DEBT SERVICE" shall mean, for any period, Cash Interest Expense for such period plus scheduled principal amortization of all Indebtedness for such period. "DEFAULT" shall mean any event, occurrence or condition which is, or upon notice, lapse of time or both would constitute, an Event of Default. "DEFAULT RATE" shall have the meaning assigned to such term in SECTION 2.06(c). "DISQUALIFIED CAPITAL STOCK" shall mean 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), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Final Maturity Date, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in (a) above, in each case at any time on or prior to the first anniversary of the Final Maturity Date, or (c) contains any repurchase obligation which may come into effect prior to payment in full of all Obligations; PROVIDED, FURTHER, HOWEVER, that any Equity Interests that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests is convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the first anniversary of the Final Maturity Date shall not constitute Disqualified Capital Stock if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the repayment in full of the Obligations. "DIVIDEND" with respect to any person shall mean that such person has declared or paid a dividend or returned any equity capital to the holders of its Equity Interests or authorized or made any other distribution, payment or delivery of property (other than Qualified Capital Stock of such person) or cash to the holders of its Equity Interests as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any of its Equity Interests outstanding (or any options or warrants -14- issued by such person with respect to its Equity Interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any of the Equity Interests of such person outstanding (or any options or warrants issued by such person with respect to its Equity Interests). Without limiting the foregoing, "Dividends" with respect to any person shall also include all payments made or required to be made by such person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "DOLLARS" or "$" shall mean lawful money of the United States. "DOMESTIC SUBSIDIARY" shall mean any Subsidiary that is organized or existing under the laws of the United States, any state thereof or the District of Columbia. "EMBARGOED PERSON" shall have the meaning assigned to such term in SECTION 6.21. "ENVIRONMENT" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources, the workplace or as otherwise defined in any Environmental Law. "ENVIRONMENTAL CLAIM" shall mean any claim, notice, demand, order, action, suit, proceeding or other communication alleging liability for investigation, remediation, removal, cleanup, response, corrective action, damages to natural resources, personal injury, property damage, fines, penalties or other costs resulting from, related to or arising out of (i) the presence, Release or threatened Release in or into the Environment of Hazardous Material at any location or (ii) any violation of Environmental Law, and shall include any claim seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from, related to or arising out of the presence, Release or threatened Release of Hazardous Material or alleged injury or threat of injury to health, safety or the Environment. "ENVIRONMENTAL LAW" shall mean any and all applicable present and future treaties, laws, statutes, ordinances, regulations, rules, decrees, orders, judgments, consent orders, consent decrees, code or other binding requirements, and the common law and judicial or agency interpretation, policy or guidance, relating to protection of public health or the Environment, the Release or threatened Release of Hazardous Material, natural resources or natural resource damages, or occupational safety or health. "ENVIRONMENTAL PERMIT" shall mean any permit, license, approval, consent or other authorization required by or from a Governmental Authority under Environmental Law. "EQUIPMENT" shall have the meaning assigned to such term in the U.S. Security Agreement. "EQUITY FINANCING" shall mean the cash contribution of approximately $136.7 million by Sponsor, its affiliates and certain members of U.S. Borrower's management to Holdings in return for Equity Interests in Holdings, and the contribution of such cash by Holdings to Parent in connection with the funding of the Acquisition. "EQUITY INTEREST" shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of property of, such partnership, whether out- -15- standing on the date hereof or issued after the Closing Date, but excluding debt securities convertible or exchangeable into such equity. "EQUITY INVESTORS" shall mean Sponsor and one or more investors reasonably satisfactory to the Administrative Agent and the Arrangers. "EQUITY ISSUANCE" shall mean, without duplication, (i) any issuance or sale by Parent or Holdings after the Closing Date of any Equity Interests in Parent or Holdings (including any Equity Interests issued upon exercise of any warrant or option), as applicable, or any warrants or options to purchase such Equity Interests or (ii) any contribution to the capital of Parent or Holdings; PROVIDED, HOWEVER, that an Equity Issuance shall not include (x) any Preferred Stock Issuance or Debt Issuance, (y) any such sale or issuance by Holdings of its Equity Interests (including its Equity Interests issued upon exercise of any warrant or option or warrants or options to purchase its Equity Interests but excluding Disqualified Capital Stock), in each case, to directors, officers or employees of any Company and (z) any Excluded Issuance. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean, with respect to any person, any trade or business (whether or not incorporated) that, together with such person, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA EVENT" shall mean (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) except as set forth on SCHEDULE 3.17, the incurrence by any Company or any of its ERISA Affiliates of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (g) except as set forth on SCHEDULE 3.17, the receipt by any Company or its ERISA Affiliates of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security; and (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to any Company. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan. -16- "EURODOLLAR REVOLVING BORROWING" shall mean a Borrowing comprised of Eurodollar Revolving Loans. "EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of ARTICLE II. "EURODOLLAR TERM BORROWING" shall mean a Borrowing comprised of Eurodollar Term Loans. "EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of ARTICLE II. "EVENT OF DEFAULT" shall have the meaning assigned to such term in ARTICLE VIII. "EXCESS AMOUNT" shall have the meaning assigned to such term in SECTION 2.10(h)(ii). "EXCESS CASH FLOW" shall mean, for any Excess Cash Flow Period, Consolidated EBITDA for such Excess Cash Flow Period, MINUS, without duplication: (a) Debt Service for such Excess Cash Flow Period actually paid during such Excess Cash Flow Period; (b) Capital Expenditures during such Excess Cash Flow Period (excluding Capital Expenditures made in such Excess Cash Flow Period where a certificate in the form contemplated by the following clause (c) was previously delivered) that are paid in cash; (c) (x) Capital Expenditures that U.S. Borrower or any of its Subsidiaries shall, during such Excess Cash Flow Period, become obligated to make but that are not made during such Excess Cash Flow Period; PROVIDED that U.S. Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such Excess Cash Flow Period, signed by a Responsible Officer of U.S. Borrower and certifying that such Capital Expenditures will be made in the following Excess Cash Flow Period or (y) the CapEx Carryforward Amount for such Excess Cash Flow Period less the CapEx Carryforward Amount from the prior Excess Cash Flow Period that is not used in such Excess Cash Flow Period; (d) the aggregate amount of investments made in cash during such period pursuant to SECTIONS 6.04(e), (i), (j), (k) and (m) (other than investments made with Excluded Issuances); (e) taxes of U.S. Borrower and its Subsidiaries that were paid in cash during such Excess Cash Flow Period or will be paid within six months after the end of such Excess Cash Flow Period and for which reserves have been established; (f) Permitted Tax Distributions that are paid during the respective Excess Cash Flow Period or will be paid within six months after the close of such Excess Cash Flow Period; (g) the absolute value of the difference, if negative, of the amount of Net Working Capital at the end of the prior Excess Cash Flow Period over the amount of Net Working Capital at the end of such Excess Cash Flow Period; -17- (h) losses excluded from the calculation of Consolidated Net Income by operation of clause (c) or (g) of the definition thereof that are paid in cash during such Excess Cash Flow Period; (i) to the extent added to determine Consolidated EBITDA, all items that did not result from a cash payment to U.S. Borrower or any of its Subsidiaries on a consolidated basis during such Excess Cash Flow Period; and (j) permanent repayments and prepayments of Indebtedness (other than the Obligations) made by U.S. Borrower and its Subsidiaries during such fiscal year to the extent funded with internally generated funds; PROVIDED that any amount deducted pursuant of any of the foregoing clauses that will be paid after the close of such Excess Cash Flow Period shall not be deducted again in a subsequent Excess Cash Flow Period; PLUS, without duplication: (i) the difference, if positive, of the amount of Net Working Capital at the end of the prior Excess Cash Flow Period over the amount of Net Working Capital at the end of such Excess Cash Flow Period; (ii) all proceeds received during such Excess Cash Flow Period of any Indebtedness to the extent used to finance any Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such borrowings); (iii) to the extent any permitted Capital Expenditures referred to in (c) above do not occur in the Excess Cash Flow Period specified in the certificate of U.S. Borrower provided pursuant to (c) above, such amounts of Capital Expenditures that were not so made in the Excess Cash Flow Period specified in such certificates; (iv) any return of capital on or in respect of investments received in cash during such period other than proceeds of an Asset Sale, which investments were made pursuant to SECTION 6.04(e), (i), (j), (k) or (m) (other than investments made from Excluded Issuances); (v) income or gain excluded from the calculation of Consolidated Net Income by operation of clause (c) or (g) of the definition thereof that is realized in cash during such Excess Cash Flow Period (except to the extent such gain is subject to SECTION 2.10); (vi) if deducted in the computation of Consolidated EBITDA, interest income; and (vii) to the extent subtracted in determining Consolidated EBITDA, all items that did not result from a cash payment by U.S. Borrower or any of its Subsidiaries on a consolidated basis during such Excess Cash Flow Period; PROVIDED FURTHER that Excess Cash Flow for the fiscal year of U.S. Borrower ending on December 31, 2004 shall be deemed to be Excess Cash Flow as calculated above multiplied by 3/4. "EXCESS CASH FLOW PERIOD" shall mean each fiscal year of U.S. Borrower. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. -18- "EXCLUDED ISSUANCE" shall mean an issuance and sale of Qualified Capital Stock of Holdings to the Permitted Holders and any corresponding issuance and sale of Qualified Capital Stock of Parent to Holdings financed with the net proceeds thereof. "EXCLUDED TAXES" shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient (each a "RECIPIENT," and collectively the "RECIPIENTS") of any payment to be made by or on account of any obligation of either Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income as a result of a present or former connection between the Recipient and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Recipient having executed, delivered or performed its obligations or received a payment under, or enforced, or otherwise in connection with, this Agreement or any other Loan Document), (b) in the case of a Foreign Lender, any U.S. federal withholding taxes that are attributable to such Foreign Lender's failure to comply with the requirements of SECTION 2.15(e), (c) Taxes that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, immediately prior to such assignment, to receive additional amounts or indemnification from either Borrower with respect to such withholding taxes pursuant to SECTION 2.15 (or would have been so entitled had the assignor's tax status (residence, etc.) immediately before such assignment been the same as the assignee's tax status immediately after such assignment) and (d) U.S. federal withholding taxes that are imposed as a result of an event occurring after the Lender becomes a Lender other than a Change in Law or regulation or interpretation thereof. "EXECUTIVE ORDER" shall have the meaning assigned to such term in SECTION 3.22. "EXECUTIVE ORDERS" shall have the meaning assigned to such term in SECTION 6.21. "EXISTING LIEN" shall have the meaning assigned to such term in SECTION 6.02(c). "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System of the United States arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" shall mean the confidential Fee Letter, dated December 31, 2003, among Holdings, the Arrangers, UBS Loan Finance LLC, Deutsche Bank AG Cayman Islands Branch, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation. "FEES" shall mean the Commitment Fees, the Administrative Agent Fees, the LC Participation Fees and the Fronting Fees. "FINAL MATURITY DATE" shall mean the latest of the Revolving Maturity Date and the Term Loan Maturity Date. "FINANCIAL OFFICER" of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person. "FIRREA" shall mean the Federal Institutions Reform, Recovery and Enforcement Act of 1989, as amended. -19- "FOREIGN LENDER" shall mean any Lender that is not, for United States federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation or partnership or entity treated as a corporation or partnership created or organized in or under the laws of the United States, or any political subdivision thereof, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust. "FOREIGN PLAN" shall mean any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by any Company with respect to employees employed outside the United States. "FOREIGN SUBSIDIARY" shall mean a Subsidiary that is organized under the laws of a jurisdiction other than the United States or any state thereof or the District of Columbia. "FRONTING FEE" shall have the meaning assigned to such term in SECTION 2.05(c). "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis; PROVIDED that with respect to Canadian Borrower and any Canadian Subsidiaries organized under the laws of Canada or a province thereof, for purposes of Sections 3.13, 5.05, 5.07 and 5.09 "GAAP" shall mean generally accepted accounting principles in Canada applied on a consistent basis. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, provincial, local or foreign court, central bank or governmental agency, authority, instrumentality or regulatory body or any subdivision thereof. "GOVERNMENTAL REAL PROPERTY DISCLOSURE REQUIREMENTS" shall mean any Requirement of Law of any Governmental Authority requiring notification of the buyer, lessee, mortgagee, assignee or other transferee of any Real Property, facility, establishment or business, or notification, registration or filing to or with any Governmental Authority, in connection with the sale, lease, mortgage, assignment or other transfer (including any transfer of control) of any Real Property, facility, establishment or business, of the actual or threatened presence or Release in or into the Environment, or the use, disposal or handling of Hazardous Material on, at, under or near the Real Property, facility, establishment or business to be sold, leased, mortgaged, assigned or transferred. "GUARANTEED OBLIGATIONS" shall mean the U.S. Guaranteed Obligations and/or the Canadian Guaranteed Obligations, as applicable. "GUARANTEES" shall mean the guarantees issued pursuant to ARTICLE VII by Parent and the Subsidiary Guarantors. "GUARANTORS" shall mean Parent and the Subsidiary Guarantors. "HAZARDOUS MATERIALS" shall mean the following: hazardous substances; hazardous wastes; polychlorinated biphenyls ("PCBs") or any substance or compound containing PCBs; asbestos or any asbestos-containing materials in any form or condition; radon or any other radioactive materials including any source, special nuclear or by-product material; petroleum, crude oil or any fraction thereof; and any other pollutant or contaminant or chemicals, wastes, materials, compounds, constituents or substances, subject to regulation or which can give rise to liability under any Environmental Laws. -20- "HEDGING AGREEMENT" shall mean any swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies. "HEDGING OBLIGATIONS" shall mean obligations under or with respect to Hedging Agreements. "HOLDINGS" shall mean Ply Gem Investment Holdings, Inc. (formerly known as CI Investment Holdings, Inc.), a Delaware corporation. "HOLDINGS SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of Holdings owing to any Permitted Holder issued pursuant to the Subordinated Note Purchase Agreement attached hereto as EXHIBIT R. "INDEBTEDNESS" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or advances; (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such person upon which interest charges are customarily paid or accrued; (d) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business on normal trade terms and not overdue by more than 90 days); (f) all Indebtedness of others secured by any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, but limited to the fair market value of such property; (g) all Capital Lease Obligations, Purchase Money Obligations and synthetic lease obligations of such person; (h) all Hedging Obligations to the extent required to be reflected on a balance sheet of such person; (i) all obligations of such person (not including any contingent obligations) for the reimbursement of any obligor in respect of letters of credit, letters of guaranty, bankers' acceptances and similar credit transactions; and (j) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person's ownership interest in or other relationship with such entity, except to the extent that terms of such Indebtedness expressly provide that such person is not liable therefor. "INDEMNIFIED TAXES" shall mean all Taxes other than Excluded Taxes. "INDEMNITEE" shall have the meaning assigned to such term in SECTION 11.03(b). "INFORMATION" shall have the meaning assigned to such term in SECTION 11.12. "INSTALLMENT CONTRACT" shall have the meaning assigned to such term in SECTION 5.13(a). "INSURANCE POLICIES" shall mean the insurance policies and coverages required to be maintained by each Loan Party which is an owner of Mortgaged Property with respect to the applicable Mortgaged Property pursuant to SECTION 5.04 and all renewals and extensions thereof. "INSURANCE REQUIREMENTS" shall mean, collectively, all provisions of the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon each Loan Party which is an owner of Mortgaged Property and applicable to the Mortgaged Property or any use or condition thereof. -21- "INTELLECTUAL PROPERTY" shall have the meaning assigned to such term in SECTION 3.06(a). "INTERCOMPANY NOTE" shall mean the U.S. Intercompany Note and the Canadian Intercompany Note. "INTEREST ELECTION REQUEST" shall mean a request by either Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with SECTION 2.08(b), substantially in the form of EXHIBIT E. "INTEREST PAYMENT DATE" shall mean (a) with respect to any ABR Loan (including Swingline Loans), the last Business Day of each March, June, September and December to occur during any period in which such Loan is outstanding, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (c) with respect to any Revolving Loan or Swingline Loan, the Revolving Maturity Date or such earlier date on which the Revolving Commitments are terminated and (d) with respect to any Term Loan, the Term Loan Maturity Date. "INTEREST PERIOD" shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, if each affected Lender so agrees, nine months) thereafter, as the applicable Borrower may elect; PROVIDED that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing; PROVIDED, HOWEVER, that an Interest Period shall be limited to the extent required under SECTION 2.03(e). "INVESTMENTS" shall have the meaning assigned to such term in SECTION 6.04. "IPO" shall mean the first underwritten public offering by Parent or Holdings of its Equity Interests after the Closing Date pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act. "IPO ENTITY" shall mean whichever of Parent or Holdings effects an IPO. "ISSUING BANK" shall mean, as the context may require, (a) UBS AG, Stamford Branch, with respect to Letters of Credit issued by it; (b) any other Lender that may become an Issuing Bank pursuant to SECTIONS 2.18(j) and (k) with respect to Letters of Credit issued by such Lender; or (c) collectively, all of the foregoing. "JOINDER AGREEMENT" shall mean a joinder agreement substantially in the form of EXHIBIT F. "JOINT LEAD ARRANGERS" shall have the meaning assigned to such term in the preamble hereto. -22- "JUDGMENT CURRENCY" shall have the meaning assigned to such term in SECTION 11.16. "JUDGMENT CURRENCY CONVERSION DATE" shall have the meaning assigned to such term in SECTION 11.16. "LANDLORD ACCESS AGREEMENT" shall mean (x) with respect to a Real Property located in the United States, a U.S. Landlord Access Agreement, substantially in the form of EXHIBIT G-1 and (y) with respect to a Real Property located in Canada, a Canadian Landlord Access Agreement, substantially in the form of EXHIBIT G-2, or, in either case, a landlord access agreement in such other form as may reasonably be acceptable to the Collateral Agent. "LC COMMITMENT" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to SECTION 2.18, as the same shall be reduced from time to time pursuant to SECTION 2.07 or SECTION 2.18. The amount of the LC Commitment shall initially be $35.0 million, but in no event exceed the Revolving Commitments. "LC DISBURSEMENT" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. "LC EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate principal amount of all Reimbursement Obligations outstanding at such time; PROVIDED that for any purpose other than calculating a fee due under this Agreement the amount in clause (a) will be reduced by the amount of industrial or economic revenue bonds issued in connection with the Assumed Debt and held by a remarketing agent or trustee for the benefit of the Collateral Agent. The LC Exposure of any Revolving Lender at any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at such time. "LC PARTICIPATION FEE" shall have the meaning assigned to such term in SECTION 2.05(c). "LC REQUEST" shall mean a request by U.S. Borrower in accordance with the terms of SECTION 2.18(b) and substantially in the form of EXHIBIT H, or such other form as shall be approved by the Administrative Agent. "LC SUB-ACCOUNT" shall have the meaning assigned to such term in SECTION 9.01(d). "LEASES" shall mean any and all leases, subleases, tenancies, options, concession agreements, rental agreements, occupancy agreements, franchise agreements, access agreements and any other agreements (including all amendments, extensions, replacements, renewals, modifications and/or guarantees thereof), whether or not of record and whether now in existence or hereafter entered into, affecting the use or occupancy of all or any portion of any Real Property. "LENDER ADDENDUM" shall mean with respect to any Lender on the Closing Date, a lender addendum in the form of EXHIBIT I, to be executed and delivered by such Lender on the Closing Date as provided in SECTION 11.14. "LENDER AFFILIATE" shall mean with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such advisor. "LENDERS" shall mean the U.S. Lenders and the Canadian Term Loan Lenders. -23- "LETTER OF CREDIT" shall mean any (i) Standby Letter of Credit and (ii) Commercial Letter of Credit, in each case, issued or to be issued by an Issuing Bank for the account of U.S. Borrower pursuant to SECTION 2.18. "LETTER OF CREDIT EXPIRATION DATE" shall mean the date which is fifteen days prior to the Revolving Maturity Date. "LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period therefor, the rate per annum determined by the Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for deposits in dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such Interest Period; PROVIDED, HOWEVER, that (i) if no comparable term for an Interest Period is available, the LIBOR Rate shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such Interest Period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "LIBOR Rate" shall mean, with respect to each day during each Interest Period pertaining to Eurodollar Borrowings comprising part of the same Borrowing, the rate per annum equal to the rate at which the Administrative Agent is offered deposits in dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to its portion of the amount of such Eurodollar Borrowing to be outstanding during such Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market). "LIEN" shall mean, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation, security interest or encumbrance of any kind or any arrangement to provide priority or preference or any filing of any financing statement under the UCC or any other similar notice of Lien under any similar notice or recording statute of any Governmental Authority, including any easement, right-of-way or other encumbrance on title to Real Property, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the foregoing; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "LOAN DOCUMENTS" shall mean this Agreement, each LC Request or application, the Notes (if any), the Security Documents, each Permitted U.S. Hedging Agreement, each Permitted Canadian Hedging Agreement and, solely for purposes of SECTION 8.01(e) hereof, the Fee Letter. "LOAN PARTIES" shall mean Parent, the Borrowers and the Subsidiary Guarantors. "LOANS" shall mean, as the context may require, a Revolving Loan, a U.S. Term Loan, a Canadian Term Loan or a Swingline Loan (and shall include any Loans contemplated by SECTION 11.02(e)). "MARGIN STOCK" shall have the meaning assigned to such term in Regulation U. -24- "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect on the condition (financial or otherwise), business, operations, assets, liabilities or prospects of Parent and its Subsidiaries, taken as a whole; (b) material impairment of the ability of the Loan Parties to fully and timely perform any of their obligations under any Loan Document; (c) material impairment of the rights of or benefits or remedies available to the Lenders or the Collateral Agent under any Loan Document; or (d) a material adverse effect on the Liens in favor of the Collateral Agent (for its benefit and for the benefit of the other Secured Parties) on the Collateral or the priority of such Liens. "MATERIAL INDEBTEDNESS" shall mean (a) the Indebtedness listed on SCHEDULE 1.01(c) and (b) any other Indebtedness (other than the Loans and Letters of Credit) or Hedging Obligations of Parent or any of its Subsidiaries in an aggregate outstanding principal amount exceeding $10.0 million. For purposes of determining Material Indebtedness, the "principal amount" in respect of any Hedging Obligations of any Loan Party at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party would be required to pay if the related Hedging Agreement were terminated at such time. "MAXIMUM RATE" shall have the meaning assigned to such term in SECTION 11.13. "MORTGAGE" shall mean an agreement, including, but not limited to, a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Mortgaged Property, which (i) in the case of Real Property owned in fee by a U.S. Loan Party, shall be substantially in the form of EXHIBIT J-1, (ii) in the case of Real Property owned in fee by a Canadian Loan Party, shall be substantially in the form of Exhibit J-2, and (iii) in the case of leased Real Property, shall be substantially in the form of EXHIBIT J-3, or, in each case, another form reasonably satisfactory to the Collateral Agent, and, in each case, with such schedules and including such provisions as shall be necessary to conform such document to applicable local or foreign law or as shall be customary under applicable local or foreign law. "MORTGAGED PROPERTY" shall mean (a) each Real Property identified on SCHEDULE 1.01(d) hereto and (b) each Real Property, if any, which shall be subject to a Mortgage delivered after the Closing Date pursuant to SECTION 5.10(d) or (e) or SECTION 5.13. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA (a) to which any Company or any ERISA Affiliate is then making or accruing an obligation to make contributions; (b) to which any Company or any ERISA Affiliate has within the preceding five plan years made contributions; or (c) with respect to which any Company could incur liability. "NET CASH PROCEEDS" shall mean: (a) with respect to any Asset Sale (other than any issuance or sale of Equity Interests), the cash proceeds received by Parent or any of its Subsidiaries (including cash proceeds subsequently received (as and when received by Parent or any of its Subsidiaries) in respect of non-cash consideration initially received) net of (i) selling expenses (including reasonable brokers' fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes and U.S. Borrower's good faith estimate of income taxes paid or payable in connection with such sale); (ii) amounts provided as a reserve, in accordance with GAAP, against (x) any liabilities under any indemnification obligations associated with such Asset Sale or (y) any other liabilities retained by Parent or any of its Subsidiaries associated with the properties sold in such Asset Sale (PROVIDED that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds); (iii) U.S. Borrower's good faith estimate of payments required to be made with respect to unassumed liabilities relating to -25- the properties sold within 90 days of such Asset Sale (PROVIDED that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 90 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds); and (iv) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money which is secured by a Lien on the properties sold in such Asset Sale (so long as such Lien was permitted to encumber such properties under the Loan Documents at the time of such sale) and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such properties); (b) with respect to any Debt Issuance, any Equity Issuance or any other issuance or sale of Equity Interests by Holdings or any of its Subsidiaries, the cash proceeds thereof, net of customary fees, commissions, costs and other expenses incurred in connection therewith; and (c) with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received in respect thereof, net of all reasonable costs and expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event. "NET WORKING CAPITAL" shall mean, at any time, Consolidated Current Assets at such time minus Consolidated Current Liabilities at such time. "NON-GUARANTOR SUBSIDIARY" shall mean each Subsidiary that is not a Subsidiary Guarantor. "NOTES" shall mean any notes evidencing the Term Loans, Revolving Loans or Swingline Loans issued pursuant to this Agreement, if any, substantially in the form of EXHIBIT K-1, K-2, K-3 or K-4. "OBLIGATIONS" shall mean the Canadian Obligations and the U.S. Obligations. "OFAC" shall have the meaning assigned to such term in SECTION 3.22. "OFFER TO REDEEM" shall have the meaning assigned to such term in SECTION 2.10(j). "OFFICERS' CERTIFICATE" shall mean a certificate executed by the chairman of the Board of Directors (if an officer), the chief executive officer or the president and one of the Financial Officers, each in his or her official (and not individual) capacity. "ORGANIZATIONAL DOCUMENTS" shall mean, with respect to any person, (i) in the case of any corporation, the certificate of incorporation and by-laws (or similar documents) of such person, (ii) in the case of any limited liability company, the certificate of formation and operating agreement (or similar documents) of such person, (iii) in the case of any limited partnership, the certificate of formation and limited partnership agreement (or similar documents) of such person, (iv) in the case of any general partnership, the partnership agreement (or similar document) of such person and (v) in any other case, the functional equivalent of the foregoing. "OTHER LIST" shall have the meaning assigned to such term in SECTION 6.21. "OTHER TAXES" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including all interest, fines, penalties and additions to tax and related expenses with regard thereto) arising from any payment made or required to -26- be made under any Loan Document or from the execution, delivery, registration or enforcement of, or otherwise with respect to, any Loan Document. "PARENT" shall have the meaning assigned to such term in the preamble hereto. "PARTICIPANT" shall have the meaning assigned to such term in SECTION 11.04(e). "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "PERFECTION CERTIFICATE" shall mean a certificate in the form of EXHIBIT L-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise. "PERFECTION CERTIFICATE SUPPLEMENT" shall mean a certificate supplement in the form of EXHIBIT L-2 or any other form approved by the Collateral Agent. "PERMITTED ACQUISITION" shall mean any transaction or series of related transactions for the direct or indirect (a) acquisition of all or substantially all of the property of any person, or of any business or division of any person; (b) acquisition of in excess of 50% of the Equity Interests of any person, and otherwise causing such person to become a Subsidiary of such person; or (c) merger or consolidation or any other combination with any person (other than (x) among U.S. Borrower and/or its Subsidiaries as permitted by SECTIONS 6.05(c) and (d) and (y) between Parent and Holdings in connection with an IPO), if each of the following conditions is met: (i) no Default then exists or would result therefrom; (ii) after giving effect to such transaction on a Pro Forma Basis, (A) U.S. Borrower shall be in compliance with all covenants set forth in SECTION 6.10 as of the most recent Test Period (assuming, for purposes of SECTION 6.10, that such transaction, and all other Permitted Acquisitions consummated since the first day of the relevant Test Period for each of the financial covenants set forth in SECTION 6.10 ending on or prior to the date of such transaction, had occurred on the first day of such relevant Test Period), and (B) unless expressly approved by the Administrative Agent, the person or business to be acquired shall have generated positive cash flow for the Test Period most recently ended prior to the date of consummation of such acquisition; (iii) no Company shall, in connection with any such transaction, assume or remain liable with respect to any Indebtedness or other liability (including any material tax or ERISA liability) of the related seller or the business, person or properties acquired, except (A) to the extent permitted under SECTION 6.01 and (B) obligations not constituting Indebtedness incurred in the ordinary course of business and necessary or desirable to the continued operation of the underlying properties, and any other such liabilities or obligations not permitted to be assumed or otherwise supported by any Company hereunder shall be paid in full or released as to the business, persons or properties being so acquired on or before the consummation of such acquisition; (iv) the person or business to be acquired shall be, or shall be engaged in, a business of the type that U.S. Borrower and its Subsidiaries are permitted to be engaged in under SECTION 6.15 and the property acquired in connection with any such transaction shall be made subject to the Lien of the Security Documents to the extent required by SECTION 5.10 and shall be free and clear of any Liens, other than Permitted Collateral Liens; -27- (v) the Board of Directors of the person to be acquired shall not have indicated publicly its opposition to the consummation of such acquisition (which opposition has not been publicly withdrawn); (vi) all transactions in connection therewith shall be consummated in accordance with all applicable laws of all applicable Governmental Authorities; (vii) with respect to any transaction involving Acquisition Consideration of more than $10.0 million, unless the Administrative Agent shall otherwise agree, U.S. Borrower shall have provided the Administrative Agent and the Lenders with (A) historical financial statements for the last three fiscal years (or, if less, the number of years since formation) of the person or business to be acquired (audited if available and, in the case of a transaction involving Acquisition Consideration of more than $20.0 million, if available without undue cost or delay) and unaudited financial statements thereof for the most recent interim period which are available, (B) reasonably detailed projections for the succeeding five years pertaining to the person or business to be acquired and updated projections for U.S. Borrower after giving effect to such transaction, (C) a reasonably detailed description of all material information relating thereto and copies of all material documentation pertaining to such transaction, and (D) all such other information and data relating to such transaction or the person or business to be acquired as may be reasonably requested by the Administrative Agent or the Required Lenders; and (viii) at least 5 Business Days prior to the proposed date of consummation of the transaction, U.S. Borrower shall have delivered to the Agents and the Lenders an Officers' Certificate certifying that (A) such transaction complies with this definition (which shall have attached thereto reasonably detailed backup data and calculations showing such compliance), and (B) such transaction could not reasonably be expected to result in a Material Adverse Effect. "PERMITTED CANADIAN HEDGING AGREEMENT" shall have the meaning assigned to such term in the definition of "Canadian Obligations." "PERMITTED COLLATERAL LIENS" means (i) Contested Liens (as defined in the Security Agreement), (ii) the Liens described in clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (m) and (n) of SECTION 6.02 and (iii) in the case of Mortgaged Property, "Permitted Collateral Liens" shall mean the Liens described in clauses (a), (b), (c), (d), (e), (g), (k) and (n) of SECTION 6.02; PROVIDED, HOWEVER upon the Closing Date or upon the date of delivery of each additional Mortgage under SECTION 5.10, 5.11 or 5.13, Permitted Collateral Liens shall mean only those Liens set forth in Schedule B to the applicable Mortgage. "PERMITTED HOLDERS" shall mean (1) Sponsor, Caxton Associates, LLC, Caxton-Iseman (Ply Gem) L.P., Frederick J. Iseman, Lee D. Meyer, John Wayne, Shawn Poe, Mark Watson, Bryan Sveinson, David S. McCready, Robert A. Ferris, Steven M. Lefkowitz and any other person that is a controlled Affiliate of any of the foregoing and (2) any Related Party of any of the foregoing; PROVIDED that in no event shall any operating portfolio company or any holding company for any operating portfolio company (other than U.S. Borrower) be a Permitted Holder. "PERMITTED LIENS" shall have the meaning assigned to such term in SECTION 6.02. "PERMITTED SALE AND LEASEBACK TRANSACTION" means a refinancing by U.S. Borrower or its Subsidiaries (other than Canadian Borrower or any Canadian Subsidiary) following the Closing Date of all or a portion of the Assumed Debt with the proceeds of one or more Sale and Leaseback Transactions effected as operating leases involving the applicable properties securing the Assumed Debt; PRO- -28- VIDED that (i) at the time of and immediately after giving effect to such Permitted Sale and Leaseback Transaction and the application of the proceeds thereof, no Default shall have occurred and be continuing and (ii) the proceeds of up to 525% of the aggregate operating lease payments in respect of such Permitted Sale and Leaseback Transaction (such amount, the "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT") are used (x) first, to repay the applicable Assumed Debt being so refinanced and (y) second, are applied in accordance with Section 2.10(c) (it being understood that, to the extent a prepayment deposit is required by the terms of the Assumed Debt, U.S. Borrower may use proceeds of Revolving Loans to fund such prepayment deposit and use proceeds of the Sale and Leaseback Transaction to repay such Revolving Loans without any Commitment reduction). "PERMITTED SALE AND LEASEBACK TRANSACTION AMOUNT" shall have the meaning assigned to such term in the definition of "Permitted Sale and Leaseback Transaction." "PERMITTED TAX DISTRIBUTIONS" means payments, dividends or distributions by U.S. Borrower to Holdings or Parent or Parent to Holdings in order to pay consolidated or combined federal, state or local taxes not payable directly by U.S. Borrower or its Subsidiaries which payments by U.S. Borrower are not in excess of the tax liabilities that would have been payable by U.S. Borrower and its Subsidiaries on a stand-alone basis. "PERMITTED U.S. HEDGING AGREEMENT" shall have the meaning assigned to such term in the definition of "U.S. Obligations." "PERSON" shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership or government, or any agency or political subdivision thereof, in any case, whether acting in a personal, fiduciary or other capacity. "PLAN" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is maintained or contributed to by any Company or its ERISA Affiliate or with respect to which any Company could incur liability (including under Section 4069 of ERISA). "PPSA" shall mean the Personal Property Security Act as in effect from time to time (except as otherwise specified) in any applicable Province of Canada. "PREFERRED STOCK" shall mean, with respect to any person, any and all preferred or preference Equity Interests (however designated) of such person whether now outstanding or issued after the Closing Date. "PREFERRED STOCK ISSUANCE" shall mean the issuance or sale by Holdings or any of its Subsidiaries of any Preferred Stock after the Closing Date (other than (x) as permitted by SECTION 6.01 or (y) any Excluded Issuance). "PREMISES" shall have the meaning assigned thereto in the applicable Mortgage. "PRO FORMA BASIS" shall mean on a basis reasonably satisfactory to the Administrative Agent. "PRO FORMA COST SAVINGS" shall mean, with respect to any Test Period, the reductions in costs that occurred during the Test Period that are (1) directly attributable to an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X or (2) implemented, committed to be implemented or the commencement of implementation of which has begun in good faith by the busi- -29- ness that was the subject of any such asset acquisition within six months of the date of the asset acquisition and that are supportable and quantifiable by the underlying records of such business, as if, in the case of each of clauses (1) and (2), all such reductions in costs had been effected as of the beginning of such period, decreased by any incremental expenses incurred or to be incurred during the Test Period in order to achieve such reduction in costs. "PRO RATA PERCENTAGE" of any Revolving Lender at any time shall mean the percentage of the total Revolving Commitments of all Revolving Lenders represented by such Lender's Revolving Commitment. "PROPERTY" shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any person and whether now in existence or owned or hereafter entered into or acquired, including all Real Property. "PURCHASE MONEY OBLIGATION" shall mean, for any person, the obligations of such person in respect of Indebtedness (including Capital Lease Obligations) incurred for the purpose of financing all or any part of the purchase price of any property (including Equity Interests of any person) or the cost of installation, construction or improvement of any property and any refinancing thereof; PROVIDED, HOWEVER, that (i) such Indebtedness is incurred within one year after such acquisition of such property by such person and (ii) the amount of such Indebtedness does not exceed 100% of the cost of such acquisition, installation, construction or improvement, as the case may be. "QUALIFIED CAPITAL STOCK" of any person shall mean any Equity Interests of such person that are not Disqualified Capital Stock. "REAL PROPERTY" shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned, leased or operated by any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof. "REFINANCING" shall mean the repayment in full, and the termination of any commitment to make extensions of credit in connection with, all of the outstanding indebtedness of Parent or any of its Subsidiaries listed on SCHEDULE 1.01(e). "REGISTER" shall have the meaning assigned to such term in SECTION 11.04(c). "REGULATION D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION S-X" shall mean Regulation S-X promulgated under the Securities Act. "REGULATION T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. -30- "REGULATION X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REIMBURSEMENT OBLIGATIONS" shall mean U.S. Borrower's obligations under SECTION 2.18(e) to reimburse LC Disbursements. "RELATED PARTY" means, with respect to any person, (1) any controlling stockholder, controlling member, general partner, Subsidiary, or spouse or immediate family member (in the case of an individual), of such person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of any person referred to in the immediately preceding clause (2), acting solely in such capacity. "RELEASE" shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment. "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans, LC Exposure and unused Revolving and Term Loan Commitments representing more than 50% of the sum of all Loans outstanding, LC Exposure and unused Revolving and Term Loan Commitments at such time. "REQUIREMENTS OF LAW" shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, ordinances, rules, regulations or similar statutes or case law. "RESPONSE" shall mean (a) "response" as such term is defined in CERCLA, 42 U.S.C. section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above. "RESPONSIBLE OFFICER" of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof with responsibility for the administration of the obligations of such person in respect of this Agreement. "RESTRUCTURING EXPENSES" shall mean losses, expenses and charges incurred in connection with restructuring by U.S. Borrower and/or one or more of its Subsidiaries, including in connection with integration of acquired businesses or persons, disposition of one or more Subsidiaries or businesses, exiting of one or more lines of businesses and relocation or consolidation of facilities, including severance, lease termination and other non-ordinary-course, non-operating costs and expenses in connection therewith. "REVOLVING AVAILABILITY PERIOD" shall mean the period from and including the Closing Date to but excluding the earlier of (i) the Business Day preceding the Revolving Maturity Date and (ii) the date of termination of the Revolving Commitments. "REVOLVING BORROWING" shall mean a Borrowing comprised of Revolving Loans. -31- "REVOLVING COMMITMENT" shall mean, with respect to each U.S. Lender, the commitment, if any, of such U.S. Lender to make Revolving Loans hereunder up to the amount set forth on Schedule I to the Lender Addendum executed and delivered by such U.S. Lender or by an amendment to this Agreement pursuant to SECTION 11.02(d), or in the Assignment and Assumption pursuant to which such U.S. Lender assumed its Revolving Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to SECTION 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such U.S. Lender pursuant to SECTION 11.04. The aggregate amount of the Lenders' Revolving Commitments on the Closing Date is $65.0 million. "REVOLVING EXPOSURE" shall mean, with respect to any U.S. Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such U.S. Lender, PLUS the aggregate amount at such time of such Lender's LC Exposure, PLUS the aggregate amount at such of such Lender's Swingline Exposure. "REVOLVING LENDER" shall mean a U.S. Lender with a Revolving Commitment. "REVOLVING LOAN" shall mean a Loan made by the U.S. Lenders to U.S. Borrower pursuant to SECTION 2.01(c). Each Revolving Loan shall either be an ABR Revolving Loan or a Eurodollar Revolving Loan. "REVOLVING MATURITY DATE" shall mean the date which is five years after the Closing Date or, if such date is not a Business Day, the first Business Day thereafter. "ROLLOVER EQUITY" shall mean the phantom equity interest of certain existing equityholders of Seller in Holdings valued at $4.3 million on terms and conditions satisfactory to the Administrative Agent in its reasonable judgment. "SALE AND LEASEBACK TRANSACTION" has the meaning assigned to such term in SECTION 6.03. "SDN LIST" shall have the meaning assigned to such term in SECTION 6.21. "SECURED PARTIES" shall mean the U.S. Secured Parties and the Canadian Secured Parties. "SECURITIES ACT" shall mean the Securities Act of 1933. "SECURITIES COLLATERAL" shall have the meaning assigned to such term in the U.S. Security Agreement or the Canadian Security Agreement, as applicable. "SECURITY AGREEMENT" shall mean the U.S. Security Agreement or the Canadian Security Agreement, as applicable. "SECURITY DOCUMENTS" shall mean the U.S. Security Documents and the Canadian Security Documents. "SELLER" shall have the meaning assigned to such term in the first recital hereto. "SENIOR LEVERAGE RATIO" shall mean, at any date of determination, the ratio of Consolidated Senior Indebtedness on such date to Consolidated EBITDA for the Test Period then most recently ended. -32- "SENIOR SUBORDINATED NOTE AGREEMENT" shall mean any indenture, note purchase agreement or other agreement pursuant to which the Senior Subordinated Notes are issued as in effect on the date hereof and thereafter amended from time to time subject to the requirements of this Agreement. "SENIOR SUBORDINATED NOTE DOCUMENTS" shall mean the Senior Subordinated Notes, the Senior Subordinated Note Agreement, the Senior Subordinated Note Guarantees and all other documents executed and delivered with respect to the Senior Subordinated Notes or the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTE GUARANTEES" shall mean the guarantees of Parent and the U.S. Subsidiary Guarantors pursuant to the Senior Subordinated Note Agreement. "SENIOR SUBORDINATED NOTES" shall mean U.S. Borrower's 9.0% Senior Subordinated Notes due 2014 issued pursuant to the Senior Subordinated Note Agreement and any registered notes issued by U.S. Borrower in exchange for, and as contemplated by, such notes with substantially identical terms as such notes. "SPONSOR" shall mean Caxton-Iseman Capital, Inc. "STANDBY LETTER OF CREDIT" shall mean any standby letter of credit or similar instrument issued for the purpose of supporting (a) workers' compensation liabilities of U.S. Borrower or any of its Subsidiaries, (b) the obligations of third-party insurers of U.S. Borrower or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third-party insurers to obtain such letters of credit, (c) performance, payment, deposit or surety obligations of U.S. Borrower or any of its Subsidiaries if required by law or governmental rule or regulation or in accordance with custom and practice in the industry, (d) Indebtedness of U.S. Borrower or any of its Subsidiaries permitted to be incurred under SECTION 6.01 or (e) any other purpose not prohibited hereunder and acceptable to the Issuing Bank. "STATUTORY RESERVES" shall mean for any Interest Period for any Eurodollar Borrowing, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the United States Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurodollar liabilities" (as such term is used in Regulation D). Eurodollar Borrowings shall be deemed to constitute Eurodollar liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Lender under Regulation D. "SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of either Borrower or any Guarantor that is by its terms subordinated in right of payment to the Obligations of such Borrower and such Guarantor, as applicable, including the Senior Subordinated Notes. "SUBSIDIARY" shall mean, with respect to any person (the "PARENT") at any date, (i) any person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date and (ii) any other corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are, as of such date, owned, controlled or held by the parent and/or one or more subsidiaries of the parent. Unless the context requires otherwise, "Subsidiary" refers to a Subsidiary of U.S. Borrower. -33- "SUBSIDIARY GUARANTOR" shall mean each U.S. Subsidiary Guarantor and each Canadian Subsidiary Guarantor. "SUCCESSFUL SYNDICATION" shall have the meaning given to such term in the Fee Letter. "SURVEY" shall mean a survey of any Mortgaged Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Property, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Property and issue the endorsements of the type required by SECTION 4.01(o)(iii) or (b) otherwise acceptable to the Collateral Agent. "SWINGLINE COMMITMENT" shall mean the commitment of the Swingline Lender to make loans pursuant to SECTION 2.17, as the same may be reduced from time to time pursuant to SECTION 2.07 or SECTION 2.17. The amount of the Swingline Commitment shall initially be $10.0 million, but in no event exceed the Revolving Commitments. "SWINGLINE EXPOSURE" shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time. "SWINGLINE LENDER" shall have the meaning assigned to such term in the preamble hereto. "SWINGLINE LOAN" shall mean any loan made by the Swingline Lender pursuant to SECTION 2.17. "SYNDICATION AGENT" shall have the meaning assigned to such term in the preamble hereto. "TAX RETURN" shall mean all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes. "TAXES" shall mean (i) any and all present or future taxes, duties, levies, imposts, assessments, deductions, withholdings or other similar charges imposed by the U.S. Internal Revenue Service or any other taxing authority (whether domestic or foreign and including any federal, state, U.S. possession, county, local, provincial or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing, and (ii) any transferee, successor, joint and several, contractual or other liability (including liability pursuant to Treasury Regulation -34- Section 1.1502-6 (or any similar provision of state, local or non-U.S. law)) in respect of any item described in clause (i). "TERM BORROWING" shall mean a Borrowing comprised of Term Loans. "TERM LOAN COMMITMENTS" shall mean the U.S. Term Loan Commitments and the Canadian Term Loan Commitments. "TERM LOAN LENDER" shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan. "TERM LOAN MATURITY DATE" shall mean the date which is seven years after the Closing Date or, if such date is not a Business Day, the first Business Day thereafter. "TERM LOAN REPAYMENT DATE" shall have the meaning assigned to such term in SECTION 2.09(a). "TERM LOANS" shall mean the U.S. Term Loans and the Canadian Term Loans. "TEST PERIOD" shall mean, at any time, the four consecutive fiscal quarters of U.S. Borrower then last ended (in each case taken as one accounting period) for which financial statements have been or are required to be delivered pursuant to SECTION 5.01(a) or (b). "TITLE COMPANY" shall mean any title insurance company as shall be retained by U.S. Borrower and reasonably acceptable to the Administrative Agent. "TITLE POLICY" shall have the meaning assigned to such term in SECTION 4.01(o)(iii). "TOTAL LEVERAGE RATIO" shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test Period then most recently ended. "TRANSACTION DOCUMENTS" shall mean the Acquisition Documents, the Senior Subordinated Note Documents and the Loan Documents. "TRANSACTIONS" shall mean, collectively, the transactions to occur on or prior to the Closing Date pursuant to the Transaction Documents, including (a) the consummation of the Acquisition; (b) the execution, delivery and performance of the Loan Documents and the initial borrowings hereunder; (c) the Refinancing; (d) the Equity Financing; (e) the issuance of the Senior Subordinated Notes; (f) the issuance of the Rollover Equity; and (g) the payment of all fees and expenses to be paid on or prior to the Closing Date and owing in connection with the foregoing. "TRANSFERRED GUARANTOR" shall have the meaning assigned to such term in SECTION 7.09. "TYPE," when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR Rate or the Alternate Base Rate. "UCC" shall mean the Uniform Commercial Code as in effect from time to time (except as otherwise specified) in any applicable state or jurisdiction. "UNITED STATES" shall mean the United States of America. -35- "U.S. BORROWER" shall have the meaning assigned to such term in the preamble hereto. "U.S. BORROWING REQUEST" shall mean a request by U.S. Borrower in accordance with the terms of SECTION 2.03 and substantially in the form of EXHIBIT C-1, or such other form as shall be approved by the Administrative Agent. "U.S. COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained by the Collateral Agent for the benefit of the U.S. Secured Parties, in accordance with the provisions of SECTION 9.01. "U.S. GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in SECTION 7.01. "U.S. GUARANTORS" shall have the meaning assigned to such term in SECTION 7.01. "U.S. INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of EXHIBIT P-1. "U.S. LENDERS" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum that make U.S. Loans or provide Commitments to U.S. Borrower and (b) any financial institution that has become a party hereto pursuant to an Assignment and Assumption that makes U.S. Loans or provides a Commitment to U.S. Borrower, other than, in each case, any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Assumption. Unless the context clearly indicates otherwise, the term "U.S. Lenders" shall include the Swingline Lender. "U.S. LOAN PARTIES" shall mean Parent, U.S. Borrower and the U.S. Subsidiary Guarantors. "U.S. LOANS" shall mean all Loans other than the Canadian Term Loans. "U.S. MORTGAGED PROPERTY" shall mean the Mortgaged Properties owned or leased by the U.S. Loan Parties. "U.S. OBLIGATIONS" shall mean (a) obligations of U.S. Borrower and the other U.S. Loan Parties from time to time arising (including by way of Article VII) under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the U.S. Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by U.S. Borrower and the other U.S. Loan Parties under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of U.S. Borrower and the other U.S. Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of U.S. Borrower and the other U.S. Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of U.S. Borrower and the other U.S. Loan Parties under each Hedging Agreement relating to either the U.S. Loans or foreign currency exchange -36- rates entered into with any counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (provided that each shall provide that it terminates or expires upon, or prior to, the repayment of all Loans hereunder) (each, a "PERMITTED U.S. HEDGING AGREEMENT") and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any U.S. Lender, any Affiliate of a U.S. Lender, the Administrative Agent or the Collateral Agent arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds, in each case, with respect to U.S. Loans. "U.S. SECURED PARTIES" shall mean, collectively, the Administrative Agent, the Collateral Agent, each other Agent, the U.S. Lenders and each party to a Permitted U.S. Hedging Agreement if such person executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such person (i) appoints the Collateral Agent as its agent under the applicable Loan Documents and (ii) agrees to be bound by the provisions of SECTIONS 11.03 and 11.09. "U.S. SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of EXHIBIT M-1 among the U.S. Loan Parties and Collateral Agent for the benefit of the Secured Parties. "U.S. SECURITY AGREEMENT COLLATERAL" shall mean all property pledged or granted as collateral pursuant to the U.S. Security Agreement delivered on the Closing Date or thereafter pursuant to SECTION 5.10. "U.S. SECURITY DOCUMENTS" shall mean the U.S. Security Agreement, the Mortgages entered into by the U.S. Loan Parties and each other security document or pledge agreement delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Obligations, and all UCC or other financing statements or instruments of perfection required by this Agreement, the U.S. Security Agreement, any Mortgage or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the U.S. Security Agreement or any Mortgage and any other document or instrument utilized to pledge as collateral for the Obligations any property. "U.S. SUBSIDIARIES" shall mean all Subsidiaries of U.S. Borrower other than Canadian Borrower and Canadian Subsidiaries. "U.S. SUBSIDIARY GUARANTOR" shall mean each U.S. Subsidiary listed on SCHEDULE 1.01(f), and each other U.S. Subsidiary that is or becomes a party to this Agreement pursuant to SECTION 5.10. "U.S. TERM LOAN" shall mean the term loans made by the U.S. Lenders to U.S. Borrower pursuant to SECTION 2.01(a). Each U.S. Term Loan shall be either an ABR Term Loan or a Eurodollar Term Loan. "U.S. TERM LOAN COMMITMENT" shall mean, with respect to each U.S. Lender, the commitment, if any, of such U.S. Lender to make a U.S. Term Loan hereunder on the Closing Date in the amount set forth on Schedule I to the Lender Addendum executed and delivered by such U.S. Lender. The aggregate amount of the Lenders' U.S. Term Loan Commitments is $160.0 million. "VOTING STOCK" shall mean, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such person. -37- "WHOLLY OWNED SUBSIDIARY" shall mean, as to any person, (a) any corporation 100% of whose capital stock (other than directors' qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this Agreement, Loans may be classified and referred to by Class (E.G., a "REVOLVING LOAN") or by Type (E.G., a "EURODOLLAR LOAN") or by Class and Type (E.G., a "EURODOLLAR REVOLVING LOAN"). Borrowings also may be classified and referred to by Class (E.G., a "REVOLVING BORROWING," "BORROWING OF U.S. TERM LOANS") or by Type (E.G., a "EURODOLLAR BORROWING") or by Class and Type (E.G., a "EURODOLLAR REVOLVING BORROWING"). SECTION 1.03 TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any Loan Document, agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any person shall be construed to include such person's successors and assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, unless otherwise indicated. SECTION 1.04 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect on the date hereof unless otherwise agreed to by U.S. Borrower and the Required Lenders. SECTION 1.05 RESOLUTION OF DRAFTING AMBIGUITIES. Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof and thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof. ARTICLE II THE CREDITS SECTION 2.01 COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly: -38- (a) to make a U.S. Term Loan to U.S. Borrower on the Closing Date in the principal amount not to exceed its U.S. Term Loan Commitment; and (b) to make a Canadian Term Loan to Canadian Borrower on the Closing Date in the principal amount not to exceed its Canadian Term Loan Commitment; and (c) to make Revolving Loans to U.S. Borrower, at any time and from time to time on or after the Closing Date until the earlier of the Revolving Maturity Date and the termination of the Revolving Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment; PROVIDED that Borrower may only borrow $2.7 million of Revolving Loans on the Closing Date. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. Within the limits set forth in clause (b) above and subject to the terms, conditions and limitations set forth herein, U.S. Borrower may borrow, pay or prepay and reborrow Revolving Loans. SECTION 2.02 LOANS. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; PROVIDED that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to SECTION 2.18(e)(ii), (x) ABR Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $500,000 and not less than $2.5 million or (ii) equal to the remaining available balance of the applicable Commitments and (y) the Eurodollar Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $500,000 and not less than $2.5 million or (ii) equal to the remaining available balance of the applicable Commitments. (b) Subject to SECTIONS 2.11 and 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request pursuant to SECTION 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; PROVIDED that the Borrowers shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Except with respect to Loans made pursuant to SECTION 2.18(e)(ii), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 12:00 noon, New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account as directed by U.S. Borrower in the applicable U.S. Borrowing Request maintained with the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. on the date of any Borrowing that such Lender will not make available to the Administrative -39- Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, each of such Lender and such Borrower severally agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of either Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement, and such Borrower's obligation to repay the Administrative Agent such corresponding amount pursuant to this SECTION 2.02(d) shall cease. (e) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date or Term Loan Maturity Date, as applicable. SECTION 2.03 BORROWING PROCEDURE. To request a Revolving Borrowing or Term Borrowing, the applicable Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Borrowing Request to the Administrative Agent (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each Borrowing Request shall be irrevocable and shall specify the following information in compliance with SECTION 2.02: (a) whether the requested Borrowing is to be a Borrowing of Revolving Loans, U.S. Term Loans or Canadian Term Loans; (b) the aggregate amount of such Borrowing; (c) the date of such Borrowing, which shall be a Business Day; (d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (e) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; PROVIDED that until the earlier of (x) the date on which the Syndication Agent shall have notified U.S. Borrower that a Successful Syndication has been achieved and (y) 60 days after the Closing Date, the Interest Period shall be seven days; (f) the location and number of the applicable Borrower's account to which funds are to be disbursed, which shall comply with the requirements of SECTION 2.02(c); and (g) that the conditions set forth in SECTIONS 4.02(b) THROUGH (d) have been satisfied as of the date of the notice. -40- If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso in clause (e) above). Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04 EVIDENCE OF DEBT; REPAYMENT OF LOANS. (a) U.S. Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each U.S. Term Loan Lender, the principal amount of each U.S. Term Loan of such U.S. Term Loan Lender as provided in SECTION 2.09, (ii) to the Administrative Agent for the account of each Revolving Lender, the then unpaid principal amount of each Revolving Loan of such Revolving Lender on the Revolving Maturity Date and (iii) to the Swingline Lender, the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; PROVIDED that on each date that a Revolving Borrowing is made, U.S. Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested. (b) Canadian Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Canadian Term Loan Lender, the principal amount of each Canadian Term Loan of such Canadian Term Loan Lender as provided in SECTION 2.09. (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (d) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type and Class thereof and the Interest Period applicable thereto; (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder; and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (e) The entries made in the accounts maintained pursuant to paragraphs (c) and (d) above shall be PRIMA FACIE evidence of the existence and amounts of the obligations therein recorded; PROVIDED that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrowers to repay the Loans in accordance with their terms. (f) Any Lender by written notice to the applicable Borrower (with a copy to the Administrative Agent) may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in the form of EXHIBIT K-I, K-2, K-3 or K-4, as the case may be. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to SECTION 11.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). -41- SECTION 2.05 FEES. (a) COMMITMENT FEE. Each Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (a "COMMITMENT FEE") equal to the Applicable Fee per annum on the average daily unused amount of each Commitment of such Lender to such Borrower during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued Commitment Fees shall be payable in arrears (A) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the date hereof, and (B) on the date on which such Commitment terminates. Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing Commitment Fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose). (b) ADMINISTRATIVE AGENT FEES. U.S. Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter or such other fees payable in the amounts and at the times separately agreed upon between U.S. Borrower and the Administrative Agent (the "ADMINISTRATIVE AGENT FEES"). (c) LC AND FRONTING FEES. U.S. Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee ("LC PARTICIPATION FEE") with respect to its participations in Letters of Credit, which shall accrue at a rate equal to the Applicable Margin from time to time used to determine the interest rate on Eurodollar Revolving Loans pursuant to SECTION 2.06 on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations) during the period from and including the Closing Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee ("FRONTING FEE"), which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations) during the period from and including the Closing Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's customary fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued LC Participation Fees and Fronting Fees shall be payable in arrears (i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which the Revolving Commitments terminate. Any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand therefor. All LC Participation Fees and Fronting Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that U.S. Borrower shall pay the Fronting Fees directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06 INTEREST ON LOANS. (a) Subject to the provisions of SECTION 2.06(c), the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time. -42- (b) Subject to the provisions of SECTION 2.06(c), the Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by either Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall, to the extent permitted by applicable law, bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal and premium, if any, of or interest on any Loan, 2% PLUS the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this SECTION 2.06 or (ii) in the case of any other amount, 2% PLUS the rate applicable to ABR Revolving Loans as provided in SECTION 2.06(a) (in either case, the "DEFAULT RATE"). (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; PROVIDED that (i) interest accrued pursuant to SECTION 2.06(C) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or a Swingline Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBOR Rate shall be determined by the Administrative Agent in accordance with the provisions of this Agreement and such determination shall be conclusive absent manifest error. (f) For purposes of the Interest Act (Canada), whenever interest payable pursuant to this Agreement is calculated with respect to any monetary Obligation relating to the Canadian Term Loans on the basis of a period other than a calendar year (the "CALCULATION PERIOD"), each rate of interest determined pursuant to such calculation expressed as an annual rate is equivalent to such rate as so determined, MULTIPLIED by the actual number of days in the calendar year in which the same is to be ascertained and DIVIDED by the number of days in the Calculation Period. (g) The principle of deemed reinvestment of interest with respect to any monetary Obligation relating to the Canadian Term Loans shall not apply to any interest calculation under this Agreement. (h) The rates of interest with respect to any monetary Obligation relating to the Canadian Term Loans stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. SECTION 2.07 TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Closing Date, The Revolving Commitments, the Swingline Commitment and the LC Commitment shall automatically terminate on the Revolving Maturity Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on March 31, 2004, if the initial Credit Extension shall not have occurred by such time. -43- (b) At its option, the applicable Borrower may at any time terminate, or from time to time permanently reduce, the Commitments of any Class; PROVIDED that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1.0 million and not less than $5.0 million and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with SECTION 2.10, the aggregate amount of Revolving Exposures would exceed the aggregate amount of Revolving Commitments. (c) The applicable Borrower shall notify the Administrative Agent in writing of any election to terminate or reduce the Commitments under SECTION 2.07(c) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by a Borrower pursuant to this Section shall be irrevocable; PROVIDED that a notice of termination of the Commitments delivered by a Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by a Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. (d) The LC Commitment shall automatically be reduced on a dollar for dollar basis by the face amount of letters of credit terminated in connection with any Permitted Sale and Leaseback Transaction one Business Day after the receipt of such proceeds; PROVIDED that the LC Commitment shall not be reduced below $10.0 million pursuant to this SECTION 2.07(d). SECTION 2.08 INTEREST ELECTIONS. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the applicable Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding anything to the contrary, the Borrowers shall not be entitled to request any conversion or continuation that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any one time. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. Any interest or conversion election pursuant to this Agreement does not constitute a new Borrowing but simply an adjustment of the basis on which interest payable to the applicable Lenders will be calculated. (b) To make an election pursuant to this Section, the applicable Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Interest Election Request to the Administrative Agent not later than the time that a Borrowing Request would be required under SECTION 2.03 if such Borrower were requesting a Revolving Borrowing or Term Borrowing of the Type resulting from such election to be made on the effective date of such election. Each Interest Election Request shall be irrevocable. (c) Each Interest Election Request shall specify the following information in compliance with SECTION 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, or if outstanding Borrowings -44- are being combined, allocation to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period"; PROVIDED that until the earlier of (x) the date on which the Syndication Agent shall have notified U.S. Borrower that a Successful Syndication has been achieved and (y) 60 days after the Closing Date, the Interest Period shall be seven days. If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration (subject to the proviso in clause (iv) above). (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If an Interest Election Request with respect to a Eurodollar Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing, the Administrative Agent or the Required Lenders may require, by notice to U.S. Borrower, that (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.09 AMORTIZATION OF TERM BORROWINGS. (a) U.S. Borrower shall pay to the Administrative Agent, for the account of the U.S. Lenders, on the dates set forth on ANNEX II, or if any such date is not a Business Day, on the immediately preceding Business Day (each such date, a "TERM LOAN REPAYMENT DATE"), a principal amount of the U.S. Term Loans equal to the amount set forth on ANNEX II for such date (as adjusted from time to time pursuant to SECTION 2.10(h)), together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment. (b) Canadian Borrower shall pay to the Administrative Agent, for the account of the Canadian Term Loan Lenders, on the Term Loan Repayment Dates, a principal amount of the Canadian Term Loans equal to the amount set forth on ANNEX II for such date (as adjusted from time to time pursuant to SECTION 2.10(H)), together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment. (c) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date. -45- SECTION 2.10 OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS AND MANDATORY OFFERS TO REDEEM. (a) OPTIONAL PREPAYMENTS. Each Borrower shall have the right at any time and from time to time to prepay any Borrowing made by such Borrower, in whole or in part, subject to the requirements of this SECTION 2.10; PROVIDED that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $2.5 million. (b) REVOLVING LOAN PREPAYMENTS. (i) In the event of the termination of all the Revolving Commitments, U.S. Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Borrowings and all outstanding Swingline Loans and replace all outstanding Letters of Credit or cash collateralize all outstanding Letter of Credit in accordance with the procedures set forth in SECTION 2.18(i). (ii) In the event of any partial reduction of the Revolving Commitments, then (x) at or prior to the effective date of such reduction, the Administrative Agent shall notify U.S. Borrower and the Revolving Lenders of the sum of the Revolving Exposures after giving effect thereto and (y) if the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments after giving effect to such reduction, then U.S. Borrower shall, on the date of such reduction, FIRST, repay or prepay Swingline Loans, SECOND, repay or prepay Revolving Borrowings and THIRD, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (iii) In the event that the sum of all Lenders' Revolving Exposures exceeds the Revolving Commitments then in effect, U.S. Borrower shall, without notice or demand, immediately FIRST, repay or prepay Revolving Borrowings, and SECOND, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (iv) In the event that the aggregate LC Exposure exceeds the LC Commitment then in effect, U.S. Borrower shall, without notice or demand, immediately replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in SECTION 2.18(i), in an aggregate amount sufficient to eliminate such excess. (c) ASSET SALES. (I) Not later than three Business Days following the receipt of any Net Cash Proceeds from a Permitted Sale and Leaseback Transaction, U.S. Borrower shall utilize the portion of the Permitted Sale and Leaseback Transaction Amount which has not been applied towards the prepayment of the Assumed Debt being refinanced or the repayment of Revolving Loans made to fund any prepayment deposit required by the terms of the Assumed Debt being refinanced to make an Offer to Redeem, in accordance with SECTIONS 2.10(h), (i) and (j), the maximum principal amount of Borrowings that may be redeemed by applying an aggregate amount equal to 100% of the portion of the Permitted Sale and Leaseback Transaction Amount not so applied. (II) Not later than three Business Days following the receipt of any Net Cash Proceeds from an Asset Sale pursuant to SECTION 6.06(h), U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to such Offer to Redeem in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED that (x) notwithstanding anything to the contrary in SECTION 2.10(H) such amount shall first be applied to redeem the Canadian Term Loans on behalf of the Canadian Borrower and (y) any such amount remaining after the redemption in full of the Canadian Term Loans shall be applied in accordance with SECTION 2.10(c)(III). -46- (III) Not later than three Business Days following the receipt of any Net Cash Proceeds of any Asset Sale (other than a Permitted Sale and Leaseback Transaction or an Asset Sale pursuant to SECTION 6.06(h)) by Parent, U.S. Borrower or any U.S. Subsidiary, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); and not later than one Business Day following the receipt of any Net Cash Proceeds of any Asset Sale by Canadian Borrower or any Canadian Subsidiary, the Borrowers shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED, in each case, that: (i) so long as no Default shall then exist or would arise therefrom, no such Offer to Redeem shall be required under this SECTION 2.10(c)(III)(i) with respect to (A) any Asset Sale permitted by SECTION 6.06(a), (B) the disposition of property which constitutes a Casualty Event, or (C) Asset Sales for fair market value resulting in no more than $250,000 in Net Cash Proceeds per Asset Sale (or series of related Asset Sales) and less than $1.5 million in Net Cash Proceeds in any fiscal year; PROVIDED that clause (C) shall not apply in the case of any Asset Sale described in clause (b) of the definition thereof or to an Asset Sale pursuant to SECTION 6.06(h); and (ii) so long as no Default shall then exist or would arise therefrom and the aggregate of Net Cash Proceeds of Asset Sales shall not exceed $20.0 million in any fiscal year of U.S. Borrower (not including for purposes of this limit only, Net Cash Proceeds of Permitted Sale and Leaseback Transactions or an Asset Sale pursuant to SECTION 6.06(h)), no Offer to Redeem shall be required on such date to the extent that (A) U.S. Borrower shall have delivered an Officers' Certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds are expected to be reinvested in fixed or capital assets within 365 days following the date of such Asset Sale (which Officers' Certificate shall set forth the estimates of the proceeds to be so expended); and (B) all Net Cash Proceeds in respect of all Asset Sales (other than those referred to in clause (C) of SECTION 2.10(c)(III)(i) in excess of $10.0 million in the aggregate at any time shall be held in the applicable Collateral Account and released therefrom only in accordance with the provisions of ARTICLE IX; PROVIDED that if all or any portion of such Net Cash Proceeds is not so reinvested within such 365-day period, such unused portion shall be applied to make an Offer to Redeem on the last day of such period as provided in this SECTION 2.10(c)(III); and PROVIDED, FURTHER, that if the property subject to such Asset Sale constituted Collateral, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with SECTIONS 5.10 and 5.11. (d) DEBT ISSUANCE. Not later than one Business Day following the receipt of any Net Cash Proceeds of any Debt Issuance by Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j). Not later than one Business Day following the receipt of any Net Cash Proceeds of any Debt Issuance by Canadian Borrower or any Canadian Subsidiary, the Borrowers, shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j). (e) EQUITY ISSUANCE OR PREFERRED STOCK ISSUANCE. Not later than one Business Day following the receipt of any Net Cash Proceeds of any Equity Issuance, U.S. Borrower shall apply an amount equal to 50% of such Net Cash Proceeds to make prepayments in accordance with SEC- -47- TIONS 2.10(h) and (i). Not later than one Business Day following the receipt of any Net Cash Proceeds of any Preferred Stock Issuance by Holdings, Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to make prepayments in accordance with SECTIONS 2.10(h) and (i). (f) CASUALTY EVENTS. Not later than one Business Day following the receipt of any Net Cash Proceeds from a Casualty Event by Parent, U.S. Borrower or any of its U.S. Subsidiaries, U.S. Borrower shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); and not later than one Business Day following the receipt of any Net Cash Proceeds from a Casualty Event by Canadian Borrower or any Canadian Subsidiary, the Borrowers, shall make an Offer to Redeem the maximum principal amount of Borrowings that may be redeemed by applying an amount equal to 100% of such Net Cash Proceeds to make redemptions in accordance with SECTIONS 2.10(h), (i) and (j); PROVIDED, in each case, that: (i) so long as no Default shall then exist or arise therefrom, no Offer to Redeem shall be required on such date to the extent that U.S. Borrower shall have delivered an Officers' Certificate to the Administrative Agent on or prior to such date stating that such proceeds are expected to be used to repair, replace or restore any property in respect of which such Net Cash Proceeds were paid or to invest in other fixed or capital assets, no later than 365 days (or such longer period as may be approved by the Administrative Agent) following the date of receipt of such proceeds; PROVIDED that if the property subject to such Casualty Event constituted Collateral under the Security Documents, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with SECTIONS 5.10 and 5.11; (ii) all Net Cash Proceeds in respect of all Casualty Events in excess of $10.0 million in the aggregate shall be held in the applicable Collateral Account and released therefrom only in accordance with the provisions of ARTICLE IX; and (iii) if any portion of such Net Cash Proceeds shall not be so applied within such 365-day (or longer) period, such unused portion shall be applied to make an Offer to Redeem on the last day of such period as provided in this SECTION 2.10(f). (g) EXCESS CASH FLOW. No later than the earlier of (i) 90 days after the end of each Excess Cash Flow Period and (ii) the date on which the financial statements with respect to such fiscal year in which such Excess Cash Flow Period occurs are delivered pursuant to SECTION 5.01(a), U.S. Borrower shall make prepayments in accordance with SECTIONS 2.10(h) and (i) in an aggregate amount equal to the excess of (x) 50% of Excess Cash Flow for the Excess Cash Flow Period then ended less (y) any voluntary prepayments of Term Loans and any permanent voluntary reductions to the Revolving Commitments to the extent that an equal amount of the Revolving Loans simultaneously is repaid, in each case so long as such amounts are not already reflected in Debt Service, during such Excess Cash Flow Period; PROVIDED that only 25% of Excess Cash Flow for the Excess Cash Flow Period then ended need be applied pursuant to this SECTION 2.10(g) if the Senior Leverage Ratio is less than 1.5:1.0 as of the end of such Excess Cash Flow Period. (h) APPLICATION OF PREPAYMENTS AND REDEMPTIONS. (i) Prior to any optional (subject to SECTION 2.10(a)) or mandatory prepayment or redemption pursuant to any Offer to Redeem hereunder, the applicable Borrower shall select the Borrowing or Borrowings to be prepaid or redeemed and shall specify such selection in the notice of such prepayment or Offer to Redeem pursuant to SECTION 2.10(i), -48- subject to the provisions of this SECTION 2.10(h). Subject to SECTION 2.10(h)(iii), any prepayments or redemptions of Term Loans pursuant to SECTION 2.10(a), (c), (d), (e), (f) or (g) shall be applied to reduce scheduled prepayments required under SECTIONS 2.09(a) and (b) on a PRO RATA basis among the prepayments remaining to be made on each Term Loan Repayment Date and shall be applied, in the case of prepayments or redemptions to be made solely by U.S. Borrower, FIRST, to U.S. Term Loans and SECOND if all U.S. Term Loans have been repaid, to Canadian Term Loans on behalf of Canadian Borrower, and, in the case of prepayments or redemptions by the Borrowers, FIRST, by Canadian Borrower to Canadian Term Loans and SECOND, if all Canadian Term Loans have been repaid, by U.S. Borrower to U.S. Term Loans. After application of redemptions and mandatory prepayments described above in this SECTION 2.10(h) and to the extent there are redemption or mandatory prepayment amounts remaining after such application, the Revolving Commitments shall be permanently reduced ratably among the Revolving Lenders in accordance with their applicable Revolving Commitments in an aggregate amount equal to such excess, and U.S. Borrower shall comply with SECTION 2.10(b). (ii) Amounts to be applied pursuant to this SECTION 2.10 to the prepayment or redemption of Term Loans and Revolving Loans shall be applied, as applicable, first to reduce outstanding ABR Term Loans and ABR Revolving Loans, respectively. Any amounts remaining after each such application shall be applied to prepay or redeem Eurodollar Term Loans or Eurodollar Revolving Loans, as applicable. Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this SECTION 2.10 shall be in excess of the amount of the ABR Loans at the time outstanding (an "EXCESS AMOUNT"), only the portion of the amount of such prepayment or redemption as is equal to the amount of such outstanding ABR Loans shall be immediately prepaid or redeemed and, at the election of the applicable Borrower, the balance of such required prepayment shall be either (A) deposited in the applicable Collateral Account and applied to the prepayment or redemption of Eurodollar Loans on the last day of the then next-expiring Interest Period for Eurodollar Loans; PROVIDED that (i) interest in respect of such Excess Amount shall continue to accrue thereon at the rate provided hereunder for the Loans which such Excess Amount is intended to repay until such Excess Amount shall have been used in full to repay such Loans and (ii) at any time while a Default has occurred and is continuing, the Administrative Agent may, and upon written direction from the Required Lenders shall, apply any or all proceeds then on deposit in either Collateral Account to the payment of such Loans in an amount equal to such Excess Amount or (B) prepaid immediately, together with any amounts owing to the Lenders under SECTION 2.13. (iii) Notwithstanding SECTIONS 2.10(e) and 2.10(g), the aggregate amount of all prepayments by the Borrowers with respect to each Canadian Term Loan pursuant to SECTIONS 2.10(e) and 2.10(g) and SECTION 2.09 as in effect on the Closing Date within the first five years following the Closing Date shall not exceed 25% of the initial principal amount of that Canadian Term Loan, except for payments required as a result of an acceleration of the Obligations of the Borrowers pursuant to ARTICLE VIII. For greater certainty and notwithstanding any other provision of this Agreement, the failure of the Borrowers to make any prepayment contemplated in SECTIONS 2.10(e) and 2.10(g) or SECTION 2.09 solely as a consequence of the immediately preceding sentence shall not constitute a Default. (i) NOTICE OF PREPAYMENT OR OFFER TO REDEEM. The applicable Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by written notice of any prepayment or Offer to Redeem hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment, (iii) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., New York City time, on the date of prepayment and (iv) in the case of an Offer to Redeem, five Business Days prior to the proposed date of redemption. Each such notice shall be irrevocable; PROVIDED that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by SECTION 2.07, then such notice of prepayment may be -49- revoked if such termination is revoked in accordance with SECTION 2.07. Each such notice shall specify the prepayment or redemption date, the principal amount of each Borrowing or portion thereof to be prepaid or redeemed and, in the case of a mandatory prepayment or Offer to Redeem, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Such notice to the Lenders may be by electronic communication. Each partial prepayment or Offer to Redeem of any Borrowing shall be in an amount that would be permitted in the case of a Credit Extension of the same Type as provided in SECTION 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment or Offer to Redeem of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing and otherwise in accordance with this SECTION 2.10. Prepayments and Offers to Redeem shall be accompanied by accrued interest to the extent required by SECTION 2.06. The Administrative Agent shall advise the applicable Borrower if an Offer to Redeem is accepted or declined by the Lenders on the Business Day prior to the proposed redemption date. If an Offer to Redeem is declined all funds that were to be used to redeem Borrowings shall revert to the applicable Borrower. (j) MANDATORY OFFERS TO REDEEM. When required by SECTIONS 2.10(c), (d) and (f), each Borrower shall make an offer to redeem Borrowings made by the Borrowers in accordance with the terms of SECTION 2.10(i), which offer may be accepted or declined by the Lenders in accordance with SECTION 11.02(e) (an "OFFER TO REDEEM"). If any Offer to Redeem is accepted, all redemptions shall be made in accordance with SECTION 2.10(h). SECTION 2.11 ALTERNATE RATE OF INTEREST. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be final and conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or (b) the Administrative Agent is advised in writing by the Required Lenders that the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give written notice thereof to U.S. Borrower and the Lenders as promptly as practicable thereafter and, until the Administrative Agent notifies U.S. Borrower and the Lenders that the circumstances giving rise to such notice no longer exist (which the Administrative Agent agrees to use its commercially reasonable efforts to do promptly after it learns such circumstances cease to exist), (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.12 INCREASED COSTS. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against property of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank; or -50- (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition or expense affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, the Issuing Bank or such Lender's or the Issuing Bank's holding company, if any, of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered, it being understood that, to the extent duplicative of the provisions of SECTION 2.15, this SECTION 2.12 shall not apply to Taxes. (b) If any Lender or the Issuing Bank determines (in good faith, but in its sole absolute discretion) that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this SECTION 2.12 shall be delivered to the applicable Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Such Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this SECTION 2.12 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; PROVIDED that neither Borrower shall be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies such Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; PROVIDED, FURTHER, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall not begin earlier than the date of effectiveness of the Change in Law. SECTION 2.13 BREAKAGE PAYMENTS. In the event of (a) the payment or prepayment, whether optional or mandatory, of any principal of any Eurodollar Loan earlier than the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto as a result of a request by a Borrower pursuant to SECTION 2.16, then, in -51- any such event, such Borrower shall compensate each Lender for the loss (other than lost profit or spread), cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this SECTION 2.13 shall be delivered to the applicable Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Such Borrower shall pay such Lender the amount shown as due on any such certificate within 5 days after receipt thereof. SECTION 2.14 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS. (a) Each Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or Reimbursement Obligations, or of amounts payable under SECTION 2.12, 2.13 or 2.15, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff, deduction or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 677 Washington Boulevard, Stamford, Connecticut, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to SECTIONS 2.12, 2.13, 2.15 and 11.03 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, unless specified otherwise, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars, except as expressly specified otherwise. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, Reimbursement Obligations, interest and fees then due hereunder, such funds shall be applied (i) FIRST, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) SECOND, towards payment of principal and Reimbursement Obligations then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and Reimbursement Obligations then due to such parties. (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise (including by exercise of its rights under SECTION 9.1 of the Security Agreement), obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lend- -52- ers to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; PROVIDED that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by either Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to U.S. Borrower or any of its Subsidiaries or Affiliates (as to which the provisions of this paragraph shall apply). Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation. If under applicable bankruptcy, insolvency or any similar law any Secured Party receives a secured claim in lieu of a setoff or counterclaim to which this SECTION 2.14(c) applies, such Secured Party shall to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights to which the Secured Party is entitled under this SECTION 2.14(c) to share in the benefits of the recovery of such secured claim. (d) Unless the Administrative Agent shall have received notice from the applicable Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to SECTION 2.02(c), 2.14(d), 2.17(d), 2.18(d), 2.18(e) or 11.03(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.15 TAXES. (a) Any and all payments by or on account of any obligation of either Borrower hereunder or under any other Loan Document shall be made without setoff, counterclaim or other defense and free and clear of and without deduction or withholding for any and all Indemnified Taxes; PROVIDED that if either Borrower or any Secured Party shall be required by law to deduct or pay any Indemnified Taxes from or in respect of such payments, then (i) the sum payable shall be increased as necessary so that after making or allowing for all required deductions and payments (including deductions, withholdings or payments applicable to additional sums payable under this SECTION 2.15) the Administrative Agent, any Lender or the Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions, withholdings or payments been required, (ii) such Borrower shall make such deductions or withholdings, as are required to be made by it and (iii) such Borrower shall pay the full amount deducted or withheld by it to the relevant Governmental Authority in accordance with applicable law. -53- (b) In addition, such Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Each Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of such Borrower hereunder or under any other Loan Document, or otherwise with regard to any Loan Document, (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this SECTION 2.15) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to either Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes and in any event within 30 days of any such payment being due, by either Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Each Foreign Lender shall deliver to the Borrowers and the Administrative Agent two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit Q and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Foreign Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrowers under this Agreement and the other Loan Documents. Such forms shall be delivered by each Foreign Lender on or before the date it becomes a party to this Agreement. In addition, each Foreign Lender shall deliver such forms within ten (10) Business Days after receipt of a written notification from the Borrowers that any form previously delivered by such Foreign Lender is invalid or is due to expire or to become obsolete. Each Foreign Lender shall promptly notify the Borrowers at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrowers (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Foreign Lender shall not be required to deliver any form pursuant to this paragraph that such Foreign Lender is not legally able to deliver. (f) If the Administrative Agent or a Lender determines in its reasonable discretion that it is entitled to claim a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this SECTION 2.15, it promptly shall notify the applicable Borrower of the availability of such refund claim. Upon receipt of a written request from a Borrower, such Administrative Agent or Lender shall use reasonable efforts to file a timely claim to such taxation authority for such refund, solely at the Borrower's expense. If the Administrative Agent or a Lender receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) or in respect of any Indemnified Taxes or Other Taxes with respect to which a Borrower has paid additional amounts pursuant to this SECTION 2.15, it shall within 30 days from the date of such receipt pay over the amount of such refund to the applicable Borrower, net of all reasonable out-of-pocket expenses of such Administrative Agent or Lender (as determined in the Administrative Agent's or Lender's reasonable discretion) and without interest (other than interest paid by the relevant taxation authority with respect to such refund); PROVIDED, HOWEVER, that (i) each Borrower, -54- upon the request of the Administrative Agent or such Lender (or assignee), agrees to repay the amount paid over to such Borrower (PLUS any penalties, interest or other charges (including Taxes) imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender (or assignee) within a reasonable time (not to exceed 20 days) after receipt of written notice that the Administrative Agent or such Lender (or assignee) is required to repay such refund to such Governmental Authority and (ii) such Administrative Agent or Lender shall not be required to make any payment under this SECTION 2.15(f) if an Event of Default shall have occurred and be continuing. Nothing contained in this SECTION 2.15(f) shall require the Administrative Agent or any Lender (or assignee) to make available its Tax Returns or any other information which it deems confidential to a Borrower or any other person. Notwithstanding anything to the contrary, in no event will any Lender be required to pay any amount to a Borrower the payment of which would place such Lender in a less favorable net after-tax position than such Lender would have been in if the additional amounts giving rise to such refund of any Indemnified Taxes had never been paid. (g) The Administrative Agent and each Lender agrees, upon written request from a Borrower, to use reasonable efforts (subject to overall policy considerations of the Administrative Agent or such Lender, as the case may be, and legal and regulatory restrictions) to avoid or minimize any amounts that might otherwise be payable by a Borrower pursuant to this SECTION 2.15; provided that such effort shall not impose on the Administrative Agent or any Lender any additional costs or any other economic, legal, regulatory or other disadvantage, as determined in the Administrative Agent's or such Lender's sole discretion; provided, further, that nothing in this SECTION 2.15(g) shall affect or postpone any of the obligations of a Borrower or the rights of any Administrative Agent or Lender pursuant to this SECTION 2.15. (h) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.16 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) MITIGATION OF OBLIGATIONS. If any Lender requests compensation under SECTION 2.12, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 2.12 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers, as applicable, hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. A certificate setting forth such costs and expenses in reasonable detail submitted by such Lender to the Administrative Agent shall be conclusive absent manifest error. (b) REPLACEMENT OF LENDERS. If any Lender requests compensation under SECTION 2.12, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.15, or any Lender is a non-consenting Lender under Section 11.02(c), or if any Lender defaults in its obligation to fund Loans hereunder, then the applicable Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.04), all of its interests, rights and obligations under this Agreement to an assignee selected by such Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); PROVIDED that (i) such Borrower shall have -55- received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consents shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (assuming for this purpose that the Loans of such Lender were being prepaid) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under SECTION 2.12 or payments required to be made pursuant to SECTION 2.15, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling a Borrower to require such assignment and delegation cease to apply. SECTION 2.17 SWINGLINE LOANS. (a) SWINGLINE COMMITMENT. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to U.S. Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $10.0 million or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; PROVIDED that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, U.S. Borrower may borrow, repay and reborrow Swingline Loans. (b) SWINGLINE LOANS. To request a Swingline Loan, U.S. Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed U.S. Borrowing Request to the Administrative Agent and the Swingline Lender, not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested Swingline Loan. Each Swingline Loan shall be an ABR Loan. The Swingline Lender shall make each Swingline Loan available to U.S. Borrower by means of a credit to the general deposit account of U.S. Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in SECTION 2.18(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan. U.S. Borrower shall not request a Swingline Loan if at the time of or immediately after giving effect to the Extension of Credit contemplated by such request a Default has occurred and is continuing or would result therefrom. Swingline Loans shall be made in minimum amounts of $500,000 and integral multiples of $250,000 above such amount. (c) PREPAYMENT. U.S. Borrower shall have the right at any time and from time to time to repay any Swingline Loan, in whole or in part, upon giving written notice to the Swingline Lender and the Administrative Agent before 12:00 (noon), New York City time, on the proposed date of repayment. (d) PARTICIPATIONS. The Swingline Lender may at any time in its discretion by written notice given to the Administrative Agent (PROVIDED such notice requirement shall not apply if the Swingline Lender and the Administrative Agent are the same entity) not later than 11:00 A.M., New York City time, on the next succeeding Business Day following such notice require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans then outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Pro Rata Percentage of such Swingline Loan -56- or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (so long as such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in SECTION 2.02(c) with respect to Loans made by such Lender (and SECTION 2.02 shall apply, MUTATIS MUTANDIS, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify U.S. Borrower of any participations in any Swingline Loan acquired by the Revolving Lenders pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from U.S. Borrower (or other party on behalf of U.S. Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent. Any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve U.S. Borrower of any default in the payment thereof. SECTION 2.18 LETTERS OF CREDIT (a) GENERAL. Subject to the terms and conditions set forth herein, U.S. Borrower may request the Issuing Bank, and the Issuing Bank agrees, to issue Letters of Credit for its own account or the account of a Subsidiary in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (PROVIDED that U.S. Borrower shall be a co-applicant, and be jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary). The Issuing Bank shall have no obligation to issue, and U.S. Borrower shall not request the issuance of, any Letter of Credit at any time if after giving effect to such issuance, the LC Exposure would exceed the LC Commitment or the total Revolving Exposure would exceed the total Revolving Commitments. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by U.S. Borrower to, or entered into by U.S. Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) REQUEST FOR ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS. To request the issuance of a Letter of Credit or the amendment, renewal or extension of an outstanding Letter of Credit, U.S. Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) an LC Request to the Issuing Bank and the Administrative Agent not later than 11:00 a.m. on the third Business Day preceding the requested date of issuance, amendment, renewal or extension (or such later date and time as is acceptable to the Issuing Bank). A request for an initial issuance of a Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank: (i) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); -57- (ii) the amount thereof; (iii) the expiry date thereof (which shall not be later than the close of business on the Letter of Credit Expiration Date); (iv) the name and address of the beneficiary thereof; (v) whether the Letter of Credit is to be issued for its own account or for the account of one of its Subsidiaries (PROVIDED that U.S. Borrower shall be a co-applicant, and therefore jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary); (vi) the documents to be presented by such beneficiary in connection with any drawing thereunder; (vii) the full text of any certificate to be presented by such beneficiary in connection with any drawing thereunder; and (viii) such other matters as the Issuing Bank may require. A request for an amendment, renewal or extension of any outstanding Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended, renewed or extended; (ii) the proposed date of amendment, renewal or extension thereof (which shall be a Business Day); (iii) the nature of the proposed amendment, renewal or extension; and (iv) such other matters as the Issuing Bank may require. If requested by the Issuing Bank, U.S. Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and, upon issuance, amendment, renewal or extension of each Letter of Credit, U.S. Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed the LC Commitment, (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments and (iii) the conditions set forth in ARTICLE IV in respect of such issuance, amendment, renewal or extension shall have been satisfied. Unless the Issuing Bank shall agree otherwise, no Letter of Credit shall be in an initial amount less than $100,000, in the case of a Commercial Letter of Credit, or $500,000, in the case of a Standby Letter of Credit, or is to be denominated in a currency other than Dollars. (c) EXPIRATION DATE. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) in the case of a Standby Letter of Credit, (x) the date which is no later than one year after the date of the issuance of such Standby Letter of Credit (or, in the case of any renewal or extension thereof, no later than one year after such renewal or extension) and (y) the Letter of Credit Expiration Date and (ii) in the case of a Commercial Letter of Credit, (x) the date that is no later than 180 days after the date of issuance of such Commercial Letter of Credit (or, in the case of any renewal or extension thereof, no later than 180 days after such renewal or extension) and (y) the Letter of Credit Expiration Date. -58- (d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby irrevocably grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Lender's Pro Rata Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by U.S. Borrower on the date due as provided in SECTION 2.18(e), or of any reimbursement payment required to be refunded to U.S. Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit, the occurrence and continuance of a Default, reduction or termination of the Commitments, or expiration, termination or cash collateralization of any Letter of Credit and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) REIMBURSEMENT. (i) If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, U.S. Borrower shall reimburse such LC Disbursement by paying to the Issuing Bank an amount equal to such LC Disbursement not later than 3:00 p.m., New York City time, on the date that such LC Disbursement is made if U.S. Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, if such notice has not been received by U.S. Borrower prior to such time on such date, then not later than 3:00 p.m., New York City time, on the Business Day immediately following the day that U.S. Borrower receives such notice; PROVIDED that U.S. Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with SECTION 2.03 that such payment be financed with ABR Revolving Loans in an equivalent amount and, to the extent so financed, U.S. Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Loans. (ii) If U.S. Borrower fails to make such payment when due, the Issuing Bank shall notify the Administrative Agent and the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from U.S. Borrower in respect thereof and such Revolving Lender's Pro Rata Percentage thereof. Each Revolving Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Lender shall have received such notice later than 12:00 noon, New York City time, on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Revolving Lender's Pro Rata Percentage of the unreimbursed LC Disbursement in the same manner as provided in SECTION 2.02(c) with respect to Revolving Loans made by such Revolving Lender, and the Administrative Agent will promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from U.S. Borrower pursuant to the above paragraph prior to the time that any Revolving Lender makes any payment pursuant to the preceding sentence and any such amounts received by the Administrative Agent from U.S. Borrower thereafter will be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made such payments and to the Issuing Bank, as appropriate. (iii) If any Revolving Lender shall not have made its Pro Rata Percentage of such LC Disbursement available to the Administrative Agent as provided above, each of such Revolving Lender and U.S. Borrower severally agrees to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with the foregoing to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of U.S. -59- Borrower, the rate per annum set forth in SECTION 2.18(H) and (ii) in the case of such Lender, at a rate determined by the Administrative Agent in accordance with banking industry rules or practices on interbank compensation. (f) OBLIGATIONS ABSOLUTE. The Reimbursement Obligation of U.S. Borrower as provided in SECTION 2.18(e) shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any draft or other document presented under a Letter of Credit being proved to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that fails to comply with the terms of such Letter of Credit; (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this SECTION 2.18, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of U.S. Borrower hereunder; (v) the fact that a Default shall have occurred and be continuing; or (vi) any material adverse change in the business, property, results of operations, prospects or condition, financial or otherwise, of U.S. Borrower and its Subsidiaries. None of the Agents, the Lenders, the Issuing Bank or any of their Affiliates shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; PROVIDED that the foregoing shall not be construed to excuse the Issuing Bank from liability to U.S. Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by U.S. Borrower to the extent permitted by applicable law) suffered by U.S. Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly give written notice to the Administrative Agent and U.S. Borrower of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; PROVIDED that any failure to give or delay in giving such notice shall not relieve U.S. Borrower of its Reimbursement Obligation to the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such Reimbursement Obligation set forth in SECTION 2.18(e)). (h) INTERIM INTEREST. If the Issuing Bank shall make any LC Disbursement, then, unless U.S. Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest payable on demand, for each day from and including the date such LC Disbursement is made to but excluding the date that U.S. Borrower reimburses such LC -60- Disbursement, at the rate per annum determined pursuant to SECTION 2.06(a) until the day after U.S. Borrower is notified of such LC Disbursement and thereafter pursuant to SECTION 2.06(c). Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to SECTION 2.18(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) CASH COLLATERALIZATION. If any Event of Default shall occur and be continuing, on the Business Day that U.S. Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, U.S. Borrower shall deposit in the LC Sub-Account, in the name of the Collateral Agent and for the benefit of the Revolving Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; PROVIDED that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to U.S. Borrower described in paragraph (g) or (h) of ARTICLE VIII. Funds in the LC Sub-Account shall be applied by the Collateral Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of outstanding Reimbursement Obligations or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other Obligations of U.S. Borrower under this Agreement. If U.S. Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount PLUS any accrued interest or realized profits with respect to such amounts (to the extent not applied as aforesaid) shall be returned to U.S. Borrower within three Business Days after all Events of Default have been cured or waived. (j) ADDITIONAL ISSUING BANKS. U.S. Borrower may, at any time and from time to time, designate one or more additional Revolving Lenders to act as an issuing bank under the terms of this Agreement, with the consent of the Administrative Agent (which consent shall not be unreasonable withheld), the Issuing Bank and such Revolving Lender(s). Any Lender designated as an issuing bank pursuant to this paragraph (j) shall be deemed (in addition to being a Revolving Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Revolving Lender, and all references herein and in the other Loan Documents to the term "Issuing Bank" shall, with respect to such Letters of Credit, be deemed to refer to such Revolving Lender in its capacity as Issuing Bank, as the context shall require. (k) RESIGNATION OR REMOVAL OF THE ISSUING BANK. The Issuing Bank may resign as Issuing Bank hereunder at any time upon at least 30 days' prior notice to the Lenders, the Administrative Agent and U.S. Borrower. The Issuing Bank may be replaced at any time by written agreement among U.S. Borrower, each Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such resignation or replacement shall become effective, U.S. Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to SECTION 2.05(c). From and after the effective date of any such resignation or replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replace- -61- ment, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, U.S. Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit. (l) OTHER. The Issuing Bank shall be under no obligation to issue any Letter of Credit if (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; or (ii) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank. The Issuing Bank shall be under no obligation to amend any Letter of Credit if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Loan Party represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders (with references to the Companies being references thereto after giving effect to the Transactions unless otherwise expressly stated) that: SECTION 3.01 ORGANIZATION; POWERS. Each Company (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted and to own and lease its property and (c) is qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so qualify or be in good standing, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. There is no existing default under any Organizational Document of any Company or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder. SECTION 3.02 AUTHORIZATION; ENFORCEABILITY. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action on the part of such Loan Party. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, -62- reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03 NO CONFLICTS. Except as set forth on SCHEDULE 3.03, the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created by the Loan Documents and (iii) consents, approvals, registrations, filings, permits or actions the failure to obtain or perform which could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate the Organizational Documents of any Company or any law, judgment, decree or order of any Governmental Authority, (c) will not violate or result in a default or require any consent or approval under any indenture, agreement, Organizational Document or other instrument binding upon any Company or its property, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any property of any Company, except Liens created by the Loan Documents and Permitted Liens. SECTION 3.04 FINANCIAL STATEMENTS; PROJECTIONS. (a) U.S. Borrower has heretofore delivered to the Lenders the consolidated balance sheets and related statements of income, stockholders' equity and cash flows of U.S. Borrower (i) as of and for the fiscal years ended December 31, 2000, December 31, 2001 and December 31, 2002, audited by and accompanied by the unqualified opinion of Ernst & Young, LLP, independent public accountants, and (y) as of and for the nine-month period ended September 30, 2003 and for the comparable period of the preceding fiscal year, in each case, certified by the chief financial officer of U.S. Borrower. Such financial statements and all financial statements delivered pursuant to SECTIONS 5.01(a) and (b) have been prepared in accordance with GAAP and present fairly and accurately, in all material respects, the financial condition and results of operations and cash flows of U.S. Borrower as of the dates and for the periods to which they relate. Except as set forth in such financial statements, there are no liabilities of any Company of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, which could reasonably be expected to result in a Material Adverse Effect, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than liabilities under the Loan Documents and the Senior Subordinated Note Documents. (b) U.S. Borrower has heretofore delivered to the Lenders U.S. Borrower's unaudited PRO FORMA consolidated balance sheet and statements of income and cash flows and PRO FORMA EBITDA for the fiscal year ended December 31, 2002, and as of and for the nine-month period ended September 30, 2003 and for the four-quarter period ended September 30, 2003, in each case after giving effect to the Transactions as if they had occurred on such date in the case of the balance sheet and as of the beginning of all periods presented in the case of the statements of income and cash flows. Such PRO FORMA financial statements have been prepared in good faith by the Loan Parties, based on the assumptions stated therein (which assumptions are believed by the Loan Parties on the date hereof and on the Closing Date to be reasonable), are based on the best information available to the Loan Parties as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions, and present fairly in all material respects the PRO FORMA consolidated financial position and results of operations of U.S. Borrower as of such date and for such periods, assuming that the Transactions had occurred at such dates. (c) The forecasts of financial performance of Parent and its subsidiaries furnished to the Lenders have been prepared in good faith by U.S. Borrower and based on assumptions believed by U.S. Borrower to reasonable. -63- (d) Since December 31, 2002, there has been no event, change, circumstance or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect. SECTION 3.05 PROPERTIES. (a) Each Company has good title to, or valid leasehold interests in, all its property material to its business, free and clear of all Liens except for, in the case of Collateral, Permitted Collateral Liens and, in the case of all other material property, Permitted Liens and minor irregularities or deficiencies in title that, individually or in the aggregate, do not interfere with its ability to conduct its business as currently conducted or to utilize such property for its intended purpose. The property of the Companies, taken as a whole, (i) is in good operating order, condition and repair (ordinary wear and tear excepted), except to the extent that the failure to be in such condition could not reasonably be expected to result in a Material Adverse Effect, and (ii) constitutes all the property which is required for the business and operations of the Companies as presently conducted. (b) SCHEDULE 3.05(b) contains a true and complete list of each interest in Real Property (i) owned by any Company as of the date hereof and describes the type of interest therein held by such Company and (ii) leased, subleased or otherwise occupied or utilized by any Company, as lessee, sublessee, franchisee or licensee, as of the date hereof and describes the type of interest therein held by such Company and whether such lease, sublease or other instrument requires the consent of the landlord thereunder or other parties thereto to the Transactions. (c) No Company has received any notice of, nor has any knowledge of, the occurrence or pendency or contemplation of any Casualty Event in excess of $5.0 million affecting all or any portion of its property. No Mortgage encumbers improved Real Property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained in accordance with SECTION 5.04. (d) Each Company owns or has rights to use all of the Collateral and all material rights with respect to any of the foregoing used in, necessary for or material to each Company's business as currently conducted. The use by each Company of such Collateral and all such rights with respect to the foregoing do not infringe on the rights of any person other than such infringement which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No claim has been made and remains outstanding that any Company's use of any Collateral does or may violate the rights of any third party that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (e) The Equipment of each Company is in good repair, working order and condition, reasonable wear and tear excepted. Each Company shall cause the Equipment to be maintained and preserved in good repair, working order and condition, reasonable wear and tear excepted, and shall as quickly as commercially practicable make or cause to be made all repairs, replacements and other improvements which are necessary or appropriate in the conduct of each Company's business. SECTION 3.06 INTELLECTUAL PROPERTY. (a) OWNERSHIP/NO CLAIMS. Each Loan Party owns, or is licensed to use, all patents, patent applications, trademarks, trade names, servicemarks, copyrights, technology, trade secrets, proprietary information, domain names, know-how and processes necessary for the conduct of its business as currently conducted (the "INTELLECTUAL PROPERTY"), except for those the failure to own or license which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim has been asserted and is pending by any person challenging or questioning the use of any such -64- Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does any Loan Party know of any valid basis for any such claim. To the knowledge of the Loan Parties, the use of such Intellectual Property by each Loan Party does not infringe the rights of any person, except for such claims and infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (b) REGISTRATIONS. Except pursuant to licenses and other user agreements entered into by each Loan Party in the ordinary course of business that are listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate, on and as of the date hereof (i) each Loan Party owns and possesses the right to use, and has taken no affirmative action to authorize or enable any other person to use, any copyright, patent or trademark (as such terms are defined in the U.S. Security Agreement) listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate and (ii) all registrations listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate are valid and in full force and effect. (c) NO VIOLATIONS OR PROCEEDINGS. To each Loan Party's knowledge, on and as of the date hereof, there is no material violation by others of any right of such Loan Party with respect to any copyright, patent or trademark listed in SCHEDULES 14(a) and 14(b) to the Perfection Certificate, respectively, pledged by it under the name of such Loan Party. SECTION 3.07 EQUITY INTERESTS AND SUBSIDIARIES. (a) SCHEDULE 3.07(A) sets forth a list of (i) all the Subsidiaries of Parent and their jurisdiction of organization as of the Closing Date and (ii) the number of each class of its Equity Interests authorized, and the number outstanding, on the Closing Date and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All Equity Interests of each Company owned by Parent and its Subsidiaries are duly and validly issued and are fully paid and non-assessable, and, other than the Equity Interests of U.S. Borrower, are owned by U.S. Borrower, directly or indirectly through Subsidiaries. All Equity Interests of U.S. Borrower are owned directly by Parent (or, after an IPO, the IPO Entity) and, prior to an IPO, all Equity Interests of Parent are owned directly by Holdings. Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Equity Interests pledged by it under the U.S. Security Agreement, free of any and all Liens, rights or claims of other persons, except the security interest created by the U.S. Security Agreement and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such Equity Interests. (b) No consent of any person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or reasonably desirable (from the perspective of a secured party) in connection with the creation, perfection or first priority status of the security interest of the Collateral Agent in any Equity Interests pledged to the Collateral Agent for the benefit of the Secured Parties under the Security Agreement or the exercise by the Collateral Agent of the voting or other rights provided for in the Security Agreement or the exercise of remedies in respect thereof. (c) An accurate organization chart, showing the ownership structure of Parent, U.S. Borrower and each Subsidiary on the Closing Date, and after giving effect to the Transactions, is set forth on SCHEDULE 3.07(c). SECTION 3.08 LITIGATION; COMPLIANCE WITH LAWS. (a) There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the knowledge of any Company, threatened against or affecting any Company or any business, property or rights of any Company (i) that involve any Loan Document or any of the Transactions or (ii) as to which -65- there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) Except for matters covered by SECTION 3.18, no Company or any of its property is in violation of, nor will the continued operation of its property as currently conducted violate, any Requirements of Law (including any zoning or building ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting any Company's Real Property or is in default with respect to any judgment, writ, injunction, decree, rule or order of any Governmental Authority, where such violation or default, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.09 AGREEMENTS. (a) No Company is a party to any agreement or instrument or subject to any corporate or other constitutional restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) No Company is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other agreement or instrument to which it is a party or by which it or any of its property is or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default. (c) SCHEDULE 3.09(c) accurately and completely lists all material agreements (other than leases of Real Property set forth on SCHEDULE 3.05(b)) to which any Company is a party which are in effect on the date hereof in connection with the operation of the business conducted thereby and U.S. Borrower has delivered to the Administrative Agent complete and correct copies of all such material agreements, including any amendments, supplements or modifications with respect thereto, and as of the date hereof all such agreements are in full force and effect. SECTION 3.10 FEDERAL RESERVE REGULATIONS. (a) No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. The pledge of the Securities Collateral pursuant to the Security Agreement does not violate such regulations. SECTION 3.11 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. No Company is (a) an "investment company" or a company "controlled" by a person required to register as an "investment company," as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) a "holding company," an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. SECTION 3.12 USE OF PROCEEDS. The Borrowers will use the proceeds of (a) the Term Loans to effect the Acquisition and the Refinancing and pay related fees and expenses, (b) the Revolving Loans after the Closing Date for general corporate purposes and up to $3.0 million on the Closing Date to effect the Acquisition and the Refinancing and pay related fees and expenses and (c) the Swingline Loans after the Closing Date for general corporate purposes. -66- SECTION 3.13 TAXES. Each Company has (a) timely filed or caused to be timely filed all federal Tax Returns and all state, local and foreign Tax Returns or materials required to have been filed by it and all such Tax Returns are true and correct in all material respects and (b) duly and timely paid, collected or remitted or caused to be duly and timely paid, collected or remitted all Taxes (whether or not shown on any Tax Return) due and payable, collectible or remittable by it and all assessments received by it, except Taxes (i) that are being contested in good faith by appropriate proceedings and for which such Company has set aside on its books adequate reserves in accordance with GAAP and (ii) which could not, individually or in the aggregate, have a Material Adverse Effect. Each Company has made adequate provision in accordance with GAAP for all Taxes not yet due and payable. Each Company is unaware of any proposed or pending tax assessments, deficiencies or audits that could be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect. No Company has ever been a party to any understanding or arrangement constituting a "tax shelter" within the meaning of Section 6111(c), Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code, or has ever "participated" in a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4, except as could not be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect. SECTION 3.14 NO MATERIAL MISSTATEMENTS. No information, report, financial statement, certificate, Borrowing Request, LC Request, exhibit or schedule furnished by or on behalf of any Company to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Confidential Information Memorandum), taken as a whole, contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading as of the date such information is dated or certified; PROVIDED that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each Company represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. SECTION 3.15 LABOR MATTERS. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against any Company pending or, to the knowledge of any Company, threatened. The hours worked by and payments made to employees of any Company have not been in violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable federal, state, local or foreign law dealing with such matters in any manner which could reasonably be expected to result in a Material Adverse Effect. All payments due from any Company, or for which any claim may be made against any Company, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Company except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Company is bound. SECTION 3.16 SOLVENCY. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the properties of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will not have unreasonably small -67- capital with which to conduct its business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. SECTION 3.17 EMPLOYEE BENEFIT PLANS. (a) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Company and its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect or the imposition of a Lien on any of the property of any Company. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $10.0 million the fair market value of the property of all such underfunded Plans. Except as set forth on SCHEDULE 3.17, using actuarial assumptions and computation methods consistent with subpart I of subtitle E of Title IV of ERISA, the aggregate liabilities of each Company or its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, could not reasonably be expected to result in a Material Adverse Effect. (b) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, to the extent applicable, each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. No Company has incurred any material unpaid obligation in connection with the termination of or withdrawal from any Foreign Plan. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is funded, determined as of the end of the most recently ended fiscal year of the respective Company on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the property of such Foreign Plan, and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued. SECTION 3.18 ENVIRONMENTAL MATTERS. (a) Except as set forth in SCHEDULE 3.18 and except as, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect: (i) The Companies and their businesses, operations and Real Property are and in the last six years have been in compliance with, and the Companies have no liability under, Environmental Law; (ii) The Companies have obtained all Environmental Permits required for the conduct of their businesses and operations, and the ownership, operation and use of their property, under Environmental Law, all such Environmental Permits are valid and in good standing; (iii) There has been no Release or threatened Release of Hazardous Material on, at, under or from any Real Property or facility presently or formerly owned, leased or operated by the Companies or their predecessors in interest that could result in liability by the Companies under Environmental Law; (iv) There is no Environmental Claim pending or, to the knowledge of the Companies, threatened against the Companies, or relating to the Real Property currently or formerly owned, leased or operated by the Companies or relating to the operations of the Companies, and -68- to the knowledge of the Companies, there are no actions, activities, circumstances, conditions, events or incidents that could form the basis of such an Environmental Claim; (v) No person with an indemnity or contribution obligation to the Companies relating to compliance with or liability under Environmental Law is in default with respect to such obligation; and (vi) No Company is obligated to perform any action or otherwise incur any expense under Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound or has assumed by contract or agreement, and no Company is conducting or financing any Response pursuant to any Environmental Law with respect to any Real Property or any other location. (b) Except as set forth in SCHEDULE 3.18: (i) No Real Property or facility owned, operated or leased by the Companies and, to the knowledge of the Companies, no Real Property or facility formerly owned, operated or leased by the Companies or any of their predecessors in interest is (i) listed or proposed for listing on the National Priorities List promulgated pursuant to CERCLA or (ii) listed on the Comprehensive Environmental Response, Compensation and Liability Information System promulgated pursuant to CERCLA or (iii) included on any similar list maintained by any Governmental Authority including any such list relating to petroleum; (ii) No Lien has been recorded or, to the knowledge of any Company, threatened under any Environmental Law with respect to any Real Property or property of the Companies; (iii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require any notification, registration, filing, reporting, disclosure, investigation, remediation or cleanup pursuant to any Governmental Real Property Disclosure Requirements or any other Environmental Law; and (iv) The Companies have made available to the Lenders all material records and files in the possession, custody or control of, or otherwise reasonably available to, the Companies concerning compliance with or liability under Environmental Law, including those concerning the existence of Hazardous Material at Real Property or facilities currently or formerly owned, operated, leased or used by the Companies. SECTION 3.19 INSURANCE. SCHEDULE 3.19 sets forth a true, complete and correct description of all insurance maintained by each Company as of the Closing Date. All insurance maintained by the Companies is in full force and effect, all premiums have been duly paid, no Company has received notice of violation or cancellation thereof, the Premises, and the use, occupancy and operation thereof, comply in all material respects with all Insurance Requirements, and there exists no material default under any Insurance Requirement. Each Company has insurance in such amounts and covering such risks and liabilities as are customary for companies of a similar size engaged in similar businesses in similar locations. SECTION 3.20 SECURITY DOCUMENTS. (a) The U.S. Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the U.S. Security Agreement Collateral and (i) when financing statements and other filings in appropriate form are filed in the offices specified on SCHEDULE 7 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of the U.S. -69- Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the U.S. Security Agreement), the Liens created by the U.S. Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the U.S. Security Agreement Collateral (other than (A) the Intellectual Property Collateral (as defined in the U.S. Security Agreement) and (B) such U.S. Security Agreement Collateral in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Collateral Liens. (b) The Canadian Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Canadian Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Canadian Security Agreement Collateral and (i) when financing statements and other filings in appropriate form are filed in the offices specified on SCHEDULE 7 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of the Canadian Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Canadian Security Agreement), the Liens created by the Canadian Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Canadian Security Agreement Collateral (other than (A) the Intellectual Property Collateral (as defined in the Canadian Security Agreement) and (B) such Canadian Security Agreement Collateral in which a security interest cannot be perfected under the PPSA as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Collateral Liens. (c) When the U.S. Security Agreement or a short form thereof is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Liens created by such U.S. Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Intellectual Property Collateral (as defined in such Security Agreement) in which a security interest may be perfected under applicable U.S. law, in each case subject to no Liens other than Permitted Collateral Liens. (d) Each Mortgage granted by a U.S. Loan Party is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable first priority Liens on, and security interests in, all of such U.S. Loan Party's right, title and interest in and to the U.S. Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent, and when such Mortgages are filed in the offices specified on SCHEDULE 1.01(d) (or, in the case of any such Mortgage executed and delivered after the date thereof in accordance with the provisions of SECTIONS 5.10, 5.11 and 5.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of SECTIONS 5.10, 5.11 and 5.13), such Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the U.S. Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage. (e) Each Mortgage granted by a Canadian Loan Party is effective to create, in favor of the Collateral Agent or its sub-agent, for its benefit and the benefit of the Canadian Secured Parties, legal, valid and enforceable first priority Liens on, and security interests in, all of such Canadian Loan Party's right, title and interest in and to the Canadian Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent, and when such Mortgages are filed in the offices specified on SCHEDULE 1.01(d) (or, in the case of any such -70- Mortgage executed and delivered after the date thereof in accordance with the provisions of SECTIONS 5.10 and 5.11, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of SECTIONS 5.10 and 5.11), such Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the Canadian Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage. (f) Each Security Document delivered pursuant to SECTIONS 5.10, 5.11 and 5.13 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent, for the benefit of the applicable Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the Loan Parties' right, title and interest in and to the Collateral thereunder, and when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law, such Security Document will constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral, in each case subject to no Liens other than the applicable Permitted Collateral Liens. SECTION 3.21 ACQUISITION DOCUMENTS; REPRESENTATIONS AND WARRANTIES IN ACQUISITION AGREEMENT. (a) SCHEDULE 3.21 lists (i) each exhibit, schedule, annex or other attachment to the Acquisition Agreement and (ii) each agreement, certificate, instrument, letter or other document contemplated by the Acquisition Agreement or any item referred to in clause (i) to be entered into, executed or delivered or to become effective in connection with the Acquisition or otherwise entered into, executed or delivered in connection with the Acquisition. The Lenders have been furnished true and complete copies of each Acquisition Document to the extent executed and delivered on or prior to the Closing Date. (b) All representations and warranties of each Company set forth in the Acquisition Agreement were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. SECTION 3.22 ANTI-TERRORISM LAW. (a) No Loan Party and, to the knowledge of the Loan Parties, none of its Affiliates is in violation of any laws relating to terrorism or money laundering ("ANTI-TERRORISM LAWS"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "EXECUTIVE Order"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) No Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or other agent of any Loan Party acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; -71- (iv) a person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or (v) a person that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control ("OFAC") at its official website or any replacement website or other replacement official publication of such list. (c) No Loan Party and, to the knowledge of the Loan Parties, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. SECTION 3.23 SUBORDINATION OF SENIOR SUBORDINATED NOTES. The Obligations are "Senior Debt," the U.S. Guaranteed Obligations are "Guarantor Senior Debt" and the Obligations and U.S. Guaranteed Obligations are "Designated Senior Debt," in each case, within the meaning of the Senior Subordinated Note Documents. ARTICLE IV CONDITIONS TO CREDIT EXTENSIONS SECTION 4.01 CONDITIONS TO INITIAL CREDIT EXTENSION. The obligation of each Lender and, if applicable, each Issuing Bank to fund the initial Credit Extension requested to be made by it shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this SECTION 4.01. (a) LOAN DOCUMENTS. All legal matters incident to this Agreement, the Credit Extensions hereunder and the other Loan Documents shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to the Administrative Agent and there shall have been delivered to the Administrative Agent an executed counterpart of each of the Loan Documents and the Perfection Certificate. (b) CORPORATE DOCUMENTS. The Administrative Agent shall have received: (i) a certificate of the secretary or assistant secretary of each Loan Party dated the Closing Date, certifying (A) that attached thereto is a true and complete copy of each Organizational Document of such Loan Party certified (to the extent applicable) as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of each Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect and (C) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the secretary or assistant secretary executing the certificate in this clause (i)); -72- (ii) a certificate as to the good standing of each Loan Party (in so-called "long-form" if available) as of a recent date, from such Secretary of State (or other applicable Governmental Authority); and (iii) such other documents as the Lenders, the Issuing Bank or the Administrative Agent may reasonably request. (c) OFFICERS' CERTIFICATE. The Administrative Agent shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of U.S. Borrower, confirming compliance with the conditions precedent set forth in this SECTION 4.01 and SECTIONS 4.02(b), (c) and (d). (d) FINANCINGS AND OTHER TRANSACTIONS, ETC. (i) The Transactions shall have been consummated or shall be consummated simultaneously on the Closing Date, in each case in all material respects in accordance with the terms hereof and the terms of the Transaction Documents, without the waiver or amendment of any such terms not approved by the Joint Lead Arrangers (such consent not to be unreasonably withheld). (ii) U.S. Borrower shall have received not less than $225.0 million in gross proceeds from the issuance and sale of the Senior Subordinated Notes, and the Senior Subordinated Note Agreement shall be in form and substance reasonably satisfactory to the Lenders. (iii) The Equity Financing shall have been consummated. The terms of the Equity Financing and the Rollover Equity shall not require any payments or other distributions of cash or property in respect thereof other than payments in kind, or any purchases, redemptions or other acquisitions thereof for cash or property other than payments in kind, in each case prior to the payment in full of all obligations under the Loan Documents and the Senior Subordinated Notes, except as permitted by the Loan Documents. (iv) The Refinancing shall have been consummated in full to the reasonable satisfaction of the Lenders with all liens in favor of the existing lenders being unconditionally released; the Administrative Agent shall have received a "pay-off" letter in form and substance reasonably satisfactory to the Administrative Agent with respect to all debt being refinanced in the Refinancing; and the Administrative Agent shall have received from any person holding any Lien securing any such debt, such UCC termination statements, mortgage releases, releases of assignments of leases and rents, releases of security interests in Intellectual Property and other instruments, in each case in proper form for recording, as the Administrative Agent shall have reasonably requested to release and terminate of record the Liens securing such debt. (e) FINANCIAL STATEMENTS, PRO FORMA BALANCE SHEET; PROJECTIONS. The Lenders shall have received and shall be reasonably satisfied with the form and substance of the financial statements described in SECTION 3.04(B) and with the forecasts of the financial performance of Parent and its Subsidiaries. (f) INDEBTEDNESS AND MINORITY INTERESTS. After giving effect to the Transactions and the other transactions contemplated hereby, no Company shall have outstanding any Indebtedness or preferred stock other than (i) the Loans and Credit Extensions hereunder, (ii) the Senior Subordinated Notes, (iii) the Indebtedness listed on SCHEDULE 6.01(b), (iv) the Assumed Debt and (v) Indebtedness owed to either Borrower or any Guarantor. -73- (g) OPINIONS OF COUNSEL. The Administrative Agent shall have received, on behalf of itself, the other Agents, the Arrangers, the Lenders and the Issuing Bank, a favorable written opinion of (i) Paul Weiss, Rifkind, Wharton & Garrison LLP, special counsel for the Loan Parties, substantially to the effect set forth in EXHIBIT N-1, (ii) each local counsel listed on SCHEDULE 4.01(g), substantially to the effect set forth in EXHIBIT N-2, and (iii) Bennett Jones LLP, Canadian counsel for the Loan Parties, substantially to the effect set forth in EXHIBIT N-3, in each case (A) dated the Closing Date and (B) addressed to the Agents, the Issuing Bank and the Lenders, and (iii) a copy of each legal opinion delivered under the other Transaction Documents, accompanied by reliance letters from the party delivering such opinion authorizing the Agents, Lenders and the Issuing Bank to rely thereon as if such opinion were addressed to them. (h) SOLVENCY CERTIFICATE. The Administrative Agent shall have received a solvency certificate in the form of EXHIBIT O, dated the Closing Date and signed by the treasurer or the chief financial officer of U.S. Borrower. (i) REQUIREMENTS OF LAW. The Lenders shall be satisfied that Parent, its Subsidiaries and the Transactions shall be in full compliance with all material Requirements of Law, including Regulations T, U and X of the Board, and shall have received reasonably satisfactory evidence of such compliance reasonably requested by them. (j) CONSENTS. The Lenders shall be reasonably satisfied that all requisite Governmental Authorities and third parties shall have approved or consented to the Transactions, and there shall be no governmental or judicial action, actual or threatened, that has or would have, singly or in the aggregate, a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Transactions or the other transactions contemplated hereby. (k) LITIGATION. There shall be no litigation, public or private, or administrative proceedings, governmental investigation or other legal or regulatory developments, actual or threatened, that, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or could materially and adversely affect the ability of Holdings, Parent, U.S. Borrower and their respective Subsidiaries to fully and timely perform their respective obligations under the Transaction Documents, or the ability of the parties to consummate the financings contemplated hereby or the other Transactions. (l) SOURCES AND USES. The sources and uses of the Loans shall be as set forth in SECTION 3.12. (m) FEES. The Arrangers and the Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including the legal fees and expenses of Cahill Gordon & Reindel LLP, special counsel to the Agents, and the fees and expenses of any local counsel, foreign counsel, appraisers, consultants and other advisors) required to be reimbursed or paid by either Borrower hereunder or under any other Loan Document. (n) PERSONAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) all certificates, agreements or instruments representing or evidencing the Securities Collateral accompanied by instruments of transfer and stock powers undated and endorsed in blank; (ii) the Intercompany Note executed by and among Parent and each of its Subsidiaries (other than Canadian Borrower) and the Canadian Intercompany Note executed by and among -74- Canadian Borrower, Parent and each of its Subsidiaries, each accompanied by instruments of transfer undated and endorsed in blank; (iii) all other certificates, agreements, including control agreements, or instruments necessary to perfect the Collateral Agent's security interest in all Chattel Paper, all Instruments, all Deposit Accounts and all Investment Property of each Loan Party (as each such term is defined in either Security Agreement and to the extent required by either Security Agreement); (iv) financing statements in appropriate form for filing under the UCC and PPSA, filings with the United States Patent and Trademark Office, and the United States Copyright Office and such other documents under applicable Requirements of Law in each jurisdiction as may be necessary or appropriate or, in the opinion of the Collateral Agent, desirable to perfect the Liens created, or purported to be created, by the Security Documents under the laws of the United States, Canada or any State or Province thereof and, with respect to all UCC financing statements required to be filed pursuant to the Loan Documents, evidence satisfactory to the Administrative Agent that U.S. Borrower has retained, at its sole cost and expense, a service provider acceptable to the Administrative Agent for the tracking of all such financing statements and notification to the Administrative Agent, of, among other things, the upcoming lapse or expiration thereof; (v) certified copies of UCC, PPSA, United States Patent and Trademark Office, United States Copyright Office, tax and judgment lien searches, bankruptcy and pending lawsuit searches or equivalent reports or searches, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Loan Party as debtor and that are filed in those state and county jurisdictions in which any property of any Loan Party is located and the state and county jurisdictions in which any Loan Party is organized or maintains its principal place of business and such other searches that the Collateral Agent deems necessary or appropriate, none of which encumber the Collateral covered or intended to be covered by the Security Documents (other than Permitted Collateral Liens or any other Liens acceptable to the Collateral Agent); (vi) with respect to each location set forth on SCHEDULE 4.01(n)(vi), a Landlord Access Agreement or Bailee Letter, as applicable; PROVIDED that no such Landlord Access Agreement shall be required with respect to any Real Property that could not be obtained after the Loan Party that is the lessee or owner of the inventory or other personal property Collateral stored with the bailee thereof, as applicable, shall have used all commercially reasonable efforts to do so; and (vii) evidence acceptable to the Collateral Agent of payment or arrangements for payment by the Loan Parties of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Security Documents. (o) REAL PROPERTY REQUIREMENTS. The Collateral Agent shall have received: (i) a Mortgage, encumbering each Mortgaged Property in favor of the Collateral Agent, for the benefit of the applicable Secured Parties, duly executed and acknowledged by each Loan Party that is the owner of or holder of any interest in such Mortgaged Property, and otherwise in form for recording in the recording office of each applicable political subdivision where each such Mortgaged Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a lien under applicable law, and such financing statements and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction, all of which shall be in form and substance reasonably satisfactory to Collateral Agent; -75- (ii) with respect to each Mortgaged Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as necessary to consummate the Transactions or as shall reasonably be deemed necessary by the Collateral Agent in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Property to grant the Lien contemplated by the Mortgage with respect to such Mortgaged Property; (iii) with respect to each Mortgage, a policy of title insurance (or marked up title insurance commitment having the effect of a policy of title insurance) insuring the Lien of such Mortgage as a valid first mortgage Lien on the Mortgaged Property and fixtures described therein in the amount equal to not less than 115% of the fair market value of such Mortgaged Property and fixtures, which fair market value is set forth on SCHEDULE 4.01(o)(iii), which policy (or such marked-up commitment) (each, a "TITLE POLICY") shall (A) be issued by the Title Company, (B) to the extent necessary, include such reinsurance arrangements (with provisions for direct access, if necessary) as shall be reasonably acceptable to the Collateral Agent, (C) contain a "tie-in" or "cluster" endorsement, if available under applicable law (I.E., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (D) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to the Collateral Agent) as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, environmental lien, subdivision, separate tax lot revolving credit, and so-called comprehensive coverage over covenants and restrictions), and (E) contain no exceptions to title other than Permitted Collateral Liens and exceptions acceptable to the Collateral Agent; (iv) with respect to each Mortgaged Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including a so-called "gap" indemnification) as shall be required to induce the Title Company to issue the Title Policy/ies and endorsements contemplated above; (v) evidence reasonably acceptable to the Collateral Agent of payment by U.S. Borrower of all Title Policy premiums, search and examination charges, escrow charges and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to above; (vi) with respect to each Real Property or Mortgaged Property, copies of all Leases in which U.S. Borrower or any Subsidiary holds the lessor's interest or other agreements relating to possessory interests, if any. To the extent any of the foregoing affect any Mortgaged Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement, and shall otherwise be acceptable to the Collateral Agent; (vii) with respect to each Mortgaged Property, each Company shall have made all notifications, registrations and filings, to the extent required by, and in accordance with, all Governmental Real Property Disclosure Requirements applicable to such Mortgaged Property; and (viii) Surveys with respect to each Mortgaged Property. (p) INSURANCE. The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by SECTION 5.04 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a "standard" or -76- "New York" lender's loss payable or mortgagee endorsement (as applicable) and shall name the Collateral Agent, on behalf of the Secured Parties, as additional insured, in form and substance satisfactory to the Administrative Agent. (q) NO MATERIAL CHANGE. No change shall have occurred since October 4, 2003, and no additional information shall be disclosed to or discovered by the Administrative Agent (including, without limitation, information contained in any review or report required to be provided to it in connection with this Agreement), which the Administrative Agent determines has had or could reasonably be expected to have a material adverse effect on the business, results of operations, condition (financial or otherwise), assets or liabilities of Parent, U.S. Borrower and their respective subsidiaries taken as a whole. SECTION 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each Lender and each Issuing Bank to make any Credit Extension (including the initial Credit Extension) shall be subject to, and to the satisfaction of, each of the conditions precedent set forth below. (a) NOTICE. The Administrative Agent shall have received a Borrowing Request as required by Section 2.03 (or such notice shall have been deemed given in accordance with SECTION 2.03) if Loans are being requested or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by SECTION 2.18(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a U.S. Borrowing Request as required by SECTION 2.17(b). (b) NO DEFAULT. The Borrowers and each other Loan Party shall be in compliance in all material respects with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and, at the time of and immediately after giving effect to such Credit Extension and the application of the proceeds thereof, no Default shall have occurred and be continuing on such date. (c) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by any Loan Party set forth in ARTICLE III hereof (other than, in the case of the initial Credit Extension only, SECTION 3.04(d)) or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (d) NO LEGAL BAR. No order, judgment or decree of any Governmental Authority shall purport to restrain any Lender from making any Loans to be made by it. No injunction or other restraining order shall have been issued, shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by this Agreement or the making of Loans hereunder. Each of the delivery of a Borrowing Request or notice requesting the issuance, amendment, extension or renewal of a Letter of Credit and the acceptance by a Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by such Borrower and each other Loan Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the conditions contained in this SECTION 4.02 have been satisfied. Each Borrower shall provide such information (including calculations in reasonable -77- detail of the covenants in SECTION 6.10) as the Administrative Agent may reasonably request to confirm that the conditions in this SECTION 4.02 have been satisfied. ARTICLE V AFFIRMATIVE COVENANTS Each Loan Party warrants, covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each Loan Party will, and will cause each of its Subsidiaries to: SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. Furnish to the Administrative Agent and each Lender: (a) ANNUAL REPORTS. As soon as available and in any event within 90 days after the end of each fiscal year (but no later than the date on which Parent would be required to file a Form 10-K under the Exchange Act if it were subject to Section 15 and 13(d) of the Exchange Act), (i) the consolidated balance sheet of Parent as of the end of such fiscal year and related consolidated statements of income, cash flows and stockholders' equity for such fiscal year, in comparative form with such financial statements as of the end of, and for, the preceding fiscal year, and notes thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out Parent, U.S. Borrower and the Subsidiaries), all prepared in accordance with Regulation S-X and accompanied by an opinion of Ernst & Young LLP or other independent public accountants of recognized national standing reasonably satisfactory to the Administrative Agent (which opinion shall not be qualified as to scope or contain any going concern or other qualification), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Parent as of the dates and for the periods specified in accordance with GAAP and (ii) a management's discussion and analysis of the financial condition and results of operations for such fiscal year, including a discussion of sales by product category, as compared to the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-K); (b) QUARTERLY REPORTS. As soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year (but no later than the date on which Parent would be required to file a Form 10-Q under the Exchange Act if it were subject to Section 15 and 13(d) of the Exchange Act), (i) the consolidated balance sheet of Parent as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and notes thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out Parent, U.S. Borrower and the Subsidiaries), all prepared in accordance with Regulation S-X under the Securities Act and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Parent as of the date and for the periods specified in accordance with GAAP consistently applied, and on a basis consistent with audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments and (ii) a management's discussion and analysis of the financial condition -78- and results of operations for such fiscal quarter and the then elapsed portion of the fiscal year, including a discussion of sales by product category, as compared to the comparable periods in the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-Q); (c) FINANCIAL OFFICER'S CERTIFICATE. (i) Concurrently with any delivery of financial statements under SECTION 5.01(a) or (b) above, a Compliance Certificate certifying that no Default has occurred or, if such a Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (ii) concurrently with any delivery of financial statements under SECTION 5.01 (a) or (b) above, a Compliance Certificate setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in SECTIONS 6.07(f) and 6.10 (including the aggregate amount of Excluded Issuances for such period and the uses therefor) and, in the case of SECTION 5.01(a) above, setting forth U.S. Borrower's calculation of Excess Cash Flow; and (iii) in the case of SECTION 5.01(a) above, a report of the accounting firm opining on or certifying such financial statements stating that in the course of its regular audit of the financial statements of Parent and its Subsidiaries, which audit was conducted in accordance with GAAP, such accounting firm obtained no knowledge that any Default insofar as it relates to financial or accounting matters has occurred or, if in the opinion of such accounting firm such a Default has occurred, specifying the nature and extent thereof; (d) FINANCIAL OFFICER'S CERTIFICATE REGARDING COLLATERAL. Concurrently with any delivery of financial statements under SECTION 5.01(a) above, a certificate of a Financial Officer setting forth the information required pursuant to the Perfection Certificate Supplement or confirming that there has been no change in such information since the date of the Perfection Certificate or latest Perfection Certificate Supplement; (e) PUBLIC REPORTS. Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Company with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor), as the case may be; (f) MANAGEMENT LETTERS. Promptly after the receipt thereof by any Company, a copy of any final "management letter" received by any such person from its certified public accountants and the management's responses thereto; (g) BUDGETS. No later than 30 days after the first day of each fiscal year of Parent and U.S. Borrower, a budget in form reasonably satisfactory to the Administrative Agent (including budgeted statements of income for each of U.S. Borrower's business units and sources and uses of cash and balance sheets and a projection of sales by product category) prepared by each of Parent and U.S. Borrower, respectively, for each quarter of such fiscal year prepared in summary form, in each case, of Parent, Borrower and their respective subsidiaries, with appropriate presentation and discussion of the principal assumptions upon which such budgets are based, accompanied by the statement of a Financial Officer of each of Parent and U.S. Borrower to the effect that the budget of Parent and U.S. Borrower, respectively, is a reasonable estimate for the period covered thereby and, promptly when available, any significant revisions of such budget; -79- (h) ORGANIZATION. Within 90 days after the close of each fiscal year of Parent, Parent shall deliver an accurate organization chart as required by SECTION 3.07(c), or confirm that there are no changes to SCHEDULE 3.07(c); (i) ORGANIZATIONAL DOCUMENTS. Promptly provide copies of any Organizational Documents that have been amended or modified in accordance with the terms hereof and deliver a copy of any notice of default given or received by any Company under any Organizational Document within 15 days after such Company gives or receives such notice; and (j) OTHER INFORMATION. Promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Company, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02 LITIGATION AND OTHER NOTICES. Furnish to the Administrative Agent and each Lender written notice of the following promptly (and, in any event, within three Business Days of any Company becoming aware thereof): (a) any Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against any Company or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document; (c) any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of a Casualty Event in excess of $5.0 million; and (e) (i) the incurrence of any material Lien (other than Permitted Collateral Liens) on, or claim asserted against any of the Collateral or (ii) the occurrence of any other event which could materially affect the value of the Collateral. SECTION 5.03 EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence, except as otherwise expressly permitted under SECTION 6.05 or SECTION 6.06 or, in the case of any Subsidiary, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, privileges, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply with all applicable Requirements of Law (including any and all zoning, building, Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; pay and perform its obligations under all Leases and Transaction Documents except, in the case of all such documents other than the Loan Documents, where the -80- failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; and at all times maintain, preserve and protect all property material to the conduct of such business and keep such property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business) and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; PROVIDED that nothing in this SECTION 5.03(b) shall prevent (i) sales of property, consolidations or mergers by or involving any Company in accordance with SECTION 6.05 or SECTION 6.06; (ii) the withdrawal by any Company of its qualification as a foreign corporation in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; or (iii) the abandonment by any Company of any rights, franchises, licenses, trademarks, trade names, copyrights or patents that such person reasonably determines are not useful to its business or no longer commercially desirable. SECTION 5.04 INSURANCE. (a) Keep its insurable property adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations, including insurance with respect to Mortgaged Properties and other properties material to the business of the Companies against such casualties and contingencies and of such types and in such amounts with such deductibles as is customary in the case of similar businesses operating in the same or similar locations, including (i) physical hazard insurance on an "all risk" basis, (ii) commercial general liability against claims for bodily injury, death or property damage covering any and all insurable claims, (iii) explosion insurance in respect of any boilers, machinery or similar apparatus constituting Collateral, (iv) business interruption insurance, (v) worker's compensation insurance and such other insurance as may be required by any Requirement of Law and (vi) such other insurance against risks as the Administrative Agent may from time to time require (such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Administrative Agent and the Collateral Agent); PROVIDED that with respect to physical hazard insurance, neither the Collateral Agent nor the applicable Company shall agree to the adjustment of any claim thereunder without the consent of the other (such consent not to be unreasonably withheld or delayed); PROVIDED, FURTHER, that no consent of any Company shall be required during an Event of Default. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof, (ii) name the Collateral Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the applicable Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable, (iii) if reasonably requested by the Collateral Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Collateral Agent. (c) Notify the Administrative Agent and the Collateral Agent immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this SECTION 5.04 is taken out by any Company; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies. (d) With respect to each U.S. Mortgaged Property, obtain flood insurance in such total amount as the Administrative Agent or the Required Lenders may from time to time require, if at any time the area in which any improvements located on any Mortgaged Property is designated a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time. -81- (e) Deliver to the Administrative Agent and the Collateral Agent and the Lenders a report of a reputable insurance broker with respect to such insurance and such supplemental reports with respect thereto as the Administrative Agent or the Collateral Agent may from time to time reasonably request. (f) No Loan Party that is an owner of Mortgaged Property shall take any action that is reasonably likely to be the basis for termination, revocation or denial of any insurance coverage required to be maintained under such Loan Party's respective Mortgage or that could be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises, and each Loan Party shall otherwise comply in all material respects with all Insurance Requirements in respect of the Premises; PROVIDED, HOWEVER, that each Loan Party may, at its own expense and after written notice to the Administrative Agent, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, the prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under this SECTION 5.04 or (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of this SECTION 5.04. SECTION 5.05 OBLIGATIONS AND TAXES. (a) Pay its material Indebtedness and other material obligations promptly and in accordance with their terms and pay and discharge promptly when due all Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, services, materials and supplies or otherwise that, if unpaid, might give rise to a Lien other than a Permitted Lien upon such properties or any part thereof; PROVIDED that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings timely instituted and diligently conducted and the applicable Company shall have set aside on its books adequate reserves or other appropriate provisions with respect thereto in accordance with GAAP and such contested amounts, individually or in the aggregate, are not reasonably expected to have a Material Adverse Effect, (ii) such contest operates to suspend collection of the contested obligation, Tax, assessment or charge and enforcement of a Lien other than a Permitted Lien and (iii) in the case of Collateral, the applicable Company shall have otherwise complied with the Contested Collateral Lien Conditions. (b) Timely and correctly file all material Tax Returns required to be filed by it. Withhold, collect and remit all Taxes that it is required to collect, withhold or remit. (c) U.S. Borrower does not intend to treat the Loans as being a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4. In the event U.S. Borrower determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof. SECTION 5.06 EMPLOYEE BENEFITS. (a) Comply in all material respects with the applicable provisions of ERISA and the Code and (b) furnish to the Administrative Agent (x) as soon as possible after, and in any event within 10 days after any Responsible Officer of any Company or any ERISA Affiliates of any Company knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in liability of the Companies or any of their ERISA Affiliates in an aggregate amount exceeding $1.0 million or the imposition of a Lien, a statement of a Financial Officer of U.S. Borrower setting forth details as to such ERISA Event and the action, if any, that the Companies propose to take with respect thereto, and (y) upon request by the Administrative Agent, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Company or any ERISA Affiliate with the Internal Revenue Service with respect to each Plan; (ii) the most recent actuarial valuation report for each Plan; (iii) all notices received -82- by any Company or any ERISA Affiliate from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan (or employee benefit plan sponsored or contributed to by any Company) as the Administrative Agent shall reasonably request. SECTION 5.07 MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS; ANNUAL MEETINGS. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law are made of all dealings and transactions in relation to its business and activities. Each Company will permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the property of such Company at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances, accounts and condition of any Company with the officers and employees thereof and advisors therefor (including independent accountants). (b) Within 120 days after the close of each fiscal year of the Companies, at the request of the Administrative Agent or Required Lenders, hold a meeting (at a mutually agreeable location and time or, at the option of the Administrative Agent, by conference call) with all Lenders who choose to attend such meeting at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Companies and the budgets presented for the current fiscal year of the Companies. SECTION 5.08 USE OF PROCEEDS. Use the proceeds of the Loans only for the purposes set forth in SECTION 3.12 and request the issuance of Letters of Credit only for the purposes set forth in the definition of Commercial Letter of Credit or Standby Letter of Credit, as the case may be. SECTION 5.09 COMPLIANCE WITH ENVIRONMENTAL LAWS; ENVIRONMENTAL REPORTS. (a) Comply, and cause all lessees and other persons occupying Real Property owned, operated or leased by any Company to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and Real Property; obtain and renew all material Environmental Permits applicable to its operations and Real Property; and conduct all Responses required by, and in accordance with, Environmental Laws; PROVIDED that no Company shall be required to undertake any Response to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP. (b) If a Default caused by reason of a breach of SECTION 3.18 or SECTION 5.09(a) shall have occurred and be continuing for more than 20 days without the Companies commencing activities reasonably likely to cure such Default, at the written request of the Administrative Agent or the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of U.S. Borrower, an environmental assessment report regarding the matters which are the subject of such Default, including, where appropriate, any soil and/or groundwater sampling, prepared by an environmental consulting firm and, in the form and substance, reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Response to address them. (c) Each Loan Party that is an owner of Mortgaged Property shall not install nor permit to be installed in the Mortgaged Property any Hazardous Materials, other than in compliance with applicable Environmental Laws. SECTION 5.10 ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS. (a) Subject to this SECTION 5.10, with respect to any property acquired after the Closing Date by any Loan Party that is -83- intended to be subject to the Lien created by any of the Security Documents but is not so subject, promptly (and in any event within 30 days after the acquisition thereof) (i) execute and deliver to the Administrative Agent and the Collateral Agent such amendments or supplements to the relevant Security Documents or such other documents as the Administrative Agent or the Collateral Agent shall deem reasonably necessary or advisable to grant to the Collateral Agent, for its benefit and for the benefit of the other applicable Secured Parties, a Lien on such property subject to no Liens other than Permitted Collateral Liens, and (ii) take all actions necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. The Borrowers shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of the Security Documents against such after-acquired properties. (b) With respect to any person that is or becomes a U.S. Subsidiary after the Closing Date, promptly (and in any event within 30 days after such person becomes a U.S. Subsidiary) (i) deliver to the Collateral Agent the certificates, if any, representing all of the Equity Interests of such U.S. Subsidiary owned by Parent or any of its Subsidiaries, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the holder(s) of such Equity Interests, and all intercompany notes owing from such U.S. Subsidiary to any Loan Party together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (ii) cause such new U.S. Subsidiary (A) to execute a Joinder Agreement or such comparable documentation to become a U.S. Subsidiary Guarantor and a joinder agreement to the U.S. Security Agreement, substantially in the form annexed thereto or, in the case of a Foreign Subsidiary (other than a Canadian Subsidiary), execute a security agreement compatible with the laws of such Foreign Subsidiary's jurisdiction in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable in the opinion of the Administrative Agent or the Collateral Agent to cause the Lien created by the U.S. Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent. Notwithstanding the foregoing, (1) the Equity Interests required to be delivered to the Collateral Agent pursuant to clause (i) of this SECTION 5.10(b) shall not include any Equity Interests of a Foreign Subsidiary created or acquired after the Closing Date and (2) no Foreign Subsidiary shall be required to take the actions specified in clause (ii) of this SECTION 5.10(b), if, in the case of either clause (1) or (2), doing so would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Code, which investment would or could reasonably be expected to trigger a NON DE MINIMIS increase in the net income of a United States shareholder of such Subsidiary pursuant to Section 951 (or a successor provision) of the Code, as reasonably determined by the Administrative Agent; PROVIDED that this exception shall not apply to (A) Voting Stock of any Subsidiary which is a first-tier controlled foreign corporation (as defined in Section 957(a) of the Code) representing 65% of the total voting power of all outstanding Voting Stock of such Subsidiary and (B) 100% of the Equity Interests not constituting Voting Stock of any such Subsidiary, except that any such Equity Interests constituting "stock entitled to vote" within the meaning of Treasury Regulation Section 1.956-2(c)(2) shall be treated as Voting Stock for purposes of this SECTION 5.10(b). (c) With respect to any person that is or becomes a Canadian Subsidiary after the Closing Date, promptly (and in any event within 30 days after such person becomes a Canadian Subsidiary) (i) deliver to the Collateral Agent, a pledge agreement in a form reasonably satisfactory to the Collateral Agent, the certificates, if any, representing all of the Equity Interests of such Canadian Subsidiary owned by Canadian Borrower or a Canadian Subsidiary, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the -84- holder(s) of such Equity Interests, and all intercompany notes owing from such Canadian Subsidiary to any Loan Party together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (ii) cause such new Subsidiary (A) to execute a Joinder Agreement or such comparable documentation to become a Canadian Subsidiary Guarantor and a joinder agreement to the Canadian Security Agreement, substantially in the form annexed thereto or, in the case of a Subsidiary not organized under the laws of Canada, execute a security agreement compatible with the laws of such Subsidiary's jurisdiction in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable in the opinion of the Administrative Agent or the Collateral Agent to cause the Lien created by such security document to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent. (d) Promptly grant to the Collateral Agent, within 60 days of the acquisition thereof, a security interest in and Mortgage on (i) each Real Property owned in fee by such U.S. Loan Party as is acquired by such U.S. Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $1.0 million, and (ii) unless the Collateral Agent otherwise consents, each leased Real Property of such U.S. Loan Party which lease individually has a fair market value of at least $1.0 million, in each case, as additional security for the Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by SECTION 6.02). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such U.S. Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy, a Survey and local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage). (e) Promptly grant to the Collateral Agent, within 60 days of the acquisition thereof, a security interest in and Mortgage creating a Lien on (i) each Real Property owned in fee by such Canadian Loan Party as is acquired by such Canadian Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $1.0 million, and (ii) unless the Collateral Agent otherwise consents, each leased Real Property of such Canadian Loan Party which lease individually has a fair market value of at least $1.0 million, in each case, as additional security for the Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by SECTION 6.02). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Collateral Liens or other Liens acceptable to the Collateral Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such Canadian Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy (if available in the relevant jurisdiction), Survey and local counsel opinion (including as to -85- title if a Title Policy is unavailable and otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage). (f) The parties hereto agree that the provisions of this SECTION 5.10 (other than this Section 5.10(f)) shall not apply to Non-Guarantor Subsidiaries. Either Borrower may designate any of its Subsidiaries acquired or formed after the Closing Date as a Non-Guarantor Subsidiary by written notice to the Administrative Agent; PROVIDED, HOWEVER, that if at any time any Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate (other than any Foreign Subsidiary that is not required to take the actions specified in SECTION 5.10(b)(ii) by operation of the last sentence of SECTION 5.10(b)) not otherwise subject to SECTION 5.10(b) has assets with either a book value or fair market value in excess of $1.0 million, then such Borrower shall, and shall cause one or more of such Subsidiaries to, comply with SECTION 5.10(b) within the time frames set forth therein so that no Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate holds property having either a book value or fair market value in excess of $1.0 million. SECTION 5.11 SECURITY INTERESTS; FURTHER ASSURANCES. Promptly, upon the reasonable request of the Administrative Agent, the Collateral Agent or any Lender, at U.S. Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by the Administrative Agent or the Collateral Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby subject to no other Liens except as permitted by the applicable Security Document, or obtain any consents or waivers as may be necessary or appropriate in connection therewith. Deliver or cause to be delivered to the Administrative Agent and the Collateral Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent as the Administrative Agent and the Collateral Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by the Administrative Agent, the Collateral Agent or the Required Lenders of any power, right, privilege or remedy pursuant to any Loan Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority execute and deliver all applications, certifications, instruments and other documents and papers that the Administrative Agent, the Collateral Agent or the Required Lenders may require. If the Administrative Agent, the Collateral Agent or the Required Lenders reasonably determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of any Loan Party constituting Collateral, the Borrowers shall provide to the Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA or other applicable law and are otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent. SECTION 5.12 INFORMATION REGARDING COLLATERAL. (a) Not effect any change (i) in any Loan Party's legal name, (ii) in the location of any Loan Party's chief executive office, (iii) in any Loan Party's identity or organizational structure, (iv) in any Loan Party's Federal Taxpayer Identification Number or organizational identification number, if any, (v) in any Loan Party's jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or organizing in any other jurisdiction) or (vi) in the case of tangible personal property in Canada, the Province in which such property is located, unless a PPSA financing statement has already been filed in respect of the Loan Party in the province to which the property is re-located until (A) it shall have given the Collateral Agent and the Administrative Agent not less than 30 days' prior written notice (in the form of an Officers' Certificate), or such lesser notice period agreed to by the Collateral Agent, of its intention so to do, clearly describing such change and providing such other information in connection therewith as the Collateral Agent or the Administrative Agent may reasonably request -86- and (B) it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the perfection and priority of the security interest of the Collateral Agent for the benefit of the Secured Parties in the Collateral, if applicable. Each Loan Party agrees to promptly provide the Collateral Agent with certified Organizational Documents reflecting any of the changes described in the preceding sentence. Each Loan Party also agrees to promptly notify the Collateral Agent of any change in the location of any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral is located (including the establishment of any such new office or facility), other than changes in location to a Mortgaged Property or a leased property subject to a Landlord Access Agreement. (b) Concurrently with the delivery of financial statements pursuant to SECTION 5.01(a), deliver to the Administrative Agent and the Collateral Agent a Perfection Certificate Supplement and a certificate of a Financial Officer and the chief legal officer of U.S. Borrower certifying that all UCC financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction necessary to protect and perfect the security interests and Liens under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). SECTION 5.13 POST-CLOSING MATTERS. (a) The applicable Loan Parties shall use their commercially reasonable efforts to obtain and deliver to the Collateral Agent (unless waived or extended by the Collateral Agent in its discretion), within the time periods set forth below, to the extent such items have not provided as of the Closing Date, the following: (i) Landlord Access Agreements for the Real Properties located at 10228 Governor Lane Boulevard, Williamsport, MD; 1600 N. State Rte 291, Carefree Industrial Park, Independence, MO; 6th Avenue SW, Medicine Hat, Alberta, Canada; and 666 Henderson Drive, Regina, Saskatoon, Saskatchewan, Canada, each in form and substance reasonably acceptable to the Collateral Agent, unless the Collateral Agent, in its reasonable judgment, waives such delivery, with respect to each of the leased Real Properties set forth in this clause (i), within forty-five (45) days after the Closing Date; (ii) the property owners' consents to leasehold mortgage financing, on terms and conditions reasonably satisfactory to the Collateral Agent, with respect to the property located at 1274 Industrial Boulevard, Jasper, TN, within forty five (45) days after the Closing Date, and if such consent is so obtained, the applicable Loan Party will deliver to Collateral Agent, within thirty (30) days thereafter, with respect to the same, the following: (1) a duly executed and acknowledged Mortgage, financing statements and other instruments meeting the requirements of Section 4.01(o)(i) hereof; (2) such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as required by Section 4.01(o)(ii); (3) a policy of title insurance meeting the requirements of Section 4.01(o)(iii); (4) policies or certificates of insurance as required by Section 4.01(p); (5) a Survey meeting the requirements of the definition of "Survey" contained in this Agreement; -87- (6) such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as required by Section 4.01(o)(iv); (7) evidence of payment of all applicable premiums, charges, costs, taxes, etc. as required by Section 4.01(o)(v); (8) copies of all leases or other agreements, and subordination of such, as required by Section 4.01(o)(vi); (9) the notices, registration and filings required by Section 4.01(o)(vii); and (10) favorable written opinions of local counsel in the states in which each such Real Property is located, as required by Section 4.01(g); and if such consent to leasehold mortgage financing, set forth in this Section 5.13(a)(ii), is so obtained, the Mortgage and policy of title insurance referred to in clauses (1) and (3), respectively, shall be in the amount of $1,109,750; and (iii) consents to mortgage, or other secured, financing (which consents shall be in form and substance reasonably satisfactory to the Collateral Agent) of Napco, Inc.'s interest, as contract purchaser, under that certain Installment Sale Agreement dated April 16, 1996 between Napco, Inc. and the Community Development Corporation of Butler County, Pennsylvania ("CDC") (as seller thereunder) providing for the sale of certain premises (the "BUTLER PROPERTY") located in Butler, Pennsylvania and more particularly described in a Memorandum of Installment Sale Agreement dated April 16, 1996 and recorded in the Recorder's Office of Butler County, Pennsylvania on April 19, 1996 in Book 2618 at Page 629 (the "INSTALLMENT CONTRACT"), from (x) CDC under the Installment Contract and any related documentation, (y) The Pennsylvania Industrial Development Authority, as holder of one or more mortgages encumbering the Butler Property and (z) any other secured lender which has a mortgage or other security interest in the Butler Property or the Installment Contract, with ninety (90) days after the Closing Date, and if such consents are so obtained, Napco Inc. will deliver to Collateral Agent, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section; PROVIDED that the Collateral Agent, in its sole judgment, may require a collateral assignment of, or other security interest in, the Installment Contract in lieu of the Mortgage set forth in subsection (a)(ii)(1), but in such case the applicable Loan Party shall not be required to seek a second consent thereto. (b) If the applicable Loan Party which is the tenant under that certain lease for the Real Property located at 2121 Woodville Road, Oregon, Ohio, more particularly described in SCHEDULE 3.05(b), does not terminate such lease and vacate such Real Property on or before June 30, 2004, such Loan Party shall use commercially reasonable efforts to obtain within forty five (45) days thereafter, the property owner's consent to leasehold mortgage financing on terms and conditions reasonably satisfactory to Collateral Agent), and if such consent is so obtained, the applicable Loan Party shall deliver to Collateral Agent, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section. (c) If while any Obligations are outstanding, the mortgage(s) or deed(s) of trust encumbering, as of the Closing Date, any of the Real Properties identified on SCHEDULE 5.13(c) (which mortgage(s) or deed(s) of trust are more particularly described in the applicable title commitments referred to in SCHEDULE 6.02(c)) are satisfied or released, the applicable Loan Party shall deliver to Collat- -88- eral Agent with respect to any such Real Property, within thirty (30) days thereafter, the documents, instruments, opinions and other items set forth in subsection (a)(ii)(1) through (10) of this Section. (d) The applicable Loan Party shall obtain and deliver to the Collateral Agent, within ten (10) Business Days after the Closing Date, unless waived or extended by the Collateral Agent in its discretion (x) a survey for the Mortgaged Property located at 15159 Andrew Jackson Highway, Fair Bluff, North Carolina and (y) if not issued by Title Company on the Closing Date, endorsements to the Title Policy respecting such Mortgaged Real Property, removing the standard survey exception and providing the comprehensive and survey endorsements thereto within fifteen (15) Business Days after the delivery to the Collateral Agent of such Survey. ARTICLE VI NEGATIVE COVENANTS Each Loan Party warrants, covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, no Loan Party will, nor will they cause or permit any Subsidiaries to: SECTION 6.01 INDEBTEDNESS. Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except (a) Indebtedness incurred under this Agreement and the other Loan Documents; (b) (i) Indebtedness outstanding on the Closing Date and listed on SCHEDULE 6.01(b), (ii) refinancings or renewals thereof or of the Indebtedness under clauses (iii) and (iv) below; PROVIDED that (A) any such refinancing Indebtedness is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being renewed or refinanced, PLUS the amount of any premiums required to be paid thereon and reasonable fees and expenses associated therewith, (B) such refinancing Indebtedness has a later or equal final maturity and longer or equal weighted average life than the Indebtedness being renewed or refinanced and (C) the covenants, events of default, subordination and other provisions thereof (including any guarantees thereof) shall be, in the aggregate in all material respects, no less favorable to the Lenders than those contained in the Indebtedness being renewed or refinanced; (iii) the Senior Subordinated Notes and Senior Subordinated Note Guarantees issued on the Closing Date (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Subordinated Notes and Senior Subordinated Note Guarantees); and (iv) additional Senior Subordinated Notes and Senior Subordinated Note Guarantees issued after the Closing Date (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Subordinated Notes and Senior Subordinated Note Guarantees) in an aggregate amount not to exceed $50.0 million less the aggregate amount of any Additional Term Loans and additional Senior Subordinated Note Guarantees issued after the Closing Date in accordance with the indenture governing the Senior Subordinated Notes by any Subsidiary Guarantor formed or acquired after the Closing Date; (c) Indebtedness under Hedging Obligations that are designed to protect against fluctuations in interest rates, foreign currency exchange rates or commodity prices, in each case not -89- entered into for speculative purposes; PROVIDED that if such Hedging Obligations relate to interest rates, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by the Loan Documents and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate; (d) Indebtedness permitted by SECTION 6.04(f); (e) Indebtedness in respect of Purchase Money Obligations and Capital Lease Obligations, and refinancings or renewals thereof, in an aggregate amount not to exceed $10.0 million at any time outstanding; (f) Indebtedness incurred by Foreign Subsidiaries in an aggregate amount not to exceed $15.0 million (not including the Canadian Intercompany Note) at any time outstanding; (g) Indebtedness in respect of bid, performance or surety bonds, workers' compensation claims, self-insurance obligations and bankers acceptances issued for the account of any Company in the ordinary course of business, including guarantees or obligations of any Company with respect to letters of credit supporting such bid, performance or surety bonds, workers' compensation claims, self-insurance obligations and bankers acceptances (in each case other than for an obligation for money borrowed), in an aggregate amount not to exceed $10.0 million at any time outstanding; (h) Contingent Obligations of any Loan Party in respect of Indebtedness otherwise permitted under this SECTION 6.01; (i) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is extinguished within five Business Days of incurrence; (j) the Canadian Intercompany Note; (k) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; (l) unsecured Indebtedness of any Company in an aggregate amount not to exceed $20.0 million at any time outstanding; (m) Indebtedness assumed in connection with any Permitted Acquisition, and refinancing or renewals thereof, in an aggregate amount not to exceed $20.0 million at any time outstanding; (n) indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or property of U.S. Borrower or any Subsidiary of U.S. Borrower or Equity Interests of any Subsidiary of U.S. Borrower, other than guarantees of Indebtedness incurred by any person acquiring all or any portion of such business, property or Equity Interests for the purpose of financing any such acquisition; PROVIDED that the maximum aggregate liability in respect of all such obligations outstanding under this clause (n) shall at no time exceed (a) in the case of an acquisition, $10.0 million (PROVIDED that the amount of such liability shall be deemed to be the amount thereof, if -90- any, reflected on the balance sheet of U.S. Borrower or any Subsidiary (E.G., the amount of such liability shall be deemed to be zero if no amount is reflected on such balance sheet)) and (b) in the case of a disposition, the gross proceeds actually received by U.S. Borrower and its Subsidiaries in connection with such disposition; and (o) Indebtedness incurred in the ordinary course of business under guarantees of Indebtedness of suppliers, licensees, franchisees or customers in an aggregate amount, together with the aggregate amount of Investments made pursuant to SECTION 6.04(j), not to exceed $5.0 million at any time outstanding. SECTION 6.02 LIENS. Create, incur, assume or permit to exist, directly or indirectly, any Lien on any property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, the "PERMITTED LIENS"): (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, (ii) in the case of any such charge or claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iii) individually or in the aggregate, could not reasonably expected to have a Material Adverse Effect; (b) Liens in respect of property of any Company imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the property of the Companies, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Companies, taken as a whole, (ii) which, if they secure obligations that are then due and unpaid, are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, and (iii) in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (c) any Lien in existence on the Closing Date and set forth on SCHEDULE 6.02(c) and any Lien granted as a replacement or substitute therefor; PROVIDED that any such replacement or substitute Lien (i) except as permitted by SECTION 6.01(b)(ii)(A), does not secure an aggregate amount of Indebtedness, if any, greater than that secured on the Closing Date and (ii) does not encumber any property other than the property subject thereto on the Closing Date (any such Lien, an "EXISTING LIEN"); (d) easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such Real Property or (iii) individually or in the aggregate materially interfering with the ordinary conduct of the business of the Companies at such Real Property; -91- (e) Liens arising out of judgments, attachments or awards not resulting in a Default and in respect of which such Company shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings and, in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (f) Liens (other than any Lien imposed by ERISA) (x) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation, (y) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; PROVIDED that (i) with respect to clauses (x), (y) and (z) of this paragraph (f), such Liens are for amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings for orders entered in connection with such proceedings have the effect of preventing the forfeiture or sale of the property subject to any such Lien, (ii) to the extent such Liens are not imposed by law, such Liens shall in no event encumber any property other than cash and Cash Equivalents, (iii) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iv) the aggregate amount of deposits at any time pursuant to clause (y) and clause (z) of this paragraph (f) shall not exceed $2.5 million in the aggregate; (g) Leases of the properties of any Company, in each case entered into in the ordinary course of such Company's business so long as such Leases are subordinate in all respects to the Liens granted and evidenced by the Security Documents and do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of any Company or (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto; (h) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Company in the ordinary course of business; (i) Liens securing Indebtedness incurred pursuant to SECTION 6.01(e); PROVIDED that any such Liens attach only to the property being financed pursuant to such Indebtedness and do not encumber any other property of any Company; (j) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Company, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; PROVIDED that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; -92- (k) Liens on property of a person existing at the time such person is acquired or merged with or into or consolidated with any Company to the extent permitted hereunder (and not created in anticipation or contemplation thereof); PROVIDED that such Liens do not extend to property not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than such existing Lien; (l) Liens granted pursuant to the Security Documents to secure the Obligations; (m) licenses of Intellectual Property granted by any Company in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Companies; (n) the filing of UCC or PPSA financing statements solely as a precautionary measure in connection with operating leases or consignment of goods; (o) Liens securing Indebtedness incurred pursuant to SECTION 6.01(f); PROVIDED that (i) such Liens do not extend to, or encumber, property which constitutes Collateral and (ii) such Liens extend only to the property (or Equity Interests) of the Foreign Subsidiary incurring such Indebtedness; (p) the existence of the "equal and ratable" clause in the Senior Subordinated Note Documents (but not any security interests granted pursuant thereto); and (q) Liens incurred in the ordinary course of business of any Company with respect to obligations that do not in the aggregate exceed $5.0 million at any time outstanding, so long as such Liens, to the extent covering any Collateral, are junior to the Liens granted pursuant to the Security Documents; PROVIDED, HOWEVER, that no consensual Liens shall be permitted to exist, directly or indirectly, on any Securities Collateral, other than Liens granted pursuant to the Security Documents. SECTION 6.03 SALE AND LEASEBACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a "SALE AND LEASEBACK TRANSACTION") (other than a Permitted Sale and Leaseback Transaction) unless (i) the sale of such property is permitted by SECTION 6.06 and (ii) any Liens arising in connection with its use of such property are permitted by SECTION 6.02. SECTION 6.04 INVESTMENT, LOAN AND ADVANCES. Directly or indirectly, lend money or credit (by way of guarantee or otherwise) or make advances to any person, or purchase or acquire any stock, bonds, notes, debentures or other obligations or securities of, or any other interest in, or make any capital contribution to, any other person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (all of the foregoing, collectively, "INVESTMENTS"), except that the following shall be permitted: (a) the Companies may consummate the Transactions in accordance with the provisions of the Transaction Documents; (b) Investments outstanding on the Closing Date and identified on SCHEDULE 6.04(b); -93- (c) the Companies may (i) acquire and hold accounts receivables owing to any of them if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms, (ii) invest in, acquire and hold cash and Cash Equivalents, (iii) endorse negotiable instruments held for collection in the ordinary course of business or (iv) make lease, utility and other similar deposits in the ordinary course of business; (d) Hedging Obligations incurred pursuant to SECTION 6.01(c); (e) loans and advances to directors, employees and officers of U.S. Borrower and the Subsidiaries for BONA FIDE business purposes and to purchase Equity Interests of Holdings, in aggregate amount not to exceed $5.0 million at any time outstanding; (f) Investments (i) by Parent, U.S. Borrower or any U.S. Subsidiary Guarantor in U.S. Borrower or any U.S. Subsidiary Guarantor, (ii) by Canadian Borrower or any Canadian Subsidiary Guarantor in Canadian Borrower or any Canadian Subsidiary Guarantor and (iii) by a Subsidiary that is not a Subsidiary Guarantor in any other Subsidiary that is not a Subsidiary Guarantor; PROVIDED that any Investment in the form of a loan or advance by or in a Loan Party shall be evidenced by an Intercompany Note and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral pursuant to the Security Documents; (g) Investments in securities of trade creditors or customers in the ordinary course of business received upon foreclosure or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (h) Investments made by U.S. Borrower or any Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with SECTION 6.06; (i) (x) Investments in Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million at any time outstanding, after taking into account amounts returned in cash (including upon disposition) and (y) Investments in Foreign Subsidiaries with the proceeds of Excluded Issuances to the extent such proceeds have not been utilized for any other purpose; PROVIDED that any such Investment made in the form of a loan or advance shall be evidenced by an Intercompany Note and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral pursuant to the Security Documents; (j) loans and advances to suppliers, licensees, franchisees or customers of U.S. Borrower or any of its Subsidiaries made in the ordinary course of business in an aggregate amount, together with the aggregate amount of Indebtedness incurred pursuant to SECTION 6.01(o), not to exceed $5.0 million at any time outstanding; (k) Investments in Subsidiaries as a result of the consummation of Permitted Acquisitions; (l) Guarantees of Indebtedness not prohibited by SECTION 6.01; and (m) other investments in an aggregate amount not to exceed $20.0 million at any time outstanding. SECTION 6.05 MERGERS AND CONSOLIDATIONS. Wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation (or agree to do any of the foregoing at any future time), except that the following shall be permitted: -94- (a) Asset Sales in compliance with SECTION 6.06; (b) acquisitions in compliance with SECTION 6.07; (c) (x) any Company (other than Canadian Borrower or any Canadian Subsidiaries) may merge or consolidate with or into U.S. Borrower or any U.S. Subsidiary Guarantor (as long as U.S. Borrower or a U.S. Subsidiary Guarantor is the surviving person in such merger or consolidation and remains a Wholly Owned Subsidiary of Parent); PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable and (y) any Non-Guarantor Subsidiary may transfer property or lease to or acquire or lease property from any Non-Guarantor Subsidiary or may be merged into any other Non-Guarantor Subsidiary; and (d) Canadian Borrower or any Canadian Subsidiaries may merge or consolidate with or into Canadian Borrower or any Canadian Subsidiary Guarantor (as long as Canadian Borrower or a Canadian Subsidiary Guarantor is the surviving person in such merger or consolidation and remains a Wholly Owned Subsidiary of Parent); PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable; and (e) any Subsidiary (other than Canadian Borrower) may dissolve, liquidate or wind up its affairs at any time; PROVIDED that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect; and (f) Holdings may merge with or into or consolidate with or into Parent in connection with any IPO, as long as the surviving person assumes all of the obligations of Parent under the Loan Documents and no Default shall have occurred and be continuing. To the extent the Required Lenders waive the provisions of this SECTION 6.05 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this SECTION 6.05, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing. SECTION 6.06 ASSET SALES. Effect any Asset Sale, or agree to effect any Asset Sale, except that the following shall be permitted subject to SECTION 2.10(c): (a) disposition of used, worn out, obsolete or surplus property by any Loan Party in the ordinary course of business and the abandonment or other disposition of Intellectual Property that is, in the reasonable judgment of U.S. Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Companies taken as a whole; (b) Asset Sales (other than Asset Sales of Equity Interests in Canadian Borrower); PROVIDED that the aggregate consideration received in respect of all Asset Sales pursuant to this clause (b) shall not exceed $25.0 million in any four consecutive fiscal quarters of U.S. Borrower; (c) leases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents; (d) the Transactions as contemplated by the Transaction Documents; -95- (e) mergers and consolidations in compliance with SECTION 6.05; (f) Investments in compliance with SECTION 6.04; (g) Permitted Sale and Leaseback Transactions; (h) the sale of (i) all, but not less than all, of the Equity Interests in Canadian Borrower, or (ii) all or substantially all of the assets of Canadian Borrower; PROVIDED that, in the case of (ii), all Canadian Term Loans and Obligations related thereto are repaid prior to or simultaneously with such Asset Sale; (i) U.S. Borrower and the Subsidiaries may sell Cash Equivalents in the ordinary course of business; (j) sales, transfers and dispositions of accounts receivable in connection with the compromise, settlement or collection thereof; and (k) within 365 days after the consummation of a Permitted Acquisition, the sale, transfer or disposition for cash, and for fair market value, of assets acquired in connection with such Permitted Acquisition and not required in the operation of the business of U.S. Borrower or any of the Subsidiaries. To the extent the Required Lenders waive the provisions of this SECTION 6.06 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this SECTION 6.06, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing. SECTION 6.07 ACQUISITIONS. Purchase or otherwise acquire (in one or a series of related transactions) any part of the property (whether tangible or intangible) of any person (or agree to do any of the foregoing at any future time), except that the following shall be permitted: (a) Capital Expenditures by U.S. Borrower and the Subsidiaries shall be permitted to the extent permitted by SECTION 6.10(c); (b) purchases and other acquisitions of inventory, materials, equipment and intangible property in the ordinary course of business; (c) Investments in compliance with SECTION 6.04; (d) leases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents; (e) the Transactions as contemplated by the Transaction Documents; (f) Permitted Acquisitions; and (g) mergers and consolidations in compliance with SECTION 6.05; PROVIDED that the Lien on and security interest in such property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with the provisions of SECTION 5.10 or SECTION 5.11, as applicable. -96- SECTION 6.08 DIVIDENDS. Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company, except that the following shall be permitted: (a) Dividends by any Company to U.S. Borrower, Canadian Borrower or any Subsidiary of U.S. Borrower and to minority equityholders of any Subsidiary paid ratably; (b) payments by U.S. Borrower or by Holdings to permit Holdings or Parent, and which are used by Holdings or Parent, to redeem Equity Interests of U.S. Borrower, Holdings or Parent held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; PROVIDED that the aggregate cash consideration paid for all such redemptions shall not exceed the sum of (A) $5.0 million during any calendar year (with unused amounts being available to be used in the following calendar year, but not in any succeeding calendar year) plus (B) the amount of any Net Cash Proceeds received by or contributed to U.S. Borrower from the issuance and sale after the Closing Date of Qualified Capital Stock of Parent, Holdings or U.S. Borrower to its officers, directors or employees that have not been applied to the payment of Dividends pursuant to this clause (b), plus (C) the Net Cash Proceeds of any "key-man" life insurance policies that have not been applied to the payment of Dividends pursuant to this clause (b); (c) (A) to the extent actually used by Parent and Holdings to pay such taxes, costs and expenses, payments by U.S. Borrower to or on behalf of Parent and Holdings in an amount sufficient to pay franchise taxes and other fees required to maintain the legal existence of Parent and Holdings and (B) payments by U.S. Borrower to or on behalf of Parent and Holdings in an amount sufficient to pay out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead of Parent and Holdings, in the case of clauses (A) and (B) in an aggregate amount not to exceed $500,000 in any fiscal year; (d) Permitted Tax Distributions by U.S. Borrower to Parent or Holdings, so long as Parent or Holdings uses such distributions to pay its taxes; (e) to the extent that the Net Cash Proceeds of any Permitted Sale and Leaseback Transaction exceed the Permitted Sale and Leaseback Transaction Amount, payments of such excess amount to Holdings to permit Holdings to pay a Dividend to the holders of Equity Interests of Holdings or a distribution to the holders of Indebtedness of Holdings; and (f) distributions to Parent in order to enable Parent or Holdings to pay, and which are used by Parent or Holdings to pay, customary and reasonable costs and expenses of an offering of securities of Parent or Holdings that is not consummated. SECTION 6.09 TRANSACTIONS WITH AFFILIATES. Enter into, directly or indirectly, any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of any Company (other than between or among U.S. Borrower and one or more U.S. Subsidiary Guarantors or between or among Canadian Borrower and one or more Canadian Subsidiary Guarantors), other than on terms and conditions at least as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm's-length transaction with a person other than an Affiliate, except that the following shall be permitted: (a) Dividends permitted by SECTION 6.08; -97- (b) Investments permitted by SECTIONS 6.04(E), (F), (I) and, to the extent such Investments are in Subsidiaries, (M); (c) reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification, compensation, employment and severance agreements, in each case approved by the Board of Directors; (d) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and otherwise not prohibited by the Loan Documents; (e) so long as no Default exists, the payment of regular management fees and transaction fees payable upon acquisitions, divestitures and the sale of Parent, to Sponsor in the amounts and at the times specified in the Advisory Services Agreement, as in effect on the Closing Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material respect than such agreement as it was in effect on the Closing Date; (f) sales or issuances of Qualified Capital Stock to Affiliates of U.S. Borrower not otherwise prohibited by the Loan Documents and the granting of registration and other customary rights in connection therewith; (g) any transaction with an Affiliate where the only consideration paid by any Loan Party is Qualified Capital Stock; (h) the Transactions as contemplated by the Transaction Documents; (i) the entering into of a tax sharing agreement, or payments pursuant thereto, between U.S. Borrower and/or one or more Subsidiaries, on the one hand, and any other person with which U.S. Borrower or such Subsidiaries are required or permitted to file a consolidated tax return or with which U.S. Borrower or such Subsidiaries are part of a consolidated group for tax purposes, on the other hand, which payments by U.S. Borrower and its Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis; (j) entering into an agreement that provides registration rights to the shareholders of U.S. Borrower, Holdings or Parent or amending any such agreement with shareholders of U.S. Borrower, Holdings or Parent and the performance of such agreements; (k) any transaction with a joint venture or similar entity which would constitute a transaction with an Affiliate solely because U.S. Borrower or any of its Subsidiaries owns an equity interest in or otherwise controls such joint venture or similar entity; PROVIDED that no Affiliate of U.S. Borrower or any of its Subsidiaries other than U.S. Borrower or any Subsidiary of U.S. Borrower shall have a beneficial interest in such joint venture or similar entity; (l) any merger, consolidation or reorganization of U.S. Borrower with an Affiliate, solely for the purposes of (a) reorganizing to facilitate an IPO of securities of U.S. Borrower, Holdings, Parent or other holding company, (b) forming a holding company or (c) reincorporating U.S. Borrower in a new jurisdiction; -98- (m) sales of inventory between or among U.S. Borrower and/or one or more of its Subsidiaries in the ordinary course of business; and (n) (i) any agreement in effect on the Closing Date listed on SCHEDULE 6.09(n), as in effect on the Closing Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material respect than such agreement as it was in effect on the Closing Date or (ii) any transaction pursuant to any agreement referred to in the immediately preceding clause (i). SECTION 6.10 FINANCIAL COVENANTS.(a) (a) MAXIMUM TOTAL LEVERAGE RATIO. Permit the Total Leverage Ratio, at any date during any period set forth in the table below, to exceed the ratio set forth opposite such period in the table below: ----------------------------------------------------------------------- TEST PERIOD LEVERAGE RATIO ----------- -------------- ----------------------------------------------------------------------- Closing Date - March 31, 2005 6.25 to 1.0 ----------------------------------------------------------------------- April 1, 2005 - June 30, 2005 5.95 to 1.0 ----------------------------------------------------------------------- July 1, 2005 - March 31, 2006 5.75 to 1.0 ----------------------------------------------------------------------- April 1, 2006 - September 30, 2006 5.50 to 1.0 ----------------------------------------------------------------------- October 1, 2006 - March 31, 2007 5.25 to 1.0 ----------------------------------------------------------------------- April 1, 2007 - June 30, 2007 5.00 to 1.0 ----------------------------------------------------------------------- July 1, 2007 - December 31, 2007 4.75 to 1.0 ----------------------------------------------------------------------- January 1, 2008 - June 30, 2008 4.50 to 1.0 ----------------------------------------------------------------------- July 1, 2008 - September 30, 2008 4.25 to 1.0 ----------------------------------------------------------------------- October 1, 2008 and thereafter 4.00 to 1.0 ----------------------------------------------------------------------- (b) MINIMUM INTEREST COVERAGE RATIO. Permit the Consolidated Interest Coverage Ratio, for any Test Period ending during any period set forth in the table below, to be less than the ratio set forth opposite such period in the table below: ----------------------------------------------------------------------- INTEREST TEST PERIOD COVERAGE RATIO ----------- -------------- ----------------------------------------------------------------------- Closing Date - December 31, 2004 1.90 to 1.0 ----------------------------------------------------------------------- January 1, 2005 - March 31, 2006 2.00 to 1.0 ----------------------------------------------------------------------- April 1, 2006 - December 31, 2006 2.10 to 1.0 ----------------------------------------------------------------------- January 1, 2007 - June 30, 2007 2.25 to 1.0 ----------------------------------------------------------------------- July 1, 2007 - December 31, 2007 2.35 to 1.0 ----------------------------------------------------------------------- January 1, 2008 - September 30, 2008 2.50 to 1.0 ----------------------------------------------------------------------- October 1, 2008 and thereafter 2.75 to 1.0 ----------------------------------------------------------------------- -99- (c) LIMITATION ON CAPITAL EXPENDITURES. Permit the aggregate amount of Capital Expenditures made in any period set forth below, to exceed the amount set forth opposite such period below: ----------------------------------------------------------------------- PERIOD AMOUNT (IN MILLIONS) ------ -------------------- ----------------------------------------------------------------------- Closing Date - December 31, 2004 $15.0 ----------------------------------------------------------------------- January 1, 2005 - December 31, 2005 $15.0 ----------------------------------------------------------------------- January 1, 2006 - December 31, 2006 $15.0 ----------------------------------------------------------------------- January 1, 2007 - December 31, 2007 $16.0 ----------------------------------------------------------------------- January 1, 2008 - December 31, 2008 $16.0 ----------------------------------------------------------------------- Each calendar year ending after 2008 $16.0 ----------------------------------------------------------------------- ; PROVIDED, HOWEVER, that (x) if the aggregate amount of Capital Expenditures made in any fiscal year shall be less than the maximum amount of Capital Expenditures permitted under this SECTION 6.10(c) for such fiscal year (before giving effect to any carryover), then an amount of such shortfall not exceeding 50% of such maximum amount (without giving effect to clause (z) below) (the "CAPEX CARRYFORWARD AMOUNT") may be added to the amount of Capital Expenditures permitted under this SECTION 6.10(c) for the immediately succeeding (but not any other) fiscal year, (y) in determining whether any amount is available for carryover, the amount expended in any fiscal year shall first be deemed to be from the amount allocated to such fiscal year (before giving effect to any carryover) and (z) the amount set forth in the table above for any period may be increased by the amount of Net Cash Proceeds of Excluded Issuances designated for Capital Expenditures for such period during such period. SECTION 6.11 PREPAYMENTS OF OTHER INDEBTEDNESS; MODIFICATIONS OF ORGANIZATIONAL DOCUMENTS AND OTHER DOCUMENTS, ETC. Directly or indirectly: (a) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Indebtedness outstanding under the Senior Subordinated Notes or any other Subordinated Indebtedness, except as otherwise permitted by this Agreement; (b) amend or modify, or permit the amendment or modification of, any provision of any Transaction Document in any manner that is adverse in any material respect to the interests of the Lenders; (c) terminate, amend, modify (including electing to treat any Pledged Interests (as defined in the U.S. Security Agreement) as a "security" under Section 8-103 of the UCC) or change any of its Organizational Documents (including by the filing or modification of any certificate of designation) or any agreement to which it is a party with respect to its Equity Interests (including any stockholders' agreement), or enter into any new agreement with respect to its Equity Interests, other than any such amendments, modifications or changes or such new agreements which are not adverse in any material respect to the interests of the Lenders; PROVIDED that Parent may issue such Equity Interests, so long as such issuance is not prohibited by SECTION 6.13 or any other provision of this Agreement, and may amend its Organizational Documents to authorize any such Equity Interests; or -100- (d) cause or permit any other obligation (other than the Obligations and the Guaranteed Obligations) to constitute Designated Senior Debt (as defined in the Senior Subordinated Note Documents). SECTION 6.12 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by U.S. Borrower or any Subsidiary, or pay any Indebtedness owed to U.S. Borrower or a Subsidiary, (b) make loans or advances to U.S. Borrower or any Subsidiary or (c) transfer any of its properties to U.S. Borrower or any Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable law; (ii) this Agreement and the other Loan Documents; (iii) the Senior Subordinated Note Documents as in effect on the Closing Date; (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Subsidiary; (v) customary provisions restricting assignment of any agreement entered into by a Subsidiary in the ordinary course of business; (vi) any Lien permitted by SECTION 6.02 restricting the transfer of the property subject thereto; (vii) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under SECTION 6.06 pending the consummation of such sale; (viii) any agreement applicable to such Subsidiary in effect at the time such Subsidiary becomes a Subsidiary of U.S. Borrower, so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Subsidiary of U.S. Borrower; (ix) customary provisions in partnership agreements, limited liability company organizational governance documents, asset sales and stock sale agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company or similar person; (x) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business; (xi) any instrument governing Indebtedness assumed in connection with any Permitted Acquisition, which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person or the properties or assets of the person so acquired; (xii) in the case of any joint venture which is not a Loan Party in respect of any matters referred to in clauses (b) and (c) above, restrictions in such person's Organizational Documents or pursuant to any joint venture agreement or stockholders agreements solely to the extent of the Equity Interests of or property held in the subject joint venture or other entity; (xiii) any encumbrances or restrictions imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clauses (iii), (viii) or (xi) above; PROVIDED that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing; or (xiv) encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries, or municipal loan or related agreements entered into in connection with the incurrence of industrial or economic revenue bonds, permitted to be incurred under this Agreement; PROVIDED that any such encumbrances or restrictions are ordinary and customary with respect to the type of Indebtedness being incurred under the relevant circumstances and do not, in the good faith judgment of the Board of Directors of U.S. Borrower, materially impair either Borrower's ability to make payment on the Obligations when due. SECTION 6.13 LIMITATION ON ISSUANCE OF CAPITAL STOCK. (a) With respect to Parent, issue any Equity Interest that is not Qualified Capital Stock. (b) With respect to U.S. Borrower or any Subsidiary, issue any Equity Interest (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, any Equity Interest, except (i) for stock splits, stock dividends and additional issuances of Equity Interests which do not decrease the percentage ownership of U.S. Borrower or any Subsidiaries in any class of the Equity Interest of such Subsidiary; (ii) Subsidiaries of U.S. Borrower formed after the Closing Date in accordance with SECTION 6.14 may issue Equity Interests to U.S. Borrower or the Subsidiary of -101- Borrower which is to own such Equity Interests; and (iii) U.S. Borrower may issue common stock that is Qualified Capital Stock to Parent. All Equity Interests issued in accordance with this SECTION 6.13(b) shall, to the extent required by SECTIONS 5.10 and 5.11 or any Security Document, be delivered to the Collateral Agent for pledge pursuant to the applicable Security Document. SECTION 6.14 LIMITATION ON CREATION OF SUBSIDIARIES. Establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; PROVIDED that, without such consent, U.S. Borrower may (i) establish or create one or more Wholly Owned Subsidiaries of U.S. Borrower, (ii) establish, create or acquire one or more Subsidiaries in connection with an Investment made pursuant to SECTIONS 6.04(f), (k) or (m) or (iii) acquire one or more Subsidiaries in connection with a Permitted Acquisition, so long as, in each case, SECTION 5.10(b) shall be complied with. SECTION 6.15 BUSINESS. (a) With respect to Parent, engage in any business activities or have any properties or liabilities, other than (i) its ownership of the Equity Interests of U.S. Borrower, (ii) obligations under the Loan Documents and the Senior Subordinated Note Documents and (iii) activities and properties incidental, ancillary or complementary to the foregoing clauses (i) and (ii). (b) With respect to U.S. Borrower and the Subsidiaries, engage (directly or indirectly) in any business other than those businesses in which U.S. Borrower and its Subsidiaries are engaged on the Closing Date as described in the Confidential Information Memorandum (or, in the good faith judgment of the Board of Directors, which are substantially related thereto or are reasonable extensions thereof). SECTION 6.16 LIMITATION ON ACCOUNTING CHANGES. Make or permit, any significant change in accounting policies or reporting practices, without the consent of the Administrative Agent, which consent shall not be unreasonably withheld, except changes that are required by GAAP. SECTION 6.17 FISCAL YEAR. Change its fiscal year-end to a date other than December 31. SECTION 6.18 LEASE OBLIGATIONS. Create, incur, assume or suffer to exist any obligations as lessee for the rental or hire of real or personal property of any kind under leases or agreements to lease having an original term of one year or more other than (1) such obligations existing on the Closing Date, (2) such obligations acquired in connection with a Permitted Acquisition that are not incurred in anticipation of such Permitted Acquisition and are obligations only of any legal entities acquired in such Permitted Acquisition and (3) with respect to other obligations, created, incurred, assumed or suffered to exist after the Closing Date, such obligations that would cause the direct and contingent liabilities of U.S. Borrower and its Subsidiaries, on a consolidated basis, in respect of all such obligations created, incurred, assumed or suffered to exist after the Closing Date not to exceed the sum of (i) $5.0 million and (ii) amounts payable in respect of leases entered into in connection with Permitted Sale and Leaseback Transactions, payable in any period of 12 consecutive months. SECTION 6.19 NO FURTHER NEGATIVE PLEDGE. Enter into any agreement, instrument, deed or lease which prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of their respective properties or revenues, whether now owned or hereafter acquired, or which requires the grant of any security for an obligation if security is granted for another obligation, except the following: (1) this Agreement and the other Loan Documents; (2) covenants in documents creating Liens permitted by SECTION 6.02 prohibiting further Liens on the properties encumbered thereby; (3) the Senior Subordinated Note Documents as in effect on the Closing Date; (4) any other agreement that does not restrict in any manner (directly or indirectly) Liens created pursuant to the Loan Documents on any Collateral securing the Obligations and does not require the direct or indirect -102- granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of property of any Loan Party to secure the Obligations; and (5) any prohibition or limitation that (a) exists pursuant to applicable law, (b) consists of customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under SECTION 6.06 pending the consummation of such sale, (c) restricts subletting or assignment of any lease governing a leasehold interest of U.S. Borrower or a Subsidiary, (d) exists in any agreement in effect at the time such Subsidiary becomes a Subsidiary of U.S. Borrower, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary or (e) is imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clause (3) or (5)(e); PROVIDED that such amendments and refinancings are no more materially restrictive with respect to such prohibitions and limitations than those prior to such amendment or refinancing. SECTION 6.20 ANTI-TERRORISM LAW; ANTI-MONEY LAUNDERING. (a) Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in SECTION 3.22, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties' compliance with this SECTION 6.20). (b) Cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of law. SECTION 6.21 EMBARGOED PERSON. Cause or permit (a) any of the funds or properties of the Loan Parties that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law ("EMBARGOED PERSON" or "EMBARGOED PERSONS") that is identified on (1) the "List of Specially Designated Nationals and Blocked Persons" (the "SDN LIST") maintained by OFAC and/or on any other similar list ("OTHER LIST") maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders (collectively, "EXECUTIVE ORDERS"), or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law. ARTICLE VII GUARANTEE SECTION 7.01 THE GUARANTEE. Parent and each U.S. Subsidiary Guarantor (the "U.S. GUARANTORS") hereby, jointly and severally guarantee, as a primary obligor and not as a surety to each U.S. Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code after any bankruptcy or insolvency petition under Ti- -103- tle 11 of the United States Code) on the Loans made by the Lenders to, and the Notes held by each Lender of, U.S. Borrower, and all other U.S. Obligations from time to time owing to the Secured Parties by any U.S. Loan Party under any Loan Document in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "U.S. GUARANTEED OBLIGATIONS"). Parent, the U.S. Borrower and each Canadian Subsidiary Guarantor (the "CANADIAN GUARANTORS") hereby, jointly and severally guarantee, as a primary obligor and not as a surety to each Canadian Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code or other applicable bankruptcy or insolvency legislation after any bankruptcy or insolvency petition under Title 11 of the United States Code or other applicable bankruptcy or insolvency legislation) on the Loans made by the Lenders to, and the Notes held by each Lender of, Canadian Borrower, and all other Canadian Obligations from time to time owing to the Canadian Secured Parties by any Canadian Loan Party under any Loan Document in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "CANADIAN GUARANTEED OBLIGATIONS"). The U.S. Guarantors hereby jointly and severally agree that if U.S. Borrower or other U.S. Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the U.S. Guaranteed Obligations, the U.S. Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the U.S. Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. The Canadian Guarantors hereby jointly and severally agree that if Canadian Borrower or other Canadian Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Canadian Guaranteed Obligations, the Canadian Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Canadian Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 7.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under SECTION 7.01 shall constitute a guaranty of payment and to the fullest extent permitted by applicable law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrowers under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or -104- waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien or security interest granted to, or in favor of, Issuing Bank or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or (v) the release of any other Guarantor pursuant to SECTION 7.09. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against either Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between the Borrowers and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against either Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. SECTION 7.03 REINSTATEMENT. The obligations of the Guarantors under this ARTICLE VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrowers or other Loan Party in respect of the applicable Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the applicable Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. SECTION 7.04 SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all applicable Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in SECTION 7.01, whether by subrogation or otherwise, against either Borrower or any other Guarantor of any of the applicable Guaranteed Obligations or any security for any of the applicable Guaranteed Obligations. Any Indebtedness of any Loan Party permitted pursuant to SECTION 6.01(d) shall be subordinated to such Loan Party's Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness. SECTION 7.05 REMEDIES. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of either Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in ARTICLE VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in said ARTICLE VIII) for purposes of SECTION 7.01, notwithstanding any stay, injunction or other prohibition preventing such -105- declaration (or such obligations from becoming automatically due and payable) as against either Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by either Borrower) shall forthwith become due and payable by the applicable Guarantors for purposes of SECTION 7.01. SECTION 7.06 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges that the guarantee in this ARTICLE VII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213. SECTION 7.07 CONTINUING GUARANTEE. The guarantee in this ARTICLE VII is a continuing guarantee of payment, and shall apply to all applicable Guaranteed Obligations whenever arising. SECTION 7.08 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under SECTION 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under SECTION 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. SECTION 7.09 RELEASE OF GUARANTORS. If, in compliance with the terms and provisions of the Loan Documents, all or substantially all of the Equity Interests or property of any Guarantor are sold or otherwise transferred (a "TRANSFERRED GUARANTOR") to a person or persons, none of which is U.S. Borrower or a Subsidiary, such Transferred Guarantor shall, upon the consummation of such sale or transfer, be released from its obligations under this Agreement (including under SECTION 11.03 hereof) and its obligations to pledge and grant any Collateral owned by it pursuant to any Security Document and, in the case of a sale of all or substantially all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the Collateral Agent pursuant to the Security Documents shall be released, and the Collateral Agent shall take such actions as are necessary to effect each release described in this SECTION 7.09 in accordance with the relevant provisions of the Security Documents. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01 EVENTS OF DEFAULT. Upon the occurrence and during the continuance of the following events ("EVENTS OF DEFAULT"): (a) default shall be made in the payment of any principal of any Loan or any Reimbursement Obligation when and as the same shall become due and payable, whether at the due date thereof (including a Term Loan Repayment Date) or at a date fixed for prepayment (whether voluntary or mandatory) thereof or by acceleration thereof or otherwise; (b) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in paragraph (a) above) due under any Loan -106- Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days; (c) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (d) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in SECTION 5.02, 5.03(a) or 5.08 or in ARTICLE VI; (e) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (a), (b) or (d) immediately above) and such default shall continue unremedied or shall not be waived for a period of 30 days after written notice thereof from the Administrative Agent or the Required Lenders to U.S. Borrower; (f) any Company shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations), when and as the same shall become due and payable beyond any applicable grace period, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee or other representative on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity or become subject to a mandatory offer purchase by the obligor; PROVIDED that it shall not constitute an Event of Default pursuant to this paragraph (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) exceeds $10.0 million at any one time (PROVIDED that, in the case of Hedging Obligations, the amount counted for this purpose shall be the amount payable by all Companies if such Hedging Obligations were terminated at such time); (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Company, or of a substantial part of the property of any Company, under Title 11 of the Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; or (iii) the winding-up or liquidation of any Company; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) any Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (g) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general -107- assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate; (i) one or more judgments, orders or decrees for the payment of money in an aggregate amount in excess of $10.0 million shall be rendered against any Company or any combination thereof and the same shall remain undischarged, unvacated or unbonded for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon properties of any Company to enforce any such judgment; (j) one or more ERISA Events or with respect to Foreign Plans noncompliance with applicable legal requirements or Foreign Plan underfunding shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other such ERISA Events and with respect to Foreign Plans noncompliance with applicable legal requirements or Foreign Plan underfunding that have occurred, could reasonably be expected to result in a Material Adverse Effect or the imposition of a Lien on any properties of a Company; (k) any security interest and Lien purported to be created by any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent, for the benefit of the applicable Secured Parties, the Liens, rights, powers and privileges purported to be created and granted under such Security Documents (including a perfected first priority security interest in and Lien on, all of the Collateral thereunder (except as otherwise expressly provided in such Security Document)) in favor of the Collateral Agent, or shall be asserted by U.S. Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby; (l) any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Loan Party or any other person, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Loan Party shall repudiate or deny any portion of its liability or obligation for the Obligations; (m) there shall have occurred a Change in Control; (n) the Acquisition shall not have occurred on the Closing Date in accordance with the terms and conditions of the Acquisition Agreement; or (o) the failure by either Borrower to make an Offer to Redeem when and as required by SECTION 2.10. then, and in every such event (other than an event with respect to Parent or either Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowers, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans and Reimbursement Obligations then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans and Reimbursement Obligations so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become -108- forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event, with respect to Parent or either Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans and Reimbursement Obligations then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding. ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS SECTION 9.01 COLLATERAL ACCOUNT. (a) The Collateral Agent is hereby authorized to establish and maintain at its office at 677 Washington Boulevard, Stamford, Connecticut 06901, in the name of the Collateral Agent, a restricted deposit account designated "Ply Gem Industries, Inc. U.S. Collateral Account." Each U.S. Loan Party shall deposit into the U.S. Collateral Account from time to time (i) the cash proceeds of any of the U.S. Security Agreement Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Loan Document, (ii) the cash proceeds of any Casualty Event with respect to U.S. Security Agreement Collateral, to the extent contemplated herein or in any other Loan Document, and (iii) any cash such U.S. Loan Party is required to pledge as additional collateral security hereunder pursuant to the Loan Documents. The Collateral Agent is hereby authorized to establish and maintain at its office at 677 Washington Boulevard, Stamford, Connecticut 06901, in the name of the Collateral Agent, a restricted deposit account designated "CWD Windows and Doors, Inc. Canadian Collateral Account." Each Canadian Loan Party shall deposit into the Canadian Collateral Account from time to time (i) the cash proceeds of any of the Canadian Security Agreement Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Loan Document, (ii) the cash proceeds of any Casualty Event with respect to Canadian Security Agreement Collateral, to the extent contemplated herein or in any other Loan Document, and (iii) any cash such Canadian Loan Party is required to pledge as additional collateral security hereunder pursuant to the Loan Documents. (b) The balance from time to time in either Collateral Account shall constitute part of the relevant Collateral and shall not constitute payment of the Obligations until applied as hereinafter provided. So long as no Event of Default has occurred and is continuing or will result therefrom, the Collateral Agent shall within two Business Days of receiving a request of the applicable Loan Party for release of cash proceeds (i) from the Collateral Account constituting Net Cash Proceeds relating to any Casualty Event or Asset Sale remit such cash proceeds on deposit in either Collateral Account to or upon the order of such Loan Party, so long as such Loan Party has satisfied the conditions relating thereto set forth in SECTION 9.02 and (ii) with respect to the LC Sub-Account, remit such Net Cash Proceeds on deposit in the LC Sub-Account to or upon the order of such U.S. Loan Party (x) at such time as all Letters of Credit shall have been terminated and all of the liabilities in respect of the Letters of Credit have been paid in full or (y) otherwise in accordance with SECTION 2.18(i). At any time following the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of either Collateral Account to the payment of the applicable Obligations in the manner specified in SECTION 9.03 hereof subject, however, in the case of amounts deposited in the LC Sub-Account, to the provisions of SECTIONS 2.18(i) and 9.03. The -109- Loan Parties shall have no right to withdraw, transfer or otherwise receive any funds deposited in either Collateral Account except to the extent specifically provided herein. (c) Amounts on deposit in either Collateral Account shall be invested and reinvested from time to time in Cash Equivalents as the applicable Loan Party (or, after the occurrence and during the continuance of an Event of Default, the Collateral Agent) shall determine by written instruction to the Collateral Agent, or if no such instructions are given, then as the Collateral Agent, in its sole discretion, shall determine which Cash Equivalents shall be held in the name and be under the control of the Collateral Agent (or any sub-agent); PROVIDED that at any time after the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, if instructed by the Required Lenders as specified herein, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Cash Equivalents and to apply or cause to be applied the proceeds thereof to the payment of the applicable Obligations in the manner specified in SECTION 9.03 hereof subject, however, in the case of amounts deposited in the LC Sub-Account, to the provisions of SECTION 2.18(i). (d) Amounts deposited into the U.S. Collateral Account as cover for liabilities in respect of Letters of Credit under any provision of this Agreement requiring such cover shall be held by the Administrative Agent in a separate sub-account designated as the "LC Sub-Account" (the "LC SUB-ACCOUNT") and, subject to SECTION 2.18(I), all amounts held in the LC Sub-Account shall constitute collateral security to be applied in accordance with SECTION 2.18(i). (e) Earnings on the amounts deposited in any Collateral Account shall be for the account of the applicable Loan Party and absent any Default will be released to the applicable Borrower upon its request. SECTION 9.02 PROCEEDS OF DESTRUCTION, TAKING AND COLLATERAL DISPOSITIONS. So long as no Event of Default shall have occurred and be continuing, in the event the applicable Loan Party elects to reinvest Net Cash Proceeds in respect of any Asset Sale or Casualty Event in accordance with the provisions of SECTIONS 2.10(c) and 2.10(f) as applicable, the Collateral Agent shall receive at least 10 days' prior notice of each request for payment and shall not release any part of such Net Cash Proceeds, until the applicable Loan Party has furnished to the Collateral Agent (i) an Officers' Certificate setting forth: (A) a brief description of the reinvestment to be made, (B) the dollar amount of the expenditures to be made, or costs incurred by such Loan Party in connection with such reinvestment and (C) evidence that the properties acquired in connection with such reinvestment have a fair market value at least equal to the amount of such Net Cash Proceeds requested to be released from the applicable Collateral Account and (ii) all security agreements and Mortgages and other items required by the provisions of SECTIONS 5.10 and 5.11 to, among other things, subject such reinvestment properties to the Lien of the Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties. SECTION 9.03 APPLICATION OF PROCEEDS. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, in full or in part, together with any other sums then held by the Collateral Agent pursuant to this Agreement, promptly by the Collateral Agent as follows: (a) FIRST, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including compensation to the Collateral Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith and all amounts for which the Collateral Agent is entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each -110- such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; (b) SECOND, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including compensation to the other applicable Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other applicable Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; (c) THIRD, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in cash, PRO RATA, of interest and other amounts constituting applicable Obligations (other than principal and Reimbursement Obligations) in each case equally and ratably in accordance with the respective amounts thereof then due and owing; (d) FOURTH, to the indefeasible payment in full in cash, PRO RATA, of principal amount of the applicable Obligations (including Reimbursement Obligations); and (e) FIFTH, the balance, if any, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct. In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (e) of this SECTION 9.03, the applicable Loan Parties shall remain liable, jointly and severally, for any deficiency. ARTICLE X THE AGENTS SECTION 10.01 APPOINTMENT. Each Lender hereby irrevocably designates and appoints each of the Administrative Agent and the Collateral Agent as an agent of such Lender under this Agreement and the other Loan Documents. Each Lender irrevocably authorizes each Agent, in such capacity, through its agents or employees, to take such actions on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. SECTION 10.02 AGENT IN ITS INDIVIDUAL CAPACITY. Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with U.S. Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. SECTION 10.03 EXCULPATORY PROVISIONS. No Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in SEC- -111- TION 11.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose or shall be liable for the failure to disclose, any information relating to U.S. Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in SECTION 11.02) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by a Borrower or a Lender, and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in ARTICLE IV or elsewhere in any Loan Document. SECTION 10.04 RELIANCE BY AGENT. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by a proper person. Each Agent also may rely upon any statement made to it orally and believed by it to be made by a proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for either Borrower), independent accountants and other advisors selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or advisors. SECTION 10.05 DELEGATION OF DUTIES. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. SECTION 10.06 SUCCESSOR AGENT. Each Agent may resign as such at any time upon at least 30 days' prior notice to the Lenders, the Issuing Bank and U.S. Borrower. Upon any such resignation, the Required Lenders shall have the right, with, if no Default shall have occurred and be continuing, the consent of Borrower (such consent not to be unreasonably withheld), to appoint a successor Agent from among the Lenders. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent, which successor shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, in each case, having combined capital and surplus of at least $250 million; PROVIDED that if such retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor Agent. Upon the acceptance of its appointment as an Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees -112- payable by U.S. Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between U.S. Borrower and such successor. After an Agent's resignation hereunder, the provisions of this ARTICLE X and SECTION 11.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent. SECTION 10.07 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. SECTION 10.08 NAME AGENTS. The parties hereto acknowledge that the Co-Documentation Agents and the Syndication Agent hold such titles in name only, and that such titles confer no additional rights or obligations relative to those conferred on any Lender hereunder. SECTION 10.09 INDEMNIFICATION. The Lenders severally agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrowers or the Guarantors and without limiting the obligation of the Borrowers or the Guarantors to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this SECTION 10.09 (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans and Reimbursement Obligations shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans and Reimbursement Obligations) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; PROVIDED that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. ARTICLE XI MISCELLANEOUS SECTION 11.01 NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: -113- (a) if to any Loan Party, to U.S. Borrower at: Ply Gem Industries, Inc. 303 West Major Kearney, Missouri 64060 Attention: Chief Financial Officer Telecopy No.: (816) 903-4330; (b) if to the Administrative Agent, the Collateral Agent or the Issuing Bank, to it at: UBS AG, Stamford Branch 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Vladimira Holeckova Telecopy No.: (203) 719-4176; (c) if to a Lender, to it at its address (or telecopy number) set forth on the applicable Lender Addendum or in the Assignment and Assumption pursuant to which such Lender shall have become a party hereto; and (d) if to the Swingline Lender, to it at: UBS Loan Finance LLC 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Vladimira Holeckova Telecopy No.: (203) 719-4176. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or by certified or registered mail, in each case delivered, sent or mailed (properly addressed) to such party as provided in this SECTION 11.01 or in accordance with the latest unrevoked direction from such party given in accordance with this SECTION 11.01, and failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices and other communications. SECTION 11.02 WAIVERS; AMENDMENT. (a) No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. -114- (b) Except as provided in paragraph (d) below, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended, supplemented or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent, the Collateral Agent (in the case of any Security Document) and the Loan Party or Loan Parties that are parties thereto, in each case with the written consent of the Required Lenders; PROVIDED that no such agreement shall: (i) increase the Commitment of any Lender without the written consent of such Lender; (ii) reduce the principal amount or premium of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any Fees payable hereunder, or change the currency of payment of any Obligation, without the written consent of each Lender affected thereby; (iii) postpone or extend the maturity of any Loan, or any scheduled date of payment of or the installment otherwise due on the principal amount of any Term Loan under SECTION 2.09, or the required date of payment of any Reimbursement Obligation, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment (except interest payable under SECTION 2.06(c)), or postpone the scheduled date of expiration of any Commitment or postpone the scheduled date of expiration of any Letter of Credit beyond the Revolving Maturity Date, without the written consent of each Lender affected thereby; (iv) change SECTION 2.14(b) or (c) in a manner that would alter the PRO RATA sharing of payments or setoffs required thereby, without the written consent of each Lender; (v) change the percentage set forth in the definition of "Required Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be); (vi) release any Guarantor from its Guarantee (except as expressly provided in ARTICLE VII), or limit its liability in respect of such Guarantee, without the written consent of each Lender; (vii) release all or a substantial portion of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Obligations), in each case without the written consent of each Lender; (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; (ix) without the consent of the Required Lenders and Term Loan Lenders holding more than 50% of the principal amount of the outstanding Term Loans, reduce the amount of, or extend the date of, any scheduled payment on the Term Loans required to be made under SECTION 2.09, change the order of application of prepayments among Term Loans and Revolving -115- Commitments under SECTION 2.10(h) or change the application of prepayments of Term Loans set forth in SECTION 2.10(h) to the remaining scheduled amortization payments to be made thereon under SECTION 2.09; or (x) without the consent of Term Loan Lenders holding more than 50% of the principal amount of each of the outstanding U.S. Term Loans and Canadian Term Loans, change the order of application of prepayments amounts of the U.S. Term Loans and the Canadian Term Loans under SECTION 2.10(h); PROVIDED, FURTHER, that (1) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, (2) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Loan Lenders), the Term Loan Lenders (but not the Revolving Lenders), or one Class of Term Loan Lenders (but no other Lenders) may be effected by an agreement or agreements in writing entered into by the Borrowers and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time, and (3) any waiver, amendment or modification prior to the completion of the primary syndication of the Commitments and Loans (as determined by the Administrative Agent) may not be effected without the written consent of the Administrative Agent. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Borrowers, the Required Lenders and the Administrative Agent (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (x) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (y) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of, premium, if any, and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. (c) If, in connection with any proposed change, waiver, discharge or termination of the provisions of this Agreement as contemplated by SECTION 11.02(b), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrowers shall have the right to replace all, but not less than all, of such non-consenting Lender or Lenders (so long as all non-consenting Lenders are so replaced) with one or more persons pursuant to SECTION 2.16 so long as at the time of such replacement each such new Lender consents to the proposed change, waiver, discharge or termination. (d) Notwithstanding anything in SECTION 11.02(b) to the contrary, this Agreement and the other Loan Documents may be amended at any time and from time to time to increase the aggregate principal amount of U.S. Term Loans or to establish additional Classes of U.S. Term Loans (collectively, "ADDITIONAL TERM LOANS") by an agreement in writing entered into by the Borrowers, the Administrative Agent, the Collateral Agent and each person (including any Lender) that shall agree to make an Additional Term Loan (and each such person that shall not already be a Lender shall be reasonably acceptable to the Administrative Agent and shall, at the time such agreement becomes effective, become a Lender with the same effect as if it had originally been a Lender under this Agreement with the Term Loans set forth in such agreement); PROVIDED that (1) no more than an amount equal to $50.0 million of Additional Term Loans less the principal amount of all Senior Subordinated Notes issued after the Closing Date pursuant to SECTION 6.01(b) may be established pursuant to this SECTION 11.02(d) without the consent of the Required Lenders, (2) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto, (3) the covenants in SECTION 6.10 would be satisfied on a Pro Forma Basis on the date of any such amendment and for the most recent Test Period, after giving effect to -116- such Additional Term Loans, and (4) the Senior Leverage Ratio would not be greater than 2.5:1.0 after giving effect thereto. Any such agreement shall be reasonably satisfactory to the Administrative Agent, shall amend the provisions of this Agreement and the other Loan Documents and shall set forth the terms of the Additional Term Loans established thereby (including the amount and final maturity thereof (which shall not be earlier than the Term Loan Maturity Date), any provisions relating to the amortization or mandatory prepayment thereof (which shall be no more than ratable or PARI PASSU, as applicable, with the Term Loans), the interest to accrue and be payable thereon and any fees to be payable in respect thereof (PROVIDED that the Applicable Margins with respect to any Additional Term Loans shall not be more than 25 basis points higher than the Applicable Margins with respect to the Term Loans and that all other payment rights shall be pari passu with the Term Loans)) and effect such other changes (including changes to the provisions of this Section, SECTION 2.14 and the definition of "Required Lenders") as U.S. Borrower and the Administrative Agent shall deem necessary or advisable in connection with the Additional Term Loans; PROVIDED that no such agreement shall (i) effect any change described in SECTION 11.02(b) (i) through (ix) without the consent of each person required to consent to such change under such clause (it being agreed, however, that the Additional Term Loans will not, of themselves, be deemed to effect any of the changes described in SECTION 11.02(b)(vi) THROUGH (viii) and (1)), (ii) amend ARTICLE V, VI or VIII to establish any affirmative or negative covenant, Event of Default or remedy that by its terms benefits one or more Classes, but not all Classes, of Loans or Borrowings without the prior written consent of Lenders holding a majority in interest of the Loans and Commitments of each Class not so benefited (it being agreed that no provision requiring either Borrower to prepay Term Loans of one or more Classes pursuant to SECTIONS 2.10(c) through (h) shall be deemed to violate this clause) or (iii) change any other provision of this Agreement or any other Loan Document that creates rights in favor of Lenders holding Loans or Commitments of any existing Class, other than as necessary or advisable in the judgment of the Administrative Agent to cause such provision to take into account, or to make the benefits of such provision available to, Lenders holding Additional Term Loans. The Loans and Borrowings established pursuant to this paragraph shall constitute Loans and Borrowings under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guarantees and security interests created by the Security Documents. The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Security Documents continue to be perfected under the UCC or otherwise after the establishment of any such Additional Term Loans. (e) Notwithstanding anything in this Agreement to the contrary, any Offer to Redeem shall be accepted by all Lenders to which such Offer to Redeem was made unless three Business Days prior to the proposed redemption date the Required Lenders give their consent for such Offer to Redeem to be declined by all such Lenders. SECTION 11.03 EXPENSES; INDEMNITY. (a) The Loan Parties agree, jointly and severally, to pay, promptly upon demand: (i) all reasonable costs and expenses incurred by the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, including the reasonable fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender and the Issuing Bank, in connection with the syndication of the Loans and Commitments, the preparation, execution and delivery of the Loan Documents, the administration of the Loans and Commitments, the perfection and maintenance of the Liens securing the Collateral and any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated); -117- (ii) all costs and expenses incurred by the Administrative Agent or the Collateral Agent, including the reasonable fees, charges and disbursements of Advisors for the Administrative Agent and the Collateral Agent, in connection with any action, suit or other proceeding affecting the Collateral or any part thereof, in which action, suit or proceeding the Administrative Agent or the Collateral Agent is made a party or participates or in which the right to use the Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Administrative Agent or the Collateral Agent to defend or uphold the Liens granted by the Security Documents (including any action, suit or proceeding to establish or uphold the compliance of the Collateral with any Requirements of Law); (iii) all costs and expenses incurred by the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, including the reasonable fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the Collateral Agent, the Swingline Lender, the Issuing Bank or any Lender, incurred in connection with the enforcement or protection of its rights under the Loan Documents, including its rights under this SECTION 11.03(a), or in connection with the Loans made or Letters of Credit issued hereunder and the collection of the Obligations, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the Obligations; and (iv) all documentary and similar taxes and charges in respect of the Loan Documents. For purposes of this SECTION 11.03(a), "ADVISORS" shall mean legal counsel (including local counsel), auditors, accountants, consultants, appraisers or other advisors; PROVIDED that (x) in the case of clause (i), the engagement of any Advisors other than legal counsel (including local counsel) shall be subject to approval by U.S. Borrower (which approval shall not be unreasonably withheld) and (y) in the case of clause (iii), the engagement of any Advisors other than one firm of legal counsel by any Lender shall be subject to approval by the Administrative Agent. (b) The Loan Parties agree, jointly and severally, to indemnify the Agents, each Lender, the Issuing Bank and the Swingline Lender, each Affiliate of any of the foregoing persons and each of their respective partners, controlling persons, directors, officers, trustees, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, all reasonable out-of-pocket costs and any and all losses, claims, damages, liabilities, penalties, judgments, suits and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution, delivery, performance, administration or enforcement of the Loan Documents, (ii) any actual or proposed use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release or threatened Release of Hazardous Materials, on, at, under or from any property owned, leased or operated by any Company at any time, or any Environmental Claim related in any way to any Company; PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted solely from the gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this SECTION 11.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of the Loans and Reimbursement Obligations, the release of all or any portion of the Collateral, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Agents, the Issuing Bank or any Lender. All -118- amounts due under this SECTION 11.03 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. (d) To the extent that either Borrower fails to promptly pay any amount required to be paid by it to the Agents, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Agents, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's PRO RATA share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; PROVIDED that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against any of the Agents, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "PRO RATA share" shall be determined based upon its share of the sum of the total Revolving Exposure, outstanding Term Loans and unused Commitments at the time. SECTION 11.04 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that the Borrowers may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent, the Collateral Agent, the Issuing Lender, the Swingline Lender and each Lender (and any attempted assignment or transfer by either Borrower without such consent shall be null and void). Nothing in this Agreement, express or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender shall have the right at any time to assign to one or more banks, insurance companies, investment companies or funds or other institutions (other than the Borrowers, Parent or any Subsidiary thereof) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); PROVIDED that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, the Administrative Agent and U.S. Borrower (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give its prior written consent to such assignment (which consents shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, any assignment made in connection with the syndication of the Commitments and Loans by the Arrangers or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2.5 million unless each of U.S. Borrower and the Administrative Agent otherwise consents, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans other than an assignment of any rights and obligations with respect to any Term Loans which may be assigned only on a PRO RATA basis between U.S. Term Loans and Canadian Term Loans (I.E., an assignment of U.S. Term Loans representing a percentage of the total principal amount of U.S. Term Loans then outstanding shall be accompanied by an assignment of Canadian Term Loans representing the same percentage of the total principal amount of Canadian Term Loans then outstanding), (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and (vi) in the case of an assignment -119- to an Affiliate of Parent, such Affiliate hereby agrees that, unless it holds all Loans of the applicable Class, its Loans and Commitments shall be disregarded for purposes of determining the requisite percentage or number of Lenders (or Lenders of any Class) required to waive, amend or modify any rights under any Loan Document or make any determination or grant any consent thereunder; and PROVIDED, FURTHER, that any consent of U.S. Borrower otherwise required under this paragraph shall not be required if a Default has occurred and is continuing or during the primary syndication of the Commitments. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement (PROVIDED that any liability of either Borrower to such assignee under SECTION 2.12 or 2.13 shall be limited to the amount, if any, that would have been payable thereunder by such Borrower in the absence of such assignment, except to the extent any such amounts are attributable to a Change in Law occurring after the date of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of SECTIONS 2.12, 2.13, 2.15 and 11.03). (c) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error, and the Borrowers, the Administrative Agent, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers, the Issuing Bank, the Collateral Agent, the Swingline Lender and any Lender (with respect to its own interest only), at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender shall have the right at any time, without the consent of either Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, to sell participations to one or more banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); PROVIDED that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; PROVIDED that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i), (ii) or (iii) of the first proviso to SEC- -120- TION 11.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of SECTIONS 2.12, 2.13 and 2.15, so long as such Participant complies with the requirements of each such Section, to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of SECTION 11.08 as though it were a Lender; PROVIDED that such Participant agrees in writing to be subject to SECTION 2.14(c) as though it were a Lender. Each Lender shall, acting for this purpose as an agent of the Borrowers, maintain at one of its offices a register for the recordation of the names and addresses of its Participants, and the amount and terms of its participations; PROVIDED that no Lender shall be required to disclose or share the information contained in such register with the Borrowers or any other party, except as required by applicable law. (f) A Participant shall not be entitled to receive any greater payment under SECTION 2.12, 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the prior written consent of the applicable Borrower (which consent shall not be unreasonably withheld or delayed). (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; PROVIDED that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrowers or the Administrative Agent, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities. SECTION 11.05 SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agents, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of SECTIONS 2.12, 2.14, 2.15 and 11.03 and ARTICLE X shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the payment of the Reimbursement Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 11.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and the Fee Letter constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when it shall -121- have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 11.07 SEVERABILITY. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 11.08 RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of either Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 11.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction. (b) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction. (c) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in SECTION 11.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in any action or proceeding arising out of or relating to any Loan Document, in the manner provided for notices (other than telecopy) in SECTION 11.01. Nothing in this Agreement or any other Loan Document will af- -122- fect the right of any party to this Agreement to serve process in any other manner permitted by applicable law. SECTION 11.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 11.11 HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 11.12 CONFIDENTIALITY. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' and Lender Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this SECTION 11.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the applicable Borrower and its obligations or (iii) any rating agency for the purpose of obtaining a credit rating applicable to any Loan or Loan Party, (g) with the consent of U.S. Borrower or (h) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than U.S. Borrower or any Subsidiary. For the purposes of this Section, "INFORMATION" means all information received from U.S. Borrower or any Subsidiary relating to U.S. Borrower or any Subsidiary or its business that is clearly identified at the time of delivery as confidential, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by U.S. Borrower or any Subsidiary. Any person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information. SECTION 11.13 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively, the "CHARGES"), -123- shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 11.14 LENDER ADDENDUM. Each Lender to become a party to this Agreement on the date hereof shall do so by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the applicable Borrower and the Administrative Agent. SECTION 11.15 OBLIGATIONS ABSOLUTE. To the fullest extent permitted by applicable law, all obligations of the Loan Parties hereunder shall be absolute and unconditional irrespective of: (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Loan Party; (b) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto against any Loan Party; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument relating thereto; (d) any exchange, release or non-perfection of any other Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations; (e) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof or any Loan Document; or (f) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Loan Parties, except for the defense of payment or performance of such obligations. SECTION 11.16 JUDGMENT CURRENCY. (a) Each Borrower's obligation hereunder and under the other Loan Documents to make payments in dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than dollars, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the respective Lender of the full amount of dollars expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against a Borrower in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than dollars (such other currency being hereinafter referred to as the "JUDGMENT CURRENCY") an amount due in dollars, the conversion shall be made at the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the Business Day immediately preceding the day on which the -124- judgment is given (such Business Day being hereinafter referred to as the "JUDGMENT CURRENCY CONVERSION DATE"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, each Borrower covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining any rate of exchange for this SECTION 11.16, such amounts shall include any premium and costs payable in connection with the purchase of dollars. [Signature Pages Follow] -125- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer ---------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer CWD WINDOWS AND DOORS, INC. By: /s/ Lee D. Meyer ---------------------------------- Name: Lee D. Meyer Title: Vice President PLY GEM HOLDINGS, INC. By: /s/ Lee D. Meyer ---------------------------------- Name: Lee D. Meyer Title: President and Chief Executive Officer GREAT LAKES WINDOW, INC. KROY BUILDING PRODUCTS, INC. NAPCO, INC. NAPCO WINDOW SYSTEMS, INC. THERMAL-GARD, INC. VARIFORM, INC. By: /s/ Lee D. Meyer ---------------------------------- Name: Lee D. Meyer Title: Vice President S-1 UBS SECURITIES LLC, as a Joint Lead Arranger By: /s/ David A. Juge ---------------------------------- Name: David A. Juge Title: Managing Director By: /s/ Oliver O. Trumbo II ---------------------------------- Name: Oliver O. Trumbo II Title: Director DEUTSCHE BANK SECURITIES INC., as a Joint Lead Arranger By: /s/ Kevin M. Sherlock ---------------------------------- Name: Kevin M. Sherlock Title: Director By: /s/ Mark Fedorcik ---------------------------------- Name: Mark Fedorcik Title: Managing Director CIBC WORLD MARKETS CORP., as a Co-Arranger By: /s/ Gerald Girardi ---------------------------------- Name: Gerald Girardi Title: Executive Director CIBC World Markets Corp., as Agent MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as a Co-Arranger By: /s/ Sheila McGillicuddy ---------------------------------- Name: Sheila McGillicuddy Title: Director S-2 UBS AG, STAMFORD BRANCH, as Issuing Bank, Administrative Agent and Collateral Agent By: /s/ Juan Zuniga ---------------------------------- Name: Juan Zuniga Title: Associate Director Banking Products Services US By: /s/ Wilfred V. Saint ---------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services US DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as Syndication Agent By: /s/ Paul J. O'Leary ---------------------------------- Name: Paul J. O'Leary Title: Vice President By: /s/ Susan LeFevre ---------------------------------- Name: Susan LeFevre Title: Director CANADIAN IMPERIAL BANK OF COMMERCE, as Co-Documentation Agent By: /s/ Gerald Girardi ---------------------------------- Name: Gerald Girardi Title: Executive Director CIBC World Markets Corp., as Agent MERRILL LYNCH CAPITAL CORPORATION, as Co-Documentation Agent By: /s/ Sheila McGillicuddy ---------------------------------- Name: Sheila McGillicuddy Title: Vice President UBS AG, LOAN FINANCE LLC, as Swingline Lender By: /s/ Juan Zuniga ---------------------------------- Name: Juan Zuniga Title: Associate Director Banking Products Services US By: /s/ Wilfred V. Saint ---------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services US S-3 ANNEX I Applicable Margin REVOLVING LOANS TOTAL ------------------------ APPLICABLE LEVERAGE RATIO EURODOLLAR ABR FEE ------------------ ---------- ----------- ---------- Level I 2.50% 1.50% 0.50% ------- >4.50:1.0 Level II 2.25% 1.25% 0.50% -------- <4.50:1.0 but >3.75:1.0 Level III 2.00% 1.00% 0.375% --------- <3.75:1.0 but >3.00:1.0 Level IV 1.75% 0.75% 0.375% -------- <3.00:1.0 Each change in the Applicable Margin or Applicable Fee resulting from a change in the Total Leverage Ratio shall be effective with respect to all Loans and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c), respectively, indicating such change until the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, the Leverage Ratio shall be deemed to be in Level I (i) from the Closing Date to the date of delivery to the Administrative Agent of the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c) for the fiscal period ended at least six months after the Closing Date, (ii) at any time during which U.S. Borrower has failed to deliver the financial statements and certificates required by SECTION 5.01(a) or (b) and SECTION 5.01(c), respectively, and (iii) at any time during the existence of an Event of Default. ANNEX II Amortization Table ------------------------------------------------------------------------- U.S. TERM LOAN CANADIAN TERM LOAN DATE AMOUNT AMOUNT ------------------------------------------------------------------------- June 30, 2004 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2004 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2004 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2005 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2005 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2005 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2005 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2006 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2006 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2006 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2006 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2007 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2007 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2007 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2007 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2008 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2008 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2008 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2008 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2009 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2009 $400,000 $75,000 ------------------------------------------------------------------------- September 30, 2009 $400,000 $75,000 ------------------------------------------------------------------------- December 31, 2009 $400,000 $75,000 ------------------------------------------------------------------------- March 31, 2010 $400,000 $75,000 ------------------------------------------------------------------------- June 30, 2010 $37,600,000 $7,050,000 ------------------------------------------------------------------------- September 30, 2010 $37,600,000 $7,050,000 ------------------------------------------------------------------------- December 31, 2010 $37,600,000 $7,050,000 ------------------------------------------------------------------------- February 12, 2011 $37,600,000 $7,050,000 ------------------------------------------------------------------------- Total $160,000,000 $30,000,000 ------------------------------------------------------------------------- SCHEDULE 1.01(b) ---------------- CONSOLIDATED EBITDA ADDBACKS (IN $ MILLIONS)
Q1 Q2 Q3 Q4 2003 2003 2003 2003 - ------------------------------------------------------------------------------------------------------- Elimination of Nortek's corporate charge 3,142 2,093 3,732 3,732* Non-cash write-off of inventory 1,373 14 0 0 Thermal Gard Window and Other (Discontinued Operations) 178 34 77 284 PVC resin price renegotiation 1,035 816 0 0 Kroy-Lowes start up 1,720 203 0 0 Savings from the Butler, Pennsylvania facility closure 758 501 0 0 Butler facility closure one-time costs 478 129 149 85 One-time GLW management charges 188 237 163 65 Kroy balance sheet adjustments 291 313 467 1,029 TOTAL ADDBACKS 9,163 4,340 4,588 5,195
* To be finalized along with the 2003 audit. SCHEDULE 5.13(c) ---------------- 1. 30499 Tracy Road, Toledo, Ohio 2. 2719 N. Division Avenue, York, NE 3. 91 Variform Drive, Martinsburg, WV 4. 7501 Orr Road, Charlotte, NC EX-10.3 30 y95660exv10w3.txt U.S. SECURITY AGREEMENT EXHIBIT 10.3 ------------ ================================================================================ U.S. SECURITY AGREEMENT By PLY GEM INDUSTRIES, INC., as U.S. Borrower and THE GUARANTORS PARTY HERETO and UBS AG, STAMFORD BRANCH, as Collateral Agent ______________________ Dated as of February 12, 2004 ================================================================================ TABLE OF CONTENTS Page ---- PREAMBLE.......................................................................1 RECITALS.......................................................................1 AGREEMENT......................................................................2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions.....................................................2 SECTION 1.2. Interpretation.................................................10 SECTION 1.3. Resolution of Drafting Ambiguities.............................11 SECTION 1.4. Perfection Certificate.........................................11 ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS SECTION 2.1. Grant of Security Interest.....................................11 SECTION 2.2. Filings........................................................12 ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF PLEDGED COLLATERAL SECTION 3.1. Delivery of Certificated Securities Collateral.................13 SECTION 3.2. Perfection of Uncertificated Securities Collateral.............14 SECTION 3.3. Financing Statements and Other Filings; Maintenance of Perfected Security Interest..............................14 SECTION 3.4. Other Actions..................................................15 SECTION 3.5. Joinder of Additional Guarantors...............................19 SECTION 3.6. Supplements; Further Assurances................................20 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 4.1. Title..........................................................20 -i- Page ---- SECTION 4.2. Validity of Security Interest..................................21 SECTION 4.3. Defense of Claims; Transferability of Pledged Collateral.......21 SECTION 4.4. Other Financing Statements.....................................21 SECTION 4.5. Chief Executive Office; Change of Name; Jurisdiction of Organization.............................................21 SECTION 4.6. Location of Inventory and Equipment............................22 SECTION 4.7. Due Authorization and Issuance.................................22 SECTION 4.8. Consents, etc..................................................22 SECTION 4.9. Pledged Collateral.............................................22 SECTION 4.10. Insurance......................................................23 SECTION 4.11. Payment of Taxes; Compliance with Laws; Contesting Liens; Claims....................................23 SECTION 4.12. Access to Pledged Collateral, Books and Records; Other Information...........................................23 ARTICLE V CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL SECTION 5.1. Pledge of Additional Securities Collateral.....................24 SECTION 5.2. Voting Rights; Distributions; etc..............................24 SECTION 5.3. Defaults, etc..................................................25 SECTION 5.4. Certain Agreements of Pledgors As Issuers and Holders of Equity Interests................................26 ARTICLE VI CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL SECTION 6.1. Grant of License...............................................26 SECTION 6.2. Protection of Collateral Agent's Security......................26 SECTION 6.3. After-Acquired Property........................................27 SECTION 6.4. Litigation.....................................................28 ARTICLE VII CERTAIN PROVISIONS CONCERNING ACCOUNTS SECTION 7.1. Maintenance of Records.........................................28 SECTION 7.2. Legend.........................................................29 SECTION 7.3. Modification of Terms, etc.....................................29 SECTION 7.4. Collection.....................................................29 -ii- Page ---- ARTICLE VIII TRANSFERS SECTION 8.1. Transfers of Pledged Collateral................................30 ARTICLE IX REMEDIES SECTION 9.1. Remedies.......................................................30 SECTION 9.2. Notice of Sale.................................................32 SECTION 9.3. Waiver of Notice and Claims....................................32 SECTION 9.4. Certain Sales of Pledged Collateral............................32 SECTION 9.5. No Waiver; Cumulative Remedies.................................33 SECTION 9.6. Certain Additional Actions Regarding Intellectual Property.....34 ARTICLE X PROCEEDS OF CASUALTY EVENTS AND COLLATERAL DISPOSITIONS; APPLICATION OF PROCEEDS SECTION 10.1. Proceeds of Casualty Events and Collateral Dispositions........34 SECTION 10.2. Application of Proceeds........................................34 ARTICLE XI MISCELLANEOUS SECTION 11.1. Concerning Collateral Agent....................................34 SECTION 11.2. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact................ .................35 SECTION 11.3. Continuing Security Interest; Assignment.......................36 SECTION 11.4. Termination; Release...........................................36 SECTION 11.5. Modification in Writing........................................37 SECTION 11.6. Notices........................................................37 SECTION 11.7. Governing Law, Consent to Jurisdiction and Service of Process; Waiver of Jury Trial............................37 SECTION 11.8. Severability of Provisions.....................................37 SECTION 11.9. Execution in Counterparts......................................38 SECTION 11.10. Business Days..................................................38 SECTION 11.11. Waiver of Stay.................................................38 -iii- Page ---- SECTION 11.12. No Credit for Payment of Taxes or Imposition...................38 SECTION 11.13. No Claims Against Collateral Agent.............................38 SECTION 11.14. No Release.....................................................39 SECTION 11.15. Obligations Absolute...........................................39 SIGNATURES...................................................................S-1 EXHIBIT 1 Form of Issuer's Acknowledgment EXHIBIT 2 Form of Securities Pledge Amendment EXHIBIT 3 Form of Joinder Agreement EXHIBIT 4 Form of Control Agreement Concerning Securities Accounts EXHIBIT 5 Form of Control Agreement Concerning Deposit Accounts EXHIBIT 6 Form of Copyright U.S. Security Agreement EXHIBIT 7 Form of Patent U.S. Security Agreement EXHIBIT 8 Form of Trademark U.S. Security Agreement EXHIBIT 9 Form of Bailee's Letter -iv- U.S. SECURITY AGREEMENT U.S. SECURITY AGREEMENT dated as of February 12, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, the "AGREEMENT") made by PLY GEM INDUSTRIES, INC., a Delaware corporation (the "U.S. BORROWER") and THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO (the "ORIGINAL GUARANTORS") OR FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the "ADDITIONAL GUARANTORS," and together with the Original Guarantors, the "GUARANTORS"), as pledgors, assignors and debtors (the U.S. Borrower, together with the Guarantors, in such capacities and together with any successors in such capacities, the "PLEDGORS," and each, a "PLEDGOR"), in favor of UBS AG, STAMFORD BRANCH, in its capacity as collateral agent pursuant to the Credit Agreement (as hereinafter defined), as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the "COLLATERAL AGENT"). R E C I T A L S : - - - - - - - - A. The U.S. Borrower, CWD Windows and Doors, Inc., the Original Guarantors, the Collateral Agent and the lending institutions listed therein (the "LENDERS") have, in connection with the execution and delivery of this Agreement, entered into that certain credit agreement, dated as of February 12, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). B. Each Original Guarantor has, pursuant to the Credit Agreement, unconditionally guaranteed the Obligations. C. The U.S. Borrower and each Original Guarantor will receive substantial benefits from the execution, delivery and performance of the obligations under the Credit Agreement and the other Loan Documents and each is, therefore, willing to enter into this Agreement. D. Each Pledgor is or, as to Pledged Collateral (as hereinafter defined) acquired by such Pledgor after the date hereof will be, the legal and/or beneficial owner of the Pledged Collateral pledged by it hereunder. E. This Agreement is given by each Pledgor in favor of the Collateral Agent for the benefit of the Secured Parties (as hereinafter defined) to secure the payment and performance of all of the Obligations (as defined in the Credit Agreement). F. It is a condition to the obligations of the Lenders to make the Loans under the Credit Agreement and a condition to the Issuing Bank issuing Letters of Credit under the Credit Agreement that each Pledgor execute and deliver the applicable Loan Documents, including this Agreement. -2- A G R E E M E N T : - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Pledgor and the Collateral Agent hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. DEFINITIONS. (a) Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. (b) Terms used but not otherwise defined herein that are defined in the Credit Agreement shall have the meanings given to them in the Credit Agreement. Section 1.03 of the Credit Agreement shall apply herein MUTATIS MUTANDIS. (c) The following terms shall have the following meanings: "ACQUISITION DOCUMENT RIGHTS" shall mean, with respect to each Pledgor, collectively, all of such Pledgor's rights, title and interest in, to and under the Acquisition Documents, including (i) all rights and remedies relating to monetary damages, including indemnification rights and remedies, and claims for damages or other relief pursuant to or in respect of the Acquisition Documents, (ii) all rights and remedies relating to monetary damages, including indemnification rights and remedies, and claims for monetary damages under or in respect of the agreements, documents and instruments referred to in the Acquisition Documents or related thereto and (iii) all proceeds, collections, recoveries and rights of subrogation with respect to the foregoing. "ADDITIONAL GUARANTORS" shall have the meaning assigned to such term in the Preamble hereof. "ADDITIONAL PLEDGED INTERESTS" shall mean, collectively, with respect to each Pledgor, (i) all options, warrants, rights, agreements, additional membership, partnership or other equity interests of whatever class of any issuer of Initial Pledged Interests or any interest in any such issuer, together with all rights, privileges, authority and powers of such Pledgor relating to such interests in each such issuer or under any Organizational Document of any such issuer, and the certificates, instruments and agreements representing such membership, partnership or other interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such membership, partnership or other equity interests from time to time acquired by such Pledgor in any manner and (ii) all membership, partnership or other equity in- -3- terests, as applicable, of each limited liability company, partnership or other entity (other than a corporation) hereafter acquired or formed by such Pledgor and all options, warrants, rights, agreements, additional membership, partnership or other equity interests of whatever class of such limited liability company, partnership or other entity, together with all rights, privileges, authority and powers of such Pledgor relating to such interests or under any Organizational Document of any such issuer, and the certificates, instruments and agreements representing such membership, partnership or other equity interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such membership, partnership or other interests, from time to time acquired by such Pledgor in any manner. "ADDITIONAL PLEDGED SHARES" shall mean, collectively, with respect to each Pledgor, (i) all options, warrants, rights, agreements, additional shares of capital stock of whatever class of any issuer of the Initial Pledged Shares or any other equity interest in any such issuer, together with all rights, privileges, authority and powers of such Pledgor relating to such interests issued by any such issuer under any Organizational Document of any such issuer, and the certificates, instruments and agreements representing such interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such interests, from time to time acquired by such Pledgor in any manner and (ii) all the issued and outstanding shares of capital stock of each corporation hereafter acquired or formed by such Pledgor and all options, warrants, rights, agreements or additional shares of capital stock of whatever class of such corporation, together with all rights, privileges, authority and powers of such Pledgor relating to such shares or under any Organizational Document of such corporation, and the certificates, instruments and agreements representing such shares and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such shares, from time to time acquired by such Pledgor in any manner. "AGREEMENT" shall have the meaning assigned to such term in the Preamble hereof. "BAILEE LETTER" shall be an agreement in form substantially similar to Exhibit 9 annexed hereto. "CANADIAN COLLATERAL" shall have the meaning assigned to such term in SECTION 2.01. "CANADIAN SHARE CERTIFICATE" shall have the meaning assigned to such term in SECTION 2.01. "CLAIMS" shall mean any and all property and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law against, all or any portion of the Pledged Collateral. -4- "COLLATERAL ACCOUNT" shall mean a collateral account or sub-account established and maintained in accordance with the provisions of SECTION 9.01 of the Credit Agreement and all property from time to time on deposit in the Collateral Account. "COLLATERAL AGENT" shall have the meaning assigned to such term in the Preamble hereof. "COMMODITY ACCOUNT CONTROL AGREEMENT" shall mean a commodity account control agreement in a form that is reasonably satisfactory to the Collateral Agent. "CONTESTED LIENS" shall mean, collectively, any Liens incurred in respect of any Claims to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of SECTION 4.11 hereof; PROVIDED, HOWEVER, that such Liens shall in all respects be subject and subordinate in priority to the Lien and security interest created by this Agreement, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien must be superior to the Lien and security interest created and evidenced hereby. "CONTRACTS" shall mean, collectively, with respect to each Pledgor, all sale, service, performance, equipment or property lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or third party or intercompany), between such Pledgor and third parties, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof. "CONTROL" shall mean (i) in the case of each Deposit Account, "control," as such term is defined in Section 9-104 of the UCC, and (ii) in the case of any Security Entitlement, "control," as such term is defined in Section 8-106 of the UCC and (iii) in the case of any Commodity Contract, "control," as such term is defined in Section 9-106 of the UCC. "CONTROL AGREEMENTS" shall mean, collectively, the Deposit Account Control Agreement, the Securities Account Control Agreement and the Commodity Account Control Agreement. "COPYRIGHTS" shall mean, collectively, with respect to each Pledgor, all copyrights (whether statutory or common law, whether established or registered in the United States or any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by such Pledgor, in each case, whether now owned or hereafter created or acquired by or assigned to such Pledgor, together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof. -5- "COPYRIGHT U.S. SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 6. "CREDIT AGREEMENT" shall have the meaning assigned to such term in RECITAL A hereof. "DEPOSIT ACCOUNT CONTROL AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 5 or such other form that is reasonably satisfactory to the Collateral Agent. "DEPOSIT ACCOUNTS" shall mean, collectively, with respect to each Pledgor, (i) all "deposit accounts" as such term is defined in the UCC and in any event shall include the LC Sub-Account and the Collateral Account and all accounts and sub-accounts relating to any of the foregoing accounts and (ii) all cash, funds, checks, notes and instruments from time to time on deposit in any of the accounts or sub-accounts described in clause (i) of this definition. "DISTRIBUTIONS" shall mean, collectively, with respect to each Pledgor, all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result of a split, revision, reclassification or other like change of the Pledged Securities, from time to time received, receivable or otherwise distributed to such Pledgor in respect of or in exchange for any or all of the Pledged Securities or Intercompany Notes. "EXCLUDED PROPERTY" shall mean Special Property other than the following: (a) the right to receive any payment of money (including Accounts, General Intangibles and Payment Intangibles) or any other rights referred to in Sections 9-406(d), 9-407(a) or 9-408(a) of the UCC to the extent that such sections of the UCC are effective to limit the prohibitions which make such property "Special Property"; and (b) any Proceeds, substitutions or replacements of any Special Property (unless such Proceeds, substitutions or replacements would constitute Special Property). "GENERAL INTANGIBLES" shall mean, collectively, with respect to each Pledgor, all "general intangibles," as such term is defined in the UCC, of such Pledgor and, in any event, shall include (i) all of such Pledgor's rights, title and interest in, to and under all insurance policies and Contracts, (ii) all know-how and warranties relating to any of the Pledged Collateral or the Mortgaged Property, (iii) any and all other rights, claims, choses-in-action and causes of action of such Pledgor against any other person and the benefits of any and all collateral or other security given by any other person in connection therewith, (iv) all guarantees, endorsements and indemnifications on, or of, any of the Pledged Collateral or any of the Mortgaged Property, (v) all lists, books, records, correspondence, ledgers, printouts, files (whether in printed form or stored electronically), tapes and other papers or materials containing information relating to any of the Pledged Collateral or any of the Mortgaged Property, including all customer or tenant lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, appraisals, -6- recorded knowledge, surveys, studies, engineering reports, test reports, manuals, standards, processing standards, performance standards, catalogs, research data, computer and automatic machinery software and programs and the like, field repair data, accounting information pertaining to such Pledgor's operations or any of the Pledged Collateral or any of the Mortgaged Property and all media in which or on which any of the information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, (vi) all licenses, consents, permits, variances, certifications, authorizations and approvals, however characterized, of any Governmental Authority (or any person acting on behalf of a Governmental Authority) now or hereafter acquired or held by such Pledgor pertaining to operations now or hereafter conducted by such Pledgor or any of the Pledged Collateral or any of the Mortgaged Property including building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation and (vii) all rights to reserves, deferred payments, deposits, refunds, indemnification of claims to the extent the foregoing relate to any Pledged Collateral or Mortgaged Property and claims for tax or other refunds against any Governmental Authority relating to any Pledged Collateral or any of the Mortgaged Property. "GOODWILL" shall mean, collectively, with respect to each Pledgor, the goodwill connected with such Pledgor's business including (i) all goodwill connected with the use of and symbolized by any Trademark in which such Pledgor has any interest, (ii) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions, methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential information and the right to limit the use or disclosure thereof by any person, pricing and cost information, business and marketing plans and proposals, consulting agreements, engineering contracts and such other assets which relate to such goodwill and (iii) all product lines of such Pledgor's business. "GUARANTORS" shall have the meaning assigned to such term in the Preamble hereof. "INITIAL PLEDGED INTERESTS" shall mean, with respect to each Pledgor, all membership, partnership or other equity interests (other than in a corporation), as applicable, of each issuer owned by such Pledgor described in SCHEDULE 11 annexed to the Perfection Certificate, together with all rights, privileges, authority and powers of such Pledgor in and to each such issuer or under any Organizational Document of each such issuer, and the certificates, instruments and agreements representing such membership, partnership or other interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such membership, partnership or other interests. "INITIAL PLEDGED SHARES" shall mean, collectively, with respect to each Pledgor, the issued and outstanding shares of capital stock of each issuer owned by such Pledgor described in SCHEDULE 11 annexed to the Perfection Certificate together with all rights, privileges, authority and powers of such Pledgor relating to such interests in each such issuer or under any Organizational Document of each such issuer, and the certificates, instruments and agreements represent- -7- ing such shares of capital stock and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to the Initial Pledged Shares. "INSTRUMENTS" shall mean, collectively, with respect to each Pledgor, all "instruments," as such term is defined in Article 9, rather than Article 3, of the UCC, and shall include all promissory notes, drafts, bills of exchange or acceptances. "INTELLECTUAL PROPERTY COLLATERAL" shall mean, collectively, the Patents, Trademarks, Copyrights, Licenses and Goodwill. "INTERCOMPANY NOTES" shall mean, with respect to each Pledgor, all intercompany notes described in SCHEDULE 12 annexed to the Perfection Certificate and intercompany notes hereafter acquired by such Pledgor and all certificates, instruments or agreements evidencing such intercompany notes, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof to the extent permitted pursuant to the terms hereof. "INVESTMENT PROPERTY" shall mean a security, whether certificated or uncertificated, Security Entitlement, Securities Account, Commodity Contract or Commodity Account, excluding, however, the Securities Collateral. "JOINDER AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 3. "LENDERS" shall have the meaning assigned to such term in RECITAL A hereof. "LICENSES" shall mean, collectively, with respect to each Pledgor, all license and distribution agreements with, and covenants not to sue, any other party with respect to any Patent, Trademark or Copyright or any other patent, trademark or copyright, whether such Pledgor is a licensor or licensee, distributor or distributee under any such license or distribution agreement, together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements or violations thereof, (iii) rights to sue for past, present and future infringements or violations thereof and (iv) other rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights or any other patent, trademark or copyright. "MORTGAGED PROPERTY" shall have the meaning assigned to such term in the Mortgages. "ORIGINAL GUARANTORS" shall have the meaning assigned to such term in the Preamble hereof. "PATENTS" shall mean, collectively, with respect to each Pledgor, all patents issued or assigned to and all patent applications and registrations made by such Pledgor (whether estab- -8- lished or registered or recorded in the United States or any other country or any political subdivision thereof), together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof. "PATENT U.S. SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 7. "PERFECTION CERTIFICATE" shall mean that certain perfection certificate dated February 12, 2004, executed and delivered by each Pledgor and Canadian Borrower in favor of the Collateral Agent for the benefit of the Secured Parties, and each other Perfection Certificate (which shall be in form and substance reasonably acceptable to the Collateral Agent) executed and delivered by the applicable Guarantor in favor of the Collateral Agent for the benefit of the Secured Parties contemporaneously with the execution and delivery of each Joinder Agreement executed in accordance with SECTION 3.5 hereof, in each case, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the Credit Agreement or upon the request of the Collateral Agent. "PLEDGE AMENDMENT" shall have the meaning assigned to such term in SECTION 5.1 hereof. "PLEDGED COLLATERAL" shall have the meaning assigned to such term in SECTION 2.1 hereof. "PLEDGED INTERESTS" shall mean, collectively, the Initial Pledged Interests and the Additional Pledged Interests; PROVIDED, HOWEVER, that to the extent applicable, Pledged Interests shall not include any interest which is not required to be pledged pursuant to SECTION 5.10(B) of the Credit Agreement. "PLEDGED SECURITIES" shall mean, collectively, the Pledged Interests, the Pledged Shares and the Successor Interests. "PLEDGED SHARES" shall mean, collectively, the Initial Pledged Shares and the Additional Pledged Shares; PROVIDED, HOWEVER, that Pledged Shares shall not include any shares which are not required to be pledged pursuant to SECTION 5.10(B) of the Credit Agreement. "PLEDGOR" shall have the meaning assigned to such term in the Preamble hereof. "SECURITIES ACCOUNT CONTROL AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 4 or such other form that is reasonably satisfactory to the Collateral Agent. -9- "SECURITIES COLLATERAL" shall mean, collectively, the Pledged Securities, the Intercompany Notes and the Distributions. "SPECIAL PROPERTY" shall mean: (a) any contract, General Intangible, permit, lease or license held by any Pledgor that validly prohibits the creation by such Pledgor of a security interest therein; (b) any contract, General Intangible, permit, lease or license held by any Pledgor to the extent that any Requirement of Law applicable thereto prohibits the creation of a security interest therein; (c) any contract, General Intangible, permit, lease or license held by any Pledgor to the extent that the creation by such Pledgor of a security interest therein is permitted only with the consent of another party, if the requirement to obtain such consent is legally enforceable and such consent has not been obtained; (d) Equipment owned by any Pledgor on the date hereof or hereafter acquired that is subject to a Lien securing a Purchase Money Obligation or Capital Lease Obligation permitted to be incurred or outstanding pursuant to the provisions of the Credit Agreement if the contract or other agreement in which such Lien is granted (or the documentation providing for such Purchase Money Obligation or Capital Lease Obligation) validly prohibits the creation of any other Lien on such Equipment or requires consent of another party (which requirement is legally enforceable) to create such other Lien, which consent can not be obtained; and (e) any property owned on the date hereof or acquired after the date hereof by any Pledgor that is subject to a Lien permitted by either Section 6.02(k) or Section 6.02(c) of the Credit Agreement if the contract or agreement pursuant to which such Lien is granted validly prohibits the creation of any other Lien on such property or requires the consent of another party to create such Lien, if the requirement to obtain such consent is legally enforceable and such consent has not been obtained. PROVIDED, HOWEVER, that to the extent such property constitutes Special Property due to a prohibition on the creation of any other Lien in the relevant permit, lease, license, contract or other agreement or by Requirement of Law applicable thereto, then in each case described in clauses (a) or (b), (c), (d) or (e) of this definition, such property shall constitute "Special Property" only to the extent and for so long as such permit, lease, license, contract or other agreement or Requirement of Law applicable thereto validly prohibits the creation of a Lien on such property in favor of the Collateral Agent and, upon the termination of such prohibition (howsoever occurring), such property shall cease to constitute "Special Property." In addition, to the extent such property constitutes "Special Property" due to failure of Pledgor to obtain consent as described in clauses (c), (d) and (e), such Pledgor shall use its commercially reasonable efforts to obtain such consent, and, upon obtaining such consent, such property shall cease to constitute "Special Property." -10- "SUCCESSOR INTERESTS" shall mean, collectively, with respect to each Pledgor, all shares of each class of the capital stock of the successor corporation or interests or certificates of the successor limited liability company, partnership or other entity owned by such Pledgor (unless such successor is such Pledgor itself) formed by or resulting from any consolidation or merger in which any person listed in SCHEDULE 1(A) annexed to the Perfection Certificate is not the surviving entity; PROVIDED, HOWEVER, that to the extent applicable, Successor Interest shall not include any shares or interests which are not required to be pledged pursuant to SECTION 5.10(B) of the Credit Agreement. "TRADEMARKS" shall mean, collectively, with respect to each Pledgor, all trademarks (including service marks), slogans, logos, certification marks, trade dress, uniform resource locations (URLs), domain names, corporate names and trade names, whether registered or unregistered, owned by or assigned to such Pledgor and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States or any other country or any political subdivision thereof), together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof. "TRADEMARK U.S. SECURITY AGREEMENT" shall mean an agreement substantially in the form annexed hereto as EXHIBIT 8. "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; PROVIDED, HOWEVER, that if by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Collateral Agent's and the Secured Parties' security interest in any item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions relating to such provisions. "U.S. BORROWER" shall have the meaning assigned to such term in the Preamble hereof. SECTION 1.2. INTERPRETATION. The rules of interpretation specified in the Credit Agreement (including SECTION 1.03 thereof) shall be applicable to this Agreement. Notwithstanding anything herein to the contrary, to the extent the term "Obligations" refers to the obligations secured by the Canadian Collateral, such term shall be deemed to apply only to the Canadian Guaranteed Obligations. Notwithstanding anything herein to the contrary, to the extent the term "Secured Parties" refers to the parties secured by the Canadian Collateral, such term shall be deemed to apply only to the Canadian Secured Parties. -11- SECTION 1.3. RESOLUTION OF DRAFTING AMBIGUITIES. Each Pledgor acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (I.E., the Collateral Agent) shall not be employed in the interpretation hereof. SECTION 1.4. PERFECTION CERTIFICATE. The Collateral Agent and each Secured Party agree that the Perfection Certificate and all descriptions of Pledged Collateral, schedules, amendments and supplements thereto applicable to the Pledgors are and shall at all times remain a part of this Agreement. ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS SECTION 2.1. GRANT OF SECURITY INTEREST. As collateral security for the payment and performance in full of all the Obligations, each Pledgor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties, a lien on and security interest in and to all of the right, title and interest of such Pledgor in, to and under the following property, wherever located, whether now existing or hereafter arising or acquired from time to time (collectively, the "PLEDGED COLLATERAL"): (i) all Accounts; (ii) all Equipment, Goods, Inventory and Fixtures; (iii) all Documents, Instruments and Chattel Paper; (iv) all Letters of Credit and Letter-of-Credit Rights; (v) all Securities Collateral; PROVIDED that a lien on and security interest in the Initial Pledged Shares represented by Canadian Borrower's share certificate number C-3 described in SCHEDULE 11 to the Perfection Certificate (the "CANADIAN SHARE CERTIFICATE") and all Successor Interests and Distributions related thereto (collectively, the "CANADIAN COLLATERAL") is pledged and granted only to secure U.S. Borrower's guarantee of the Canadian Obligations; (vi) all Collateral Accounts; (vii) all Investment Property; (viii) all Intellectual Property Collateral; -12- (ix) the Commercial Tort Claims described on SCHEDULE 15 to the Perfection Certificate; (x) all General Intangibles; (xi) all Deposit Accounts; (xii) all Acquisition Documents and Acquisition Document Rights; (xiii) all Supporting Obligations; (xiv) all books and records relating to the Pledged Collateral; and (xv) to the extent not covered by clauses (i) through (xiv) of this sentence, all other personal property of such Pledgor, whether tangible or intangible and all Proceeds and products of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, any and all Proceeds of any insurance, indemnity, warranty or guaranty payable to such Pledgor from time to time with respect to any of the foregoing. Notwithstanding anything to the contrary contained in clauses (i) through (xv) above, the security interest created by this Agreement shall not extend to, and the term "Pledged Collateral" shall not include, any Excluded Property and (i) the Pledgors shall from time to time at the request of the Collateral Agent give written notice to the Collateral Agent identifying in reasonable detail the Special Property (and stating in such notice that such Special Property constitutes "Excluded Property") and shall provide to the Collateral Agent such other information regarding the Special Property as the Collateral Agent may reasonably request provided that failure to provide such notice to the Collateral Agent shall not affect the status of any property as Special Property and (ii) from and after the Closing Date, no Pledgor shall permit to become effective in any document creating, governing or providing for any permit, lease or license, a provision that would prohibit the creation of a Lien on such permit, lease or license in favor of the Collateral Agent unless such Pledgor believes, in its reasonable judgment, that such prohibition is usual and customary in transactions of such type. The security interest granted in clause (viii) shall not extend to any "intent to use" application for a Trademark until such time as a statement of use has been filed with the United States Patent and Trademark Office. SECTION 2.2. FILINGS. (a) Each Pledgor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral, including (i) whether such Pledgor is an organization, the type of organization and any organizational identification number issued to such Pledgor, (ii) any financing or continuation statements or other documents without the signature of such Pledgor where permitted by law, including the filing of -13- a financing statement describing the Pledged Collateral as "all assets in which the Pledgor now owns or hereafter acquires rights" and (iii) in the case of a financing statement filed as a fixture filing or covering Pledged Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Pledged Collateral relates. Each Pledgor agrees to provide all information described in the immediately preceding sentence to the Collateral Agent promptly upon request. (b) Each Pledgor hereby ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto relating to the Pledged Collateral if filed prior to the date hereof. (c) Each Pledgor hereby further authorizes the Collateral Agent to file filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country), including this Agreement, the Copyright U.S. Security Agreement, the Patent U.S. Security Agreement and the Trademark U.S. Security Agreement, or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Pledgor hereunder, without the signature of such Pledgor, and naming such Pledgor, as debtor, and the Collateral Agent, as secured party. ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF PLEDGED COLLATERAL SECTION 3.1. DELIVERY OF CERTIFICATED SECURITIES COLLATERAL. Each Pledgor represents and warrants that all certificates or instruments representing or evidencing the Securities Collateral in existence on the date hereof have been delivered to the Collateral Agent in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank and that the Collateral Agent has a perfected first priority security interest therein. Each Pledgor hereby agrees that all certificates or instruments representing or evidencing Securities Collateral acquired by such Pledgor after the date hereof shall immediately upon receipt thereof by such Pledgor be delivered to and held by or on behalf of the Collateral Agent pursuant hereto. All certificated Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Collateral Agent. The Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Collateral Agent or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder. In addition, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right at any time to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations. -14- SECTION 3.2. PERFECTION OF UNCERTIFICATED SECURITIES COLLATERAL. Each Pledgor represents and warrants that the Collateral Agent has a perfected first priority security interest in all uncertificated Pledged Securities pledged by it hereunder that is in existence on the date hereof. Each Pledgor hereby agrees that if any of the Pledged Securities are at any time not evidenced by certificates of ownership, then each applicable Pledgor shall, to the extent permitted by applicable law (i) if necessary or desirable to perfect a security interest in such Pledged Securities, cause such pledge to be recorded on the equityholder register or the books of the issuer, cause the issuer to execute and deliver to the Collateral Agent an acknowledgment of the pledge of such Pledged Securities substantially in the form of EXHIBIT 1 annexed hereto, execute any customary pledge forms or other documents necessary or appropriate to complete the pledge and give the Collateral Agent the right to transfer such Pledged Securities under the terms hereof and, upon request, provide to the Collateral Agent an opinion of counsel, in form and substance reasonably satisfactory to the Collateral Agent, confirming such pledge and perfection thereof and (ii) if reasonably requested by the Collateral Agent, use its commercially reasonable efforts to cause such Pledged Securities to become certificated and in the event such Pledged Securities become certificated, to deliver such Pledged Securities to the Collateral Agent in accordance with the provisions of SECTION 3.1. SECTION 3.3. FINANCING STATEMENTS AND OTHER FILINGS; MAINTENANCE OF PERFECTED SECURITY INTEREST. Each Pledgor represents and warrants that all filings necessary to perfect the security interest granted by it to the Collateral Agent in respect of the Pledged Collateral have been delivered to the Collateral Agent in completed and, to the extent necessary or appropriate, duly executed form for filing in each governmental, municipal or other office specified in SCHEDULE 7 annexed to the Perfection Certificate. Each Pledgor agrees that at the sole cost and expense of the Pledgors, (i) such Pledgor will maintain the security interest created by this Agreement in the Pledged Collateral as a perfected first priority security interest to the extent required by this Agreement and shall defend such security interest against the claims and demands of all persons except Permitted Collateral Liens, (ii) such Pledgor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Pledged Collateral and such other reports in connection with the Pledged Collateral as the Collateral Agent may reasonably request, all in reasonable detail and (iii) at any time and from time to time, upon the written request of the Collateral Agent, such Pledgor shall promptly and duly execute and deliver, and file and have recorded, such further instruments and documents and take such further action as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and the rights and powers herein granted, including the filing (including by electronic filing) of any financing statements, continuation statements and other documents (including this Agreement) under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby and the execution and delivery of Control Agreements, all in form reasonably satisfactory to the Collateral Agent and in such offices (including the United States Patent and Trademark Office and the United States Copyright Office) wherever required by law to perfect, continue and maintain a valid, enforceable, first priority security interest in the Pledged Collateral as provided herein and to preserve the other rights and interests granted to the Collateral Agent hereunder, as against third parties, with respect to the Pledged Collateral. Notwithstanding anything to the -15- contrary contained in this Agreement, no representation or warranty is made by any Pledgor as to the perfection or priority of any security interest in Intellectual Property Collateral which is registered in a jurisdiction other than and outside of the United States or any equipment covered by a certificate of title which cannot be perfected by UCC filings with the relevant Governmental Authority. SECTION 3.4. OTHER ACTIONS. In order to further ensure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Collateral Agent's security interest in the Pledged Collateral, each Pledgor represents and warrants (as to itself) as follows and agrees, in each case at such Pledgor's own expense, to take the following actions with respect to the following Pledged Collateral: (a) INSTRUMENTS AND TANGIBLE CHATTEL PAPER. (i) No amounts payable under or in connection with any of the Pledged Collateral are evidenced by any Instrument (other than a check to be deposited) or Tangible Chattel Paper, other than such Instruments and Tangible Chattel Paper listed in SCHEDULE 12 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made) and (ii) each Instrument and each item of Tangible Chattel Paper listed in SCHEDULE 12 annexed to the Perfection Certificate, other than Instruments and Chattel Paper representing amounts in the aggregate for all Pledgors of less than $500,000, has been properly endorsed, assigned and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank. If any amount then payable under or in connection with any of the Pledged Collateral shall be evidenced by any Instrument (other than a check to be deposited) or Tangible Chattel Paper, and such amount, together with all amounts payable evidenced by any Instrument or Tangible Chattel Paper not previously delivered to the Collateral Agent exceeds $500,000 in the aggregate for all Pledgors, the Pledgor acquiring such Instrument or Tangible Chattel Paper shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify. (b) DEPOSIT ACCOUNTS. Each Pledgor has neither opened nor maintains any Deposit Accounts other than the accounts listed in SCHEDULE 16 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made) and (ii) upon execution of a Deposit Account Control Agreement by such Pledgor, the applicable Bank and the Collateral Agent, the Collateral Agent will have a perfected first priority security interest in each Deposit Account listed in SCHEDULE 16 annexed to the Perfection Certificate by Control. No Pledgor shall hereafter establish and maintain any Deposit Account unless (1) the applicable Pledgor shall have given the Collateral Agent 30 days' prior written notice of its intention to establish such new Deposit Account with a Bank and (2) unless the Collateral Agent agrees in writing that it is not required, such Bank and such Pledgor shall have duly executed and delivered to the Collateral Agent a Deposit Account Control Agreement with respect to such Deposit Account. Each Pledgor agrees that at the time it establishes any additional Deposit Accounts it shall enter into a duly authorized, executed -16- and delivered Deposit Account Control Agreement with respect to such Deposit Account. The Collateral Agent agrees with each Pledgor that the Collateral Agent shall not give any instructions directing the disposition of funds from time to time credited to any Deposit Account or withhold any withdrawal rights from such Pledgor with respect to funds from time to time credited to any Deposit Account unless an Event of Default of the type specified in clause (a), (g) or (h) of ARTICLE VIII the Credit Agreement has occurred and is continuing or if the Loans or other Obligations shall be declared or otherwise become immediately due and payable or, after an Event of Default has occurred, the Commitments shall be terminated. The provisions of this SECTION 3.4(B) shall not apply to the Collateral Account or to any other Deposit Accounts for which the Collateral Agent is the Bank. No Pledgor shall grant Control of any Deposit Account to any person other than the Collateral Agent. The provisions of this Section 3.4(b) shall not apply to any Deposit Account which (i) solely contains any property not beneficially owned by any Pledgor or (ii) has a restricted purpose under the terms of documents relating to the Assumed Debt and the funds therein can only be used for such purpose. (c) INVESTMENT PROPERTY. (i) Each Pledgor (1) has no Securities Accounts or Commodity Accounts other than those listed in SCHEDULE 16 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made) and the Collateral Agent has a perfected first priority security interest in such Securities Accounts and Commodity Accounts, if any, by Control unless the Collateral Agent agrees in writing that it is not required, (2) does not hold, own or have any interest in any certificated securities or uncertificated securities other than those constituting Pledged Securities and those maintained in Securities Accounts or Commodity Accounts listed in SCHEDULE 16 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made) and (3) unless the Collateral Agent agrees in writing that it is not necessary, as of the date hereof, has entered into a duly authorized, executed and delivered Securities Account Control Agreement or a Commodity Account Control Agreement with respect to each Securities Account or Commodity Account listed in SCHEDULE 16 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made), if any, as applicable. (ii) If any Pledgor shall at any time hold or acquire any certificated securities constituting Investment Property, such Pledgor shall promptly (a) endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory to the Collateral Agent or (b) deliver such securities into a Securities Account with respect to which a Control Agreement is in effect in favor of the Collateral Agent. If any securities now or hereafter acquired by any Pledgor constituting Investment Property are uncertificated and are issued to such Pledgor or its nominee directly by the issuer thereof, such Pledgor shall promptly notify the Collateral Agent thereof and pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (a) cause the issuer to -17- agree to comply with instructions from the Collateral Agent as to such securities, without further consent of any Pledgor or such nominee, (b) cause a Security Entitlement with respect to such uncertificated security to be held in a Securities Account with respect to which the Collateral Agent has Control or (c) arrange for the Collateral Agent to become the registered owner of the securities. Pledgor shall not hereafter establish and maintain any Securities Account or Commodity Account with any Securities Intermediary or Commodity Intermediary unless (1) the applicable Pledgor shall have given the Collateral Agent 30 days' prior written notice of its intention to establish such new Securities Account or Commodity Account with such Securities Intermediary or Commodity Intermediary, and (2) unless the Collateral Agent in agrees in writing that it is not required, such Securities Intermediary or Commodity Intermediary, as the case may be, and such Pledgor shall have duly executed and delivered a Control Agreement with respect to such Securities Account or Commodity Account, as the case may be. Each Pledgor shall accept any cash and Investment Property in trust for the benefit of the Collateral Agent and within one (1) Business Day of actual receipt thereof, deposit any cash or Investment Property and any new securities, instruments, documents or other property by reason of ownership of the Investment Property (other than payments of a kind described in, and which such Pledgor is entitled to retain pursuant to the provision of, Sections 5.2 and 7.4 hereof) received by it into a Controlled Account. The Collateral Agent agrees with each Pledgor that the Collateral Agent shall not give any Entitlement Orders or instructions or directions to any issuer of uncertificated securities, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by such Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment, withdrawal or dealing rights would occur. The provisions of this SECTION 3.4(C) shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary. No Pledgor shall grant control over any Investment Property to any person other than the Collateral Agent. (iii) As between the Collateral Agent and the Pledgors, the Pledgors shall bear the investment risk with respect to the Investment Property and Pledged Securities, and the risk of loss of, damage to, or the destruction of the Investment Property and Pledged Securities, whether in the possession of, or maintained as a security entitlement or deposit by, or subject to the control of, the Collateral Agent, a Securities Intermediary, Commodity Intermediary, any Pledgor or any other person; PROVIDED, HOWEVER, that nothing contained in this SECTION 3.4(C) shall release or relieve any Securities Intermediary or Commodity Intermediary of its duties and obligations to the Pledgors or any other person under any Control Agreement or under applicable law. Each Pledgor shall promptly pay all Claims and fees of whatever kind or nature with respect to the Investment Property and Pledged Securities pledged by it under this Agreement except for claims subject to Contested Liens. In the event any Pledgor shall fail to make such payment contemplated in the immediately preceding sentence, the Collateral Agent may (following notice to the Pledgor, to the extent practicable taking into account the value of its interest in such Pledged Securities, of its intention to pay any such Claim) do so for the account of such -18- Pledgor and the Pledgors shall promptly reimburse and indemnify the Collateral Agent from all costs and expenses incurred by the Collateral Agent under this SECTION 3.4(C) in accordance with SECTION 11.03 of the Credit Agreement. (d) ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. No amount under or in connection with any of the Pledged Collateral in the aggregate for all Pledgors in excess of $500,000 is evidenced by any Electronic Chattel Paper or any "transferable record" (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction) other than such Electronic Chattel Paper and transferable records listed in SCHEDULE 12 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made). If any amount payable under or in connection with any of the Pledged Collateral shall be evidenced by any Electronic Chattel Paper or any transferable record, the Pledgor acquiring such Electronic Chattel Paper or transferable record shall promptly notify the Collateral Agent thereof and shall take such action as the Collateral Agent may reasonably request to vest in the Collateral Agent control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The requirement in the preceding sentence shall apply to the extent that such amount, together with all amounts payable evidenced by Electronic Chattel Paper or any transferable record in which the Collateral Agent has not been vested control within the meaning of the statutes described in this sentence exceeds $500,000 in the aggregate for all Pledgors. The Collateral Agent agrees with such Pledgor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent's loss of control, for the Pledgor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Pledgor with respect to such Electronic Chattel Paper or transferable record. (e) LETTER-OF-CREDIT RIGHTS. If any Pledgor is at any time a beneficiary under a Letter of Credit now or hereafter issued in favor of such Pledgor, other than a Letter of Credit issued pursuant to the Credit Agreement, such Pledgor shall promptly notify the Collateral Agent thereof and such Pledgor shall, at the request of the Collateral Agent, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, use commercially reasonable efforts to either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the Letter of Credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of such Letter of Credit, with the Collateral -19- Agent agreeing, in each case, that the proceeds of any drawing under the Letter of Credit are to be applied as provided in the Credit Agreement. The actions in the preceding sentence shall be taken to the extent that the amount under such Letter of Credit, together with all amounts under Letters of Credit for which the actions described above in clause (i) and (ii) have not been taken, exceeds $500,000 in the aggregate for all Pledgors. (f) COMMERCIAL TORT CLAIMS. As of the date hereof each Pledgor hereby represents and warrants that it holds no Commercial Tort Claims other than those listed in SCHEDULE 15 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made). If any Pledgor shall at any time hold or acquire a Commercial Tort Claim having a value together with all other Commercial Tort Claims of all Pledgors in which the Collateral Agent does not have a security interest in excess of $500,000 in the aggregate, such Pledgor shall promptly notify the Collateral Agent in writing signed by such Pledgor of the brief details thereof and grant to the Collateral Agent in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent. (g) LANDLORD'S ACCESS AGREEMENTS/BAILEE LETTERS. Each Pledgor shall use its commercially reasonable efforts to obtain as soon as practicable after the date hereof with respect to each location set forth in SCHEDULE 4.01(N)(VI) annexed to the Credit Agreement, where such Pledgor maintains Pledged Collateral, a Bailee Letter and/or Landlord Access Agreement, as applicable, and use commercially reasonable efforts to obtain a Bailee Letter, Landlord Access Agreement and/or landlord's lien waiver, as applicable, from all such bailees and landlords, as applicable, who from time to time have possession of Pledged Collateral in the ordinary course of such Pledgor's business and if reasonably requested by the Collateral Agent. A waiver of bailee's lien shall not be required if the value of the Pledged Collateral held by such bailee at the relevent location is less then $100,000. A Landlord Access Agreement and/or landlord's lien waiver shall not be required if the value of the Pledged Collateral held at the relevant leased location is less then $100,000. SECTION 3.5. JOINDER OF ADDITIONAL GUARANTORS. The Pledgors shall cause each Subsidiary of the U.S. Borrower which, from time to time, after the date hereof shall be required to pledge any assets to the Collateral Agent for the benefit of the Secured Parties pursuant to the provisions of the Credit Agreement, (a) to execute and deliver to the Collateral Agent (i) a Joinder Agreement substantially in the form of EXHIBIT 3 annexed hereto within thirty (30) Business Days on which it was acquired or created and (ii) a Perfection Certificate, in each case, within thirty (30) Business Days of the date on which it was acquired or created or (b) in the case of a Subsidiary organized outside of the United States required to pledge any assets to the Collateral Agent pursuant to the Credit Agreement, execute and deliver such documentation as the Collateral Agent shall reasonably request and, in each case, upon such execution and delivery, such Subsidiary shall, to the extent required by the Credit Agreement, constitute a "Guarantor" and a "Pledgor" for all purposes hereunder with the same force and effect as if originally named as a -20- Guarantor and Pledgor herein. The execution and delivery of such Joinder Agreement shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor and Pledgor as a party to this Agreement. SECTION 3.6. SUPPLEMENTS; FURTHER ASSURANCES. Each Pledgor shall take such further actions, and shall execute and deliver to the Collateral Agent such additional assignments, agreements, supplements, powers and instruments, as the Collateral Agent may in its reasonable judgment deem necessary or appropriate, wherever required by law, in order to perfect, preserve and protect the security interest in the Pledged Collateral as provided herein and the rights and interests granted to the Collateral Agent hereunder, to carry into effect the purposes hereof or better to assure and confirm unto the Collateral Agent the Pledged Collateral or permit the Collateral Agent to exercise and enforce its rights, powers and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, each Pledgor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Collateral Agent from time to time upon reasonable request such lists, descriptions and designations of the Pledged Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments as the Collateral Agent shall reasonably request. If an Event of Default has occurred and is continuing, the Collateral Agent may institute and maintain, in its own name or in the name of any Pledgor, such suits and proceedings as the Collateral Agent may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at the sole cost and expense of the Pledgors. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Each Pledgor represents, warrants and covenants as follows: SECTION 4.1. TITLE. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement and Permitted Liens, such Pledgor owns and, as to Pledged Collateral acquired by it from time to time after the date hereof, will own the rights in each item of Pledged Collateral pledged by it hereunder free and clear of any and all Liens or claims of others other than Permitted Collateral Liens. In addition, no Liens or claims exist on the Securities Collateral, other than as permitted by SECTION 6.02 of the Credit Agreement. Such Pledgor has not filed, nor authorized any third party to file a financing statement or other public notice with respect to all or any part of the Pledged Collateral on file or of record in any public office, except such as have been filed in favor of the Collateral Agent pursuant to this Agreement or as are permitted by the Credit Agreement or financing statements or public notices relating to the termination statements listed on SCHEDULE 9 to the -21- Perfection Certificate. No person other than the Collateral Agent has control or possession of all or any part of the Pledged Collateral, except as permitted by the Credit Agreement. SECTION 4.2. VALIDITY OF SECURITY INTEREST. The security interest in and Lien on the Pledged Collateral granted to the Collateral Agent for the benefit of the Secured Parties hereunder constitutes (a) a legal and valid security interest in all the Pledged Collateral securing the payment and performance of the Obligations, and (b) subject to the filings and other actions described in SCHEDULE 7 annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made), a perfected security interest in all the Pledged Collateral, except as otherwise permitted in this Agreement. The security interest and Lien granted to the Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement in and on the Pledged Collateral will, except as otherwise provided in this Agreement, at all times constitute a perfected, continuing security interest therein, subject only to Permitted Collateral Liens. SECTION 4.3. DEFENSE OF CLAIMS; TRANSFERABILITY OF PLEDGED COLLATERAL. Each Pledgor shall, at its own cost and expense, defend title to the Pledged Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Collateral Agent and the priority thereof against all claims and demands of all persons, at its own cost and expense, at any time claiming any interest therein adverse to the Collateral Agent or any other Secured Party other than Permitted Collateral Liens (other than Contested Liens). Except as expressly permitted by the Credit Agreement, this Agreement or any other Loan Document, there is no agreement to which any Pledgor is a party, and no Pledgor shall enter into any agreement or take any other action, that would reasonably be expected to restrict the transferability of any of the Pledged Collateral or otherwise impair or conflict in any material respect with such Pledgors' obligations or the rights of the Collateral Agent hereunder. SECTION 4.4. OTHER FINANCING STATEMENTS. It has not filed, nor authorized any third party to file a (nor will there be any) valid or effective financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Pledged Collateral other than financing statements and other statements and instruments relating to Permitted Collateral Liens. So long as any of the Obligations remain unpaid, no Pledgor shall execute, authorize or permit to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) relating to any Pledged Collateral, except financing statements and other statements and instruments filed or to be filed in respect of and covering the security interests granted by such Pledgor to the holder of the Permitted Collateral Liens. SECTION 4.5. CHIEF EXECUTIVE OFFICE; CHANGE OF NAME; JURISDICTION OF ORGANIZATION. (a) It shall comply with the provisions of SECTION 5.12(A) of the Credit Agreement. (b) The Collateral Agent may rely on opinions of counsel as to whether any or all UCC financing statements of the Pledgors need to be amended as a result of any of the changes described in SECTION 5.12(A) of the Credit Agreement. If any Pledgor fails to provide information to the Collateral Agent about such changes on a timely basis, the Collateral Agent -22- shall not be liable or responsible to any party for any failure to maintain a perfected security interest in such Pledgor's property constituting Pledged Collateral, for which the Collateral Agent needed to have information relating to such changes. The Collateral Agent shall have no duty to inquire about such changes if any Pledgor does not inform the Collateral Agent of such changes, the parties acknowledging and agreeing that it would not be feasible or practical for the Collateral Agent to search for information on such changes if such information is not provided by any Pledgor. SECTION 4.6. LOCATION OF INVENTORY AND EQUIPMENT. It shall not move any material Equipment or Inventory to any location other than one within the United States until (i) it shall have given the Collateral Agent not less than 30 days' prior written notice (in the form of an Officers' Certificate) of its intention so to do, clearly describing such new location within the United States and providing such other information in connection therewith as the Collateral Agent may request and (ii) with respect to such new location, such Pledgor shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the perfection and priority of the security interest of the Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby, including using commercially reasonable efforts to obtain waivers of landlord's or warehousemen's and/or bailee's liens with respect to such new location, if applicable, and if requested by the Collateral Agent. Such Pledgor agrees to provide the Collateral Agent with prompt notice following the movement of any material Equipment or Inventory to any location other than one that is listed in the relevant Schedules to the Perfection Certificate. SECTION 4.7. DUE AUTHORIZATION AND ISSUANCE. All of the Initial Pledged Shares have been, and to the extent any Pledged Shares are hereafter issued, such Pledged Shares will be, upon such issuance, duly authorized, validly issued and fully paid and non-assessable. All of the Initial Pledged Interests have been fully paid for, and there is no amount or other obligation owing by any Pledgor to any issuer of the Initial Pledged Interests in exchange for or in connection with the issuance of the Initial Pledged Interests or any Pledgor's status as a partner or a member of any issuer of the Initial Pledged Interests. SECTION 4.8. CONSENTS, ETC. In the event that the Collateral Agent desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other person therefor, then, upon the reasonable request of the Collateral Agent, such Pledgor agrees to use its commercially reasonable efforts to assist and aid the Collateral Agent to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. SECTION 4.9. PLEDGED COLLATERAL. All information set forth herein, including the schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party, including the Perfection Certificate and the schedules thereto as supplemented from time to time through the date as of which this representation is made or deemed made, by or on behalf of any Pledgor in connection with this Agreement, in each case, relating to the Pledged Collateral, is accurate and complete in all material re- -23- spects. The Pledged Collateral described on the Schedules annexed to the Perfection Certificate (to the extent required to be listed on the schedules to the Perfection Certificate as of the date this representation is made or deemed made) constitutes all of the property of such type of Pledged Collateral owned or held by the Pledgors. SECTION 4.10. INSURANCE. In the event that the proceeds of any insurance claim are paid after the Collateral Agent has exercised its right to foreclose after an Event of Default, such Net Cash Proceeds shall be paid to the Collateral Agent to satisfy any deficiency remaining after such foreclosure. SECTION 4.11. PAYMENT OF TAXES; COMPLIANCE WITH LAWS; CONTESTING LIENS; CLAIMS. Each Pledgor represents and warrants that all Claims imposed upon or assessed against the Pledged Collateral have been paid and discharged except to the extent such Claims constitute a Lien not yet due and payable which is a Contested Lien or a Permitted Collateral Lien. Each Pledgor shall comply with all Requirements of Law applicable to the Pledged Collateral the failure to comply with which would, individually or in the aggregate, have a Material Adverse Effect. Each Pledgor may at its own expense contest the validity, amount or applicability of any Claims or Requirements of Law so long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Credit Agreement. Notwithstanding the foregoing provisions of this SECTION 4.11, (i) no contest of any such obligation may be pursued by such Pledgor if such contest would expose the Collateral Agent or any other Secured Party to (A) any possible criminal liability or (B) any additional civil liability for failure to comply with such obligations unless such Pledgor shall have furnished a bond or other security therefor reasonably satisfactory to the Collateral Agent, or such Secured Party, as the case may be and (ii) if at any time payment or performance of any obligation contested by such Pledgor pursuant to this SECTION 4.11 shall become necessary to prevent the imposition of remedies because of non-payment, such Pledgor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 4.12. ACCESS TO PLEDGED COLLATERAL, BOOKS AND RECORDS; OTHER INFORMATION. Upon reasonable request to each Pledgor, the Collateral Agent, its agents, accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable times as may be reasonably requested by the Collateral Agent all of the Pledged Collateral and Mortgaged Property including all of the books, correspondence and records of such Pledgor relating thereto. The Collateral Agent and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and such Pledgor agrees to render to the Collateral Agent, at such Pledgor's cost and expense, such clerical and other assistance as may be reasonably requested by the Collateral Agent with regard thereto. Such Pledgor shall, at any and all times, within a reasonable time after written request by the Collateral Agent, furnish or cause to be furnished to the Collateral Agent, in such manner and in such detail as may be reasonably requested by the Collateral Agent, additional information with respect to the Pledged Collateral. -24- ARTICLE V CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL SECTION 5.1. PLEDGE OF ADDITIONAL SECURITIES COLLATERAL. Each Pledgor shall, upon obtaining any Pledged Securities or Intercompany Notes of any person, accept the same in trust for the benefit of the Collateral Agent and forthwith deliver to the Collateral Agent a pledge amendment, duly executed by such Pledgor, in substantially the form of EXHIBIT 2 annexed hereto (each, a "PLEDGE AMENDMENT"), and the certificates and other documents required under SECTION 3.1 and SECTION 3.2 hereof in respect of the additional Pledged Securities or Intercompany Notes which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Securities or Intercompany Notes. Each Pledgor hereby authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Securities or Intercompany Notes listed on any Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. SECTION 5.2. VOTING RIGHTS; DISTRIBUTIONS; ETC. (i) So long as no Event of Default shall have occurred and be continuing: (A) Each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms or purposes hereof, the Credit Agreement or any other document evidencing the Obligations; PROVIDED, however, that no Pledgor shall in any event exercise such rights in any manner which could reasonably be expected to have a Material Adverse Effect. (B) Each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien hereof, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Credit Agreement; PROVIDED, HOWEVER, that any and all such Distributions consisting of rights or interests in the form of securities shall, unless otherwise provided in the Credit Agreement, be promptly delivered to the Collateral Agent to hold as Pledged Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Pledgor and be forthwith delivered to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). (ii) The Collateral Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of any Pledgor and at the sole cost and expense of the Pledgors, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to SECTION -25- 5.2(I)(A) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to SECTIONS 5.2(I)(B) AND 5.2(III)(B) hereof. (iii) Upon the occurrence and during the continuance of any Event of Default: (A) All rights of each Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to SECTION 5.2(I)(A) hereof shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights. (B) All rights of each Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to SECTION 5.2(I)(B) hereof shall cease and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. (iv) Each Pledgor shall, at its sole cost and expense, from time to time execute and deliver to the Collateral Agent appropriate instruments as the Collateral Agent may request in order to permit the Collateral Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to SECTION 5.2(iii)(A) hereof and to receive all Distributions which it may be entitled to receive under SECTION 5.2(III)(B) hereof. (v) All Distributions which are received by any Pledgor contrary to the provisions of SECTION 5.2(I)(B) or SECTION 5.2(III)(B) hereof shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Pledgor and shall immediately be paid over to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 5.3. DEFAULTS, ETC. Such Pledgor is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which such Pledgor is a party relating to the Pledged Securities pledged by it, and such Pledgor is not in default or violation of any other provisions of any such agreement to which such Pledgor is a party which could reasonably be expected to have a Material Adverse Effect. No Securities Collateral pledged by such Pledgor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any person with respect thereto except as have been disclosed to the Collateral Agent, and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the Organizational Documents and certificates, if any, delivered to the Collateral Agent) which evidence any Pledged Securities of such Pledgor. -26- SECTION 5.4. CERTAIN AGREEMENTS OF PLEDGORS AS ISSUERS AND HOLDERS OF EQUITY INTERESTS. (i) In the case of each Pledgor which is an issuer of Securities Collateral, such Pledgor agrees to be bound by the terms of this Agreement relating to the Securities Collateral issued by it and will comply with such terms insofar as such terms are applicable to it. (ii) In the case of each Pledgor which is a partner in a partnership, limited liability company or other entity, such Pledgor hereby consents to the extent required by the applicable Organizational Document to the pledge by each other Pledgor, pursuant to the terms hereof, of the Pledged Interests in such partnership, limited liability company or other entity and, upon the occurrence and during the continuance of an Event of Default, to the transfer of such Pledged Interests to the Collateral Agent or its nominee and to the substitution of the Collateral Agent or its nominee as a substituted partner or member in such partnership, limited liability company or other entity with all the rights, powers and duties of a general partner or a limited partner or member, as the case may be. ARTICLE VI CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL SECTION 6.1. GRANT OF LICENSE. For the purpose of enabling the Collateral Agent, during the continuance of an Event of Default, to exercise rights and remedies under ARTICLE IX hereof with respect to the Intellectual Property Collateral, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Pledgor hereby grants to the Collateral Agent, to the extent permissible, an irrevocable, non-exclusive license (exercisable only after an Event of Default has occurred and is continuing) to use, assign, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by such Pledgor, wherever the same may be located. Such license shall include access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof. SECTION 6.2. PROTECTION OF COLLATERAL AGENT'S SECURITY. On a continuing basis, each Pledgor shall, at its sole cost and expense, (i) promptly following its becoming aware thereof, notify the Collateral Agent of (A) any materially adverse determination in any proceeding in the United States Patent and Trademark Office or the United States Copyright Office with respect to any material Patent, Trademark or Copyright or (B) the institution of any proceeding or any adverse determination in any federal, state or local court or administrative body regarding such Pledgor's claim of ownership in or right to use any of the Intellectual Property Collateral material to the use and operation of the Pledged Collateral or Mortgaged Property, its right to register such Intellectual Property Collateral or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect the Intellectual Property Collateral material to the -27- use and operation of the Pledged Collateral or Mortgaged Property as presently used and operated and as contemplated by the Credit Agreement, (iii) not permit to lapse or become abandoned any Intellectual Property Collateral material to the use and operation of the Pledged Collateral or Mortgaged Property as presently used and operated and as contemplated by the Credit Agreement, and not settle or compromise any pending or future litigation or administrative proceeding with respect to such Intellectual Property Collateral, in each case except as shall be consistent with commercially reasonable business judgment, (iv) upon such Pledgor obtaining knowledge thereof, promptly notify the Collateral Agent in writing of any event which may be reasonably expected to materially and adversely affect the value or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Pledged Collateral or Mortgaged Property, the ability of such Pledgor or the Collateral Agent to dispose of the Intellectual Property Collateral or any portion thereof or the rights and remedies of the Collateral Agent in relation thereto including a levy or threat of levy or any legal process against the Intellectual Property Collateral or any portion thereof, (v) not license the Intellectual Property Collateral or amend or permit the amendment of any of the licenses in a manner that would materially impair, in the reasonable business judgment of such Pledgor, the value of the Intellectual Property Collateral or the Lien on and security interest in the Intellectual Property Collateral intended to be granted to the Collateral Agent for the benefit of the Secured Parties, without the consent of the Collateral Agent, which consent shall not be unreasonably withheld, (vi) diligently keep adequate records respecting the Intellectual Property Collateral and (vii) furnish to the Collateral Agent from time to time upon the Collateral Agent's reasonable request therefor reasonably detailed statements and amended schedules further identifying and describing the Intellectual Property Collateral and such other materials evidencing or reports pertaining to the Intellectual Property Collateral as the Collateral Agent may reasonably from time to time request. SECTION 6.3. AFTER-ACQUIRED PROPERTY. If any Pledgor shall, at any time before the Obligations have been paid in full (other than contingent indemnification obligations which, pursuant to the provisions of the Credit Agreement or the Security Documents, survive the termination thereof), (i) obtain any rights to any additional Intellectual Property Collateral or (ii) become entitled to the benefit of any additional Intellectual Property Collateral or any renewal or extension thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property Collateral, or any improvement on any Intellectual Property Collateral, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this SECTION 6.3 with respect to such Pledgor shall automatically constitute Intellectual Property Collateral if such would have constituted Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this Agreement without further action by any party. Each Pledgor shall promptly (i) provide to the Collateral Agent written notice of any of the foregoing and (ii) upon the Collateral Agent's reasonable request, confirm the attachment of the Lien and security interest created by this Agreement to any rights described in clauses (i) and (ii) of the immediately preceding sentence of this SECTION 6.3 by execution of an instrument in form reasonably acceptable to the Collateral Agent and the filing of any instruments or statements as shall be reasonably necessary to preserve, protect or perfect the Collateral Agent's security interest in such Intellectual Property Collateral. Further, each Pledgor authorizes the Collateral Agent to modify this Agreement by amending -28- SCHEDULES 14(C) and 14(D) annexed to the Perfection Certificate to include any Intellectual Property Collateral acquired or arising after the date hereof of such Pledgor. SECTION 6.4. LITIGATION. Unless there shall occur and be continuing any Event of Default, each Pledgor shall have the right to commence and prosecute in its own name, as the party in interest, for its own benefit and at the sole cost and expense of the Pledgors, such applications for protection of the Intellectual Property Collateral and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value or other damage as are necessary or desirable to protect the Intellectual Property Collateral. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent shall have the right but shall in no way be obligated to file applications for protection of the Intellectual Property Collateral and/or bring suit in the name of any Pledgor, the Collateral Agent or the Secured Parties to enforce the Intellectual Property Collateral and any license thereunder. In the event of such a suit brought by the Collateral Agent, each Pledgor shall, at the reasonable request of the Collateral Agent, do any and all lawful acts and execute any and all documents reasonably requested by the Collateral Agent in aid of such enforcement and the Pledgors shall promptly reimburse and indemnify the Collateral Agent for all costs and expenses incurred by the Collateral Agent in the exercise of its rights under this SECTION 6.4 in accordance with SECTION 11.03 of the Credit Agreement. In the event that the Collateral Agent shall elect not to bring suit to enforce the Intellectual Property Collateral as permitted by this SECTION 6.4 and an Event of Default has occurred and is continuing, each Pledgor agrees, at the reasonable request of the Collateral Agent, to take all commercially reasonable actions necessary, whether by suit, proceeding or other action, to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value of or other damage to any of the Intellectual Property Collateral by others and for that purpose agrees to diligently maintain any suit, proceeding or other action against any person so infringing necessary to prevent such infringement. ARTICLE VII CERTAIN PROVISIONS CONCERNING ACCOUNTS SECTION 7.1. MAINTENANCE OF RECORDS. Each Pledgor shall keep and maintain at its own cost and expense complete records of each Account, in a manner consistent with prudent business practice, including records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto. Each Pledgor shall, at such Pledgor's sole cost and expense, upon the Collateral Agent's demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible evidence of Accounts, including all documents evidencing Accounts and any books and records relating thereto to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Pledgor). Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent may transfer a full and complete copy of any Pledgor's books, records, credit information, reports, memoranda and all other writings relating to the Accounts to and for the use by any person that has acquired or is contemplating acquisition -29- of an interest in the Accounts or the Collateral Agent's security interest therein without the consent of any Pledgor. SECTION 7.2. LEGEND. Each Pledgor shall legend, at the request of the Collateral Agent made at any time after the occurrence and during the continuance of an Event of Default, and in form and manner satisfactory to the Collateral Agent, the Accounts and the other books, records and documents of such Pledgor evidencing or pertaining to the Accounts with an appropriate reference to the fact that the Accounts have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein. SECTION 7.3. MODIFICATION OF TERMS, ETC. No Pledgor shall rescind or cancel any obligations evidenced by any Account or modify any term thereof in any manner that would adversely affect the value as Pledged Collateral thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with prudent business practice, or extend or renew any such obligations except in the ordinary course of business consistent with prudent business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Account or interest therein except in the ordinary course of business consistent with prudent business practice without the prior written consent of the Collateral Agent (such consent not to be unreasonably withheld or delayed). Each Pledgor shall timely fulfill all obligations on its part to be fulfilled under or in connection with the Accounts in accordance with this Agreement. SECTION 7.4. COLLECTION. Each Pledgor shall use commercially reasonable efforts to cause to be collected from the Account Debtor of each of the Accounts, as and when due in the ordinary course of business and consistent with prudent business practice (including Accounts that are delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Account, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account, except that any Pledgor may, with respect to an Account, allow in the ordinary course of business (i) a refund or credit due as a result of returned or damaged or defective merchandise or for any other reason as determined by such Pledgor in its reasonable business judgment and (ii) such extensions of time to pay amounts due in respect of Accounts and such other modifications of payment terms or settlements in respect of Accounts as shall be commercially reasonable in the circumstances, all in accordance with such Pledgor's ordinary course of business consistent with its collection practices as in effect from time to time. The costs and expenses (including attorneys' fees) of collection, in any case, whether incurred by any Pledgor, the Collateral Agent or any Secured Party, shall be paid by the Pledgors. -30- ARTICLE VIII TRANSFERS SECTION 8.1. TRANSFERS OF PLEDGED COLLATERAL. No Pledgor shall sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral pledged by it hereunder except as permitted by the Credit Agreement. ARTICLE IX REMEDIES SECTION 9.1. REMEDIES. Upon the occurrence and during the continuance of any Event of Default the Collateral Agent may from time to time exercise in respect of the Pledged Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it, the following remedies: (i) Personally, or by agents or attorneys, immediately take possession of the Pledged Collateral or any part thereof, from any Pledgor or any other person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Pledgor's premises where any of the Pledged Collateral is located, remove such Pledged Collateral, remain present at such premises to receive copies of all communications and remittances relating to the Pledged Collateral and use in connection with such removal and possession any and all services, supplies, aids and other facilities of any Pledgor; (ii) Demand, sue for, collect or receive any money or property at any time payable or receivable in respect of the Pledged Collateral including instructing the obligor or obligors on any agreement, instrument or other obligation constituting part of the Pledged Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent, and in connection with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; PROVIDED, HOWEVER, that in the event that any such payments are made directly to any Pledgor, prior to receipt by any such obligor of such instruction, such Pledgor shall segregate all amounts received pursuant thereto in trust for the benefit of the Collateral Agent and shall promptly (but in no event later than one (1) Business Day after receipt thereof) pay such amounts to the Collateral Agent; (iii) Sell, assign, grant a license to use or otherwise liquidate, or direct any Pledgor to sell, assign, grant a license to use or otherwise liquidate, any and all investments made in whole or in part with the Pledged Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment, license or liquidation; -31- (iv) Take possession of the Pledged Collateral or any part thereof, by directing any Pledgor in writing to deliver the same to the Collateral Agent at any place or places so designated by the Collateral Agent, in which event such Pledgor shall at its own expense: (A) forthwith cause the same to be moved to the place or places designated by the Collateral Agent and therewith delivered to the Collateral Agent, (B) store and keep any Pledged Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent and (C) while the Pledged Collateral shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition. Each Pledgor's obligation to deliver the Pledged Collateral as contemplated in this SECTION 9.1(IV) is of the essence hereof. Upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by any Pledgor of such obligation; (v) Withdraw all moneys, instruments, securities and other property in any bank, financial securities, deposit or other account of any Pledgor constituting Pledged Collateral for application to the Obligations as provided in ARTICLE X hereof; (vi) Retain and apply the Distributions to the Obligations as provided in ARTICLE X hereof; (vii) Exercise any and all rights as beneficial and legal owner of the Pledged Collateral, including perfecting assignment of and exercising any and all voting, consensual and other rights and powers with respect to any Pledged Collateral; and (viii) All the rights and remedies of a secured party on default under the UCC, and the Collateral Agent may also in its sole discretion, without notice except as specified in SECTION 9.2 hereof, sell, assign or grant a license to use the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable. The Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser, licensee, assignee or recipient of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold, assigned or licensed at such sale, to use and apply any of the Obligations owed to such person as a credit on account of the purchase price of any Pledged Collateral payable by such person at such sale. Each purchaser, assignee, licensee or recipient at any such sale shall acquire the property sold, assigned or licensed absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law, any claims -32- against the Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold, assigned or licensed at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. SECTION 9.2. NOTICE OF SALE. Each Pledgor acknowledges and agrees that, to the extent notice of sale or other disposition of Pledged Collateral shall be required by law, ten (10) days' prior notice to such Pledgor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters. No notification need be given to any Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. SECTION 9.3. WAIVER OF NOTICE AND CLAIMS. Each Pledgor hereby waives, to the fullest extent permitted by applicable law, notice or judicial hearing in connection with the Collateral Agent's taking possession or the Collateral Agent's disposition of any of the Pledged Collateral, including any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which such Pledgor would otherwise have under law, and each Pledgor hereby further waives, to the fullest extent permitted by applicable law: (i) all damages occasioned by such taking of possession except to the extent caused by the gross negligence or willful misconduct of the Collateral Agent or any agent acting on its behalf, (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law. The Collateral Agent shall not be liable for any incorrect or improper payment made pursuant to this ARTICLE IX in the absence of gross negligence or willful misconduct. Any sale of or any other realization upon, any Pledged Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the applicable Pledgor therein and thereto, and shall be a perpetual bar both at law and in equity against such Pledgor and against any and all persons claiming or attempting to claim the Pledged Collateral so sold or realized upon, or any part thereof, from, through or under such Pledgor. SECTION 9.4. CERTAIN SALES OF PLEDGED COLLATERAL. (i) Each Pledgor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such Governmental Authority. Each Pledgor acknowledges that any such sales may be at prices and on terms less favorable to the Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that, except as may be required by applicable law, the Collateral Agent shall have no obligation to engage in public sales. -33- (ii) Each Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act, and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Securities Collateral and Investment Property, to limit purchasers to persons who will agree, among other things, to acquire such Securities Collateral or Investment Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Collateral Agent than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral or Investment Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. (iii) If the Collateral Agent determines to exercise its right to sell any or all of the Securities Collateral or Investment Property, upon written request, the applicable Pledgor shall from time to time furnish to the Collateral Agent all such information that is then available to such Pledgor as the Collateral Agent may reasonably request in order to determine the number of securities included in the Securities Collateral or Investment Property which may be sold by the Collateral Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (iv) Each Pledgor further agrees that a breach of any of the covenants contained in this SECTION 9.4 will cause irreparable injury to the Collateral Agent and other Secured Parties, that the Collateral Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this SECTION 9.4 shall be specifically enforceable against such Pledgor, and such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing. SECTION 9.5. NO WAIVER; CUMULATIVE REMEDIES. (i) No failure on the part of the Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of the Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy; nor shall the Collateral Agent be required to look first to, enforce or exhaust any other security, collateral or guaranties. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (ii) In the event that the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall -34- have been determined adversely to the Collateral Agent, then and in every such case, the Pledgors, the Collateral Agent and each other Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of the Collateral Agent and the other Secured Parties shall continue as if no such proceeding had been instituted. SECTION 9.6. CERTAIN ADDITIONAL ACTIONS REGARDING INTELLECTUAL PROPERTY. If any Event of Default shall have occurred and be continuing, upon the written demand of the Collateral Agent, each Pledgor shall execute and deliver to the Collateral Agent an assignment or assignments of any Intellectual Property Collateral and such other documents as are necessary or appropriate to carry out the intent and purposes hereof. Within five (5) Business Days of written notice thereafter from the Collateral Agent, each Pledgor shall make available to the Collateral Agent, to the extent within such Pledgor's power and authority, such personnel in such Pledgor's employ on the date of the Event of Default as the Collateral Agent may reasonably designate to permit such Pledgor to continue, directly or indirectly, to produce, advertise and sell the products and services sold by such Pledgor under the issued Patents, registered Trademarks and/or registered Copyrights, and such persons shall be available to perform their prior functions on the Collateral Agent's behalf. ARTICLE X PROCEEDS OF CASUALTY EVENTS AND COLLATERAL DISPOSITIONS; APPLICATION OF PROCEEDS SECTION 10.1. PROCEEDS OF CASUALTY EVENTS AND COLLATERAL DISPOSITIONS. The Pledgors shall take all actions required by the Credit Agreement with respect to any Net Cash Proceeds of any Casualty Event or from the sale or disposition of any Pledged Collateral. SECTION 10.2. APPLICATION OF PROCEEDS. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, together with any other sums then held by the Collateral Agent pursuant to this Agreement, in accordance with the Credit Agreement. ARTICLE XI MISCELLANEOUS SECTION 11.1. CONCERNING COLLATERAL AGENT. (i) The Collateral Agent has been appointed as collateral agent pursuant to the Credit Agreement. The actions of the Collateral Agent hereunder are subject to the provi- -35- sions of the Credit Agreement. The Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including the release or substitution of the Pledged Collateral), in accordance with this Agreement and the Credit Agreement. The Collateral Agent may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided in the Credit Agreement. Upon the acceptance of any appointment as the Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Agent. (ii) The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which the Collateral Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Collateral Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Securities Collateral, whether or not the Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters or (ii) taking any necessary steps to preserve rights against any person with respect to any Pledged Collateral. (iii) The Collateral Agent shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Agreement and its duties hereunder, upon advice of counsel selected by it. (iv) If any item of Pledged Collateral also constitutes collateral granted to the Collateral Agent under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the provisions of this Agreement shall control unless the other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral expressly states that such document shall control. SECTION 11.2. COLLATERAL AGENT MAY PERFORM; COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. If any Pledgor shall fail to perform any covenants contained in this Agreement (including such Pledgor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of such Pledgor under any Pledged Collateral) or if any representation or -36- warranty on the part of any Pledgor contained herein shall be breached, the Collateral Agent may (but shall not be obligated to), following notice to such Pledgor of such failure to perform and such Pledgor's failure to remedy such failure within a commercially reasonable time period, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; PROVIDED, HOWEVER, that the Collateral Agent shall in no event be bound to inquire into the validity of any tax, lien, imposition or other obligation which such Pledgor fails to pay or perform as and when required hereby and which such Pledgor does not contest in accordance in accordance with the provisions of SECTION 4.11 hereof. Any and all amounts so expended by the Collateral Agent shall be paid by the Pledgors in accordance with the provisions of SECTION 11.03 of the Credit Agreement. Neither the provisions of this SECTION 11.2 nor any action taken by the Collateral Agent pursuant to the provisions of this SECTION 11.2 shall prevent any such failure to observe any covenant contained in this Agreement nor any breach of representation or warranty from constituting an Event of Default. Each Pledgor hereby appoints the Collateral Agent its attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, after the occurrence and during the continuance of an Event of Default, in the Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms of the Credit Agreement, this Agreement and the other Security Documents which the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof. Except where prior notice is expressly required by the terms of this Agreement, the Collateral Agent shall use commercially reasonable efforts to provide notice to the Pledgor prior to taking any action taken in the preceding sentence, PROVIDED that failure to deliver such notice shall not limit the Collateral Agent's right to take such action or the validity of any such action. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 11.3. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon the Pledgors, their respective successors and assigns and (ii) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and the other Secured Parties and each of their respective successors, transferees and assigns. No other persons (including any other creditor of any Pledgor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party, herein or otherwise, subject however, to the provisions of the Credit Agreement and any Hedging Agreement. SECTION 11.4. TERMINATION; RELEASE. The Pledged Collateral and the Obligations of any Guarantor shall be released from the Lien of this Agreement in accordance with the provisions of the Credit Agreement. In addition, if any Pledged Collateral is sold or otherwise disposed of (other than to a U.S. Loan Party) in a manner permitted by the Credit Agreement, such Pledged Collateral shall be released from the Liens created hereby. Furthermore, at such time as the Obligations shall have been paid in full and the Commitments have been terminated, -37- the Pledged Collateral shall be released from the Liens created hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Pledgor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Pledged Collateral shall revert to the Pledgors. Upon termination hereof or any release of Pledged Collateral in accordance with the provisions of the Credit Agreement, the Collateral Agent shall, upon the request and at the sole cost and expense of the Pledgors, assign, transfer and deliver to Pledgor, against receipt and without recourse to or warranty by the Collateral Agent except as to the fact that the Collateral Agent has not encumbered the released assets, such of the Pledged Collateral to be released (in the case of a release) as may be in possession of the Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Pledged Collateral, proper documents and instruments (including UCC-3 termination statements or releases, or other documentation as such Pledgor shall reasonably request) acknowledging the termination hereof or the release of such Pledged Collateral, as the case may be. SECTION 11.5. MODIFICATION IN WRITING. No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by any Pledgor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by the Collateral Agent. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by any Pledgor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other document evidencing the Obligations, no notice to or demand on any Pledgor in any case shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances. SECTION 11.6. NOTICES. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to any Pledgor, addressed to it at the address of the U.S. Borrower set forth in the Credit Agreement and as to the Collateral Agent, addressed to it at the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this SECTION 11.6. SECTION 11.7. GOVERNING LAW, CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL. This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction. The other provisions of SECTIONS 11.09 and 11.10 of the Credit Agreement are incorporated herein, MUTATIS MUTANDIS, as if a part hereof. SECTION 11.8. SEVERABILITY OF PROVISIONS. Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. -38- SECTION 11.9. EXECUTION IN COUNTERPARTS. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. SECTION 11.10. BUSINESS DAYS. In the event any time period or any date provided in this Agreement ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 11.11. WAIVER OF STAY. Each Pledgor covenants (to the extent it may lawfully do so) that in the event that such Pledgor or any property or assets of such Pledgor shall hereafter become the subject of a voluntary or involuntary proceeding under the Code or such Pledgor shall otherwise be a party to any federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Collateral Agent has commenced foreclosure proceedings under this Agreement, such Pledgor shall not, and each Pledgor hereby expressly waives their right to (to the extent it may lawfully do so) at any time insist upon, plead or in any whatsoever, claim or take the benefit or advantage of any such automatic stay or such similar provision as it relates to the exercise of any of the rights and remedies (including any foreclosure proceedings) available to the Collateral Agent as provided in this Agreement, in any other Security Document or any other document evidencing the Obligations. Each Pledgor further covenants (to the extent it may lawfully do so) that it will not hinder, delay or impede the execution of any power granted herein to the Collateral Agent, but will suffer and permit the execution of every such power as though no law relating to any stay or similar provision had been enacted. SECTION 11.12. NO CREDIT FOR PAYMENT OF TAXES OR IMPOSITION. No Pledgor shall be entitled to any credit against the principal or interest or any other amount payable under the Credit Agreement, and no Pledgor shall be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, in either case, by reason of the payment of any Tax on the Pledged Collateral or any part thereof. SECTION 11.13. NO CLAIMS AGAINST COLLATERAL AGENT. Nothing contained in this Agreement shall constitute any consent or request by the Collateral Agent, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Pledged Collateral or any part thereof, nor as giving any Pledgor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Collateral Agent in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. -39- SECTION 11.14. NO RELEASE. Nothing set forth in this Agreement shall relieve any Pledgor from the performance of any term, covenant, condition or agreement on such Pledgor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to any person under or in respect of any of the Pledged Collateral or shall impose any obligation on the Collateral Agent or any other Secured Party to perform or observe any such term, covenant, condition or agreement on such Pledgor's part to be so performed or observed or shall impose any liability on the Collateral Agent or any other Secured Party for any act or omission on the part of such Pledgor relating thereto or for any breach of any representation or warranty on the part of such Pledgor contained in this Agreement, the Credit Agreement or the other Loan Documents, or under or in respect of the Pledged Collateral or made in connection herewith or therewith. The obligations of each Pledgor contained in this SECTION 11.14 shall survive the termination hereof and the discharge of such Pledgor's other obligations under this Agreement, the Credit Agreement and the other Loan Documents. SECTION 11.15. OBLIGATIONS ABSOLUTE. All obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Pledgor; (ii) any lack of validity or enforceability of the Credit Agreement, any Hedging Agreement or any other Loan Document, or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any Hedging Agreement or any other Loan Document or any other agreement or instrument relating thereto; (iv) any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations; (v) any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement, any Hedging Agreement or any other Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of SECTION 11.5 hereof; or (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any Pledgor, except for the defense of payment or performance of the Obligations. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] S-1 IN WITNESS WHEREOF, the Pledgors and the Collateral Agent have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. PLY GEM INDUSTRIES, INC., as Pledgor By: /s/ Shawn K. Poe ----------------------------- Name: Shawn K. Poe Title: Vice President, Chief Financial Officer, Treasurer and Secretary PLY GEM HOLDINGS, INC., as Pledgor By: /s/ Shawn K. Poe ----------------------------- Name: Shawn K. Poe Title: Vice President, Chief Financial Officer, Treasurer and Secretary GREAT LAKES WINDOW, INC., NAPCO, INC., NAPCO WINDOW SYSTEMS, INC., THERMAL-GARD, INC., VARIFORM, INC., KROY BUILDING PRODUCTS, INC., as Pledgors By: /s/ Shawn K. Poe ----------------------------- Name: Shawn K. Poe Title: Vice President, Treasurer and Secretary S-2 UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ Anthony N. Joseph ----------------------------- Name: Anthony N. Joseph Title: Associate Director Banking Products Services US By: /s/ Wilfred V. Saint ----------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services US EXHIBIT 1 [Form of] ISSUER'S ACKNOWLEDGMENT The undersigned hereby (i) acknowledges receipt of a copy of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "U.S. SECURITY AGREEMENT;" capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the U.S. Security Agreement), dated as of February 12, 2004, made by PLY GEM INDUSTRIES, INC., a Delaware Corporation (the "U.S. BORROWER"), the Guarantors party thereto and UBS AG, STAMFORD BRANCH, as collateral agent (in such capacity and together with any successors in such capacity, the "COLLATERAL AGENT"), (ii) agrees promptly to note on its books the security interests granted to the Collateral Agent and confirmed under the U.S. Security Agreement, (iii) agrees that it will comply with instructions of the Collateral Agent with respect to the applicable Securities Collateral without further consent by the applicable Pledgor, (iv) agrees to notify the Collateral Agent upon obtaining knowledge of any interest in favor of any person in the applicable Securities Collateral that is adverse to the interest of the Collateral Agent therein and (v) waives any right or requirement at any time hereafter to receive a copy of the U.S. Security Agreement in connection with the registration of any Securities Collateral thereunder in the name of the Collateral Agent or its nominee or the exercise of voting rights by the Collateral Agent or its nominee. [ ] By: /s/ ----------------------------- Name: Title: EXHIBIT 2 [Form of] SECURITIES PLEDGE AMENDMENT This Security Pledge Amendment, dated as of [ ], is delivered pursuant to SECTION 5.1 of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "U.S. SECURITY AGREEMENT;" capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the U.S. Security Agreement), dated as of February 12, 2004 made by PLY GEM INDUSTRIES, INC., a Delaware Corporation (the "U.S. BORROWER"), the Guarantors party thereto and UBS AG, STAMFORD BRANCH, as collateral agent (in such capacity and together with any successors in such capacity, the "COLLATERAL AGENT"). The undersigned hereby agrees that this Pledge Amendment may be attached to the U.S. Security Agreement and that the Pledged Securities and/or Intercompany Notes listed on this Pledge Amendment shall be deemed to be and shall become part of the Pledged Collateral and shall secure all Obligations. PLEDGED SECURITIES NUMBER OF PERCENTAGE OF CLASS SHARES ALL ISSUED CAPITAL OF STOCK PAR CERTIFICATE OR OR OTHER EQUITY ISSUER OR INTERESTS VALUE NO(S). INTERESTS INTERESTS OF ISSUER - ------ ------------ ----- ----------- --------- ------------------- -2- INTERCOMPANY NOTES PRINCIPAL DATE OF INTEREST MATURITY ISSUER AMOUNT ISSUANCE RATE DATE - ------ --------- -------- -------- -------- [ ], as Pledgor By: /s/ ----------------------------- Name: Title: AGREED TO AND ACCEPTED: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ----------------------------- Name: Title: By: /s/ ----------------------------- Name: Title: EXHIBIT 3 [Form of] JOINDER AGREEMENT [Name of New Pledgor] [Address of New Pledgor] [Date] ____________________________ ____________________________ ____________________________ ____________________________ Ladies and Gentlemen: Reference is made to that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "U.S. SECURITY AGREEMENT;" capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the U.S. Security Agreement), dated as of February 12, 2004, made by PLY GEM INDUSTRIES, INC., a Delaware Corporation (the "U.S. BORROWER"), the Guarantors party thereto and UBS AG, STAMFORD BRANCH, as collateral agent (in such capacity and together with any successors in such capacity, the "COLLATERAL AGENT"). This letter supplements the U.S. Security Agreement and is delivered by the undersigned, [ ] (the "NEW PLEDGOR"), pursuant to SECTION 3.5 of the U.S. Security Agreement. The New Pledgor hereby agrees to be bound as a Pledgor by all of the terms, covenants and conditions set forth in the U.S. Security Agreement to the same extent that it would have been bound if it had been a signatory to the U.S. Security Agreement on the execution date of the U.S. Security Agreement. Without limiting the generality of the foregoing, the New Pledgor hereby grants and pledges to the Collateral Agent, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, a Lien on and security interest in, all of its right, title and interest in, to and under the Pledged Collateral and expressly assumes all obligations and liabilities of a Pledgor thereunder. The New Pledgor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Pledgors contained in the U.S. Security Agreement. -2- This agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. -3- IN WITNESS WHEREOF, the New Pledgor has caused this letter agreement to be executed and delivered by its duly authorized officer as of the date first above written. [NEW PLEDGOR] By: /s/ ----------------------------- Name: Title: AGREED TO AND ACCEPTED: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ----------------------------- Name: Title: By: /s/ ----------------------------- Name: Title: [Schedules to be attached] EXHIBIT 4 [Form of] CONTROL AGREEMENT CONCERNING SECURITIES ACCOUNTS This Control Agreement Concerning Securities Accounts (this "CONTROL AGREEMENT"), dated as of [ ], by and among [ ] (the "PLEDGOR"), the Collateral Agent (as such term is defined below) and [ ] (the "SECURITIES INTERMEDIARY"), is delivered pursuant to SECTION 3.4(C) of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT"), dated as of February 12, 2004, made by the Pledgor and each of the Guarantors listed on the signature pages thereto in favor of UBS AG, Stamford Branch, as collateral agent, as pledgee, assignee and secured party (the "COLLATERAL AGENT"). This Control Agreement is for the purpose of perfecting the security interests of the Secured Parties granted by the Pledgor in the Designated Accounts described below. All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Security Agreement. Section 1. CONFIRMATION OF ESTABLISHMENT AND MAINTENANCE OF DESIGNATED ACCOUNTS. The Securities Intermediary hereby confirms and agrees that (i) the Securities Intermediary has established for the Pledgor and maintains the account(s) listed in SCHEDULE I annexed hereto (such account(s), together with each such other securities account maintained by the Pledgor with the Securities Intermediary collectively, the "DESIGNATED ACCOUNTS" and each a "DESIGNATED ACCOUNT"), (ii) each Designated Account will be maintained in the manner set forth herein until termination of this Control Agreement, (iii) this Control Agreement is the valid and legally binding obligation of the Securities Intermediary, (iv) the Securities Intermediary is a "securities intermediary" as defined in Article 8-102(a)(14) of the UCC, (v) each of the Designated Accounts is a "securities account" as such term is defined in Section 8-501(a) of the UCC and (vi) all securities or other property underlying any financial assets which are credited to any Designated Account shall be registered in the name of the Securities Intermediary, endorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to any Designated Account be registered in the name of the Pledgor, payable to the order of the Pledgor or specially endorsed to the Pledgor, except to the extent the foregoing have been specially endorsed to the Securities Intermediary or in blank. Section 2. "FINANCIAL ASSETS" ELECTION. The Securities Intermediary hereby agrees that each item of Investment Property credited to any Designated Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. -2- Section 3. ENTITLEMENT ORDER. If at any time the Securities Intermediary shall receive an "entitlement order" (within the meaning of Section 8-102(a)(8) of the UCC) issued by the Collateral Agent and relating to any financial asset maintained in one or more of the Designated Accounts, the Securities Intermediary shall comply with such entitlement order without further consent by the Pledgor or any other person. The Securities Intermediary shall also comply with instructions directing the Securities Intermediary with respect to the sale, exchange or transfer of financial assets held in each Designated Account originated by a Pledgor, or any representative of, or investment manager appointed by, a Pledgor until such time as the Collateral Agent delivers a Notice of Sole Control pursuant to SECTION 9(I) to the Securities Intermediary. Section 4. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. The Securities Intermediary hereby agrees that any security interest in any Designated Account it now has or subsequently obtains shall be subordinate to the security interest of the Collateral Agent. The financial assets and other items deposited to any Designated Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Secured Parties (except that the Securities Intermediary may set off all amounts due to the Securities Intermediary in respect of its customary fees and expenses for the routine maintenance and operation of the Designated Accounts, including overdraft fees and amounts advanced to settle authorized transactions. Section 5. CHOICE OF LAW. Both this Control Agreement and the Designated Accounts shall be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Securities Intermediary's jurisdiction and the Designated Accounts (as well as the security entitlements related thereto) shall be governed by the laws of the State of New York. (1) Section 6. CONFLICT WITH OTHER AGREEMENTS; AMENDMENTS. As of the date hereof, there are no other agreements entered into between the Securities Intermediary and the Pledgor with respect to any Designated Account or any security entitlements or other financial assets credited thereto (other than standard and customary documentation with respect to the establishment and maintenance of such Designated Accounts). The Securities Intermediary and the Pledgor will not enter into any other agreement with respect to any Designated Account unless the Collateral Agent shall have received prior written notice thereof. The Securities Intermediary and the Pledgor have not and will not enter into any other agreement with respect to (i) creation or perfection of any security interest in or (ii) control of security entitlements maintained in any of the Designated Accounts or purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders with respect to financial assets cred- - ---------------------- 1 The location of the Securities Intermediary may result in a different choice of governing law, which may require opinion of Borrower counsel. -3- ited to any Designated Account as set forth in SECTION 3 hereof without the prior written consent of the Collateral Agent acting in its sole discretion. In the event of any conflict with respect to control over any Designated Account between this Control Agreement (or any portion hereof) and any other agreement now existing or hereafter entered into, the terms of this Control Agreement shall prevail. No amendment or modification of this Control Agreement or waiver of any rights hereunder shall be binding on any party hereto unless it is in writing and is signed by all the parties hereto. Section 7. CERTAIN AGREEMENTS. (i) The Securities Intermediary has furnished to the Collateral Agent the most recent account statement issued by the Securities Intermediary with respect to each of the Designated Accounts and the financial assets and cash balances held therein, identifying the financial assets held therein in a manner acceptable to the Collateral Agent. Each such statement accurately reflects the assets held in such Designated Account as of the date thereof. (ii) The Securities Intermediary will, upon its receipt of each supplement to the Security Agreement signed by the Pledgor and identifying one or more financial assets as "Pledged Collateral," enter into its records, including computer records, with respect to each Designated Account a notation with respect to any such financial asset so that such records and reports generated with respect thereto identify such financial asset as "Pledged." (iii) The Collateral Agent has delivered to the Securities Intermediary a list, signed by an authorized representative of the officers of the Collateral Agent authorized to give approvals or instructions under this Control Agreement (the "AUTHORIZED REPRESENTATIVES") and the Securities Intermediary shall be entitled to rely on communications from any such authorized officers until the earlier of the termination of this Control Agreement in accordance with the terms hereof and notification by an Authorized Representative of a change in such list at any time. Section 8. NOTICE OF ADVERSE CLAIMS. Except for the claims and interest of the Collateral Agent and of the Pledgor in the financial assets maintained in the Designated Account(s), the Securities Intermediary on the date hereof does not know of any claim to, or security interest in, any Designated Account or in any financial asset credited thereto and does not know of any claim that any person other than the Collateral Agent has been given "control" (within the meaning of Section 8-106 of the UCC) of any Designated Account or any such financial asset. If the Securities Intermediary becomes aware that any person is asserting any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process or any claim of control) against any of the financial assets maintained in any Designated Account, the Securities Intermediary promptly notify the Collateral Agent and the Pledgor thereof. -4- Section 9. MAINTENANCE OF DESIGNATED ACCOUNTS. In addition to the obligations of the Securities Intermediary in SECTION 3 hereof, the Securities Intermediary agrees to maintain the Designated Accounts as follows: (i) NOTICE OF SOLE CONTROL. If at any time the Collateral Agent delivers to the Securities Intermediary a notice of sole control in substantially the form set forth in EXHIBIT A attached hereto (the "NOTICE OF SOLE CONTROL") with respect to any Designated Account, the Securities Intermediary agrees that, after receipt of such notice, it will take all instructions with respect to such Designated Account solely from the Collateral Agent and cease taking instructions from Pledgor, including, without limitation, instructions for investment, distribution or transfer of any financial asset maintained in any Designated Account. Permitting settlement of trades pending at the time of receipt of such notice shall not constitute a violation of the immediately preceding sentence. (ii) VOTING RIGHTS. Until such time as the Securities Intermediary receives a Notice of Sole Control, the Pledgor, or an investment manager on behalf of the Pledgor, shall direct the Securities Intermediary with respect to the voting of any financial assets credited to any Designated Account. (iii) STATEMENTS AND CONFIRMATIONS. The Securities Intermediary will send copies of all statements and other correspondence (excluding routine confirmations) concerning any Designated Account or any financial assets credited thereto simultaneously to each of the Pledgor and the Collateral Agent at the address set forth in SECTION 11 hereof. The Securities Intermediary will provide to the Collateral Agent, upon the Collateral Agent's request therefor from time to time and, in any event, as of the last business day of each calendar month, a statement of the market value of each financial asset maintained in each Designated Account. The Securities Intermediary shall not change the name or account number of any Designated Account without the prior written consent of the Collateral Agent. (iv) BAILEE FOR PERFECTION. The Securities Intermediary acknowledges that, in the event that it should come into possession of any certificate representing any security or other assets held as financial assets in any of the Designated Accounts, the Securities Intermediary shall retain possession of the same for the benefit of the Collateral Agent and such act shall cause the Securities Intermediary to be deemed a bailee for the Collateral Agent, if necessary to perfect the Collateral Agent's security interest in such securities or assets. The Securities Intermediary hereby acknowledges its receipt of a copy of the Security Agreement, which shall also serve as notice to the Securities Intermediary of a security interest in collateral held by a bailee. Section 10. SUCCESSORS; ASSIGNMENT. The terms of this Control Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors and permitted assignees. -5- Section 11. NOTICES. Any notice, request or other communication required or permitted to be given under this Control Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [ ] [Address] Attention: Telecopy: Telephone: with copy to: [ ] [Address] Attention: Telecopy: Telephone: Securities Intermediary: [ ] [Address] Attention: Telecopy: Telephone: Collateral Agent: UBS AG, Stamford Branch 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Telecopy: Telephone: -6- with a copy to: Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attention: Daniel J. Zubkoff, Esq. and Susanna M. Suh, Esq. Telecopy: (212) 269-5420 Telephone: (212) 701-3000 Any party may change its address for notices in the manner set forth above. Section 12. TERMINATION. The rights and powers granted herein to the Collateral Agent are powers coupled with an interest and will be affected neither by the bankruptcy of the Pledgor nor by the lapse of time. The obligations of the Securities Intermediary hereunder shall continue in effect until (i) the security interests of the Secured Parties with respect to the financial assets maintained in the Designated Account(s) have been terminated and an Authorized Representative has notified the Securities Intermediary of such termination in writing or (ii) thirty days following the Securities Intermediary's delivery of written notice of such termination to the Pledgor and the Collateral Agent. Section 13. SEVERABILITY. If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, other than those provisions held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted. Section 14. COUNTERPARTS. This Control Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Control Agreement by signing and delivering one or more counterparts. S-1 [ ], as Pledgor By: /s/ ------------------------------ Name: Title: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ------------------------------ Name: Title: By: /s/ ------------------------------ Name: Title: [ ], as Securities Intermediary By: /s/ ------------------------------ Name: Title: SCHEDULE I DESIGNATED ACCOUNT(S) EXHIBIT A [Letterhead of UBS AG, Stamford Branch] [Date] [Securities Intermediary] [Address] Attention: Re: NOTICE OF SOLE CONTROL Ladies and Gentlemen: As referenced in SECTION 9(I) of the Control Agreement Concerning Designated Accounts dated as of [ ], by and among [ ], us and you (the "CONTROL AGREEMENT") (a copy of which is attached) we hereby give you notice of our sole control over the financial assets maintained in the Designated Account(s) referred to in the Control Agreement, account numbers: ________________ (the "SPECIFIED DESIGNATED ACCOUNTS"). You are hereby instructed not to accept any direction, instruction or entitlement order with respect to financial assets maintained in the Specified Designated Accounts from any person other than the undersigned. -2- You are instructed to deliver a copy of this notice by facsimile transmission to [Pledgor]. Very truly yours, UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ------------------------------ Name: Title: By: /s/ ------------------------------ Name: Title: cc: [Pledgor] EXHIBIT 5 [Form of] CONTROL AGREEMENT CONCERNING DEPOSIT ACCOUNTS This CONTROL AGREEMENT CONCERNING DEPOSIT ACCOUNTS (this "CONTROL AGREEMENT"), dated as of [ ], by and among [ ] (the "PLEDGOR"), the Collateral Agent (as such term is defined below) and [ ] (the "BANK"), is delivered pursuant to SECTION 3.4(B) of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "SECURITY AGREEMENT"), dated as of February 12, 2004, made by the Pledgor and each of the Guarantors listed on the signature pages thereto in favor of UBS AG, STAMFORD BRANCH, as collateral agent, as pledgee, assignee and secured party (the "COLLATERAL AGENT"). This Control Agreement is for the purpose of perfecting the security interests of the Secured Parties granted by the Pledgor in the Designated Accounts described below. All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Security Agreement. Section 1. CONFIRMATION OF ESTABLISHMENT AND MAINTENANCE OF DESIGNATED ACCOUNTS. The Bank hereby confirms and agrees that (i) the Bank has established for the Pledgor and maintains the deposit account(s) listed in SCHEDULE 1 annexed hereto (such account(s), together with each such other deposit account maintained by the Pledgor with the Bank collectively, the "DESIGNATED ACCOUNTS" and each a "DESIGNATED ACCOUNT"), (ii) each Designated Account will be maintained in the manner set forth herein until termination of this Control Agreement, (iii) the Bank is a "bank," as such term is defined in the UCC, (iv) this Control Agreement is the valid and legally binding obligation of the Bank and (v) each Designated Account is a "deposit account" as such term is defined in Article 9 of the UCC. Section 2. CONTROL. The Bank shall comply with instructions originated by the Collateral Agent without further consent of the Pledgor or any person acting or purporting to act for the Pledgor being required, including, without limitation, directing disposition of the funds in each Designated Account. The Bank shall also comply with instructions directing the disposition of funds in each Designated Account originated by the Pledgor or its authorized representatives until such time as the Collateral Agent delivers a Notice of Sole Control pursuant to SECTION 8(I) hereof to the Bank. Section 3. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. The Bank hereby agrees that any security interest in any Designated Account it now has or subsequently obtains shall be subordinate to the security interest of the Collateral Agent. The funds deposited into any -2- Designated Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Secured Parties (except that the Bank may set off (i) all amounts due to the Bank in respect of its customary fees and expenses for the routine maintenance and operation of the Designated Accounts, including overdraft fees, and (ii) the face amount of any checks or other items which have been credited to any Designated Account but are subsequently returned unpaid because of uncollected or insufficient funds). Section 4. CHOICE OF LAW. Both this Control Agreement and the Designated Account(s) shall be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Bank's jurisdiction and the Designated Account(s) shall be governed by the law of the State of New York. (2) Section 5. CONFLICT WITH OTHER AGREEMENTS; AMENDMENTS. As of the date hereof, there are no other agreements entered into between the Bank and the Pledgor with respect to any Designated Account or any funds credited thereto (other than standard and customary documentation with respect to the establishment and maintenance of such Designated Accounts). The Bank and the Pledgor will not enter into any other agreement with respect to any Designated Account unless the Collateral Agent shall have received prior written notice thereof. The Bank and the Pledgor have not and will not enter into any other agreement with respect to control of the Designated Accounts or purporting to limit or condition the obligation of the Bank to comply with any orders or instructions with respect to any Designated Account as set forth in SECTION 2 hereof without the prior written consent of the Collateral Agent acting in its sole discretion. In the event of any conflict with respect to control over any Designated Account between this Control Agreement (or any portion hereof) and any other agreement now existing or hereafter entered into, the terms of this Control Agreement shall prevail. No amendment or modification of this Control Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all the parties hereto. Section 6. CERTAIN AGREEMENTS. (i) The Bank has furnished to the Collateral Agent the most recent account statement issued by the Bank with respect to each of the Designated Accounts and the cash balances held therein. Each such statement accurately reflects the assets held in such Designated Account as of the date thereof. - ----------------------------- 2 The location of the bank may result in a different choice of governing law, which may require opinion of Borrower counsel. -3- (ii) The Collateral Agent has delivered to the Bank a list, signed by an authorized representative, of the officers of the Collateral Agent authorized to give approvals or instructions under this Control Agreement (the "AUTHORIZED REPRESENTATIVES") and the Bank shall be entitled to rely on communications from any such authorized officers until the earlier of the termination of this Control Agreement in accordance with the terms hereof and notification by an Authorized Representative of a change in such list at any time. Section 7. NOTICE OF ADVERSE CLAIMS. Except for the claims and interest of the Secured Parties and of the Pledgor in the Designated Account(s), the Bank on the date hereof does not know of any claim to, or security interest in, any Designated Account or in any funds credited thereto and does not know of any claim that any person other than the Collateral Agent has been given control (within the meaning of Section 8-106 of the UCC) of any Designated Account or any such funds. If the Bank becomes aware that any person is asserting any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process or any claim of control) against any funds in any Designated Account, the Bank will promptly notify the Collateral Agent and the Pledgor thereof. Section 8. MAINTENANCE OF DESIGNATED ACCOUNTS. In addition to the obligations of the Bank in SECTION 2 hereof, the Bank agrees to maintain the Designated Accounts as follows: (i) NOTICE OF SOLE CONTROL. If at any time the Collateral Agent delivers to the Bank a notice of sole control in substantially the form set forth in Exhibit A attached hereto (the "NOTICE OF SOLE CONTROL") with respect to any Designated Account, the Bank agrees that, after receipt of such notice, it will take all instruction with respect to such Designated Account solely from the Collateral Agent and cease taking instructions from the Pledgor, including, without limitation, instructions for distribution or transfer of any funds in any Designated Account. (ii) STATEMENTS AND CONFIRMATIONS. The Bank will send copies of all statements and other correspondence (excluding routine confirmations) concerning any Designated Account simultaneously to the Pledgor and the Collateral Agent at the address set forth in SECTION 10 hereof. The Bank will promptly provide to the Collateral Agent, upon request therefor from time to time and, in any event, as of the last business day of each calendar month, a statement of the cash balance in each Designated Account. The Bank shall not change the name or account number of any Designated Account without the prior written consent of the Collateral Agent. Section 9. SUCCESSORS; ASSIGNMENT. The terms of this Control Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors and permitted assignees. -4- Section 10. NOTICES. Any notice, request or other communication required or permitted to be given under this Control Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [ ] [Address] Attention: Telecopy: Telephone: with copy to: [ ] [Address] Attention: Telecopy: Telephone: Bank: [ ] [ ] [ ] Attention: Telecopy: Telephone: Collateral Agent: UBS AG, Stamford Branch 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Telecopy: Telephone: -5- with a copy to: Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attention: Daniel J. Zubkoff, Esq. and Susanna M. Suh, Esq. Telecopy: (212) 269-5420 Telephone: (212) 701-3000 Any party may change its address for notices in the manner set forth above. Section 11. TERMINATION. The rights and powers granted herein to the Collateral Agent are powers coupled with an interest and will be affected neither by the bankruptcy of the Pledgor nor by the lapse of time. The obligations of the Bank hereunder shall continue in effect until (i) the security interests of the Secured Parties with respect to the Designated Account(s) have been terminated and an Authorized Representative has notified the Bank of such termination in writing or (ii) thirty days following the Bank's delivery of written notice of such termination to the Collateral Agent and Pledgor. Section 12. SEVERABILITY. If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, other than those provisions held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted. Section 13. COUNTERPARTS. This Control Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Control Agreement by signing and delivering one or more counterparts. S-1 [ ], as Pledgor By: /s/ ------------------------------ Name: Title: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ------------------------------ Name: Title: By: /s/ ------------------------------ Name: Title: [ ], as Securities Intermediary By: /s/ ------------------------------ Name: Title: SCHEDULE 1 Designated Account(s) EXHIBIT A [Letterhead of UBS AG, Stamford Branch] [Date] [Bank] [Address] Attention: _______________ Re: NOTICE OF SOLE CONTROL Ladies and Gentlemen: As referenced in SECTION 8(I) of the Control Agreement Concerning Designated Accounts dated as of [ ], by and among [ ], us and you (the "CONTROL AGREEMENT") (a copy of which is attached) we hereby give you notice of our sole control over the Designated Account(s) referred to in the Control Agreement, having account number(s): ___________________________________ (the "SPECIFIED DESIGNATED ACCOUNTS"). You are hereby instructed not to accept any direction or instructions with respect to the Specified Designated Accounts or any funds credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. -2- You are instructed to deliver a copy of this notice by facsimile transmission to [Pledgor] Very truly yours, UBS AG, Stamford Branch, as Collateral Agent By: /s/ -------------------------------- Name: Title: By: /s/ -------------------------------- Name: Title: cc: [Pledgor] EXHIBIT 6 [FORM OF] COPYRIGHT U.S. SECURITY AGREEMENT COPYRIGHT U.S. SECURITY AGREEMENT, dated as of February 12, 2004, by PLY GEM INDUSTRIES, INC. (the "U.S. BORROWER") and each Guarantor listed on Schedule II hereto (collectively, the "ORIGINAL GUARANTORS," together with the U.S. Borrower, the "PLEDGORS"), in favor of UBS AG, STAMFORD BRANCH, in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the "COLLATERAL AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Pledgors are party to a U.S. Security Agreement of even date herewith (the "U.S. SECURITY AGREEMENT") in favor of the Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Copyright U.S. Security Agreement; NOW, THEREFORE, in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into Credit Agreement, the Pledgors hereby agree with the Collateral Agent as follows: SECTION 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the U.S. Security Agreement and used herein have the meaning given to them in the U.S. Security Agreement. SECTION 2. GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL. Each Pledgor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor: (a) Copyrights of such Pledgor listed on Schedule I (3) attached hereto; and (b) all Proceeds of any and all of the foregoing (other than Excluded Property). - ------------------------- 3 Should include same Copyrights listed on Schedule 14(d) of the Perfection Certificate. -2- SECTION 3. U.S. SECURITY AGREEMENT. The security interest granted pursuant to this Copyright U.S. Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the U.S. Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Collateral Agent with respect to the security interest in the Copyrights made and granted hereby are more fully set forth in the U.S. Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Copyright U.S. Security Agreement is deemed to conflict with the U.S. Security Agreement, the provisions of the U.S. Security Agreement shall control unless the Collateral Agent shall otherwise determine. SECTION 4. TERMINATION. Upon the full performance of the Obligations, the Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral pledge, grant, assignment, lien and security interest in the Copyrights under this Copyright U.S. Security Agreement. [signature page follows] -3- IN WITNESS WHEREOF, each Pledgor has caused this Copyright U.S. Security Agreement to be executed and delivered by its duly authorized offer as of the date first set forth above. Very truly yours, PLY GEM INDUSTRIES, INC. By: /s/ ---------------------------------- Name: Title: [ORIGINAL GUARANTORS] (4) By: /s/ ---------------------------------- Name: Title: Accepted and Agreed: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ---------------------------------- Name: Title: By: /s/ ---------------------------------- Name: Title: - ------------------------------------ 4 This document needs only to be executed by any U.S. Guarantor which owns a pledged Copyright. -4- SCHEDULE I TO COPYRIGHT SECURITY AGREEMENT COPYRIGHT REGISTRATIONS AND COPYRIGHT APPLICATIONS COPYRIGHT REGISTRATIONS: ---------------------------------------------------------------------------- REGISTRATION OWNER NUMBER TITLE ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- COPYRIGHT APPLICATIONS: ------------------------------------------------------- OWNER TITLE ------------------------------------------------------- ------------------------------------------------------- -5- SCHEDULE II TO COPYRIGHT SECURITY AGREEMENT ORIGINAL GUARANTORS - ---------------------------------------------------------------------------- NAME ADDRESS - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- EXHIBIT 7 [FORM OF] PATENT U.S. SECURITY AGREEMENT PATENT U.S. SECURITY AGREEMENT, dated as of February 12, 2004, by PLY GEM INDUSTRIES, INC. (the "U.S. BORROWER") and each Guarantor listed on Schedule II hereto (collectively, the "ORIGINAL GUARANTORS," and together with the U.S. Borrower, the "PLEDGORS"), in favor of UBS AG, STAMFORD BRANCH, in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the "COLLATERAL AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Pledgors are party to a U.S. Security Agreement of even date herewith (the "U.S. SECURITY AGREEMENT") in favor of the Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Patent U.S. Security Agreement; NOW, THEREFORE, in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into Credit Agreement, the Pledgors hereby agree with the Collateral Agent as follows: SECTION 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the U.S. Security Agreement and used herein have the meaning given to them in the U.S. Security Agreement. SECTION 2. GRANT OF SECURITY INTEREST IN PATENT COLLATERAL. Each Pledgor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor: (a) Patents of such Pledgor listed on Schedule I (5) attached hereto; and (b) all Proceeds of any and all of the foregoing (other than Excluded Property). - ----------------------------- 5 Should include same Patents listed on Schedule 14(c) of the Perfection Certificate. -2- SECTION 3. U.S. SECURITY AGREEMENT. The security interest granted pursuant to this Patent U.S. Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the U.S. Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Collateral Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the U.S. Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Patent U.S. Security Agreement is deemed to conflict with the U.S. Security Agreement, the provisions of the U.S. Security Agreement shall control unless the Collateral Agent shall otherwise determine. SECTION 4. TERMINATION. Upon the full performance of the Obligations, the Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral pledge, grant, assignment, lien and security interest in the Patents under this Patent U.S. Security Agreement. [signature page follows] -3- IN WITNESS WHEREOF, each Pledgor has caused this Patent U.S. Security Agreement to be executed and delivered by its duly authorized offer as of the date first set forth above. Very truly yours, PLY GEM INDUSTRIES, INC. By: /s/ ----------------------------------- Name: Title: [ORIGINAL GUARANTORS] (6) By: /s/ ----------------------------------- Name: Title: Accepted and Agreed: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ----------------------------------- Name: Title: By: /s/ ----------------------------------- Name: Title: - ---------------------------------- 6 This document needs only to be executed by any U.S. Guarantor which owns a pledged Patent. -4- SCHEDULE I TO PATENT SECURITY AGREEMENT PATENTS AND PATENT APPLICATIONS PATENTS: ---------------------------------------------------------------------------- OWNER PATENT NAME ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- PATENT APPLICATIONS: ---------------------------------------------------------------------------- APPLICATION OWNER NUMBER NAME ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- -5- SCHEDULE II TO PATENT SECURITY AGREEMENT ORIGINAL GUARANTORS - ---------------------------------------------------------------------------- NAME ADDRESS - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- EXHIBIT 8 [FORM OF] TRADEMARK U.S. SECURITY AGREEMENT TRADEMARK U.S. SECURITY AGREEMENT, dated as of February 12, 2004, by PLY GEM INDUSTRIES, INC. (the "U.S. BORROWER") and each Guarantor listed on Schedule II hereto (collectively, the "ORIGINAL GUARANTORS," together with the U.S. Borrower, the "PLEDGORS"), in favor of UBS AG, STAMFORD BRANCH, in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the "COLLATERAL AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Pledgors are party to a U.S. Security Agreement of even date herewith (the "U.S. SECURITY AGREEMENT") in favor of the Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Trademark U.S. Security Agreement; NOW, THEREFORE, in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into Credit Agreement, the Pledgors hereby agree with the Collateral Agent as follows: SECTION 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the U.S. Security Agreement and used herein have the meaning given to them in the U.S. Security Agreement. SECTION 2. GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL. Each Pledgor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor: (a) Trademarks of such Pledgor listed on Schedule I7 attached hereto, but not including any Trademarks subject to an "intent to use" application until such time as a statement of use has been filed with the United States Patent and Trademark Office; (b) all Goodwill associated with such Trademarks; and - ---------------------------- 7 Should include same Trademarks listed on Schedule 14(c) of the Perfection Certificate. -2- (c) all Proceeds of any and all of the foregoing (other than Excluded Property). SECTION 3. U.S. SECURITY AGREEMENT. The security interest granted pursuant to this Trademark U.S. Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the U.S. Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Trustee with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the U.S. Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark U.S. Security Agreement is deemed to conflict with the U.S. Security Agreement, the provisions of the U.S. Security Agreement shall control unless the Collateral Agent shall otherwise determine. SECTION 4. TERMINATION. Upon the full performance of the Obligations, the Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral pledge, grant, assignment, lien and security interest in the Trademarks under this Trademark U.S. Security Agreement. [signature page follows] -3- IN WITNESS WHEREOF, each Pledgor has caused this Trademark U.S. Security Agreement to be executed and delivered by its duly authorized offer as of the date first set forth above. Very truly yours, PLY GEM INDUSTRIES, INC. By: /s/ ----------------------------------- Name: Title: [ORIGINAL GUARANTORS] (8) By: /s/ ----------------------------------- Name: Title: Accepted and Agreed: UBS AG, STAMFORD BRANCH, as Collateral Agent By: /s/ ----------------------------------- Name: Title: By: /s/ ----------------------------------- Name: Title: - ---------------------------------- 8 This document needs only to be executed by any U.S. Guarantor which owns a pledged Trademark. -4- SCHEDULE I TO TRADEMARK SECURITY AGREEMENT TRADEMARK REGISTRATIONS AND TRADEMARK APPLICATIONS TRADEMARK REGISTRATIONS: ---------------------------------------------------------------------------- REGISTRATION OWNER NUMBER TRADEMARK ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- TRADEMARK APPLICATIONS: ---------------------------------------------------------------------------- APPLICATION OWNER NUMBER TRADEMARK ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- -5- SCHEDULE II TO TRADEMARK SECURITY AGREEMENT ORIGINAL GUARANTORS - ---------------------------------------------------------------------------- NAME ADDRESS - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- EXHIBIT 9 FORM OF NOTICE TO BAILEE OF SECURITY INTEREST IN INVENTORY CERTIFIED MAIL -- RETURN RECEIPT REQUESTED - ------------------------------------------ [ ], 200[ ] TO: [Bailee's Name] [Bailee's Address] Re: PLY GEM INDUSTRIES, INC. ------------------------ Ladies and Gentlemen: In connection with that certain U.S. Security Agreement, dated as February 12, 2004 (the "U.S. SECURITY AGREEMENT"), made by Ply Gem Industries, Inc., the Guarantors party thereto and UBS AG, Stamford Branch ("UBS") as Collateral Agent, we have granted to UBS a security interest in substantially all of our personal property, including our inventory. This letter constitutes notice to you, and your signature below will constitute your acknowledgment, of UBS's continuing first priority security interest in all goods with respect to which you are acting as bailee. Until you are notified in writing to the contrary by UBS, however, you may continue to accept instructions from us regarding the delivery of goods stored by you. Your acknowledgment also constitutes a waiver and release, for UBS's benefit, of any and all claims, liens, including bailee's liens, and demands of every kind which you have or may later have against such property (including any right to include such property in any secured financing to which you may become party). In order to complete our records, kindly have a duplicate of this letter signed by an officer of your company and return same to us at your earliest convenience. -2- Receipt acknowledged, confirmed and Very truly yours, approved: [BAILEE] [APPLICABLE PLEDGOR] By: /s/ By: /s/ ---------------------------- ---------------------------- Name: Name: Title: Title: cc: UBS AG, Stamford Branch EX-10.4 31 y95660exv10w4.txt PHANTOM STOCK PLAN EXHIBIT 10.4 ------------ PLY GEM INVESTMENT HOLDINGS, INC. PHANTOM STOCK PLAN ------------------ SECTION 1. GENERAL (a) PURPOSE. The purpose of this Ply Gem Investment Holdings, Inc. Phantom Stock Plan (the "Plan") is to attract, motivate and retain certain key employees of Ply Gem Investment Holdings, Inc. (the "Company") and its Subsidiaries who are primarily responsible for the long-term performance of the Company and to align their interest with that of the stockholders of the Company. (b) OVERVIEW. The Plan is generally designed to provide non-qualified deferred compensation to Participants. Each Participant's interest in the Plan is recorded in and maintained under a bookkeeping Account and these Accounts are deemed invested in the Company's stock, but there is no stock actually issued to the Plan (which is generally why these accounts credits are called "Phantom"). When valuing a Participant's Account for payment purposes, the following rules generally apply: if the Company becomes publicly traded through an IPO, the stock market will dictate the value of the Account; if a Realization Event or a Tag-Along Event occurs, the amount paid to shareholders will dictate the value of the Account; and in the event that a Participant's employment with the Company terminates and if neither a Realization Event nor an IPO occurs prior to the time the Participant is paid the value of his or her Account, certain formulas described in the Plan dictate the value of the Account (which value differs depending upon the length of time a Participant has been employed with the Company and the circumstances surrounding the termination of employment). Following an IPO, each Participant will generally be paid out five years after the IPO, subject to further deferral opportunities and the right of the Company to accelerate such payment, with earlier payment upon a Realization Event or a termination of employment. The value of each Account is generally paid in cash or stock, at the discretion of the Company. SECTION 2. DEFINITIONS. As used in this Plan, capitalized terms not defined in this Plan shall have the meaning attributed to such terms in the Stockholders Agreement and the following terms shall have the meanings set forth below: (a) ACCOUNT. An unfunded bookkeeping account established to record a Participant's interest under this Plan, the terms and conditions of which are set forth in this Plan and in each Participant's Award Agreement. (b) AWARD. A grant of Phantom Incentive Units and/or a grant of Phantom Additional Units under this Plan. (c) AWARD AGREEMENT. The written agreement evidencing an Award, which shall be executed or otherwise acknowledged in writing by a Participant. (d) BOARD. The Board of Directors of the Company. 2 (e) CAUSE. "Cause" means: (i) conviction of, or entry of a pleading of guilty or no contest by, a Participant with respect to a felony or any lesser crime of which fraud or dishonesty is a material element; (ii) a Participant's willful and continued failure to perform substantially his or her duties with the Company or any of its Subsidiaries, or a failure to follow the lawful direction of the Board or any chief executive officer of the Company or any of its Subsidiaries to whom such Participant reports after the Board of Directors or such chief executive officer delivers a written demand for substantial performance, specifically identifying the manner in which the Participant has not substantially performed his material duties and the Participant neglects to cure such a failure within 30 days; (iii) a Participant's theft, fraud or embezzlement of any property or assets of the Company or any of its Affiliates or Subsidiaries, or such Participant's dishonesty against the Company or any of its Affiliates or Subsidiaries which has resulted in material damage to the Company or any of its Affiliates or Subsidiaries or (iv) a Participant's breach of any noncompetition or nonsolicitation requirements set forth in the Stockholders Agreement or willful breach of any confidentiality requirements set forth in the Stockholders Agreement, in each case, whether or not such agreement or requirement is enforceable under applicable law. (f) COMMON STOCK. Common stock, par value $0.01 per share, of the Company, and any other stock or units into which such common stock shall thereafter be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of stock or units or the like. (g) COMPANY. Ply Gem Investment Holdings, Inc., a Delaware corporation. (h) DISABILITY. With respect to any Participant, any event of disability under the disability insurance plan of the Company or any of its Affiliates or Subsidiaries covering such Participant, or if there shall be no such disability plan, then as set forth in any agreement between such Participant and the Company or any of its Affiliates or Subsidiaries, or if there shall be no such agreement, then the inability of the Participant to perform his or her duties as an employee of the Company or any of its Affiliates or Subsidiaries for at least one-hundred eighty (180) days during any consecutive 12-month period. (i) EFFECTIVE DATE. February __, 2004. (j) IPO. The closing of the initial underwritten public offering of shares of Common Stock pursuant to an effective registration statement filed under the Securities Act. (k) PARTICIPANT. Any current or future employee of the Company or any of its Subsidiaries who is eligible for, and is selected by the Board for, an Award under this Plan and who has executed an Award Agreement. (l) PHANTOM ADDITIONAL UNIT. A Phantom Additional Unit is a phantom stock unit representing one share of Common Stock and 0.4591 shares of Preferred Stock that is credited to a Participant's Account. As used herein, a "Common Phantom Additional Unit" shall mean the portion of a Phantom Additional Unit representing one share of Common Stock and a "Preferred Phantom Additional Unit" shall mean the portion of a Phantom Additional Unit representing 0.4591 shares of Preferred Stock. 3 (m) PHANTOM INCENTIVE UNIT. A Phantom Incentive Unit is a phantom stock unit representing a share of Common Stock that is credited to a Participant's Account. (n) PLAN. This Ply Gem Investment Holdings, Inc. Phantom Stock Plan. (o) PREFERRED STOCK. Senior Preferred Stock, par value $0.01 per share, of the Company, and any other stock or units into which such preferred stock shall thereafter be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of stock or units or the like. (p) REALIZATION EVENT. Any transaction in which Caxton-Iseman (Ply Gem), L.P. has the right to exercise "Drag-Along Rights" pursuant to Section 4.7 of the Stockholders Agreement. (q) STOCKHOLDERS AGREEMENT. That certain Stockholders Agreement, dated as of February __, 2004, by and among the Company, Caxton-Iseman (Ply Gem), L.P., the other investors executing the agreement and designated as "Other Investors" therein and the individuals executing the agreement and designated as "Management Stockholders" therein. (r) TAG-ALONG EVENT. Any occurrence of an event qualifying for "Tag Along" treatment under Section 4.5 of the Stockholders' Agreement. SECTION 3. ADMINISTRATION. (a) This Plan shall be administered by the Board. Subject to the provisions of this Plan and applicable law and subject to Participants' rights under outstanding Award Agreements, the Board shall have the power and sole discretion, in addition to other express powers and authorizations conferred on the Board by this Plan, to: (i) designate Participants; (ii) determine the Awards to a Participant; (iii) determine, in a manner consistent with the terms of this Plan and any Award Agreements entered into pursuant to this Plan, payments and how other matters are to be calculated in connection with Awards and Accounts; (iv) determine the terms and conditions of Awards; (v) determine whether, to what extent, and under what circumstances Awards and amounts payable pursuant to an Account shall be deferred at the election of the holder thereof or of the Board; (vii) interpret, administer, reconcile any inconsistency, correct any defect and/or supply any omission in this Plan and any instrument or agreement relating to this Plan, or Awards under this Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of this Plan; and (ix) make any other determination and take any other action that the Board deems necessary or desirable for the administration of this Plan. The decisions of the Board shall be final, conclusive, and binding upon all parties, including, without limitation, the Company, any Participant, any holder or beneficiary of any Account and any stockholder of the Company. (b) No member of the Board shall be liable for any action or determination made in good faith with respect to this Plan, any Award or any Account. 4 SECTION 4. ELIGIBILITY. Members of senior management and key employees of the Company and/or its Subsidiaries shall be eligible to be designated as a Participant in this Plan by the Board and to receive an Award credited to an Account. SECTION 5. PHANTOM INCENTIVE UNIT AWARDS AND PHANTOM ADDITIONAL UNIT AWARDS. (a) GENERAL. The Board shall, in its sole discretion, designate employees of the Company or its Subsidiaries as Participants in this Plan and, in connection therewith, the Board shall determine the number of Phantom Incentive Units and/or Phantom Additional Units to be granted to each Participant so designated. An Account shall be established in the records of the Company to which the number of Phantom Incentive Units and/or Phantom Additional Units so granted shall be credited. As more fully set forth herein, a Participant shall share in any dividends or distributions paid by the Company to its stockholders, and a Participant's Account will be fully or partially distributed to him or her following the occurrence of a Realization Event. (b) AVAILABILITY FOR AWARD; DIVIDENDS; VALUE. (i) Awards may be made in respect of up to 10% of the Common Stock outstanding as constituted as of the Effective Date (prior to dilution by the Phantom Incentive Units, Phantom Additional Units and any Contingent Rights) under the Plan. (ii) To the extent that dividends or distributions are declared and paid to holders of Common Stock, each Participant will receive the amount that would have been distributed to the Participant had the Phantom Incentive Units and/or Common Phantom Additional Units credited to the Participant's Account been issued and outstanding Common Stock and such dividend or distribution shall be paid at the same time and in the same manner as dividends or distributions are paid to holders of Common Stock. (iii) To the extent that dividends or distributions are declared and paid to holders of Preferred Stock, each Participant will receive the amount that would have been distributed to the Participant had the Preferred Phantom Additional Units credited to the Participant's Account been issued and outstanding Preferred Stock and such dividend or distribution shall be paid at the same time and in same manner as dividends and distributions are paid to holders of Preferred Stock. (c) DEFERRAL OF PAYMENT. Notwithstanding any other provision of this Plan, the Board may make good faith determinations respecting the time and/or medium of payment and/or impose conditions on payment of the value of a Participant's Account in order to reflect the time and medium of payment, or conditions on payment, applicable to holders of Common Stock and/or Preferred Stock, as applicable, in connection with a Realization Event, IPO or otherwise, in order to accomplish the intended purposes of this Plan. By way of example and without limiting the generality of the foregoing, the Board may impose appropriate restrictions on the payment of the value of a Participant's Account if the holders of Common Stock and/or Preferred Stock, as applicable, are subject to a clawback or are required to escrow payment for their Common Stock and/or Preferred Stock, as applicable. (d) TERMINATION OF ACCOUNT FOLLOWING PAYMENT. Following the payment of all or a portion of the Account attributable to the Phantom Incentive Units, any such Phantom 5 Incentive Units shall thereafter be deemed cancelled. Following the payment of all or a portion of the Account attributable to Common Phantom Additional Units, any such Common Phantom Additional Units shall thereafter be deemed cancelled, although the Preferred Phantom Additional Units may still have value if such portion of the Account was not theretofore paid. Following the payment of all or a portion of the Account attributable to Preferred Phantom Additional Units, any such Preferred Phantom Additional Units shall thereafter be deemed cancelled, although the Common Phantom Additional Units may still have value if such portion of the Account was not theretofore paid. The payment of a dividend or distribution with respect to any Award shall not be considered a payment of any portion of a Participant's Account for purposes of this Section 5(d). SECTION 6. PAYMENT OF ACCOUNTS. (a) REALIZATION EVENT. Except as provided in Section 8 (generally relating to terminations of employment before a Realization Event), upon the closure and funding of a Realization Event, each Account shall be credited with the same value per Phantom Incentive Unit and/or Common Phantom Additional Unit as the value received in the Realization Event by a holder of Common Stock for one share of Common Stock, and each Participant (or his or her estate, as applicable) will be paid the value of his or her Account, subject to the Board's discretion to defer the payment of the value of a Participant's Account to appropriately reflect the payment schedule, contingent payment, holdbacks or contingent obligations applicable to holders of Common Stock following the Realization Event, as follows: (i) as soon as practicable following a Realization Event that is a cash transaction, the value of each Account shall be paid in cash to the Participants. (ii) following a Realization Event that is an equity or other non-cash exchange for Common Stock, (A) the Board shall credit each Account attributable to any Phantom Incentive Unit and/or Common Phantom Additional Unit at such time and in such amounts of such medium (including notes, equity securities, or a combination of the foregoing) as payments are made available to holders of Common Stock pursuant to the Realization Event or, in the Board's sole discretion, in cash and (B) the value of the Accounts attributable to the Phantom Incentive Units and/or Common Phantom Additional Units shall be distributed as soon as practicable following such credit to the Account; provided that the Board may elect to continue to defer payment of the Account until not later than such time as the equity or other medium received in exchange for Common Stock may be converted into cash or is otherwise transferable and, in the event of such deferral, the Board shall determine whether payment shall be made either in cash or in the same medium of payment as holders of Common Stock received in the Realization Event, including notes, equity securities, or a combination of the foregoing. (b) PREFERRED STOCK. Notwithstanding anything herein to the contrary, the value of the Accounts, if any, attributable to any Preferred Phantom Additional Unit shall be paid to a Participant upon a Realization Event only when and to the extent permitted in this Section 6(b). The Accounts attributable to each Preferred Phantom Additional Unit shall receive a credit at such times and in such amounts as payments are made to a holder of 0.4591 shares of Preferred Stock in redemption thereof. The value of the Accounts attributable to the Preferred Phantom Additional Units shall be paid to the Participants as soon as practicable following such credit to the Account and in the same medium (cash, equity, or any other medium) received by the holders of Preferred Stock. The Company has the right to pay the value of the Account in 6 respect of Preferred Phantom Additional Units following a Participant's termination of employment for any reason and prior to any other event giving rise to the payout of Preferred Stock generally as described in Section 8(b)(ii)(D) below. (c) IPO. From and after the consummation by the Company of an IPO that occurs prior to a Realization Event, the following shall apply: (i) If the Company shall be required to pay out the value of any Account or shall exercise any right it may have to pay out the value of any Account or if any Participant shall have the right to receive any portion of an Account, the Company may pay the value of the Account in shares of Common Stock (in the case of Phantom Incentive Units or Common Phantom Additional Units) or Preferred Stock (in the case of Preferred Phantom Additional Units) or (in the case of either Phantom Incentive Units or Phantom Additional Units) in cash (determined by using, in the case of Phantom Incentive Units or Common Phantom Additional Units, the market price of the Common Stock, and in the case of Preferred Phantom Additional Units, the Liquidation Value of the Company's Preferred Stock and the accrued but unpaid dividends thereon, in each case on the date immediately prior to the payment) or a combination of the foregoing ("Post-IPO Payout"). (ii) Except as provided in Section 8 (generally relating to termination of employment prior to a Realization Event) and except upon the earlier occurrence of a Realization Event, and subject to the Company's right after the IPO to pay the value of the Account at such earlier time as it shall determine, on the fifth anniversary of the IPO the Account will be paid to the Participant, who will receive the Post-IPO Payout unless the Participant (or the Participant's estate, as applicable) elected in writing no later than the fourth anniversary of the IPO to defer the Post-IPO Payout for an additional 36 months from the fifth anniversary of the IPO. Each Participant who remains employed with the Company and who chooses to defer the payment of his or her Post-IPO Payout (including, for this purpose, any Participant or Participant's estate who otherwise deferred payment of his or her Account) no later than the fourth anniversary of the IPO may continue to defer the payment of the Post-IPO Payout for additional 36 month intervals, provided that the election to defer is made no later than one year prior to the date on which the Post-IPO Payout would otherwise be paid. (d) TAG-ALONG EVENT. In connection with a Tag-Along Event, the Company shall, in its discretion (A) immediately prior to the Tag-Along Event distribute to each Participant, a number of shares of such class or classes of the Company's Capital Stock such that the number of shares so distributed plus the number of shares which the holder would be entitled to sell under Section 4.5 of the Stockholders Agreement without regard to the Phantom Incentive Units or Phantom Additional Units held by such Participant (assuming that the source for the shares to be sold constituted shares of Capital Stock, and shares distributed with respect to Phantom Incentive Units and shares distributed with respect to Phantom Additional Units in proportion to the number of shares or such units held) equals the total number of shares of Capital Stock the holder is entitled to sell (the "Pro Rata Portion") or (B) immediately following the Tag-Along Event, credit each Participant's Account with the value the Participant would have received from the shares that would be distributed pursuant to clause (A) had such shares been distributed and sold in the Tag-Along Event, and either pay such portion of the Account as soon as practicable following the Tag-Along Event or continue to defer the payment of the Account until the Account is otherwise payable in accordance with this Plan. For purposes of the foregoing clause (B), the credit in respect of the Account and any payment of the Account 7 shall only be in respect of the Phantom Incentive Units and/or the Phantom Additional Units, as applicable, to which the Pro Rata Portion applies. For purposes of this Section 6(d), the Pro Rata Portion, to the extent it is attributable to Phantom Incentive Units, shall apply "pro rata" to the total number of Protected and Unprotected Phantom Incentive Units credited to a Participant's Account. SECTION 7. COMPLIANCE WITH DEBT INSTRUMENTS AND LEGAL REQUIREMENTS. (a) LEGAL REQUIREMENTS. The grant of Phantom Incentive Units and Phantom Additional Units, payment of the value of a Participant's Account (including a partial distribution of a Participant's Account, if applicable), and the other obligations of the Company under this Plan shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency as may be required. (b) DEBT INSTRUMENTS. Notwithstanding the requirements of Section 6 hereof regarding the payment of the value of the Accounts, the Company shall not be obligated to pay the value of any portion of any Account (A) at any time there exists and is continuing a default or an event of default on the part of the Company or under any guarantee or other agreement under which the Company or one of its Subsidiaries has borrowed money or (B) if such payment would constitute a breach of, or result in a default or an event of default on the part of the Company or any of its Subsidiaries, under any such guarantee or agreement. In the event that payment of any portion of any Account is deferred pursuant to this Section 7(b), the Company shall pay the value of such portion as soon as possible following the date on which such payment would not result in any such breach or default, with interest at the federal short-term interest rate on the first day of the month the Participant (or his or her estate) has the right to receive payment of the value of his or her Account pursuant to Section 6, to be recalculated on the first day of each month thereafter until all such payments due under the Account are made. (c) POSTPONEMENT. The Board, in its sole discretion, may postpone the issuance or delivery of any securities under a Participant's Account as the Company may consider appropriate and may require a Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of any such securities in compliance with applicable laws, rules and regulations. SECTION 8. TERMINATION OF EMPLOYMENT. (a) PROTECTION OF ACCOUNT VALUES. Unless otherwise provided in an Award Agreement, Accounts shall become "Protected" as follows: (i) subject to continued employment with the Company or one of its Subsidiaries, Participants shall initially be "Unprotected" but shall become Protected in the value of the Phantom Incentive Unit portion of their Accounts, as follows: 18.75% on the first anniversary of the date of the applicable Award Agreement, if still employed. 37.5% on the second anniversary of the date of the applicable Award Agreement, if still employed. 8 56.25% on the third anniversary of the date of the applicable Award Agreement, if still employed. 75% on the fourth anniversary of the date of the applicable Award Agreement, if still employed. Fully Protected upon the earlier of a Realization Event or an IPO, if still employed. (ii) upon the occurrence of the earlier of a Realization Event or an IPO, a Participant who is then employed with the Company or one of its Subsidiaries shall become fully Protected in the Phantom Incentive Unit portion of his or her Account; and (iii) the Phantom Additional Unit portion of each Participant's Account, as applicable, is fully Protected as of the date of grant of such Phantom Additional Units. (b) PAYMENT UPON TERMINATION OF EMPLOYMENT. (i) Unless otherwise provided in an Award Agreement and notwithstanding any of the foregoing to the contrary, if a Participant's employment with the Company or its Subsidiaries terminates for any reason, and neither a Realization Event nor an IPO has occurred as of such termination of employment, the Participant's Account will be credited with the "CASH-OUT AMOUNT," as provided below immediately prior to the payment of the Account, and such Account shall be paid to such Participant within 90 days following the termination of such Participant's employment with the Company (or up to one year following the date of termination as may be determined by the Chief Executive Officer of the Company), as the Board may, in its discretion, determine; provided that, in the case of death or Disability, payment of the Account will be governed by Section 8(b)(ii)(C) and will be paid to the Participant's estate, as applicable. (ii) The "Cash-Out Amount" is determined as follows: (A) CAUSE TERMINATION. In the event that a Participant's employment with the Company or its Subsidiaries is terminated by the Company for Cause and neither a Realization Event nor an IPO has occurred prior to such termination of employment, then the Cash-Out Amount is equal to, with respect to each Phantom Incentive Unit, (x) the initial value of the Phantom Incentive Unit on the date of grant as set forth in the Award Agreement, plus or minus (y) any change in Adjusted Retained Earnings per share from the date of grant through the end of the most recent fiscal quarter preceding the date of termination of employment; (B) OTHER DISCHARGES; QUITS. In the event that a Participant's employment with the Company or its Subsidiaries terminates for any reason other than (i) by the Company for Cause or (ii) due to the Participant's death or Disability, and neither a Realization Event nor an IPO has occurred prior to such termination of employment, then the Cash-Out Amount is equal to the sum of: 9 (x) with respect to each Protected Phantom Incentive Unit and each Common Phantom Additional Unit, an amount equal to the quotient obtained by dividing (I) the excess of (i) the product of 6.6 times Consolidated EBITDA during the Measurement Period over (ii) the Consolidated Indebtedness as of the date of termination, by (II) the number of shares of Common Stock then issued and outstanding and all shares of Common Stock issuable upon the exercise of any then outstanding Contingent Right, whether or not such Contingent Right is at the time exercisable on the date of termination of employment; plus (y) with respect to each Phantom Incentive Unit that is Unprotected, an amount equal to (I) the initial value of the Phantom Incentive Unit on the date of grant as set forth in the Award Agreement, plus or minus (II) any change in Adjusted Retained Earnings per share from the date of grant through the end of the most recent fiscal quarter preceding the date of termination of employment; (C) DEATH OR DISABILITY. In the event that a Participant's employment with the Company or its Subsidiaries terminates due to the Participant's death or Disability and neither a Realization Event nor an IPO has occurred prior to such termination of employment, then the Cash-Out Amount is the amount described in Section 8(b)(ii)(B) (above) with respect to each Phantom Incentive Unit and the Account will be paid to the Participant (or the Participant's estate, as applicable) one year following the termination of Participant's employment or, in the Board's discretion, at any time prior to one year following the termination of employment; provided that, unless the Board shall otherwise determine, the Participant or the Participant's estate, as applicable, may elect within 180 days following such termination of employment to defer the payment of the Account until such time as payment is otherwise required or made in accordance with the Plan. (D) PHANTOM ADDITIONAL UNITS. If a Participant's employment with the Company or its Subsidiaries terminates for any reason prior to a Realization Event or an IPO, then (x) with respect to each Common Phantom Additional Unit, the Cash-Out Amount is the amount described in Section 8(b)(ii)(B)(x) above and (y) with respect to each Preferred Phantom Additional Unit, the Cash-Out Amount is 0.4591 times the sum of (I) the "Liquidation Value" plus (II) the "Maximum Dividend" (each as defined in the Company's Certificate of Incorporation). (iii) Notwithstanding the foregoing, with respect to Phantom Incentive Units valued at the Cash-Out Amount as described in Section 8(b)(ii)(B) above, (A) if during the Measurement Period the Company or any of its Subsidiaries shall have purchased or otherwise acquired, without the approval of the Chief Executive Officer of the Company (in a single transaction or in a series of transactions), a business which is outside of the building products industry, all calculations required under this Section 8(b) shall be made on a pro forma basis to eliminate the effect of such acquisition and any financing undertaking in connection therewith and (B) in the event that a sale of the Company is consummated within nine months following the payment of a Participant's Account, and if the per share purchase price (or the amount available for distribution, in the event of a sale of all or substantially all of the Company's assets) 10 (such price or amount, the "Actual Amount") is higher than the Cash-Out Amount used to value such Phantom Incentive Units, whether or not Protected, then the Participant will receive, at the same time stockholders of the Company receive payment in connection with such sale, an additional payment from the Company equal to the excess of (x) the number of Phantom Incentive Units multiplied by the Actual Amount over (y) the aggregate Cash-Out Amount for such Phantom Incentive Units. (iv) If a Participant's employment with the Company or its Subsidiaries terminates for any reason and at any time following the occurrence of an IPO, even if such employment terminated prior to a Realization Event, in lieu of the amounts described in Section 8(b)(i) through (iii), the Participant will be entitled to the Post-IPO Payout (as described in Section 6(c)(i) above) in respect of the Phantom Incentive Units and the Phantom Additional Units credited to such Participant's Account, which Account shall be paid to such Participant in accordance with Section 6(c). (v) All calculations under Section 6 and this Section 8 of the value of shares based upon the number of outstanding shares of Common Stock and/or Preferred Stock shall be determined assuming that each Phantom Incentive Unit and each Common Phantom Additional Unit is an outstanding share of Common Stock and each Preferred Phantom Additional Unit is 0.4591 outstanding shares of Preferred Stock. SECTION 9. DILUTION ADJUSTMENTS. (a) CERTAIN EVENTS. In the event of a reclassification, recapitalization, stock split, stock dividend, combination of units, or other similar or extraordinary event, the number and kind of Phantom Incentive Units and Phantom Additional Units, in the aggregate, reserved for issuance or with respect to which Awards may be made under this Plan shall be adjusted to reflect such event in the same manner in which Common Stock and Preferred Stock are adjusted to reflect such event, and the Board shall make such adjustments as it deems appropriate and equitable in the number, kind and price of Phantom Incentive Units and Phantom Additional Units credited to outstanding Accounts, and in any other matters which relate to Awards or Accounts and which are affected by the events referred to above. (b) OTHER ADJUSTMENTS. The Board is authorized to make adjustments in the terms and conditions of, and the criteria included in, Accounts in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 9(a)) affecting the Company, or the financial statements of the Company or any subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Board determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. SECTION 10. AMENDMENT AND TERMINATION. (a) AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend, discontinue, or terminate this Plan or any portion thereof at any time; provided, however, that any such amendment, alteration, suspension, discontinuance, or termination that would materially adversely affect the rights of any Participant with respect to any outstanding Account held pursuant to this Plan shall not, to that extent, be effective without the written consent of the affected Participant. 11 (b) AMENDMENTS TO AWARDS. The Board may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Account, prospectively or retroactively; provided, however, that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination not expressly contemplated by this Plan that would materially adversely affect the rights of any Participant or other holder of an Account shall not to that extent be effective without the written consent of the affected Participant or holder. SECTION 11. GENERAL PROVISIONS. (a) NONTRANSFERABILITY. Neither an Account, nor any Phantom Incentive Unit and/or Phantom Additional Units recorded thereunder, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company. (b) NO RIGHTS TO AWARDS. No Person shall have any claim to be granted any Phantom Incentive Unit or Phantom Additional Unit, and there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Accounts. The terms and conditions of Phantom Incentive Units and Phantom Additional Units, Accounts and the Board's determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not Participants are similarly situated). (c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to settle Awards in Common Stock, Preferred Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Common Stock or Preferred Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock or Preferred Stock to be offered or sold under the Plan until an IPO. Upon an IPO, the Company shall undertake to register shares of Common Stock and/or Preferred Stock pursuant to the Securities Act on a Form S-8 with the Securities and Exchange Commission for issuance under this Plan, such that in the event the Company makes a distribution of the Accounts in shares of Common Stock or Preferred Stock at any time following an IPO, there will be a sufficient number of shares registered under this Plan. (d) TAX WITHHOLDING. A Participant may be required to pay to the Company, at its request, and the Company shall have the right and is hereby authorized to withhold from any payment due or transfer made under any Account or otherwise under this Plan or from any compensation or other amount owing to or in respect of a Participant, the amount (in cash, securities, or other property) of any applicable withholding taxes in respect of an Account, its distribution or settlement in cash or in kind, or any payment or transfer under an Account or under this Plan, and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. 12 (e) OTHER COMPENSATION ARRANGEMENTS. (i) Nothing contained in this Plan shall prevent the Company or any Subsidiary or other Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, securities and other types of awards, and such arrangements may be either generally applicable or applicable only in specific cases. (ii) Neither the grant of Phantom Incentive Units or Phantom Additional Units hereunder nor the payment of any amounts in respect of any Account shall be taken into account in determining a Participant's right to receive any additional benefits or compensation under any other plan or arrangement. (f) NO RIGHT TO SERVICE OR EMPLOYMENT. The grant of Phantom Incentive Units or Phantom Additional Units shall not be construed as giving a Participant the right to be retained in the employ or service of the Company or any Subsidiary. Further, the Company or its Subsidiaries may at any time terminate a Participant from any employment or other service relationship or discontinue, free from any liability or any claim under this Plan, unless otherwise expressly provided in this Plan or in the Participant's Award Agreement. (g) AWARDS AS AN UNSECURED PROMISE. (i) The Phantom Incentive Units and Phantom Additional Units granted under this Plan do not constitute an equity interest in the Company or its Subsidiaries. A Participant shall not share in the voting rights of the Company or its Subsidiaries as a result of an Award. (ii) The Company shall not be required to and shall not segregate any funds representing awards of Phantom Incentive Units or Phantom Additional Units granted hereunder, and nothing in this Plan or any Award Agreement shall be construed as providing for such segregation. (iii) Nothing in this Plan or any Award Agreement, and no action taken pursuant to their respective terms, shall create or be construed to create a trust or escrow account of any kind, or a fiduciary relationship between the Company or its Subsidiaries, on the one hand, and any Participant, or any other Person, on the other hand. (iv) The Participants and their beneficiaries and any other Persons entitled to payment in respect of an Account shall rely solely on the unsecured promise of the Company to make the payments required under the terms of any Account, but shall have the right to enforce such a claim in the same manner as any unsecured general creditor of the Company. The Participants shall not have any preferred claim on, or any beneficial ownership in, any assets of the Company. Any rights created under this Plan or any Award Agreement shall be mere unsecured contractual rights of the Participants against the Company. (h) TERMINATION WITH SUBSIDIARIES. For purposes of this Plan, a Participant's employment will be deemed terminated when he or she is no longer employed by the Company or any of its Subsidiaries. 13 (i) CONFLICTS. In the event of a conflict between the terms of this Plan and any Award Agreement, the terms of this Plan shall prevail. (j) GOVERNING LAW. Unless otherwise provided in the applicable Award Agreement, the validity, construction, and effect of this Plan and any rules and regulations relating to this Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within such state without regard to the choice of law principles thereof. (k) HEADINGS. Headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof. EX-10.5 32 y95660exv10w5.txt 2004 STOCK OPTION PLAN EXHIBIT 10.5 ------------ PLY GEM INVESTMENT HOLDINGS, INC. 2004 STOCK OPTION PLAN (EFFECTIVE AS OF FEBRUARY 12, 2004) 1. PURPOSE The purpose of the Plan is to provide a means through which the Company and its Affiliates may attract able persons to enter and remain in the employ of the Company and Affiliates and to provide a means whereby employees, directors and consultants of the Company and its Affiliates can acquire and maintain Common Stock ownership, thereby strengthening their commitment to the welfare of the Company and Affiliates and promoting an identity of interest between stockholders and these employees. The Plan provides for granting Incentive Stock Options and Nonqualified Stock Options. 2. DEFINITIONS The following definitions shall be applicable throughout the Plan. (a) "Affiliate" means (i) any entity that directly or indirectly is controlled by, controls, or is under common control with the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee. (b) "Award" means, individually or collectively, any Incentive Stock Option or Nonqualified Stock Option. (c) "Board" means the Board of Directors of the Company. (d) "Cause" means: (i) conviction of, or entry of a pleading of guilty or no contest by, a Participant with respect to a felony or any lesser crime of which fraud or dishonesty is a material element; (ii) a Participant's willful and continued failure to perform substantially his or her duties with the Company or any of its Subsidiaries, or a failure to follow the lawful direction of the Board or any chief executive officer of the Company or any of its Subsidiaries to whom such Participant reports after the Board of Directors or such chief executive officer delivers a written demand for substantial performance, specifically identifying the manner in which the Participant has not substantially performed his material duties and the Participant neglects to cure such a failure within 30 days; (iii) a Participant's theft, fraud or embezzlement of any property or assets of the Company or any of its Affiliates or Subsidiaries, or such Participant's dishonesty against the Company or any of its Affiliates or Subsidiaries which has resulted in material damage to the Company or any of its Affiliates or Subsidiaries or (iv) a Participant's breach of any noncompetition, nonsolicitation or willful breach of any 2 confidentiality requirements set forth in the Stockholder's Agreement whether or not such agreement or requirement is enforceable under applicable law. (e) "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. (f) "Committee" means the compensation committee of the Board established under the By-Laws of the Company, or if no such committee has yet been established, the Board. The Committee shall consist of at least two people as the Board may appoint to administer the Plan or, if no such committee has been appointed by the Board, the Board. On and after the time that the Company becomes subject to the Exchange Act, unless the Board is acting as the Committee or the Board specifically determines otherwise, each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be an Eligible Director; provided that the mere fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee which Award is otherwise validly granted under the Plan. (g) "Common Stock" means the common stock, par value $0.01 per share, of the Company. (h) "Company" means Ply Gem Investment Holdings, Inc., a Delaware corporation. (i) "Date of Grant" means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization or, if there is no such date, the date indicated on the Stock Option Agreement. (j) "Disability" means, with respect to any Participant, any event of disability under the disability insurance plan of the Company or any of its Affiliates or Subsidiaries covering such Participant, or if there shall be no such disability plan, then as set forth in any agreement between such Participant and the Company or any of its Affiliates or Subsidiaries, or if there shall be no such agreement, then the inability of the Participant to perform his or her duties as an employee of the Company or any of its Affiliates or Subsidiaries for at least one-hundred eighty (180) days during any consecutive 12-month period.. (k) "Effective Date" means February 12, 2004. (l) "Eligible Director" means a person who is (i) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act, or a person meeting any similar requirement under any successor rule or regulation and (ii) an "outside director" within the meaning of Section 162(m) of the Code, and the Treasury Regulations promulgated thereunder; PROVIDED, HOWEVER, that clause (ii) shall apply only on and after the 162(m) Effective Date and only with respect to grants of Awards with 3 respect to which the Company's tax deduction could be limited by Section 162(m) of the Code if such clause did not apply. (m) "Eligible Person" means any (i) individual regularly employed by the Company or an Affiliate who satisfies all of the requirements of Section 6 hereof; (ii) director of the Company or an Affiliate; or (iii) consultant or advisor to the Company or an Affiliate who is entitled to participate in an "employee benefit plan" within the meaning of 17 CFR ss. 230.405 (which, as of the Effective Date, includes those who (A) are natural persons and (B) provide BONA FIDE services to the Company other than in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Company's securities). (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (o) "Fair Market Value" on a given date means, except to the extent otherwise provided in a Stock Option Agreement, (i) if the Stock is listed on a national securities exchange, the mean between the highest and lowest sale prices reported as having occurred on the primary exchange with which the Stock is listed and traded on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Stock is not listed on any national securities exchange but is quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System ("NASDAQ") on a last sale basis, the average between the high bid price and low ask price reported on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Stock is not listed on a national securities exchange nor quoted in the NASDAQ on a last sale basis, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately. (p) "Incentive Stock Option" means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an incentive stock option as described in Section 422 of the Code. (q) "Nonqualified Stock Option" means an Option granted by the Committee to a Participant under the Plan which is not designated by the Committee as an Incentive Stock Option and otherwise meets the requirements set forth herein. (r) "162(m) Effective Date" means the first date on which Awards granted under the Plan do not qualify for an exemption from the deduction limitations of Section 162(m) of the Code on account of an exemption, or a transition or grandfather rule. (s) "Option" means an award granted under Section 7. (t) "Option Period" means the period described in Section 7(c). 4 (u) "Option Price" means the exercise price for an Option as described in Section 7(a). (v) "Participant" means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to Section 6. (w) "Plan" means this Ply Gem Investment Holdings, Inc. 2004 Stock Option Plan. (x) "Securities Act" means the Securities Act of 1933, as amended. (y) "Subsidiary" of a Person means any other Person (i) as to which such Person has the power to elect a majority of the board of directors (or other board, body or Person that serves the function of a board of directors) of such other Person or (ii) which is included as a subsidiary in the consolidated financial statements of such Person in accordance with United States generally accepted accounting principles as in effect from time to time. (z) "Stock" means the Common Stock or such other authorized shares of stock of the Company as the Committee may from time to time authorize for use under the Plan. (aa) "Stock Option Agreement" means the agreement between the Company and a Participant who has been granted an Option pursuant to Section 7 which defines the rights and obligations of the parties as required in Section 7(d). 3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL The Plan is effective as of the Effective Date. The validity and exercisability of any and all Awards granted pursuant to the Plan on and after the 162(m) Effective Date is contingent upon approval of the Plan by the shareholders of the Company in a manner intended to comply with the shareholder approval requirements of Section 162(m) of the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the shareholders of the Company in a manner intended to comply with the shareholder approval requirements of Section 422(b)(i) of the Code; provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. The expiration date of the Plan, on and after which no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled. 5 4. ADMINISTRATION The Committee shall administer the Plan. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. (a) Subject to the provisions of the Plan and applicable law, the Committee shall have the power, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with Awards; (iv) determine the terms and conditions of any Awards; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Stock, other securities, other Options, or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, shares of Stock, other securities, other Options, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret, administer reconcile any inconsistency, correct any default and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action specified under the Plan or that the Committee deems necessary or desirable for the administration of the Plan. (b) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing any and all Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all parties, including, without limitation, the Company, any Affiliate, any Participant, any holder of any Award, and any shareholder. (c) No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award hereunder. 5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN The Committee may, from time to time, grant Awards of Options to one or more Eligible Persons; PROVIDED, HOWEVER, that: (a) Subject to Section 9, the aggregate number of shares of Stock in respect of which Awards may be granted under the Plan is 148,050 shares; 6 (b) Such shares shall be deemed to have been issued in payment of Awards whether or not they are actually delivered. In the event any Award shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new grants under the Plan; (c) Stock delivered by the Company in settlement of Awards granted under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase; and (d) On and after the 162(m) Effective Date, no person may be granted Options under the Plan during any calendar year with respect to more than 15,000 shares of Stock; provided that such number shall be adjusted pursuant to Section 9 only in a manner which will not cause the Options granted under the Plan to fail to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code. 6. ELIGIBILITY Participation shall be limited to Eligible Persons who have entered into a Stock Option Agreement or who received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan. 7. TERMS OF OPTIONS The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Eligible Person; PROVIDED, HOWEVER, that no Incentive Stock Options shall be granted to any Eligible Person who is not an employee of the Company or a "parent" or "subsidiary" of the Company, as such terms are used in Section 422(a)(2) of the Code. Each Option so granted shall be subject to the following conditions, or to such other conditions as may be reflected in the applicable Stock Option Agreement. In all events, the provisions in the applicable Stock Option Agreement shall control the terms of the Option issued pursuant thereto. If there shall be a conflict between the provisions of the Plan and such Stock Option Agreement, the provisions of the Plan shall control. (a) OPTION PRICE. The Option Price per share of Stock for each Option shall be set by the Committee at the time of grant but shall not be less than (i) in the case of an Incentive Stock Option, and subject to Section 7(e), the Fair Market Value of a share of Stock at the Date of Grant, and (ii) in the case of a Nonqualified Stock Option, the par value of a share of Stock; PROVIDED, HOWEVER, that all Options granted on and after the 162(m) Effective Date which are intended to qualify as "performance-based compensation" under Section 162(m) of the Code shall have an Option Price per share of Stock no less than the Fair Market Value of a share of Stock on the Date of Grant. 7 (b) MANNER OF EXERCISE AND FORM OF PAYMENT. No shares of Stock shall be delivered pursuant to any exercise of an Option until payment in full of the aggregate exercise price therefor is received by the Company. Options which have become exercisable may be exercised by delivery of written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price shall be payable in cash and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised (including by means of attestation of ownership of a sufficient number of shares of Stock in lieu of actual delivery of such shares to the Company); PROVIDED, HOWEVER, that such shares are not subject to any pledge or other security interest and have either been held by the Participant for six months, previously acquired by the Participant on the open market or meet such other requirements as the Committee may determine necessary in order to avoid an accounting earnings charge in respect of the Option) or, in the discretion of the Committee, either (i) in other property having a fair market value on the date of exercise equal to the Option Price, (ii) if there shall be a public market for the Stock, by delivering to the Committee a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of loan proceeds, or proceeds of the sale of the Stock subject to the Option, sufficient to pay the Option Price or (iii) by such other method as the Committee may allow. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in the manner described in clause (ii) of the preceding sentence if the Committee determines that exercising an Option in such manner would violate the Sarbanes-Oxley Act of 2002. (c) VESTING, OPTION PERIOD AND EXPIRATION. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the "Option Period"); PROVIDED, HOWEVER, that notwithstanding any vesting dates set by the Committee, the Committee may in its sole discretion accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of any such Option other than with respect to exercisability. If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires. Unless otherwise stated in the applicable Stock Option Agreement, the Option shall expire earlier than the end of the Option Period in the following circumstances: (i) If prior to the end of the Option Period, the Participant's employment with the Company terminates due to a termination by the Company or any Affiliate without Cause or due to the Participant's death or Disability, the Option shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such termination. In such event, the Option shall remain exercisable by the Participant until its expiration, only to the extent the Option was vested and exercisable at the time of such termination. (ii) If the Participant ceases employment or service with the Company and Affiliates for reasons other than the terminations described in clause (i) above, the Option shall expire immediately upon such cessation of employment or service. 8 (d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option granted under the Plan shall be evidenced by a Stock Option Agreement, which shall contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Stock Option Agreement, which shall be subject to the following terms and conditions: (i) Each Option or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof. (ii) Each share of Stock purchased through the exercise of an Option shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Participant purchases the share or when the Option expires. (iii) Subject to Section 8(h), Options shall not be transferable by the Participant except by will or the laws of descent and distribution and shall be exercisable during the Participant's lifetime only by him. (iv) Each Option shall vest and become exercisable by the Participant in accordance with the vesting schedule established by the Committee and set forth in the Stock Option Agreement evidencing such Option. (v) Unless otherwise provided in a Stock Option Agreement, prior to the effectiveness of any Participant's exercise of an Option, such Participant must enter into the Stockholders Agreement, dated as of February __, 2004, by and among the Company, Caxton-Iseman (Ply Gem), L.P. and the other investors and individuals executing such Stockholders Agreement, as in effect from time to time. (vi) Each Stock Option Agreement may contain a provision that, upon demand by the Committee for such a representation, the Participant shall deliver to the Committee at the time of any exercise of an Option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof, and any other representations deemed necessary by the Committee to ensure compliance with all applicable federal and state securities laws. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option shall be a condition precedent to the right of the Participant or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws. (vii) Each Incentive Stock Option Agreement shall contain a provision requiring the Participant to notify the Company in writing 9 immediately after the Participant makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Participant acquired the Stock by exercising the Incentive Stock Option. (e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option. (f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options. (g) VOLUNTARY SURRENDER. The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option, if any, granted under the Plan to be conditioned upon the granting to the Participant of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonqualified Stock Option surrendered. 8. GENERAL (a) ADDITIONAL PROVISIONS OF AN AWARD. Awards granted to a Participant under the Plan also may be subject to such other provisions (whether or not applicable to Awards granted to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options (provided, that the Committee determines that providing such financing does not violate the Sarbanes-Oxley Act of 2002), provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares or terminate employment, provisions allowing the Participant to elect to defer the receipt of payment in respect of Awards for a specified period or until a specified event and provisions to comply with federal and state securities laws and 10 federal and state tax withholding requirements. Any such provisions shall be reflected in the Stock Option Agreement. (b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person. (c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption. (d) TAX WITHHOLDING. (i) A Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any shares of Stock or other property deliverable under any Award or from any compensation or other amounts owing to a Participant the amount (in cash, Stock or other property) of any required tax withholding and payroll taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (ii) Without limiting the generality of clause (i) above, if so provided in Stock Option Agreement, a Participant may satisfy, in whole or in part, the foregoing withholding liability (but no more than the minimum required withholding liability) by delivery of shares of Stock owned by the Participant with a Fair Market Value equal to such withholding liability (provided that such shares are not subject to any pledge or other security interest and have either been held by the Participant for six months, previously acquired by the Participant on the open market or meet such other requirements as the Committee may determine necessary in order to avoid an accounting earnings charge), or by 11 having the Company withhold from the number of shares of Stock otherwise issuable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability. (e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate. (f) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. (g) GOVERNING LAW. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware. (h) FUNDING. No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. (i) NONTRANSFERABILITY. Each Award shall be exercisable only by the Participant during the Participant's lifetime, or, if permissible under applicable law, by the Participant's legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant 12 otherwise than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate. (j) RELIANCE ON REPORTS. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than himself. (k) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Affiliate except as otherwise specifically provided in such other plan. (l) EXPENSES. The expenses of administering the Plan shall be borne by the Company and Affiliates. (m) PRONOUNS. Masculine pronouns and other words of masculine gender shall refer to both men and women. (n) TITLES AND HEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. (o) TERMINATION OF EMPLOYMENT. For all purposes herein, a person who transfers from employment or service with the Company to employment or service with an Affiliate or vice versa shall not be deemed to have terminated employment or service with the Company or an Affiliate. (p) SEVERABILITY. If any provision of the Plan or any Stock Option Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 9. CHANGES IN CAPITAL STRUCTURE Awards granted under the Plan and any agreements evidencing such awards, the maximum number of shares of Stock subject to all Options stated in Section 5(a) and the maximum number of shares of Stock with respect to which any one person may be granted Options during any period stated in Section 5(d) shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the 13 number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock or extraordinary cash dividends, stock splits, reverse stock splits, recapitalization, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants, or which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. Any adjustment in Incentive Stock Options under this Section 9 shall be made only to the extent not constituting a "modification" within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 9 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards granted on and after the 162(m) Effective Date which are intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or substitutions may be made without causing Awards granted under the Plan to fail to qualify as such "performance-based compensation." The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes. Notwithstanding the above, in the event of any of the following: A. The Company is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of the Company in a form other than stock or other equity interests of the surviving entity; B. All or substantially all of the stock or assets of the Company are acquired by another person; C. The reorganization or liquidation of the Company; or D. The Company shall enter into a written agreement to undergo an event described in clauses A, B or C above, then the Committee may, in its sole discretion and upon at least 10 days advance notice to the affected persons, cancel any outstanding Awards and cause the holders thereof to be paid, in cash or stock, or any combination thereof, the value of such Awards which are then exercisable based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. The terms of this Section 9 may be varied by the Committee in any particular Stock Option Agreement. 10. NONEXCLUSIVITY OF THE PLAN 14 Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. 11. AMENDMENTS AND TERMINATION (a) AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; PROVIDED that no such amendment, alteration, suspension, discontinuation or termination shall be made without shareholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan (including as necessary to prevent Awards granted under the Plan on and after the 162(m) Effective Date from failing to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code); and PROVIDED FURTHER that any such amendment, alteration, suspension, discontinuance or termination that would impair the rights of any Participant or any holder of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant or holder. (b) AMENDMENT OF STOCK OPTION AGREEMENTS. The Committee may, to the extent consistent with the terms of any Stock Option Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would impair the rights of any Participant in respect of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant. * * * As adopted by the Board of Directors of Ply Gem Investment Holdings, Inc. as of February 12, 2004. EX-10.6 33 y95660exv10w6.txt CHANGE IN CONTROL SEVERANCE BENEFIT PLAN EXHIBIT 10.6 ------------ PLY GEM INDUSTRIES, INC. Change in Control Severance Benefit Plan for Key Employees October 30, 2003 Ply Gem Industries, Inc. (the "Company") desires to assure that it and its subsidiaries (the "Employer") will have the benefit of the continued service and experience of certain of their key employees designated as hereinafter provided ("Employees," or individually, the "Employee") and to assure Employer and the Employee of the continuity of management of the Company and Employer in the event of any change in control of the Company on or before March 31, 2004 and adopts this plan (the "Plan") to provide such assurances. 1. Designated Employees. Employees entitled to participate in the Plan shall be those designated from time to time by the Board of Directors of the Company. 2. Change in Control. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred upon the closing on an agreement for the acquisition, merger or consolidation of the Company resulting in all or substantially all of the business and/or assets of the Company being controlled by a corporation or other entity other than Nortek, Inc. or its affiliates. 4. Severance Benefit. If during a period of 24 months following a Change in Control, either (i) the employment of Employee is terminated by Employer without Cause (as defined below) or (ii) there is a material adverse change in the terms of the employment of Employee which entitles Employee to treat any such change as such a termination as hereinafter provided (either (i) or (ii) being referred to herein as a "Qualifying Termination") Employee shall be entitled to receive severance pay at an annual rate in an amount equal to Employees 2003 base pay plus his estimated/actual 2003 performance incentive bonus (excluding all other bonuses, such as, any "stay" or relocation bonuses), such severance pay to be paid for the 24-month period following such termination in the same manner as Employee's basic salary was paid immediately prior to such termination and to be subject to appropriate tax withholding. Payment of such amount shall be considered severance pay in consideration of past services, services subsequent to Employee's designation under this Plan and continued services during a period while any such Change in Control is pending and thereafter and is not to be reduced by compensation or income received by Employee from any other employment or other source. It is understood and agreed to by Employee that any payments made pursuant to this agreement are not counted as wages or other compensation for purposes of any pension, 401(k) or other benefit plan of Employer. For the purpose of this Plan, "Cause" shall mean: (i) the willful and continued failure of Employee to perform substantially Employee's material duties (other than any such failures resulting from or contributed to by, incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Employee by the Board of Directors of the Company and which notice specifically identifies the manner in which the Employee has not substantially performed his material duties; or (ii) because of conviction of Employee of a crime involving theft, embezzlement or fraud against Employer or a civil judgment in which Employer is awarded damages from Employee in respect of a claim of loss of funds through fraud or misappropriation by Employee, which in either case has become final and is not subject to further appeal, continued employment of Employee would be demonstrably injurious to Employer. In the event of a Qualifying Termination, Employee shall continue for a period of 24 months after termination to be covered at the expense of Employer (reduced by the employee contribution under the plan for active employees) by the same or equivalent medical and dental insurance coverage as he was covered immediately prior to such termination, it being understood that the Employer's obligation during the first 18 months shall be the reimbursement of the Employee's COBRA premium (reduced by the employee contribution for active employees). Following a Change in Control, a material adverse change in the terms of employment of Employee by Employer which Employee is entitled to treat as a termination by Employer for purposes of this Plan includes: (a) Without Employee's express written consent, assignment of Employee to any duties inconsistent with his position, duties and responsibilities and status with Employer immediately prior to a Change in Control; or (b) A reduction by the Employer in Employee's base salary as in effect immediately prior to a Change in Control; or (c) Without Employee's express written consent, the Employer's requiring Employee to be based anywhere other than within 50 miles of his office location immediately prior to a Change in Control, except for required travel on the Employer's business to an extent substantially consistent with his business travel obligations immediately prior to a Change in Control; or (d) The taking of any action by the Employer which would deprive Employee of any material employee benefit enjoyed by him immediately prior to a Change in Control except where such change is applicable to all employees participating is such benefit plan; or (e) Any breach by the Company or Employer of any provision of this Plan. 6. Limited Effect. This Plan, any agreement entered into pursuant hereto and payment of severance benefits hereunder shall not give Employee any right of continued employment, and no right to any compensation or benefits from the Company or Employer except the right specifically stated herein for certain severance pay benefits in the event of a Change in Control at a time when Employee is still employed by Employer and is a designated Employee under this Plan, shall not limit Employer's right to terminate Employee's employment at any time prior to a Change in Control, with or without cause, or to terminate Employees designation as an Employee under this Plan, except as may be otherwise provided in a written employment agreement between Employee and Employer, and shall not confer on Employee any right to severance pay except in the event as specifically provided for herein. 7. Termination. This Plan and the employee benefits described herein shall terminate on March 31, 2004 provided no Change of Control has occurred prior to that date. 8. Indemnification. Employer agrees to pay all costs and expenses incurred by Employee in connection with the enforcement of his rights under this Plan and will indemnify and hold harmless Employee from and against any damages, liabilities and expenses (including without limitation fees and expenses of counsel) incurred by Employee in connection with any litigation or threatened litigation, arising out of the making, performance or enforcement of this Plan. 9. Governing Law. This Plan and agreements made with Employees hereunder shall be governed by the laws of the State of Delaware. EX-10.7 34 y95660exv10w7.txt LETTER TO LEE MEYER EXHIBIT 10.7 ------------ NORTEK RICHARD L. BREADY CHAIRMAN AND CEO October 31, 2003 Lee Meyer President Ply Gem Industries, Inc. 303 W. Major Street P.O. Box 559 Kearney, MO 64060 Dear Lee, This letter describes the terms and conditions of the key employee incentive program for the possible sale of Ply Gem Industries, Inc., including its wholly-owned subsidiaries Variform, Inc., Napco, Inc., Great Lakes Window, Inc., Kroy Buildings Products, Inc. and Thermal-Gard, Inc., and the business of the CWD Windows and Doors Division of Broan-NuTone Canada Inc. (collectively "WDS"). 1. Upon the closing of the sale of WDS, you will be paid by Nortek, Inc. a cash incentive bonus of $1,000,000, payable on or before the 10th day after Nortek receives payment from the sale. 2. Upon the closing of the sale of WDS: (a) the Class A Options previously granted to you pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan shall become fully vested; and (b) the Class A and Class B Options previously granted to you shall remain exercisable by you (subject to all other conditions of the Plan, including the requirements that a minimum Exit Value per share in excess of $92 is achieved and that the Kelso entities achieve the 17% Investor Return) regardless of your continued employment with VMS after the sale. A copy of the resolution of the Compensation Committee of the Nortek Holdings Board of Directors is enclosed together with a copy of the Stock Option Plan. 3. No payments or arrangements pursuant to paragraphs 1 and 2 above shall be made if you are not employed by WDS (for any reason) on the sale date or you have not committed the necessary time and effort toward the sale of WDS which shall include preparing due diligence materials, preparing presentation material, meeting with potential buyers and otherwise acting in the best interests of the shareholders of WDS. 4. You have also been named by the Ply Gem Industries, Inc. Board of Directors as a participant in the Ply Gem Industries, Inc. Change in Control Severance NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 2 Benefit Plan for Key Employees, a copy of which is enclosed. The Plan provides generally that if you are terminated other than for Cause or there is a material adverse change in your employment during a period of 24 months following the sale of WDS, you shall be paid, for the 24 months following such termination, an annual amount equal to your 2003 base salary plus your 2003 annual performance bonus. (Please refer to the specific language of the plan.) 5. In the event the sale of WDS is not completed on or before March 31, 2004, this letter shall be null, void and have no further effect and any obligation or agreement set forth herein shall immediately terminate even if WDS is sold at some later date. 6. This letter should in no way be viewed as any guarantee of continued employment with WDS. 7. All payments shall be subject to any applicable withholdings and any tax on such amounts shall be your responsibility. It is understood that payments made pursuant to this letter do not create any employment arrangement between any individual and Ply Gem, Nortek or any Nortek subsidiary. Any payments made pursuant to this agreement are not counted toward any pension, 401(k) or other benefit plan of WDS or Nortek. 8. This letter sets forth the entire understanding regarding what payment, if any, shall be made to you upon the sale of WDS except as may be set forth in a written agreement between the parties or contained in written benefit plans available to employees or executives generally. Very truly yours, /s/ Richard L. Bready Richard L. Bready EX-10.8 35 y95660exv10w8.txt LETTER TO SHAWN POE EXHIBIT 10.8 ------------ NORTEK RICHARD L. BREADY CHAIRMAN AND CEO October 31, 2003 Shawn Poe Vice President, Finance Variform, Inc. 303 W. Major Street P.O. Box 559 Kearney, MO 64060 Dear Shawn, This letter describes the terms and conditions of the key employee incentive program for the possible sale of Ply Gem Industries, Inc., including its wholly-owned subsidiaries Variform, Inc., Napco, Inc., Great Lakes Window, Inc., Kroy Buildings Products, Inc. and Thermal-Gard, Inc., and the business of the CWD Windows and Doors Division of Broan-NuTone Canada Inc. (collectively "WDS"). 1. Upon the closing of the sale of WDS, you will be paid by Nortek, Inc. a cash incentive bonus of $200,000, payable on or before the 10th day after Nortek receives payment from the sale. 2. Upon the closing of the sale of WDS: (a) the Class A Options previously granted to you pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan shall become fully vested; and (b) the Class A and Class B Options previously granted to you shall remain exercisable by you (subject to all other conditions of the Plan, including the requirements that a minimum Exit Value per share in excess of $92 is achieved and that the Kelso entities achieve the 17% Investor Return) regardless of your continued employment with WDS after the sale. A copy of the resolution of the Compensation Committee of the Nortek Holdings Board of Directors is enclosed together with a copy of the Stock Option Plan. 3. No payments or arrangements pursuant to paragraphs 1 and 2 above shall be made if you are not employed by WDS (for any reason) on the sale date or you have not committed the necessary time and effort toward the sale of WDS which shall include preparing due diligence materials, preparing presentation material, meeting with potential buyers and otherwise acting in the best interests of the shareholders of WDS. 4. You have also been named by the Ply Gem Industries, Inc. Board of Directors as a participant in the Ply Gem Industries, Inc. Change in Control Severance NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 2 Benefit Plan for Key Employees, a copy of which is enclosed. The Plan provides generally that if you are terminated other than for Cause or there is a material adverse change in your employment during a period of 24 months following the sale of WDS, you shall be paid, for the 24 months following such termination, an annual amount equal to your 2003 base salary plus your 2003 annual performance bonus. (Please refer to the specific language of the plan.) 5. In the event the sale of WDS is not completed on or before March 31, 2004, this letter shall be null, void and have no further effect and any obligation or agreement set forth herein shall immediately terminate even if WDS is sold at some later date. 6. This letter should in no way be viewed as any guarantee of continued employment with WDS. 7. All payments shall be subject to any applicable withholdings and any tax on such amounts shall be your responsibility. It is understood that payments made pursuant to this letter do not create any employment arrangement between any individual and Ply Gem, Nortek or any Nortek subsidiary. Any payments made pursuant to this agreement are not counted toward any pension, 401(k) or other benefit plan of WDS or Nortek. 8. This letter sets forth the entire understanding regarding what payment, if any, shall be made to you upon the sale of WDS except as may be set forth in a written agreement between the parties or contained in written benefit plans available to employees or executives generally. Very truly yours, /s/ Richard L. Bready Richard L. Bready EX-10.9 36 y95660exv10w9.txt LETTER TO JOHN WAYNE EXHIBIT 10.9 ------------ NORTEK RICHARD L. BREADY CHAIRMAN AND CEO October 31, 2003 John Wayne President Variform, Inc. 303 W. Major Street P.O. Box 559 Kearney, MO 64060 Dear John, This letter describes the terms and conditions of the key employee incentive program for the possible sale of Ply Gem Industries, Inc., including its wholly-owned subsidiaries Variform, Inc., Napco, Inc., Great Lakes Window, Inc., Kroy Buildings Products, Inc. and Thermal-Gard, Inc., and the business of the CWD Windows and Doors Division of Broan-NuTone Canada Inc. (collectively "WDS"). 1. Upon the closing of the sale of WDS, you will be paid by Nortek, Inc. a cash incentive bonus of $400,000, payable on or before the 10th day after Nortek receives payment from the sale. 2. Upon the closing of the sale of WDS: (a) the Class A Options previously granted to you pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan shall become fully vested; and (b) the Class A and Class B Options previously granted to you shall remain exercisable by you (subject to all other conditions of the Plan, including the requirements that a minimum Exit Value per share in excess of $92 is achieved and that the Kelso entities achieve the 17% Investor Return) regardless of your continued employment with WDS after the sale. A copy of the resolution of the Compensation Committee of the Nortek Holdings Board of Directors is enclosed together with a copy of the Stock Option Plan. 3. No payments or arrangements pursuant to paragraphs 1 and 2 above shall be made if you are not employed by WDS (for any reason) on the sale date or you have not committed the necessary time and effort toward the sale of WDS which shall include preparing due diligence materials, preparing presentation material, meeting with potential buyers and otherwise acting in the best interests of the shareholders of WDS. 4. You have also been named by the Ply Gem Industries, Inc. Board of Directors as a participant in the Ply Gem Industries, Inc. Change in Control Severance NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 2 Benefit Plan for Key Employees, a copy of which is enclosed. The Plan provides generally that if you are terminated other than for Cause or there is a material adverse change in your employment during a period of 24 months following the sale of WDS, you shall be paid, for the 24 months following such termination, an annual amount equal to your 2003 base salary plus your 2003 annual performance bonus. (Please refer to the specific language of the plan.) 5. In the event the sale of WDS is not completed on or before March 31, 2004, this letter shall be null, void and have no further effect and any obligation or agreement set forth herein shall immediately terminate even if WDS is sold at some later date. 6. This letter should in no way be viewed as any guarantee of continued employment with WDS. 7. All payments shall be subject to any applicable withholdings and any tax on such amounts shall be your responsibility. It is understood that payments made pursuant to this letter do not create any employment arrangement between any individual and Ply Gem, Nortek or any Nortek subsidiary. Any payments made pursuant to this agreement are not counted toward any pension, 401(k) or other benefit plan of WDS or Nortek. 8. This letter sets forth the entire understanding regarding what payment, if any, shall be made to you upon the sale of WDS except as may be set forth in a written agreement between the parties or contained in written benefit plans available to employees or executives generally. Very truly yours, /s/ Richard L. Bready Richard L. Bready EX-10.10 37 y95660exv10w10.txt LETTER TO MARK WATSON EXHIBIT 10.10 ------------- NORTEK RICHARD L. BREADY CHAIRMAN AND CEO October 31, 2003 Mark Watson President Thermal-Gard, Inc. 400 Walnut Street Punxsutawney, PA 15767-1368 Dear Mark, This letter describes the terms and conditions of the key employee incentive program for the possible sale of Ply Gem Industries, Inc., including its wholly-owned subsidiaries Variform, Inc., Napco, Inc., Great Lakes Window, Inc., Kroy Buildings Products, Inc. and Thermal-Gard, Inc., and the business of the CWD Windows and Doors Division of Broan-NuTone Canada Inc. (collectively "WDS"). 1. Upon the closing of the sale of WDS, you will be paid by Nortek, Inc. a cash incentive bonus of $300,000, payable on or before the 10th day after Nortek receives payment from the sale. 2. Upon the closing of the sale of WDS: (a) the Class A Options previously granted to you pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan shall become fully vested; and (b) the Class A and Class B Options previously granted to you shall remain exercisable by you (subject to all other conditions of the Plan, including the requirements that a minimum Exit Value per share in excess of $92 is achieved and that the Kelso entities achieve the 17% Investor Return) regardless of your continued employment with WDS after the sale. A copy of the resolution of the Compensation Committee of the Nortek Holdings Board of Directors is enclosed together with a copy of the Stock Option Plan. 3. No payments or arrangements pursuant to paragraphs 1 and 2 above shall be made if you are not employed by WDS (for any reason) on the sale date or you have not committed the necessary time and effort toward the sale of WDS which shall include preparing due diligence materials, preparing presentation material, meeting with potential buyers and otherwise acting in the best interests of the shareholders of WDS. 4. You have also been named by the Ply Gem Industries, Inc. Board of Directors as a participant in the Ply Gem Industries, Inc. Change in Control Severance Benefit Plan for Key Employees, a copy of which is enclosed. The Plan NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 2 provides generally that if you are terminated other than for Cause or there is a material adverse change in your employment during a period of 24 months following the sale of WDS, you shall be paid, for the 24 months following such termination, an annual amount equal to your 2003 base salary plus your 2003 annual performance bonus. (Please refer to the specific language of the plan.) 5. In the event the sale of WDS is not completed on or before March 31, 2004, this letter shall be null, void and have no further effect and any obligation or agreement set forth herein shall immediately terminate even if WDS is sold at some later date. 6. This letter should in no way be viewed as any guarantee of continued employment with WDS. 7. All payments shall be subject to any applicable withholdings and any tax on such amounts shall be your responsibility. It is understood that payments made pursuant to this letter do not create any employment arrangement between any individual and Ply Gem, Nortek or any Nortek subsidiary. Any payments made pursuant to this agreement are not counted toward any pension, 401(k) or other benefit plan of WDS or Nortek. 8. This letter sets forth the entire understanding regarding what payment, if any, shall be made to you upon the sale of WDS except as may be set forth in a written agreement between the parties or contained in written benefit plans available to employees or executives generally. Very truly yours, /s/ Richard L. Bready Richard L. Bready NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 EX-10.11 38 y95660exv10w11.txt LETTER TO BRYAN SEVEINSON EXHIBIT 10.11 ------------- NORTEK RICHARD L. BREADY CHAIRMAN AND CEO October 31, 2003 Bryan Sveinson President CWD Windows and Doors 2008-48th Street SE Calgary Alberta, Canada T2B 2E5 Dear Bryan, This letter describes the terms and conditions of the key employee incentive program for the possible sale of Ply Gem Industries, Inc., including its wholly-owned subsidiaries Variform, Inc., Napco, Inc., Great Lakes Window, Inc., Kroy Buildings Products, Inc. and Thermal-Gard, Inc., and the business of the CWD Windows and Doors Division of Broan-NuTone Canada Inc. (collectively "WDS"). 1. Upon the closing of the sale of WDS, you will be paid by Nortek, Inc. a cash incentive bonus of $200,000, payable on or before the 10th day after Nortek receives payment from the sale. 2. Upon the closing of the sale of WDS: (a) the Class A Options previously granted to you pursuant to the Nortek Holdings, Inc. 2002 Stock Option Plan shall become fully vested; and (b) the Class A and Class B Options previously granted to you shall remain exercisable by you (subject to all other conditions of the Plan, including the requirements that a minimum Exit Value per share in excess of $92 is achieved and that the Kelso entities achieve the 17% Investor Return) regardless of your continued employment with WDS after the sale. A copy of the resolution of the Compensation Committee of the Nortek Holdings Board of Directors is enclosed together with a copy of the Stock Option Plan. 3. No payments or arrangements pursuant to paragraphs 1 and 2 above shall be made if you are not employed by WDS (for any reason) on the sale date or you have not committed the necessary time and effort toward the sale of WDS which shall include preparing due diligence materials, preparing presentation material, meeting with potential buyers and otherwise acting in the best interests of the shareholders of WDS. 4. You have also been named by the Ply Gem Industries, Inc. Board of Directors as a participant in the Ply Gem Industries, Inc. Change in Control Severance 2 Benefit Plan for Key Employees, a copy of which is enclosed. The Plan provides generally that if you are terminated other than for Cause or there is a material adverse change in your employment during a period of 24 months following the sale of WDS, you shall be paid, for the 24 months following such termination, an annual amount equal to your 2003 base salary plus your 2003 annual performance bonus. (Please refer to the specific language of the plan.) 5. In the event the sale of WDS is not completed on or before March 31, 2004, this letter shall be null, void and have no further affect and any obligation or agreement set forth herein shall immediately terminate even if WDS is sold at some later date. 6. This letter should in no way be viewed as any guarantee of continued employment with WDS. 7. All payments shall be subject to any applicable withholdings and any tax on such amounts shall be your responsibility. It is understood that payments made pursuant to this letter do not create any employment arrangement between any individual and Ply Gem, Nortek or any Nortek subsidiary. Any payments made pursuant to this agreement are not counted toward any pension, 401(k) or other benefit plan of WDS or Nortek. 8. This letter sets forth the entire understanding regarding what payment, if any, shall be made to you upon the sale of WDS except as may be set forth in a written agreement between the parties or contained in written benefit plans available to employees or executives generally. Very truly yours, /s/ Richard L. Bready Richard L. Bready NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600 FAX 401-751-4610 EX-10.12 39 y95660exv10w12.txt SEPARATION CONSULTING & NONCOMPETITION AGREEMENT EXHIBIT 10.12 ------------- SEPARATION, CONSULTING AND NONCOMPETITION AGREEMENT This Separation, Consulting and Noncompetition Agreement (hereafter "Agreement") is entered into as of January 5, 2004 by and between John T. Forbis (hereafter "Forbis") and Kroy Building Products, Inc. (hereafter "Company"). In exchange for the mutual promises set forth below and intending to be legally bound hereby, Forbis and the Company hereby agree as follows: 1. Forbis' employment will be terminated on January 5, 2004 (the "Termination Date"). Forbis will be paid his salary (less usual payroll deductions) through the Termination Date. 2. Forbis agrees that for a period of time commencing on the Termination Date and ending December 31, 2005, he shall provide consulting services relating to the business of the Company pursuant to the following: a maximum of 40 hours per week for a period of three months beginning January 6, 2004; a maximum of 32 hours per week for a period of three months beginning April 6, 2004; a maximum of 16 hours per week for a period of three months beginning July 6, 2004; a maximum of 8 hours per week for a period of three months beginning October 6, 2004; and a maximum of 8 hours per week through 2005, as requested by the Company. Forbis and the Company agree that Forbis will not maintain an office at any Company facility, but will be provided space as needed and that any consulting services requested by the Company are performed by Forbis as an independent contractor and not as an employee of the Company. In exchange for the foregoing consulting services, the Company agrees to pay Forbis, as a non-employee, twenty-four monthly payments in the amount of $21,500 each. The payments will be mailed on the fifteenth day of each month beginning on the later of January 15, 2004 or the day which is one day after the expiration of the Revocation Period (as defined in section 7(b) herein), and ending on December 15, 2005. If the fifteenth day of a particular month is a Saturday, Sunday or Holiday, then the payment that month will be mailed on the first business day after the fifteenth day of the month. Should Forbis breach his obligation to provide consulting services hereunder, the Company, after providing Forbis with at least 30 days notice and an opportunity to cure same, may terminate the consulting arrangement and be relieved of any obligation to make Forbis any further payments hereunder. 3. The Company shall cause the payments made pursuant to paragraph 2 hereunder to be reported to the Internal Revenue Service as income to Forbis on a Form 1099. The Company shall have no responsibility to pay any federal, state or local taxes due on the payments made to Forbis hereunder. Payment of any federal, state or local taxes due on such payments is the exclusive responsibility of Forbis, and Forbis agrees to indemnify and hold the Company harmless from any such taxes, penalties or interest. 4. All fringe benefits of employment (including but not limited to eligibility for bonus and car allowance) cease as of the Termination Date. To the extent Forbis was a participant in any salary investment plan, profit sharing plan, stock option plan or any other similar benefit plan (hereinafter "Plans") during his employment with the Company, any rights, benefits or obligations under such Plans remain governed by the terms of those Plans, and this Agreement is not intended to either enhance or impair whatever rights, benefits or obligations existed as of the Termination Date. 5. PROTECTION OF CONFIDENTIAL INFORMATION AND NON-COMPETITION. Forbis acknowledges and agrees that the Noncompetition Agreement dated as of September 9, 1999 between Forbis and the Company ("Noncompetition Agreement") 2 remains in full force and effect, is fully enforceable and survives the termination of his employment, provided, however, the non-compete term (as set forth in section 2(a) of the Noncompetition Agreement) shall be extended to a period of three years commencing on the earlier of December 31, 2005 or the date in which the consulting arrangement is terminated by the Company pursuant to section 2 of this Agreement. Forbis agrees to comply with and be bound by the terms of the Noncompetition Agreement, as amended herein. 6. GENERAL RELEASE. Full and Final Release of All Claims a. As a material inducement to the Company to enter into this Agreement, Forbis does for himself and for his heirs, representatives, executors, administrators, trustees, guardians, successors and assigns hereby remise, release, settle, discontinue, satisfy and fully and finally forever discharge any and all persons or entities, including without limitation the Company and its past, present and future foreign and/or domestic agents, servants, directors, officers, employees, shareholders, trustees, predecessors, successors, assigns, parents, subsidiaries, divisions, affiliates (including but not limited to Nortek, Inc., PlyGem Industries, Inc., and Variform, Inc.), dealers, distributors, and insurers, and each of their past, present and future foreign and/or domestic agents, servants, directors, officers, employees, shareholders, trustees, predecessors, successors, assigns, parents, subsidiaries, divisions, affiliates, dealers, distributors and insurers (hereinafter collectively referred to as the "Released Parties"), of and from any and all demands, liability, grievances, claims, actions, causes of action, awards, verdicts, judgments, decrees, damages, compensatory damages, punitive 3 damages, delay damages, liquidated damages, attorney's fees, past, present and future wages, fringe benefits and demands of every kind, whether in tort or in contract, or for violation of federal or state law, or otherwise, whether at law or in equity, and whether known or unknown, which Forbis has ever had, now has or may hereafter have arising from any act or omission which occurred before the date on which this Agreement is executed by Forbis. The claims being released hereunder include, but are not limited to, claims of negligence, breach of contract, wrongful discharge, violation of federal, state and local laws which prohibit discrimination and/or retaliation on the basis of race, color, national origin, religion, sex, age, and disability, including, but not limited to, the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq., and the Older Workers Benefits Protection Act, as amended, 29 U.S.C. Sections 629 et seq. (hereafter referred to as "OWBPA"), claims under Nebraska's Wage Payment and Collection Law, claims growing out of any legal restrictions on the Company's right to terminate its employees, claims arising directly or indirectly from Forbis' employment with, or termination by, the Company (including, but not limited to, any claims relating to wages, fringe benefits, severance pay, overtime pay, etc.). Forbis further agrees that he will not file a lawsuit, grievance, charge or claim against the Company, or against any of the other Released Parties, based on any act or omission which occurred before the date on which this Agreement is executed by Forbis. b. As a material inducement to Forbis to enter into this Agreement, the Company does for itself and its past, present and future foreign and/or domestic agents, servants, directors, officers, employees, shareholders, trustees, predecessors, 4 successors, assigns, parents, subsidiaries, divisions, affiliates (including but not limited to Nortek, Inc., PlyGem Industries, Inc. and Variform, Inc.), dealers, distributors, and insurers, and each of their past, present and future foreign and/or domestic agents, servants, directors, officers, employees, shareholders, trustees, predecessors, successors, assigns, parents, subsidiaries, divisions, affiliates, dealers, distributors and insurers hereby remise, release, settle, discontinue, satisfy and fully and finally forever discharge Forbis and his heirs, representatives, executors, administrators, trustees, guardians, successors and assigns of and from any and all demands, liability, grievances, claims, actions, causes of action, awards, verdicts, judgments, decrees, damages, compensatory damages, punitive damages, delay damages, liquidated damages, attorney's fees, and demands of every kind, whether at law or in equity, and whether known or unknown, which the Company has ever had, now has or may hereafter have arising from any act or omission which occurred before the date on which this Agreement is executed by the Company. c. Notwithstanding the terms of this General Release, this Agreement shall not impair the right of either Forbis or the Company to receive the performances promised hereunder. Forbis and the Company reserve the right to commence a lawsuit against the other to enforce the terms of this Agreement and/or to seek monetary and/or equitable relief for its non-performance. Moreover, Forbis and the Company further agree that, if a lawsuit is commenced by either (or both) of them against the other to enforce the terms of this Agreement and/or to seek monetary and/or equitable relief for its non-performance, then within sixty (60) days of the date judgment is entered the party against whom judgment is entered shall pay, over and above the amount of any judgment, the 5 prevailing party's reasonable attorney's fees and defense costs. In the event that such lawsuit is settled or discontinued by consent of both parties prior to judgment, or in the event that judgments are entered against both parties, then neither party is the prevailing party hereunder, and Forbis and the Company shall each bear their own attorney's fees and defense costs. 7. OWBPA REPRESENTATIONS OF FORBIS. a. Forbis makes the following representations to the Company, each of which is an important consideration to the Company's willingness to enter into this Agreement with Forbis: i. The payments and other benefits which the Company has agreed to provide, as stated above, are payments and benefits to which Forbis would not necessarily be entitled were it not for this Agreement. ii. Forbis is aware that federal, state, and local laws prohibit discrimination against employees because of their race, color, religion, sex, age, national origin, disability, and otherwise and that an employee who believes that he has been discriminated against for any of these reasons has a right to file a lawsuit or to initiate other legal proceedings against his employer and to recover damages if it is proved that the employer violated any one of these laws; iii. Forbis is aware that, by signing this Agreement, which includes a General Release, he is giving up any right to 6 recover damages or to obtain any other relief for himself from the Company and the other entities and persons described in paragraph 6 above (i.e. , the Released Parties) not only on the basis of the discrimination laws mentioned above, but also for any and all other claims or causes of action which Forbis has or believes that he has based upon any event which occurred as a result of or in connection with his employment with or termination of employment by the Company; iv. No promises or representations except those contained in this Agreement have been made to Forbis in connection with the termination of his employment; v. Forbis has read and understands each and every provision in this Agreement; vi. Forbis has not filed any charge, claim or complaint with a court or administrative agency against the Company, or any of the other entities and persons described in paragraph 7 above (i.e., the Released Parties) before the date he signed this Agreement; and vii. Forbis represents that he has not previously assigned or transferred, or purported to assign or transfer, to any person or entity, any claim released by him under this Agreement or any portion thereof or interest therein. 7 b. Forbis also acknowledges and agrees that he has been advised by the Company to review this Agreement with his attorney, that he has the opportunity to have twenty-one (21) days from the date of his receipt of this Agreement to consider executing it, and that he has the opportunity to revoke this Agreement by giving written notice to the Company (c/o Lee D. Meyer, President and CEO PlyGem Industries, Inc.) within seven (7) days (the "Revocation Period") following the date of his execution of this Agreement. If this Agreement is executed by Forbis before the expiration of 21 days from the date of his receipt of the Agreement, Forbis acknowledges and agrees that this act was knowing and voluntary and done with the understanding that he could have considered the Agreement for the full 21 days before signing. Forbis understands and agrees that the Agreement, including the rights to any payments hereunder, is not effective or enforceable until the seven (7) day revocation period following the date of execution has expired. 8. Forbis further agrees not to seek employment or reemployment with the Company or any parent, subsidiary, related company, division or affiliate of the Company (including without limitation Nortek, Inc., PlyGem Industries, Inc., Napco, Inc. and Variform, Inc.). Moreover, should Forbis ever attempt to seek such employment or reemployment, Forbis agrees that Forbis' application or request for employment may be rejected and that there shall be no obligation to give Forbis' application or request for employment any consideration whatsoever before rejecting the same. 9. Forbis also expressly agrees to release the Company and to indemnify and hold harmless the Company from any and all damages, losses, demands, claims, liability, actions, awards, verdicts, judgments, decrees, costs, penalties, expenses, and counsel fees 8 by any person or entity claiming any subrogation interest, lien or other interest in the payments made to Forbis hereunder. 10. Forbis and the Company expressly understand and agree that this Agreement is a compromise of a doubtful and disputed claim and that the aforesaid payments to Forbis are not in any way to be construed as an admission by the Company of liability or fault of any kind to Forbis or to anyone else, all such liability or fault being expressly denied by the Company. 11. CONFIDENTIALITY AGREEMENT. Forbis agrees that, to the extent consistent with any legal, regulatory, statutory, ethical, tax and/or fiduciary obligations and duties, and except as may be necessary to implement and to give full force and effect to this Agreement, Forbis shall keep both the fact of the payments by the Company and the amount of those payments strictly confidential, and shall not disclose this information to any other person or entity. Forbis further agrees that if and when he ever intends to disclose the fact and/or the amount of the payments to him by the Company, whether such intended disclosure be voluntary or in response to legal compulsion or process (for example, a subpoena, a search warrant or a court order), Forbis shall notify the Company orally and in writing at least fourteen (14) days in advance of the date of the intended disclosure. 12. Forbis and the Company further agree that they will not in any manner, directly or indirectly, disparage the other to any person or entity, including but not limited to current and former employees of the Company, current and former customers of the Company, and competitors of the Company. 9 13. Forbis and the Company agree that this Agreement shall be construed according to the laws of the State of Nebraska. 14. This Agreement shall become effective upon the execution hereof by both parties. Forbis and the Company expressly agree that this Agreement may be executed in duplicate originals, and that a true and correct copy of this Agreement shall be considered as effective for any purpose as if it were the original. 15. Forbis and the Company understand and agree that this Agreement contains all of the terms of the Agreement between them. Forbis and the Company further represent that they have carefully read this entire Agreement, that the terms thereof have been explained to them by their own attorneys, and that they understand its content and effect. Forbis and the Company further acknowledge that they understand that by signing this agreement, they have released specific rights against each other. 16. Forbis shall be entitled to the incentives outlined in the letter from Richard L. Bready, Chairman and CEO of Nortek, Inc., dated October 31, 2003 notwithstanding the requirement in section 3 of such letter that Forbis be employed by WDS on the sale date. All other terms and conditions in such letter, including but not limited to the other conditions in section 3 of such letter, shall remain in full force and effect. 10 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have hereunto set their hands and seals on the dates indicated below. WITNESS: - ---------------------------------- ---------------------------------- Print Name: JOHN T. FORBIS ----------------------- Address: Date: 1/19/04 -------------------------- --------------------- NORTEK, INC. KROY BUILDING PRODUCTS, INC. - ---------------------------------- ---------------------------------- Richard L. Bready Lee Meyer Chairman of the Board, CEO & President President & CEO, Ply Gem Norteck, Inc. Industries, Inc. Date: 1/19/04 Date: 1/19/2003 11 EX-10.13 40 y95660exv10w13.txt DEBT FINANCING ADVISORY AGREEMENT EXHIBIT 10.13 ------------ EXECUTION COPY DEBT FINANCING ADVISORY AGREEMENT DEBT FINANCING ADVISORY AGREEMENT (this "AGREEMENT"), dated as of February 12, 2004, between PLY GEM INDUSTRIES, INC., a Delaware corporation (the "COMPANY") and CXCIC LLC, a Delaware limited liability company ("CIC"). WHEREAS, pursuant to a Stock Purchase Agreement, dated as of December 19, 2003 (the "STOCK PURCHASE AGREEMENT"), among Ply Gem Investment Holdings, Inc., f/k/a CI Investment Holdings, Inc., (the "PARENT"), Nortek, Inc. and WDS LLC (together with Nortek, Inc., the "SELLERS"), the Sellers have agreed to sell, upon the terms and subject to the conditions set forth therein, all of the outstanding shares of stock of the Company to the Parent (the "ACQUISITION"); and WHEREAS, all capitalized terms used in this Agreement but not otherwise defined herein shall have the meaning ascribed to them in the Stock Purchase Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. SERVICES AND COMPENSATIONSECTION 2.. In consideration of the services provided by CIC in connection with the debt financing for the Acquisition, immediately upon the Closing, the Company shall pay to CIC a debt financing arrangement and advisory fee equal to 2.375% of aggregate amount of such debt financing (or $11,400,000). SECTION 2. REIMBURSEMENT. Upon the request of CIC and/or its Affiliates, the Company shall promptly reimburse CIC and/or its Affiliates for all reasonable out-of-pocket expenses (including, without limitation, legal, accounting, consulting and travel fees and expenses) incurred in connection with the performance of this Agreement (other than salary expenses and associated overhead charges). SECTION 3. TERMINATION. If the Stock Purchase Agreement is terminated prior to the Closing, this Agreement shall immediately terminate and be of no further force or effect. SECTION 4. INDEMNITY AND EXCULPATION.(a) None of CIC, any of its Affiliates or any of their respective partners, members, officers, directors, stockholders, Affiliates, agents or employees (each, an "INDEMNIFIED PARTY") shall have any liability to the Company for any services provided pursuant to this Agreement, except as may result from such Indemnified Party's gross negligence or willful misconduct. (b) The Company hereby agrees to indemnify each Indemnified Party from and against all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, without limitation, interest, penalties and reasonable fees, expenses and disbursements of 2 attorneys, experts, personnel and consultants reasonably incurred by such Indemnified Party in any action or proceeding between the Company and such Indemnified Party or between such Indemnified Party and any third party, or otherwise) based upon, arising out of, or otherwise in respect of, this Agreement or any Indemnified Party's equity interest (whether direct or indirect) in the Company. To the extent that the foregoing indemnification is not permitted by law, each of the Indemnified Parties and the Company shall be subject and entitled to contribution based upon the relative benefits (not to exceed in any event the amount of fees paid to CIC hereunder) received by each and, if legally required, based upon the relative fault of each of the Indemnified Parties and the Company. SECTION 5. ASSIGNMENT. This Agreement may not be assigned by either party hereto without the prior written consent of the other party; PROVIDED, that the Company shall be entitled to assign this Agreement to any Person that is an Affiliate of the Company or that otherwise assumed or is a successor to substantially all of the assets and the liabilities of the Company. SECTION 6. MODIFICATION. This Agreement may not be modified or amended in any manner other than by an instrument in writing signed by both parties hereto, or their respective successors or assigns. SECTION 7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior agreement or understanding among them with respect to such subject matter. SECTION 8. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid and return receipt requested. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission or, if mailed, five days after the date of deposit in the United States mails, as follows: (a) if to CIC, to: CxCIC LLC c/o Caxton-Iseman Capital, Inc. 500 Park Avenue, 8th Floor New York, NY 10022 Attention: Frederick Iseman Telephone: (212) 752-1850 Facsimile: (212) 832-9450 3 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019 Attention: Carl L. Reisner, Esq. Telephone: (212) 373-3017 Facsimile: (212) 373-2085 (b) if to the Company, to: Ply Gem Industries, Inc. 303 West Major Street Kearney, MO 64060 Attention: Shawn K. Poe Telephone: (800) 800-2244 Facsimile: (816) 903-4330 Any party may, by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder. SECTION 9. GOVERNING LAW; SUBMISSION TO JURISDICTION. All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the internal law (and not the law of conflicts) of the State of New York. SECTION 10. COUNTERPARTS. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original all of which taken together shall constitute one and the same instrument. [Signature page follows] 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: CXCIC LLC By: /s/ Frederick Iseman --------------------------------------- Name: Frederick Iseman Title: EX-10.14 41 y95660exv10w14.txt GENERAL ADVISORY AGREEMENT EXHIBIT 10.14 ------------- EXECUTION COPY ADVISORY AGREEMENT ADVISORY AGREEMENT (this "AGREEMENT"), dated as of February 12, 2004, between PLY GEM INDUSTRIES, INC., a Delaware corporation (the "COMPANY") and CXCIC LLC, a Delaware limited liability company ("CIC"). WHEREAS, pursuant to a Stock Purchase Agreement, dated as of December 19, 2003 (the "STOCK PURCHASE AGREEMENT"), among Ply Gem Investment Holdings, Inc., f/k/a CI Investment Holdings, Inc., (the "PARENT"), Nortek, Inc. and WDS LLC (together with Nortek, Inc., the "SELLERS"), the Sellers have agreed to sell, upon the terms and subject to the conditions set forth therein, all of the outstanding shares of stock of the Company to the Parent (the "ACQUISITION"); WHEREAS, simultaneously with the execution and delivery of this Agreement, the Parent, through its wholly owned subsidiary, Ply Gem Holdings, Inc., is consummating the Acquisition; WHEREAS, the Company desires for CIC to provide certain ongoing advisory and management services to the Company, and CIC is willing to provide such services subject to the terms and conditions contained herein; and WHEREAS, all capitalized terms used in this Agreement but not otherwise defined herein shall have the meaning ascribed to them in the Stock Purchase Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. SERVICES. During the term of this Agreement, CIC shall provide such acquisition and financial advisory services to the Company and its subsidiaries as the Board of Directors of the Company shall reasonably request, including without limitation: general executive and management services; assistance with the identification, support, negotiation and analysis of acquisitions and dispositions; assistance with the support, negotiation and analysis of financial alternatives; and human resource functions. SECTION 2. COMPENSATION. (a) In consideration of the services to be provided in accordance with Section 1, but subject to Sections 2(d) and 2(e), the Company shall pay to CIC, for each fiscal year of the Company, an advisory fee (the "ANNUAL FEE") equal to 2% of the Company's EBITDA (as defined below) for such fiscal year. The Annual Fee shall be pro rated for partial years. The Annual Fee for each fiscal year shall be paid in 12 installments, payable on or before the 10th day of each month (other than the first month) of such fiscal year and the first month of the next fiscal year, in an amount equal to 2% of the Company's EBITDA for the previous month. Notwithstanding the foregoing, at the election of either CIC or the Company, the Annual Fee for such fiscal 2 year may be paid in one installment in an amount equal to 99% of the estimated Annual Fee for such fiscal year (the "ESTIMATED DISCOUNTED ANNUAL FEE"), payable at any time on or after the Closing, in the case of the Annual Fee for fiscal year 2004, and on or before the first day of the last month of the Company's preceding fiscal year, in the case of the Annual Fee for each fiscal year after fiscal year 2004; PROVIDED, HOWEVER, that if it is determined after the calculation of the Company's EBITDA for such fiscal year that the amount of such payment is less than or greater than 99% of the actual Annual Fee for such fiscal year (the "ACTUAL DISCOUNTED ANNUAL FEE"), then (i) if the Actual Discounted Annual Fee is greater than the Estimated Discounted Annual Fee, the Company shall pay to CIC an amount equal to such difference, and (ii) if the Estimated Discounted Annual Fee is greater than the Actual Discounted Annual Fee, CIC shall return to the Company an amount equal to such difference, in each case, within 10 business days of such determination. (b) Upon the acquisition by the Company of any business or entity, or similar transactions with respect to which CIC provides services, the Company shall pay to CIC a transaction fee equal to 2% of the purchase or sale price, as applicable. Upon the divestiture by the Company of any business or entity, or similar transactions with respect to which CIC provides services, the Company shall pay to CIC a transaction fee equal to 1% of the purchase or sale price, as applicable. (c) Upon the completion of a merger, consolidation or other business combination of the Company with and into a third party, or a sale of all or substantially all of the stock of the Company or any of its direct or indirect parent companies to a third party, or a sale of all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis, the Company shall pay to CIC a transaction fee equal to 1% of the sale price. (d) CIC shall not be entitled to the Annual Fee with respect to the first fiscal year of the Initial Term unless (i) the Company's debt-to-EBITDA ratio for the last twelve months then ended is less than 5.20:1 or (ii) the Company's EBITDA for the last twelve months then ended is at least $85.5 million; PROVIDED, HOWEVER, that if it is determined that as of December 31, 2005 (i) the Company's debt-to-EBITDA ratio for the last twelve months then ended is less than 5.20:1 or (ii) the Company's EBITDA for the last twelve months then ended is at least $85.5 million, any unpaid installment of the Annual Fee with respect to the first fiscal year of the Initial Term shall be paid within 10 business days of such determination. (e) The Annual Fee payable in any fiscal year shall not exceed the amounts permitted under the Credit Agreement, dated as of the date hereof, among the Company, the guarantors party thereto, the lenders party thereto, UBS Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers and bookrunners, CIBC World Markets Corp. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-arrangers, UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent, UBS Loan Finance LLC, as swingline lender, Deutsche Bank AG Cayman Islands Branch, as syndication agent, and Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation, as co-documentation agents 3 (as amended, the "CREDIT AGREEMENT") or under the Indenture, dated as of February 12, 2004, governing the Company's [__]% Senior Subordinated Notes due 2012 (as amended, the "INDENTURE"). If at any time an Event of Default has occurred and is continuing under either the Credit Agreement or the Indenture and the Estimated Discounted Annual Fee has been paid for the fiscal year in which such Event of Default has occurred, CIC shall promptly return to the Company an amount equal to the product of (x) the amount of such Estimated Discounted Annual Fee and (y) a fraction, the numerator of which is the number of months remaining in such fiscal year (including the month in which such Event of Default has occurred) and the denominator of which is 12. Notwithstanding anything to the contrary set forth in this Section 2(e), on the first day in any fiscal year upon which the full amount of the Annual Fee payable with respect to such fiscal year shall be permitted to be paid, such full amount shall be paid, and upon the first day upon which any partial amount of the Annual Fee that would have been payable with respect to any prior fiscal year except for the provisions of this Section 2(e), such partial amount shall be paid. (f) As used in this Section 2, the following terms shall have the following meanings: (i) "COMMON PHANTOM ADDITIONAL UNIT" shall have the meaning specified in the Phantom Stock Plan. (ii) "EBITDA" for a specified fiscal period means consolidated net income (loss) of the Company (x) plus, to the extent deducted in computing such consolidated net income (loss), (1) an amount equal to any extraordinary loss and/or any net capital loss realized, (2) provision for taxes based on income or profits, (3) consolidated interest expense whether paid or accrued and whether or not capitalized (including amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with indebtedness (including costs associated with letters of credit)), (4) depreciation and amortization (including amortization of goodwill, organization costs and any capitalized management fees, overhead allocations, or transaction fees paid to Caxton-Iseman (Ply Gem), L.P. or its Affiliates (the "SPONSOR") (but excluding payments of expense reimbursement or indemnification payments to Sponsor), (5) dividends paid or accrued on preferred stock, (6) any management fees, overhead allocations and transaction fees paid to Sponsor or its Affiliates (but excluding payments of expense reimbursement or indemnification payments to Sponsor), (7) charges related to Common Phantom Additional Units, Preferred Phantom Additional Units and Phantom Incentive Units credited to any account under the Phantom Stock Plan, (8) costs associated with the shut down of the businesses conducted by Thermal-Gard, Inc., (9) severance costs related to John Forbis, (10) items listed on Schedule 1.01(b) of the Credit Agreement and (11) any other items deemed to be unusual or non-recurring by the Company and (y) minus any tax benefit recorded and any extraordinary gain and/or any net capital gain realized, in each case, on a consolidated basis and determined in accordance with GAAP. (iii) "GAAP" means United States generally accepted accounting principles. 4 (iv) "PHANTOM INCENTIVE UNITS" shall have the meaning specified in the Phantom Stock Plan. (v) "PHANTOM STOCK PLAN" means the Phantom Stock Plan of the Company adopted as of the date hereof, as amended or modified from time to time. (vi) "PREFERRED PHANTOM ADDITIONAL UNITS" shall have the meaning specified in the Phantom Stock Plan. SECTION 3. TERM. The initial term of this Agreement shall be ten (10) years (the "INITIAL Term"), subject to Section 4. Upon the expiration of the Initial Term, the term of this Agreement shall be automatically renewed for consecutive one-year extensions unless the Company or CIC provides written notice of termination no fewer than 30 days prior to the end of the current term. SECTION 4. TERMINATION. This Agreement shall terminate: (a) 30 days after the delivery of a written notice by CIC; (b) upon the completion of a merger, consolidation or other business combination of the Company with and into a third party, or a sale of all or substantially all of the stock of the Company or any of its direct or indirect parent companies to a third party, or a sale of all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis; or (c) upon the closing of the initial underwritten public offering of equity securities of the Company or any of its direct or indirect parent companies pursuant to an effective registration statement fled under the Securities Act of 1933, as amended. SECTION 5. FEES UPON TERMINATION. If this Agreement is terminated for any reason prior to the expiration of the Initial Term, the Company shall pay to CIC, concurrently with such termination, an amount equal to the present value of the advisory fee that would otherwise have been payable to CIC in accordance with Section 2(b) through the end of the Initial Term, based on the Company's cost of funds to borrow amounts under the revolving credit facility under the Credit Agreement. SECTION 6. REIMBURSEMENT. Upon the request of CIC and/or its Affiliates, and in any event, prior to the termination of this Agreement, the Company shall promptly reimburse CIC and/or its Affiliates for all reasonable out-of-pocket expenses (including, without limitation, legal, accounting, consulting and travel fees and expenses) incurred in connection with the performance of this Agreement (other than salary expenses and associated overhead charges). 5 SECTION 7. INDEMNITY AND EXCULPATION. (a) None of CIC, any of its Affiliates or any of their respective partners, members, officers, directors, stockholders, Affiliates, agents or employees (each, an "INDEMNIFIED PARTY") shall have any liability to the Company for any services provided pursuant to this Agreement, except as may result from such Indemnified Party's gross negligence or willful misconduct. (b) The Company hereby agrees to indemnify each Indemnified Party from and against all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, without limitation, interest, penalties and reasonable fees, expenses and disbursements of attorneys, experts, personnel and consultants reasonably incurred by such Indemnified Party in any action or proceeding between the Company and such Indemnified Party or between such Indemnified Party and any third party, or otherwise) based upon, arising out of, or otherwise in respect of, this Agreement or any Indemnified Party's equity interest (whether direct or indirect) in the Company. To the extent that the foregoing indemnification is not permitted by law, each of the Indemnified Parties and the Company shall be subject and entitled to contribution based upon the relative benefits (not to exceed in any event the amount of fees paid to CIC hereunder) received by each and, if legally required, based upon the relative fault of each of the Indemnified Parties and the Company. SECTION 8. ASSIGNMENT. This Agreement may not be assigned by either party hereto without the prior written consent of the other party; PROVIDED, that the Company shall be entitled to assign this Agreement to any Person that is an Affiliate of the Company or that otherwise assumed or is a successor to substantially all of the assets and the liabilities of the Company. SECTION 9. MODIFICATION. This Agreement may not be modified or amended in any manner other than by an instrument in writing signed by both parties hereto, or their respective successors or assigns. SECTION 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior agreement or understanding among them with respect to such subject matter. SECTION 11. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid and return receipt requested. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission or, if mailed, five days after the date of deposit in the United States mails, as follows: 6 (a) if to CIC, to: CxCIC LLC c/o Caxton-Iseman Capital, Inc. 500 Park Avenue, 8th Floor New York, NY 10022 Attention: Frederick Iseman Telephone: (212) 752-1850 Facsimile: (212) 832-9450 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019 Attention: Carl L. Reisner, Esq. Telephone: (212) 373-3017 Facsimile: (212) 373-2085 (b) if to the Company, to: Ply Gem Industries, Inc. 303 West Major Street Kearney, MO 64060 Attention: Shawn K. Poe Telephone: (800) 800-2244 Facsimile: (816) 903-4330 Any party may, by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder. SECTION 12. GOVERNING LAW; SUBMISSION TO JURISDICTION. All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the internal law (and not the law of conflicts) of the State of New York. SECTION 13. COUNTERPARTS. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original all of which taken together shall constitute one and the same instrument. [Signature page follows] 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: CXCIC LLC By: /s/ Frederick Iseman --------------------------------------- Name: Frederick Iseman Title: EX-10.15 42 y95660exv10w15.txt TAX SHARING AGREEMENT EXHIBIT 10.15 ------------- EXECUTION COPY TAX SHARING AGREEMENT THIS TAX SHARING AGREEMENT (the "Agreement"), dated as of February 12, 2004 is entered into between Ply Gem Investment Holdings, Inc., a Delaware corporation ("Parent"), Ply Gem Holdings, Inc., a Delaware corporation ("Holdco"), and Ply Gem Industries, Inc., a Delaware corporation ("Opco", and together with Holdco, the "Subsidiaries"). Parent is the common parent corporation of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), that has elected to file consolidated federal income tax returns, and the Subsidiaries are members of such group. Parent and the Subsidiaries desire to set forth in this Agreement their agreement as to certain matters relating to the inclusion of the Subsidiary Consolidated Group (as defined below) in the Parent Consolidated Group (as defined below), including the allocation of tax liabilities for years in which the Subsidiaries are so included, and certain other matters relating to taxes. The parties agree as follows: 1. DEFINITIONS. "Adjustment" shall have the meaning set forth in Section 8. "Agreement Year" shall mean any taxable year beginning on or after February 12, 2004 during which the Subsidiary Consolidated Group is included in the Parent Consolidated Group. "Balance Payment" shall have the meaning set forth in Section 4. "Code" shall have the meaning set forth above. "Estimated Income Tax Payments" shall have the meaning set forth in Section 4. "Final Determination" shall mean the final resolution of any tax matter, including, but not limited to, a closing agreement with the IRS or the relevant state, local or foreign taxing authority, a claim for refund which has been allowed, a deficiency notice with respect to which the period for filing a petition with the Tax Court or the relevant state, local or foreign tribunal has expired, or a decision of competent jurisdiction that is not subject to appeal or as to which the time for appeal has expired. "IRS" shall mean the Internal Revenue Service. "Parent" shall have the meaning set forth above. "Parent Consolidated Group" shall mean the affiliated group of corporations (including any predecessors and successors thereto) within the meaning of Section 1504(a) of the Code electing to file consolidated federal income tax returns and of which Parent is the common parent. "Parent Consolidated Return" shall have the meaning set forth in Section 2. "Post-Consolidation Year" shall have the meaning set forth in Section 6 of this Agreement. "Pro Forma Subsidiary Attribute" shall have the meaning set forth in Section 5. "Pro Forma Subsidiary Return" shall have the meaning set forth in Section 3. "Records" shall have the meaning set forth in Section 8. "Regulations" shall mean the Treasury regulations promulgated under the Code. "Total Periodic Payments" shall have the meaning set forth in Section 4. "Subsidiaries" shall have the meaning set forth above. "Subsidiary Consolidated Group" shall mean the affiliated group of corporations (including any predecessors and successors thereto) within the meaning of Section 1504(a) of the Code, of which Holdco would be the common parent if it were not included in the Parent Consolidated Group. "Subsidiary Return Items" shall have the meaning set forth in Section 8. "Subsidiary Tax Package" shall have the meaning set forth in Section 7. 2. FILING OF CONSOLIDATED RETURNS AND PAYMENT OF CONSOLIDATED TAX LIABILITY. For all taxable years in which Parent files consolidated federal income tax returns (any such return of the Parent Consolidated Group for any taxable year, a "Parent Consolidated Return") and is entitled to include the Subsidiary Consolidated Group in such returns, Parent shall include the Subsidiary Consolidated Group in the consolidated federal income tax returns that it files as the common parent corporation of the Parent Consolidated Group. Parent, the Subsidiaries and the other members of the Parent Consolidated Group shall file any and all consents, elections or other documents and take any other actions necessary or appropriate to effect the filing of such federal income tax returns. For all taxable years in which the Subsidiary Consolidated Group is included in the Parent Consolidated Group, Parent shall pay the entire federal income tax liability of 2 the Parent Consolidated Group and shall indemnify and hold harmless the Subsidiaries and each member of the Subsidiary Consolidated Group against any such liability; provided, however, that the Subsidiaries shall make payments to Parent or receive payments from Parent as provided in this Agreement for any Agreement Year. 3. PRO FORMA SUBSIDIARY RETURN. For each Agreement Year, Parent shall prepare a pro forma federal income tax return for the Subsidiary Consolidated Group (a "Pro Forma Subsidiary Return"). Except as otherwise provided in this Agreement, the Pro Forma Subsidiary Return for each Agreement Year shall be prepared as if Holdco filed a consolidated federal income tax return on behalf of the Subsidiary Consolidated Group for such taxable period. The Pro Forma Subsidiary Return shall reflect any carryovers of net operating losses, net capital losses, excess tax credits, or other tax attributes from prior Pro Forma Subsidiary Returns (excluding those attributes that are carried back pursuant to Section 5) that could have been utilized by the Subsidiary Consolidated Group if the Subsidiary Consolidated Group had never been included in the Parent Consolidated Group and all Pro Forma Subsidiary Returns had been filed as actual returns. The Pro Forma Subsidiary Return shall be prepared in a manner that reflects all elections, positions and methods used in the Parent Consolidated Return that must be applied on a consolidated basis and otherwise shall be prepared in a manner consistent with the Parent Consolidated Return. The provisions of the Code that require consolidated computations, such as Sections 861, 1201-1212 and 1231, shall be applied separately to the Subsidiary Consolidated Group as if the Subsidiary Consolidated Group and the Parent Consolidated Group (excluding the members of the Subsidiary Consolidated Group) were separate affiliated groups, except that the Pro Forma Subsidiary Return prepared for the last taxable year, or portion thereof, during which the Subsidiary Consolidated Group is included in the Parent Consolidated Return shall also include any gains or losses of the members of the Subsidiary Consolidated Group on transactions within the Subsidiary Consolidated Group that must be taken into account pursuant to Section 1.1502-13 of the Regulations and reflected on the Parent Consolidated Return when the Subsidiary Consolidated Group ceases to be included in the Parent Consolidated Return. For each Agreement Year, Section 1.1502-13 of the Regulations shall be applied as if the Subsidiary Consolidated Group were not a member of the Parent Consolidated Group. For purposes of the Agreement, all determinations made as if the Subsidiary Consolidated Group had never been included in the Parent Consolidated Group and as if all Pro Forma Subsidiary Returns were actual returns shall reflect any actual short taxable years resulting from the Subsidiary Consolidated Group joining or leaving the Parent Consolidated Group. 4. TAX PAYMENTS. (a) ESTIMATED INCOME TAX PAYMENTS. For each Agreement Year, the Subsidiaries shall make periodic payments ("Estimated Income Tax Payments") to Parent in such amounts, that, combined, shall be equal to the estimated tax payments that would be payable by the Subsidiary Consolidated Group if it were not included in the Parent Consolidated Group, no later than the dates on which such estimated tax payments would be 3 due from the Subsidiary Consolidated Group if it were not included in the Parent Consolidated Group. (b) BALANCE PAYMENT. For each Agreement Year, the Subsidiaries shall pay to Parent an amount equal to the tax payment that would be payable by the Subsidiary Consolidated Group if it were not included in the Parent Consolidated Group, no later than March 15 of the following year (the "Balance Payment"). (c) PAYMENTS BASED ON PRO FORMA SUBSIDIARY RETURN. For each Agreement Year, the Subsidiaries shall pay to Parent, no later than the date on which a Parent Consolidated Return is filed for such Agreement Year, an amount equal to the sum of (i) the federal income tax liability shown on the corresponding Pro Forma Subsidiary Return prepared for such Agreement Year and (ii) the additions to tax, if any, under Section 6655 of the Code that would have been imposed on the Subsidiary Consolidated Group (treating the amount due to Parent under (i) above as its federal income tax liability and treating any Estimated Income Tax Payments to Parent pursuant to clause (a) as estimated payments under Section 6655 of the Code) and which result from the inaccuracy of any information provided by the Subsidiaries to Parent pursuant to Section 7 hereof or from the failure of the Subsidiaries to provide any requested information, reduced by (iii) the sum for such Agreement Year of the amount of the Estimated Income Tax Payments and the Balance Payment (collectively, the "Total Periodic Payments"), plus (iv) any interest and additions to tax (other than under Section 6655 of the Code) that would be due under the Code if the Total Periodic Payments were actual payments of tax. If the Total Periodic Payments to Parent for any Agreement Year exceed the amount of the liability of the Subsidiaries for such Agreement Year under the preceding sentence, Parent shall pay to Holdco an amount equal to such excess within 10 days after filing the Parent Consolidated Return for such Agreement Year. For purposes of this Agreement, the term "federal income tax liability" includes the tax imposed by Sections 11, 55 and 59A of the Code, or any successor provisions to such Sections. Parent shall notify the Subsidiaries of any amounts due from the Subsidiaries to Parent pursuant to this Section 4 at least 5 business days prior to the date such payments are due, and such payments shall not be considered due until the later of the due date described above or the fifth day after Parent gives such notice. 5. LOSSES; REFUNDS. If a Pro Forma Subsidiary Return for any Agreement Year reflects a net operating loss, net capital loss, excess tax credit or other tax attribute (a "Pro Forma Subsidiary Attribute"), which attribute is actually utilized in a Parent Consolidated Return (including any amendments thereto), then, within 30 days after the date such Pro Forma Subsidiary Attribute is actually realized in cash (whether directly or by offset), Parent shall pay to Holdco an amount equal to the refund that the Subsidiary Consolidated Group would have received as a result of the carryback of such Pro Forma Subsidiary Attribute to a Pro Forma Subsidiary Return for any prior Agreement Year or Years, assuming that all Pro Forma Subsidiary Returns had been filed as actual returns and that the Subsidiary Consolidated Group had filed returns as a separate affiliated 4 group for all prior taxable years. All calculations of deemed refunds pursuant to this Section 5 shall include interest computed as if the Subsidiary Consolidated Group had filed a claim for refund or an application for a tentative carryback adjustment pursuant to Section 6411(a) of the Code on the date on which the relevant Parent Consolidated Return is filed. 6. PAYMENTS FOR TAXABLE YEARS IN THE EVENT OF DECONSOLIDATION. (a) PAYMENTS BY THE SUBSIDIARIES TO PARENT. If for any taxable year after the Subsidiary Consolidated Group ceases to be included in the Parent Consolidated Group (a "Post-Consolidation Year"), (i) the federal income tax liability of the Subsidiary Consolidated Group is less than the federal income tax liability that would have been imposed with respect to the same period if the Subsidiary Consolidated Group had not been included in the Parent Consolidated Group for any Agreement Year and all Pro Forma Subsidiary Returns had been actual returns for such years, or (ii) the federal income tax liability of the Parent Consolidated Group is greater than the federal income tax liability that would have been imposed with respect to the same period if the Subsidiary Consolidated Group had not been included in the Parent Consolidated Group for any Agreement Year and all Pro Forma Subsidiary Returns had been actual returns for such years, then, to the extent that the Subsidiaries have not already made a payment to Parent for utilization of the tax attributes that gave rise to the decrease or increase described in (i) or (ii), the Subsidiaries shall pay to Parent an amount equal to such decrease or increase within 10 days of the filing of Subsidiary Post-Consolidation Year return. In the event that there is both a decrease and an increase described in (i) and (ii), respectively, of the previous sentence for any Post-Consolidation Year, then the Subsidiaries shall make a payment to Parent in an amount equal to the sum of such decrease and increase, unless such decrease and increase (or any portion thereof) result from utilization of the same tax attribute(s), in which case the amount of the payment will be reduced accordingly. (b) PAYMENTS BY PARENT TO THE SUBSIDIARIES. If for any Post-Consolidation Year (i) the federal income tax liability of the Subsidiary Consolidated Group is greater than the federal income tax liability that would have been imposed with respect to the same period if the Subsidiary Consolidated Group had not been included in the Parent Consolidated Group for any Agreement Year and all Pro Forma Subsidiary Returns had been actual returns for such years, or (ii) the federal income tax liability of the Parent Consolidated Group is less than the federal income tax liability that would have been imposed with respect to the same period if the Subsidiary Consolidated Group had not been included in the Parent Consolidated Group for any Agreement Year and all Pro Forma Subsidiary Returns had been actual returns for such years, then, to the extent that Parent has not already made a payment to the Subsidiaries for utilization of the tax attributes that gave rise to the increase or decrease described in (i) or (ii), Parent shall pay to Holdco an amount equal to such increase or decrease within 10 days of notification by Holdco to Parent of the filing of Subsidiary Post-Consolidation Year return. In the event that there is both an increase and a decrease described in (i) and (ii), respectively, of the 5 previous sentence for any Post-Consolidation Year, then Parent shall make a payment to Holdco in an amount equal to the sum of such increase and decrease, unless such increase and decrease (or any portion thereof) result from utilization of the same tax attribute(s), in which case the amount of the payment will be reduced accordingly. (c) DOCUMENTATION. Prior to the payment of any amounts due pursuant to this Section 6, the parties shall exchange such information and documentation as is reasonably satisfactory to each of them in order to substantiate the amounts due pursuant to this Section 6. Any disputes as to such amounts and documentation that cannot be resolved prior to the date on which a payment is due shall be referred to an independent accounting firm whose fees shall paid one-half by Holdco and one-half by Parent. (d) POST-CONSOLIDATION YEAR CARRYBACKS. (i) If a Subsidiary Consolidated Group federal income tax return for any Post-Consolidation Year reflects a net operating loss, net capital loss, excess tax credits, or any other tax attribute, whether or not the Subsidiaries waive the right to carryback any such attribute to a Parent Consolidated Return, no payment with respect to such carrybacks shall be due from Parent. (ii) If a Parent Consolidated Return for any Post-Consolidation Year reflects a net operating loss, net capital loss, excess tax credits, or any other tax attribute, such attribute may be carried back to Parent Consolidated Return for an Agreement Year, and Parent shall be entitled to retain (without any obligation to reimburse the Subsidiaries) the full amount of any refund received in connection therewith. In the event that either of the Subsidiaries (or any other member of the Subsidiary Consolidated Group) receive any refund with respect to an Agreement Year issued in connection with a carryback of a Parent Consolidated Group tax attribute from a Post-Consolidation Year to a Parent Consolidated Return for an Agreement Year, such Subsidiary (or member of the Subsidiary Consolidated Group) shall promptly pay the full amount of such refund to Parent. (e) NO DUPLICATION OF PAYMENT. Notwithstanding anything to the contrary herein, neither Section 5(a) nor Section 5(b) shall require the Subsidiaries or Parent, as the case may be, to make any payment pursuant to such section to the extent that the payment is attributable to a tax attribute for which payment has previously been made pursuant to Section 4. 7. PREPARATION OF TAX PACKAGE AND OTHER FINANCIAL REPORTING INFORMATION. The Subsidiaries shall provide to Parent, in a format determined by Parent, all information requested by Parent as reasonably necessary to prepare the Parent Consolidated Return and the Pro Forma Subsidiary Return (the "Subsidiary Tax Package"). The Subsidiary Tax Package with respect to any taxable year shall be provided to Parent on a basis consistent with practices of the Parent Consolidated Group. 6 The Subsidiaries shall also provide to Parent information required to determine the Total Periodic Payments, current federal taxable income, current and deferred tax liabilities, tax reserve items and any additional current or prior information required by Parent on a timely basis consistent with practices of the Parent Consolidated Group. 8. RETURNS, AUDITS, REFUNDS, AMENDED RETURNS, LITIGATION, ADJUSTMENTS AND RULINGS. (a) RETURNS. Parent shall have exclusive and sole responsibility for the preparation and filing of the Parent Consolidated Returns (including requests for extensions) and any other returns, amended returns and other documents or statements required to be filed with the IRS in connection with the determination of the federal income tax liability of the Parent Consolidated Group. (b) AUDITS; REFUND CLAIMS. Parent will have exclusive and sole responsibility and control with respect to the conduct of IRS examinations of the returns filed by the Parent Consolidated Group and any refund claims with respect to such returns, including without limitation the right to select counsel, the right to determine the court or other body in which any contest shall be brought, the right to determine whether to contest a proposed deficiency or to pay a tax and sue for a refund and the right to determine whether and how to appeal any adverse determination . The Subsidiaries shall assist and cooperate with Parent during the course of any such proceeding. Parent shall give Holdco notice of and consult with Holdco with respect to any issues relating to items of income, gain, loss, deduction or credit of the Subsidiaries (or any other member of the Subsidiary Consolidated Group) (any such items, "Subsidiary Return Items"). Parent shall not settle or otherwise compromise any Subsidiary Return Item that would result in additional liability for the Subsidiaries under this Agreement without the written consent of Holdco, which consent shall not be unreasonably withheld. If Holdco does not respond to Parent's request for consent within 30 days, Holdco shall be deemed to have consented. (c) LITIGATION. If the federal income tax liability of the Parent Consolidated Group becomes the subject of litigation in any court, the conduct of the litigation shall be controlled exclusively by Parent. The Subsidiaries shall assist and cooperate with Parent during the course of litigation, and Parent shall consult with Holdco regarding any issues relating to Subsidiary Return Items. (d) EXPENSES. The Subsidiaries shall reimburse Parent for all reasonable out-of-pocket expenses (including, without limitation, legal, consulting and accounting fees) in the course of proceedings described in paragraphs (b) and (c) of this Section 8, to the extent such expenses are reasonably attributable to Subsidiary Return Items for any Agreement Year. (e) RECALCULATION OF PAYMENTS TO REFLECT ADJUSTMENTS. To the extent that there is a Final Determination with respect to a Parent Consolidated Return that results in a change in an item relating to such return (an "Adjustment") that affects the treatment of a Subsidiary Return Item for an Agreement Year, a corresponding 7 adjustment shall be made to the corresponding Pro Forma Subsidiary Return. All calculations of payments made pursuant to Sections 4, 5 and 6 of this Agreement shall be recomputed to reflect the effect of any Adjustments on the relevant Pro Forma Subsidiary Return. Within 5 days after any such Adjustment, the Subsidiaries or Parent, as appropriate, shall make a payment to the other party reflecting such Adjustment, plus interest pursuant to Section 9 of the Agreement, calculated as if payments by and to the Subsidiaries pursuant to Sections 4, 5 and 6 of this Agreement and this Section 8 were payments and refunds of federal income taxes. The Subsidiaries shall further pay to Parent the amount of any penalties or additions to tax incurred by the Parent Consolidated Group as a result of an adjustment to any Subsidiary Return Item for an Agreement Year. (f) RULINGS. The Subsidiaries shall assist and cooperate with Parent and take all actions requested by Parent in connection with any ruling requests submitted by Parent to the IRS. (g) APPLICABILITY WITH RESPECT TO ALL CONSOLIDATED RETURNS. The provisions of Sections 8(a), (b) and (c) above shall apply to Parent Consolidated Returns and Subsidiary Return Items for all taxable years in which the Subsidiaries are includable in the Parent Consolidated Group. (h) DOCUMENT RETENTION, ACCESS TO RECORDS AND USE OF PERSONNEL. Until the expiration of the relevant statute of limitations (including extensions), the Subsidiaries shall (i) retain records, documents, accounting data, computer data and other information (collectively, the "Records") necessary for the preparation, filing, review, audit or defense of all tax returns relevant to an obligation, right or liability of either party under the Agreement; and (ii) give Parent reasonable access to such Records and to its personnel (insuring their cooperation) and premises to the extent relevant to an obligation, right or liability of either party under the Agreement. Prior to disposing of any such Records, the Subsidiaries shall notify Parent in writing of such intention and afford Parent the opportunity to take possession or make copies of such Records at its discretion. 9. INTEREST. Interest required to be paid by or to the Subsidiaries pursuant to the Agreement shall, unless otherwise specified, be computed at the rate and in the manner provided in the Code for interest on underpayments and overpayments, respectively, of federal income tax for the relevant period. Any payments required pursuant to the Agreement which are not made within the time period specified in the Agreement shall bear interest at a rate equal to the rate provided in the Code for interest on underpayments of tax. 10. FOREIGN, STATE AND LOCAL INCOME TAXES. (a) In the case of foreign, state or local taxes based on or measured by the net income of the Parent Consolidated Group, or any members of the Parent Consolidated Group (other than solely with respect to the Subsidiary Consolidated Group 8 or solely with respect to members of the Parent Consolidated Group other than members of the Subsidiary Consolidated Group) on a combined, consolidated or unitary basis, the provisions of this Agreement shall apply with equal force to such foreign, state or local tax for each Agreement Year, whether or not the Subsidiary Consolidated Group is included in the Parent Consolidated Group for federal income tax purposes; provided, however, that interest pursuant to the first sentence of Section 9 of this Agreement shall be computed at the rate and in the manner provided under such foreign, state or local law for interest on underpayments and overpayments of such tax for the relevant period, and references to provisions of the Code throughout the Agreement shall be deemed to be references to analogous provisions of foreign, state and local law. (b) For any taxable year, Parent shall have the sole and exclusive control of (a) the determination of whether a combined, consolidated or unitary tax return should be filed for any foreign, state or local tax purpose and (b) all foreign, state or local income tax audits and litigation with respect to the Subsidiary Consolidated Group to the same extent as provided in this Agreement for federal income tax matters (including the right in its sole discretion to have the Subsidiaries pay any disputed taxes and sue for a refund in the forum of Parent's choice). The Subsidiaries shall reimburse Parent for all reasonable out-of-pocket expenses (including, without limitation, legal, consulting and accounting fees) in the course of proceedings described in the preceding sentence, to the extent such expenses are reasonably attributable to the Subsidiary Consolidated Group. (c) Holdco shall be responsible for filing tax returns relating to payroll, sales and use, property, withholding, capital stock, net worth and similar taxes attributable to members of the Subsidiary Consolidated Group and shall be responsible for the payment of such taxes. (d) For all taxable years that the Subsidiaries are members of the Parent Consolidated Group, the Subsidiaries shall have the sole and exclusive responsibility for all taxes based on or measured by net income that are determined solely by the income of the Subsidiary Consolidated Group (or any combination of the members thereof, including the predecessors and successors of such members) on a combined, consolidated, unitary or separate company basis. (e) Parent will provide notice of and consult with the Subsidiaries with respect to any issue relating to such audits and litigation, and the Subsidiaries will provide to Parent any information necessary to conduct such audits and litigation. Parent shall not settle or otherwise compromise any audits or litigation that would result in additional liability for the Subsidiaries under this Section 10 without the written consent of Holdco, which consent shall not be unreasonably withheld. If Holdco does not respond to Parent's request for consent within 30 days, Holdco shall be deemed to have consented. 11. SUCCESSORS AND ACCESS TO INFORMATION. The Agreement shall be binding upon and inure to the benefit of any successor to any of the parties, by merger, acquisition of assets or otherwise, to the same 9 extent as if the successor had been an original party to the Agreement, and in such event, all references in this Agreement to a party shall refer instead to the successor of such party. If for any taxable year the Subsidiaries are no longer included in the Parent Consolidated Group, Parent and the Subsidiaries agree to provide to the other party any information reasonably required to complete tax returns for taxable periods beginning after the Subsidiaries are no longer included in a Parent Consolidated Return, and each of Parent and the Subsidiaries will cooperate with respect to any audits or litigation relating to any Parent Consolidated Return. 12. CONFIDENTIALITY. Each of Parent and the Subsidiaries agrees that any information furnished pursuant to the Agreement is confidential and, except as and to the extent required by law or otherwise during the course of an audit or litigation or other administrative or legal proceeding, shall not be disclosed to other persons. In addition, each of Parent and the Subsidiaries shall cause its employees, agents and advisors to comply with the terms of this Section 12. 13. GOVERNING LAW. The Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts entered into and to be fully performed within the State of Delaware. 14. HEADINGS. The headings in the Agreement are for convenience only and shall not be deemed for any purpose to constitute a part or to affect the interpretation of the Agreement. 15. SECTION REFERENCES. References to Sections shall, unless otherwise specified, be references to Sections of this Agreement. 16. COUNTERPARTS. The Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, and it shall not be necessary in making proof of the Agreement to produce or account for more than one counterpart. 17. SEVERABILITY. If any provision of the Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the maximum extent practicable. In any event, all other provisions of the Agreement shall be deemed valid, binding, and enforceable to their full extent. 10 18. TERMINATION. The Agreement shall remain in force and be binding so long as the applicable period of assessments (including extensions) remains unexpired for any taxes contemplated by the Agreement; provided, however, that neither Parent nor the Subsidiaries shall have any liability to the other party with respect to tax liabilities for any taxable year in which the Subsidiary Consolidated Group is not included in the Parent Consolidated Return for such year, except as provided in Sections 5 and 10. 19. SUCCESSOR PROVISIONS. Any reference herein to any provisions of the Code or Treasury Regulations shall be deemed to include any amendments or successor provisions thereto, as appropriate. 20. COMPLIANCE BY SUBSIDIARIES. Parent and Holdco each agrees to cause all members of the Parent Consolidated Group and the Subsidiary Consolidated Group (including predecessors and successors to such members) to comply with the terms of this Agreement. IN WITNESS WHEREOF, each of the parties to this Agreement has caused this Agreement to be executed by its duly authorized officer on this February 12, 2004. [Signatures follow] 11 PLY GEM INVESTMENT HOLDINGS, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: PLY GEM HOLDINGS, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: 12 EX-10.16 43 y95660exv10w16.txt TRANSITION SERVICES AGREEMENT EXHIBIT 10.16 ------------- EXECUTION COPY TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT dated as of February 12, 2004 (this "AGREEMENT") by and between Nortek, Inc., a Delaware corporation (the "SELLER"), and Ply Gem Industries, Inc., a Delaware corporation (the "COMPANY"). W I T N E S S E T H: WHEREAS, pursuant to a Stock Purchase Agreement dated as of December 19, 2003 (as amended and in effect from time to time, the "PURCHASE AGREEMENT") among the Seller, WDS LLC and Ply Gem Investment Holdings, Inc., a Delaware corporation (the "BUYER"), the Seller and WDS LLC have agreed to sell, upon the terms and subject to conditions set forth therein, all of the outstanding shares of stock of the Company to the Buyer; and WHEREAS, Section 4.10 of the Purchase Agreement provides that it is a condition precedent to the obligation of the Buyer to consummate the transactions contemplated by the Purchase Agreement, that the Seller enter into a transition services agreement containing the terms and conditions set forth herein; and WHEREAS, the Company desires that Seller provide on a transitional basis certain Services (as defined below) to the Company and its Subsidiaries (as defined in the Purchase Agreement) to support the business activities of the Company and its Subsidiaries during a transition period following the Closing Date and the Seller is willing to provide, or cause its Affiliates (as defined in the Purchase Agreement) to provide, such Services to the Company and its Subsidiaries on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, and subject to the terms and conditions herein contained, the parties hereto agree as follows: 1. DEFINITIONS. Any capitalized term used and not otherwise defined herein shall have the meaning assigned to it in the Purchase Agreement. 2. SERVICES. (a) Commencing on the date hereof and continuing throughout the Term (as defined below), unless earlier terminated pursuant to the terms of this Agreement or except as expressly noted otherwise, the Seller shall provide, or cause its Affiliates to provide, to the Company and its Subsidiaries, in connection with the conduct of their business activities, the services described on SCHEDULE A attached hereto (the "SERVICES") along with consultation and assistance with taking over the Services. The Seller shall provide each of the Services to the Company on substantially the same basis as provided to the Company prior to the date hereof. The parties agree that the Seller may use third party service providers in connection with the provision of the Services hereunder, consistent with the past practices of the Seller; PROVIDED, HOWEVER, the Seller will not 2 materially increase its use of such third party service providers in connection with the provision of the Services without the prior written consent of the Company. (b) The Seller agrees that it shall use all reasonable commercial efforts to obtain all consents, licenses, waivers or other approvals from all Persons with respect to the software programs set forth on SCHEDULE B hereto (the "CONSENTS"), to the extent necessary for the Seller and its Affiliates to fully provide all of the Services (it being understood that no party shall be required to pay any money to the Person from whom such Consent is sought (other than reimbursement of the reasonable out-of-pocket costs of providing the same) or otherwise undertake any new obligation to such Person or waive any existing benefit or right in order to obtain any such Consent, unless the Seller is not able to arrange for the Company to receive the same benefits from and after the Closing to which the Company would have been entitled if such Consent had been obtained, in which case the Seller shall be required to pay such money or undertake such new obligation or waive such existing benefit or right in order to obtain such Consent). The parties will cooperate with each other in exercising such reasonable efforts. If any such Consent is not obtained, the Seller shall, with respect to any such software program, arrange for the Company to receive substantially the same benefits under such software program after the date hereof until the end of the Term to which the Company would have been entitled if such consent, waiver or approval had been obtained. 3. REIMBURSEMENT OF EXPENSES. (a) During each 30-day period during the Term, the Company and its Subsidiaries shall pay to the Seller an amount equal to the applicable Monthly Cost (as defined below) for such period plus the actual and direct reasonable out-of-pocket expenses incurred by the Seller or its Affiliates during such period in respect of the provision of the Services (it being understood that such out-of-pocket expenses shall not include any indirect costs and expenses, such as a portion of salaries for employees providing such Services or overhead costs attributable to such Services) (collectively, the "TRANSITION SERVICES EXPENSES"). The Seller shall prepare, on or before the 30th day after the end of each 30-day period during the Term, a statement that provides in reasonable detail the Services provided and the Transition Services Expenses incurred during such period (the "MONTHLY STATEMENT"), accompanied by commercially reasonable supporting documentation for such Transition Services Expenses (other than the Monthly Cost). The Seller shall provide such additional information relating to the Transition Services Expenses as may be reasonably requested by the Company. (b) "MONTHLY COST" shall mean, for each 30-day period during the Term, the amount set forth below applicable to such 30-day period: PERIOD AMOUNT ------ ------ 1-30 $ 0 31-60 $ 0 61-90 $10,000 3 91-120 $20,000 121-150 $30,000 151-180 $40,000 (c) The Company shall pay the Transition Services Expenses for each 30-day period within 30 days after presentation of the Monthly Statement for such 30-day period, by wire transfer of immediately available funds, to an account or accounts of the Seller designated in writing by the Seller. If the Company fails to make any payment within such 30-day period, the Seller may terminate the Term if such payment is not made by the Company within 10 days of written notice to the Company. 4. TERM OF SERVICES. (a) Subject to Section 4(b), the obligations of the Seller to provide the Services hereunder shall commence on the date hereof and, except where expressly noted otherwise on SCHEDULE A, shall continue in effect until the date which is 180 days after the date of this Agreement (the "TERM"). (b) Any and all of the Services (including any portion of a specific Service) are terminable by written notice by the Company to the Seller at any time. 5. INDEMNIFICATION; LIABILITY. (a) The Company hereby agrees to indemnify and hold harmless, and to cause each of the other Transferred Companies to indemnify and hold harmless on a joint and several basis, the Seller, its Affiliates, and the officers, managers, employees, agents, successors and assigns of any of them with respect to any Losses incurred by any of them arising out of or related to the Services furnished under this Agreement, whether arising out of breach of warranty, strict liability, tort, contract, fiduciary liability under ERISA or otherwise, other than Losses which result from the Seller's gross negligence, willful misconduct or bad faith in performing its obligations hereunder. (b) The Seller hereby agrees that under no circumstances shall the Company, the Transferred Companies or any of their respective officers, managers, employees, agents, successors and assigns be liable for any Losses other than as expressly set forth in Section 5(a) above, and that under no circumstances shall such persons be liable for any Losses in the nature of punitive damages (other than punitive damages payable to a Governmental Authority or other third party). (c) The Company hereby agrees that under no circumstances shall the Seller, its Affiliates, or the directors, officers, managers, employees, agents, successors and assigns of any of them be liable for any Losses directly or 4 indirectly arising out of, relating to or in connection with this Agreement or the performance or non-performance of Services hereunder, other than that the Seller may be liable for Losses which result from the Seller's gross negligence, willful breach or bad faith in performing its obligations hereunder; PROVIDED, that in no event shall any such Losses include any special, incidental, consequential, lost profits, expectation, punitive or other indirect damages. (d) In no event shall the Seller have any liability for Losses under Section 5(c) arising out of the performance or nonperformance of Services hereunder that are reasonably expected to be avoided, in whole or in part, by the re-performance or performance of such Services, unless (i) the Company has notified the Seller in writing in reasonable detail of the circumstances of the allegedly inadequate performance, (ii) the Company has given the Seller a reasonable opportunity to re-perform or perform the applicable Services and (iii) the Seller has failed to re-perform or perform such Services in the manner required by this Agreement within a reasonable time period thereafter. 6. RECORDS RETENTION. During the Term, the Seller and its Affiliates shall maintain the agreements, documents, books, records and files (collectively, the "RECORDS") relating to the provision of the Services hereunder. Promptly following expiration of the Term (or at such earlier date this Agreement is terminated) or the termination of any of the Services during the Term, and in any event within five days after such expiration or termination, the Seller shall arrange with the Company for the Records relating to the provision of all of the Services or the Services so terminated, as the case may be, to be delivered to the Company. During the Term, upon reasonable written notice and subject to Section 9 hereof, the Seller shall furnish or cause to be furnished to the Company and its directors, officers, employees, consultants, counsel, accountants and other authorized representatives, access, during business hours and upon reasonable prior written notice, such Records and shall permit such persons to examine and copy such Records to the extent reasonably requested by the Company as reasonably necessary for financial reporting and accounting matters, the preparation and filing of any returns, reports or forms or defense of any claim or assessment. 7. FURTHER ASSURANCES. The Company and the Seller shall execute such documents and other papers and take such further action as the other party may reasonably request in order to carry out the provisions hereof and provide the Services hereunder. 8. POST-TERM COOPERATION. The parties acknowledge that, although the Company and its personnel and agents shall have full responsibility from and after the expiration of the Term for making arrangements other than with the Seller or its Affiliates with respect to all of the Services provided by the Seller prior thereto, the Seller and its personnel and agents may have certain information with respect to certain Services that the Company and its personnel and agents may occasionally seek access to from time to time from and after the expiration of the Term to address the matters covered by such Services. Therefore, in furtherance of the Seller's obligations under Section 6.9 of the Stock Purchase Agreement, the Seller agrees, subject to Section 9 hereof, from and after the expiration of the Term, to cooperate with the Company and to use reasonable efforts to make available its personnel and agents, upon reasonable prior notice and during normal business hours, to the Company and its personnel and agents for reasonable 4 requests for information in connection with the matters identified with an asterisk on SCHEDULE A. Nothing in this Section 8 shall be construed to obligate the Seller to incur any out-of-pocket costs or expenses, take any action which is not consistent with any of its contractual obligations existing on the date hereof or other legal obligations or which may otherwise expose it to liability, maintain or retain any of its personnel or agents, or take any action that would interfere with ordinary day-to-day business activities of its personnel or agents. 9. CONFIDENTIAL INFORMATION. The parties acknowledge and agree that, notwithstanding any provision herein to the contrary, the Seller has no obligation, during the Term or otherwise, to disclose or provide any information which the Seller, any of its Affiliates or any of their respective directors, officers, managers, employees or agents is required by law, contract existing on the date hereof or other legally enforceable obligation to maintain in confidence or with any information if disclosing or providing such information would result in the loss of any attorney-client or similar privilege with respect to such information. The Seller represents and warrants that it is not bound on the date hereof by any such contract that prevents the Seller, any of its Affiliates or any of their respective directors, officers, managers, employees or agents from providing or disclosing any such information in connection with providing any Services. 10. LIMITED WARRANTY. WITH RESPECT TO ANY LICENSED MATERIALS PROVIDED IN CONNECTION WITH THE SERVICES, THE SELLER PROVIDES SUCH LICENSED MATERIALS TO THE COMPANY AS IS, AS AVAILABLE AND WITH ALL FAULTS. THE SELLER EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY WARRANTY ARISING OUT OF A COURSE OF DEALING. 11. MISCELLANEOUS. (a) This Agreement shall be governed by the internal laws of the State of New York, without giving effect to conflict of laws principles thereof, and shall be binding upon the parties and inure to the benefit of the successors and assigns of the respective parties hereto. (b) This Agreement and all rights hereunder may not be assigned by any party hereto except with the prior written consent of the other party hereto. (c) All notices and other communications hereunder shall be given in accordance with the provisions set forth in Section 10.1 of the Purchase Agreement to the parties hereto at the following addresses: If to the Company, to: Ply Gem Industries, Inc. 303 West Major Kearney, MO 64060 Tel.: (800) 800-2244 6 Fax: (816) 903-4330 Attention: Shawn K. Poe with copies to: Ply Gem Investment Holdings, Inc. c/o Caxton-Iseman Capital, Inc. 500 Park Avenue, 8th Floor New York, New York 10022 Tel.: (212) 774-5801 Fax: (212) 832-9450 Attention: Frederick Iseman if to the Seller, to: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02902 Tel.: (401) 751-1600 Fax: (401) 751-4610 Attention: Kevin W. Donnelly, Esq. (d) Nothing contained herein shall create a partnership, joint venture, agency or employment relationship among the parties hereto. No employees of either of the parties hereto shall be the agent or employee of the other party hereto. (e) This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements with respect thereto. This Agreement may be amended, and any provision waived, only in writing signed by the party or parties against whom such amendment or waiver is sought to be enforced. (f) This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their authorized officers as of the day first above written. NORTEK, INC. By: /s/ Kevin Donnelly --------------------------------------- Name: Kevin Donnelly Title: PLY GEM INDUSTRIES, INC. By: /s/ Lee D. Meyer --------------------------------------- Name: Lee D. Meyer Title: SCHEDULE A TRANSITION SERVICES ------------------- FINANCIAL ACCOUNTING SUPPORT - ---------------------------- Seller to continue to provide accounting support consistent with past practice to include, without limitation: 1. Maintain the Company's consolidated general ledger. 2. Provide monthly financial closing support (corporate accruals and reserve computations). 3. Prepare consolidated monthly financial statements using the Nortek "I-file" format, until such time the Company has installed a consolidation and reporting system. 4. The Company shall have the right to utilize the Nortek I-file format, even after the expiration of the Term; PROVIDED, that the Seller has no obligation to maintain, service, support or update Nortek I-file after the Term and the Seller shall have no liability of any type in respect of the continued use of the Nortek I-file format after the Term. 5. General support during the 2003 close and E&Y audit. 6. Assistance in transitional tax planning, compliance and reporting matters, including the preparation of state tax returns and coordinating the preparation of the 2003 federal return by E&Y. 7. Assistance on transition of existing telecommunications (MCI) agreement, the Microsoft license agreement, the UPS shipping agreement and the LeasePlan USA and Emkay vehicle lease agreements. LEGAL - ----- 1. Seller to continue to provide support of its internal counsel consistent with past practice to include, but not limited to: trademarks, patents, copyrights, purchase contracts, real estate, legal entities and litigation, including the suits covered under the indemnification clause in the Purchase Agreement.* REAL ESTATE - ----------- 2. Provide assistance with transitional matters relating to owned and leased real property, including the lease obligations covered under the indemnification clause in the Purchase Agreement.* 8 ENVIRONMENT, HEALTH & SAFETY - ---------------------------- 3. Provide assistance on environmental matters including on new and existing licenses and/or permits related to the Company.* 4. Continue to provide risk management consultation and assistance consistent with past practices, recognizing that the Company will be obtaining new stand-alone policies at Closing.* EMPLOYEE BENEFITS - ----------------- 5. Provide routine administration services consistent with the Seller's past practice, for the Ply-Gem Pension Plan and for the following 401(k) plans: Great Lakes Window, Inc. 401(k) Savings Plan Variform, Inc. 401(k) Savings Plan Napco, Inc. Salary Investment Plan Napco, Inc. Profit Sharing Plan and Trust Napco Window Systems, Inc. 401(k) Savings Plan Napco Window Systems, Inc. Profit Sharing Plan and Trust Kroy Building Products, Inc. 401(k) Savings Plan However, the Services contemplated under this Agreement shall be purely ministerial in nature and shall not be provided in a fiduciary capacity with respect to the plans under ERISA. The actions of the Seller and its officers, managers and employees shall be as agents for the plan fiduciaries appointed by the Company. In addition, various plans shall name the Company as "named fiduciary" and the Company shall be responsible for executing all documents and providing all information that is required for Seller to provide the services contemplated hereunder. Specifically, the Seller undertakes to provide the following services in connection with the qualified retirement plans listed above; PROVIDED, HOWEVER, that the Company shall respond promptly and in any event by the dates requested by the Seller in connection with the provision of information, review of documents, distribution of materials and execution of documents as reasonably requested. 1. Preparation of Annual Report, Form 5500 for each Plan, to be signed by the Company. 2. Preparation of a "summary annual report" for each Plan for distribution by Company personnel. 3. Coordination with Plan auditors for preparation of any certified financial statements required for Form 5500. 4. Monitor remittance of employee and company contributions to Plans. 10 5. Process domestic relations orders ("QDRO's"); referral to outside counsel as necessary pursuant to procedures currently in effect. 6. Coordinate with legal counsel to maintain legal compliance with respect to the form of Plan documents; and prepare determination letter requests for Plans using procedures currently in effect. 7. Coordinate with legal counsel the adoption of any plan amendments and related corporate resolutions deemed necessary for compliance or that may be otherwise reasonably requested by the Company. 8. Process distribution of benefits requests in the event of death, disability, hardship, termination of employment pursuant to Plan documents and procedures currently in effect. 9. Process loan requests to the extent provided for in Plan documents. 10. Monitor third party contractors' testing for compliance under Sections 401(k), 402(g), 410 and 415 of the Code. 11. Maintain Database (Corporate-wide) (defined contribution plan only). 12. Monitor release and allocation of forfeitures under Plans. 13. Monitor preparation of annual account statements for Plans' participants for distribution by Company personnel 14. Monitor reporting of Plan distributions on Form 1099R to Plans' participants and beneficiaries. 15. Preparation of annual reports with the Pension Benefit Guaranty Corporation, to be signed by the Company. 16. Monitor suspension of benefits procedures for post normal retirement age employees. 17. Monitor preparation of periodic benefit statements for Plans' participants for distribution by Company personnel. 18. Monitor income tax reporting of plan distributions to Plans' participants and beneficiaries. 19. Monitor preparation of annual Actuarial Report by third party vendor. 20. Process and distribute participant communications 21. Other ministerial actions that are usual and customary under procedures currently in effect. SCHEDULE B REQUIRED CONSENTS ----------------- 1. Nortek I-file format EX-10.17 44 y95660exv10w17.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.17 ------------- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of April 2, 2002 by and between Hoover FRT Acquisition Co., a Delaware corporation (the "Buyer") and PLY GEM INDUSTRIES, INC., a Delaware corporation (the "Seller"). The Seller owns all of the issued and outstanding shares of capital stock identified in Section 3.2 of the Disclosure Schedule (the "Shares") of Hoover Treated Wood Products, Inc., a Delaware corporation (the "Company"). This Agreement contemplates a transaction in which the Buyer will purchase the Shares from the Seller for cash. 1. PURCHASE AND SALE OF SHARES. 1.1 Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Shares for the consideration specified below in Section 1.2. 1.2 Purchase Price. (a) Buyer and Seller have agreed that the purchase price for the Shares will be $13,750,000 plus the differential between the Company's current assets and current liabilities (the "Purchase Price"), which differential is currently estimated to be $6,954,000, (the "Estimated W/C"). At Closing, the Buyer will pay the Seller the Purchase Price for the Shares based on the Estimated W/C by wire transfer of immediately available federal funds to a bank account designated by Seller (subject to a post-closing adjustment in accordance with the following paragraphs of this Section 1.2). (b) If the Closing Working Capital (as defined in paragraph (c) below) exceeds the Estimated W/C, the Buyer shall pay to the Seller the amount of such excess 2 with interest calculated and paid from the Closing Date (as hereafter defined) at the prime rate (as specified in the Wall Street Journal on the Closing Date) through the payment date. If the Estimated W/C exceeds the Closing Working Capital, the Seller shall pay to the Buyer the amount of such excess with interest calculated and paid from the Closing Date (as hereafter defined) at the prime rate (as specified in the Wall Street Journal on the Closing Date) through the payment date. Such payments shall be made in cash within five business days after the Closing Working Capital Statement shall have been agreed upon or deemed agreed upon pursuant to paragraph (d) below. (c) The "Closing Working Capital" shall be the difference between the Company's current assets and current liabilities as set forth on the Closing Working Capital Statement. (d) Within 45 days after the Closing, the Seller, at Seller's expense, shall prepare and deliver to the Buyer a reasonably detailed statement of the Company's current assets and current liabilities as of March 31, 2002 (the "Preliminary Closing Working Capital Statement"). The Seller shall prepare the Preliminary Closing Working Capital Statement on the basis of the accounting methods, treatments, assumptions, principles and procedures consistent with those used in the preparation of the Financial Statements (as defined in Section 3.5). Without limiting the generality of the foregoing, the Preliminary Closing Working Capital Statement shall be prepared on the basis of facts known by the management of the Company no later than 45 days after the Closing Date and on the assumption that the Company continues to be a part of the Seller's group of companies and no adjustment, provision, charge, reserve or write-off shall be made or included in respect of any costs, liabilities or charges to be incurred after the Closing 3 Date as a consequence of the change of ownership of the Company or any change in management strategy, direction or priority resulting therefrom or in respect of the complete or partial reorganization or restructuring of any business or operation of the Company. For purposes of the Preliminary Closing Working Capital Statement, the parties agree that: (i) all liabilities reflected on the Balance Sheet (as defined in Section 3.5) shall be current liabilities, (ii) the reserve for environmental matters is agreed to be fixed at $308,000 less applicable payments made consistent with past practice from February 23, 2002 through March 31, 2002, (iii) with regard to the Detroit Roof referenced in Section 3.6(d) of the Disclosure Schedule, the Company will accrue the replacement cost of the roof on its books less any amounts paid by the Company prior to the Closing Date Balance Sheet and Seller will be responsible for any insurance deductible or retention, (iv) with regard to the reconstruction of the Pine Bluff facility, the Company will accrue $234,000 less any amounts paid by the Company prior to the Closing Date Balance Sheet, (v) there shall be no accrual for retiree health benefits to be provided to Jack B. Smith, and (vi) the Company shall accrue on the Closing Working Capital Statement the unpaid amount of the $600,000 bonus payments to Messrs. Holden, Dickson, Clark and Borris plus applicable taxes and benefit costs less the sum of $8,000. The Preliminary Closing Working Capital Statement shall not include either as a current asset or current liability of the Company: (i) any asset or liability related to the FRT Claims (as defined in Section 9.5(a) hereof), (ii) any deferred or current income taxes, (iii) any prepaid insurance, and (iv) any intercompany accounts (v) any insurance proceeds and (vi) assets or liabilities related to the Hoover Treated Wood Products, Inc. Retirement Income Plan. Buyer certifies in preparing the Preliminary Working Capital 4 Statement that: (i) inventories will in all material respects be properly reflected on the Company's books and records in accordance with GAAP (as hereafter defined) and will be valued at the lower cost or market on a "first in, first out " basis, and (ii) all notes and accounts receivable of the Company will be valid receivables properly reflected on the Company's books and records in accordance with GAAP consistently applied and not subject to any material counterclaim, deduction, credit or set-off. The Buyer shall be entitled to full access to the relevant records and working papers used by the Seller in preparing the Preliminary Closing Working Capital Statement. If the Buyer believes that any change is required to be made to the Preliminary Closing Working Capital Statement, the Buyer shall, within 30 days after receipt, give written notice and description of, and basis for, such change. Failure to notify the Seller within such 30-day period shall constitute acceptance and approval of the Preliminary Closing Working Capital Statement. If the proposed change is not accepted by the Seller, then the Buyer and the Seller shall negotiate in good faith to resolve the dispute. If, after 30 days from Buyer's notice to Seller, any such proposed change remains disputed, the (i) the Buyer or the Seller, as the case may be, shall immediately pay to the other party the amount, if any, not subject to the dispute and (ii) PricewaterhouseCoopers (the "Accounting Firm") shall be instructed to use its best efforts to resolve any such dispute within 45 days after such dispute has been referred to it. The decision of the Accounting Firm shall be final and binding. The fees and expenses of the Accounting Firm shall be allocated between the Buyer and the Seller by the Accounting Firm in proportion to its resolution of the dispute. The "Closing Working Capital Statement" shall mean the Preliminary Closing Working 5 Capital Statement as finally agreed upon or deemed agreed upon pursuant to the foregoing provisions. 1.3 The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Salisbury & Ryan LLP concurrent with the execution of this Agreement commencing at 9:00 a.m. local time (the "Closing Date"). 1.4 Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Buyer (unless delivered previously) the following: (a) stock certificates representing all of the Shares, accompanied by a stock power duly executed in blank or duly executed instruments of transfer, in a form satisfactory to Buyer; (b) the minute books, stock transfer book, corporate seal of each of the Company and resignation letters from the existing directors; (c) the certificate of an officer of the Seller certifying as to the matters set forth in Section 5.4; (d) copies of resolutions of the Board of Directors of the Seller relating to the sale of the Shares certified by Seller's secretary; (e) a certificate of the Seller confirming that no assets that are not current assets have been damaged or destroyed since February 23, 2002; and (f) all other documents, certificates, instruments or writings required to be delivered by Seller at or prior to the Closing pursuant to this Agreement or otherwise required in connection herewith. 6 1.5 Deliveries by Buyer. At the Closing, Buyer shall deliver or cause to be delivered to Seller (unless delivered previously) the following: (a) the Purchase Price based on the Estimated W/C by wire transfer of immediately available funds to a bank account designated by Seller prior to the Closing; (b) the certificate of an officer of Buyer certifying as to the matters set forth in Section 6.4; and (c) all other documents, certificates, instruments or writings required to be delivered by Buyer at or prior to the Closing pursuant to this Agreement or otherwise required in connection herewith. 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to the Buyer that the statements contained in this Section 2 are true, correct and complete as of the Closing Date, except as set forth in the disclosure schedule accompanying this Agreement (the "Disclosure Schedule"). 2.1 Authorization. The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Seller has obtained all necessary approvals from its Board of Directors required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms, except as such enforcement may be subject to (a) any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereinafter in effect relating to or limiting creditors' rights generally, and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be 7 subject to equitable defenses and the discretion of the court before which any proceeding therefore may be brought. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or government agency in order to consummate the transactions contemplated by this Agreement. 2.2 Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge or other restriction of any government, governmental agency, or court to which the Seller is subject, or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement, mortgage, instrument of indebtedness or other arrangement to which the Seller is a party or by which it is bound or to which any of its assets is subject. 2.3 Broker's Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer or the Company could become liable or obligated, other than the fee or commission owed to Throne and Company, for which the Seller is liable. 2.4 Ownership of Shares. The Seller holds of record and owns beneficially all of the Shares, free and clear of any restrictions on transfer, claims, taxes, liens or other demands or liabilities. The Seller is not a party to any option, warrant, right, contract, call, put or other agreement or commitment providing for the disposition or acquisition of 8 any capital stock of the Company (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to voting of any capital stock of the Company. 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER CONCERNING THE COMPANY. The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are true, correct and complete as of the Closing Date, except (a) as set forth in the specifically referenced Section of the Disclosure Schedule, and (b) for changes in the business and properties of the Company expressly permitted or required by the terms hereof. 3.1 Organization, Qualification and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company is duly qualified or licensed and in good standing to do business as a foreign corporation in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary. The Company has all requisite power and authority to carry on its business as now conducted and to own or lease and to operate its properties as such properties are now owned, leased or operated. Section 3.1 of the Disclosure Schedule lists the directors and officers of the Company. The Seller has delivered to the Buyer true, correct and complete copies of the charter and by-laws of the Company (each as amended to date). 3.2 Capitalization. The Shares constitute the entire authorized, issued and outstanding shares of capital stock of the Company and are described in Section 3.2 of the Disclosure Schedule. All of the Shares have been duly authorized and are validly 9 issued, fully paid and nonassessable. All of the Shares are held of record and beneficially by the Seller. There are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights, or other agreements or commitments of any kind or character to which the Company is a party or which are binding upon the Company providing for the issuance, disposition or acquisition of any of its capital stock. There are no outstanding or authorized equity appreciation, phantom equity, or similar rights with respect to the Company. There are no voting trusts, proxies or any other agreements or understandings with respect to the voting of the capital stock of the Company. 3.3 Non-Contravention. Except as set forth in Section 3.3 of the Disclosure Schedule, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation of, or be in conflict with, or constitute or create a default under, result in a default (or give rise to any right of termination, cancellation or acceleration) or result in the creation or imposition of any lien, security interest or other encumbrance upon, any property of the Company pursuant to (a) its charter or by-laws, each as amended to date; (b) any agreement, note, bond, mortgage, indenture, license, contract, lease or other instrument, obligation or commitment to which it is a party or by which it or any of its assets or properties is bound or to which it or any of such assets or properties are subject; or (c) any statute or any judgment, decree, order, writ, injunction, regulation or rule of any court or governmental or regulatory authority. 3.4 Consents. Except as set forth in Section 3.4 of the Disclosure Schedule, no consent, approval or authorization of, or registration, qualification or filing with, any 10 governmental agency or regulatory or other authority or any other individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization or other entity (collectively "Person") is required for the execution and delivery of this Agreement or for the consummation of the transactions contemplated hereby. 3.5 Financial Statements. (a) Attached hereto as Section 3.5(a) of the Disclosure Schedule are copies of the unaudited income statements of the Company for the fiscal years ended December 31, 1999, 2000 and 2001 and the portion of the current fiscal year ended February 23, 2002, and the related balance sheets of the Company at such dates except for December 31, 1999 (together with all footnotes thereto, the "Financial Statements"). Except as disclosed in any footnote thereto, each of such Financial Statements has been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods covered thereby and fairly present the financial condition and results of operations of the Company for the periods and as of the dates indicated; provided, however, that the Financial Statements lack certain footnotes required by GAAP and other presentation items that are identified in Section 3.5(b) of the Disclosure Schedule. The most recent balance sheet of the Company included in the Financial Statements is herein referred to as the "Balance Sheet." The date of the Balance Sheet is herein referred to as the "Balance Sheet Date." The Financial Statements for December 31, 2001 and prior periods were utilized for the consolidation of the Company's accounts with those of the Seller and Nortek, Inc. (b) Except as set forth in Section 3.5(b) of the Disclosure Schedule or the Balance Sheet or the footnotes thereto, the Company does not have any liabilities, debts 11 or other obligations (whether accrued, matured, absolute, fixed, contingent or otherwise and whether due or to become due) of the kind required to be disclosed under GAAP, except such liabilities incurred in the ordinary course of business since the Balance Sheet Date. Section 3.5(b) of the Disclosure Schedule lists all of the off-balance sheet and contingent liabilities of the Company as of the Balance Sheet Date. 3.6 Absence of Certain Changes. Except as set forth in Section 3.6 of the Disclosure Schedule, since the December 31, 2001 Balance Sheet Date, the Company has carried on its business only in the ordinary course consistent with past practices, and there has been no material adverse change in business, operations, affairs, properties, assets or in the financial condition of the Company, either individually or in the aggregate. Since December 31, 2001, there has been no distribution by the Company of any non-current assets. 3.7 Title to Properties. Section 3.7 of the Disclosure Schedule lists all the material tangible personal properties and assets that the Company has title to. 3.8 Real Property. (a) Section 3.8(a) of the Disclosure Schedule lists all real property owned by the Company (the "Owned Real Property"), which is all the material real property that is required to regularly conduct its business. Except as set forth in Section 3.8(b) of the Disclosure Schedule, the Company has good title to its Owned Real Property in fee simple absolute, free and clear of all defects of title and also free and clear of any liens, security interests or other encumbrances, other than (i) liens for current taxes not yet payable and (ii) liens disclosed on the Financial Statements (collectively, "Permitted Encumbrances"). No party other than the Company is in possession of any portion of the 12 Company's Owned Real Property, whether as lessee or sublessee thereof, tenant at sufferance or otherwise. There are no pending or, to the knowledge of the Seller, threatened special assessments affecting all or any portion of the Owned Real Property. Seller has no knowledge of any improvements contemplated by any municipality which might give rise to an assessment. All real estate, taxes, penalties and interest due and payable on or before the Closing Date with respect to the Owned Real Property have been paid in full. There are no options held by the Company to purchase or acquire any interest in real property. The Company has not granted any options or entered into any contracts to sell or dispose of any interest in the Owned Real Property. Seller knows of no fact nor has failed to disclose any fact known to Seller, which would prevent the Company from using and operating the Owned Real Property after the Closing in the normal manner in which it has been operated in the conduct of its business. Prior to the date hereof, neither Seller nor the Company has received any notice or communications from any governmental unit or other body having the power of eminent domain in connection with the Owned Real Property or any fact thereof. (b) The leases listed in Section 3.8 (c) of the Disclosure Schedule (the "Real Property Leases") constitute all leases, subleases, licenses and other agreements under which the Company leases as lessor or as lessee uses or occupies or has any right to use or occupy, now or in the future, any real property (the "Leased Real Property"). The Seller has heretofore delivered to the Buyer true, correct and complete copies of all Real Property Leases (including all modifications thereof and all amendments and supplements thereto). Each of the Real Property Leases is valid, binding and in full force and effect, all rent and other sums and charges payable by the Company party thereto as a 13 tenant thereunder is current, no notice of default or termination under any Real Property Leases is outstanding, no termination event or condition or uncured default on the part of the Company or, to the knowledge of the Seller, the landlord, exist under any Real Property Lease, and no event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event of condition on the part of the Company, or to the knowledge of the Seller, the landlord. 3.9 Environmental Matters. For purposes of this Section 3.9, the following terms shall have the meanings indicated: (a) "Environmental Law" shall mean: (i) any law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, legal doctrine, order, judgment, decree, injunction, requirement or agreement with any governmental entity in effect on the Closing Date relating to (x) the protection, preservation or restoration of the environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety or (y) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labelling, production, release or disposal of Hazardous Substances, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Substance. (b) "Hazardous Substance" shall mean any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise 14 regulated, under any Environmental Law, whether by type or by quantity, including any substance containing any such substance as a component (including, without limiting the generality of the foregoing, asbestos). Except to the extent specifically described in Section 3.9 of the Disclosure Schedule: (a) to Seller's knowledge, the business of the Company, as presently engaged in by the Company, is in compliance with all applicable Environmental Laws, including, without limitation, all permits, licenses and other approvals and authorizations; (b) since August 1997, neither Seller nor the Company has received in writing any notices, demand letters or requests for information from any governmental entity or any third party indicating that the Company may be in violation of, or liable under, any Environmental Law in connection with the ownership or operation of its business; (c) there are no civil, criminal or administrative actions, suits, demands, claims, hearings, or to Seller's knowledge, investigations or proceedings pending or threatened against the Company or Seller with respect to the business of the Company or the Owned Real Property or the Leased Real Property relating to any violation, or alleged violation, of any Environmental Law; (d) no reports have been filed since August 1997, or are required to be filed, by the Company or Seller concerning the release of any Hazardous Substance or the threatened or actual violation of any Environmental Law in respect of the Owned Real Property or the Leased Real Property; (e) there have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by or which are in the possession of the Company or 15 Seller relating to the business of the Company or the Owned Real Property or the Leased Real Property which have not been delivered to Buyer prior to the date hereof; (f) to Seller's knowledge, there are no underground storage tanks on, in or under any of the Owned Real Property or the Leased Real Property and no underground storage tanks have been closed or removed from any properties which are or have been in the ownership of the Company; (g) none of the Owned Real Property or the Leased Real Property has been used at any time by the Company as a hazardous waste disposal site; and (h) the Company is in compliance with all financial assurance requirements imposed by the Oil Pollution Act of 1990 and any other applicable Environmental Law. 3.10 Material Contracts. Section 3.10 of the Disclosure Schedule lists all contracts and other agreements to which the Company is a party, the performance of which will involve consideration in excess of $50,000. The Seller has delivered to the Buyer a correct and complete copy of each contract or other agreement listed in Section 3.10 of the Disclosure Schedule (as amended to date). 3.11 Proprietary Rights. For purposes of this Agreement, the term "Proprietary Rights" means all patents, patent applications, patent disclosures and inventions (whether or not reduced to practice); all trademarks, service marks, trade dress, logos, trade names and corporate names and all goodwill associated therewith; all registered and unregistered statutory and common law copyrights; all registrations, applications and renewals for any of the foregoing; all trade secrets, confidential information, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, 16 plans, technical and computer data, marketing plans, and customer and supplier lists and related information; marketing and promotional materials and all other proprietary rights. Section 3.11 of the Disclosure Schedule contains a complete and accurate list of all patented and registered Proprietary Rights owned by the Company and all pending patent applications and applications for the registration of other Proprietary Rights owned or filed by the Company. Section 3.11 of the Disclosure Schedule also contains a complete and accurate list of all (a) trade or corporate names used by the Company; and (b) all licenses and other rights granted by the Company to any third party with respect to Proprietary Rights and licenses and other rights granted by the Company. Except as set forth in Section 3.11 of the Disclosure Schedule, (a) to Seller's know ledge the Company owns and possesses all right, title and interest in and to, free and clear of any liens, or has a valid, enforceable and effective license to use, all Proprietary Rights used in the operation of its business as presently conducted; (b) no claim by any third party contesting the validity, enforceability, use or ownership of any Proprietary Rights owned or used by the Company has been made, is currently outstanding or is threatened and, to Seller's know ledge, there are no meritorious grounds for any such claim; (c) neither the Company nor any of its officers has received any notice of, or is aware of any facts which indicate a likelihood of, any infringement of or misappropriation by, or of conflict with any Proprietary Rights of any third party; (d) to Seller's know ledge, the Company has not infringed, misappropriated or otherwise conflicted with any Proprietary Rights of any third parties, or is aware of any infringement, misappropriation or conflict which will occur as a result of the continued operation of its business as presently conducted; and (e) the Proprietary Rights owned or 17 used by the Company immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. 3.12 Litigation. (a) Except for FRT Claims, Section 3.12(a) of the Disclosure Schedule sets forth a list of all lawsuits, claims, actions, proceedings or, to Seller's knowledge, investigations pending or, to the best knowledge of the Seller, threatened by or against or affecting the Company and a summary of the amount claimed and the nature of the claims. Neither the Seller nor the Company is in default under any judgment, order or decree of any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, relating to the Company. (b) Except for the FRT Claims, there is no lawsuit, claim, action, proceeding or investigation by the Seller or the Company currently pending or which the Seller or any of the Company intends to initiate related to the Company, which may be reasonably expected to have a material adverse effect on the business, operations, affairs, properties, assets or in the financial condition of the Company and there is no pending lawsuit, claim, action, proceeding or investigation against the Company, which is reasonably likely to have a material adverse effect on the business, operations, affairs, properties, assets or financial condition of the Company. 3.13 Legal Compliance. (a) Except as set forth in Section 3.13(a) of the Disclosure Schedule, the Company is not in violation of any term or provision of (i) its charter, bylaws or any resolution of its directors or stockholders, (ii) any other instrument by which the Company is bound, including, without limitation, any license to conduct business, note, bond, mortgage, agreement, contract, lease, permit, or other instrument of 18 any nature whatsoever, or (iii) any term of any order, judgment or decree of any court, arbitration, tribunal or government or other regulatory authority; and (b) Except as set forth in Section 3.13(b) of the Disclosure Schedule, to Seller's knowledge the Company is in compliance in all material respects with all applicable laws, ordinances, rules and regulations of any foreign, federal, state or local government (and all agencies thereof). 3.14 Employee Benefits. (a) Section 3.14(a) of the Disclosure Schedule contains a true, complete and correct list of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended, herein "ERISA") ("Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase, deferred compensation, incentive compensation, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits plan, program, agreement or arrangement and other employee fringe benefit plans sponsored, maintained, contributed to or required to be contributed to by Seller, the Company or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with Seller and the Company would be deemed a "single employer" within the meaning of Section 4001(a)(15) of ERISA, for the benefit of any employee, former employee or consultant of the Company (such plans hereinafter referred to collectively as the "Plans"). Section 3.14(a) of the Disclosure Schedule identifies each of the Plans that is sponsored, maintained, contributed to or required to be contributed to by the Company (such plans hereinafter referred to collectively as the "Company Plans"). Except as set forth in the Disclosure Schedule, Seller has provided to Buyer true, complete and correct copies of 19 (i) each Plan (or, the case of any unwritten Plans, written descriptions thereof), including all amendments thereto, (ii) a copy of the annual report and actuarial report, if required under ERISA, with respect to each such Plan for the last two (2) years, (iii) to the extent required by ERISA (or similar foreign law), a copy of the most recent Summary Plan Description (or similar document), together with each "Summary of Material Modifications," required under ERISA (or similar foreign law) with respect to each Plan, and all material employee communications relating to such Plan, (iv) if the Plan is funded through a trust or other funding agreement (including all amendments thereto) a copy of the trust or other funding agreement and the latest financial statements thereof and (v) all contracts relating to the Plans with respect to which the Company may have any liability, including, without limitation, insurance contracts, investment management agreements, subscription and participation agreements and record-keeping agreements. (b) Except as set forth in Section 3.14(b) of the Disclosure Schedule, no Company Plan is subject to any provision of ERISA. Each Company Plan has been administered in accordance with its terms and all applicable law. Except as set forth in Section 3.14(b) of the Disclosure Schedule, all reports, returns, summaries and similar documents with respect to the Company Plans required to be filed with any governmental agency or distributed to any Company Plan participant have been duly and timely filed or distributed. Except as set forth in Section 3.14(b) of the Disclosure Schedule, there are no investigations by any governmental agency, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Company Plans), suits or proceedings against or involving any Company Plan or asserting any rights or claims to benefits under any Company Plan that could reasonably give rise to any liability to the 20 Company and there are no facts that could reasonably give rise to any liability in the event of any such investigation, claim, suit or proceeding, and, to the best of Seller's knowledge, there are no such investigations, claims, suits or proceedings threatened. Except as set forth in Section 3.14(b) of the Disclosure Schedule, all contributions to, and payments from, the Company Plans that may have been required to be made in accordance with the provisions of each of the Company Plans and applicable laws have been, in all cases, made on a timely basis and in full or, if applicable, accrued in accordance with Financial Accounting Standards Board Statement No. 87. No Company Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees of the Company beyond their retirement or other termination of service (other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any Pension Plan, (iii) deferred compensation benefits accrued as liabilities on the books of the Company, or (iv) benefits the full cost of which is born by the current or former employee (or his beneficiary)). (c) Except as set forth in Section 3.14(c) of the Disclosure Schedule, with respect to each Company Plan, (i) the fair market value of the assets of each funded Company Plan, the liability of each insurer for any Company Plan funded through insurance or the book reserve established for any Company Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations with respect to all current and former participants in such Company Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Company Plan, and (ii) each Company Plan required to 21 be registered or otherwise qualified has been registered or otherwise qualified and has been maintained in good standing with applicable regulatory authorities. (d) No liability under Title IV of ERISA has been incurred by Seller, the Company or any ERISA Affiliate within the prior six years that has not been satisfied in full, and no condition exists that presents a risk of incurring such liability. Except as set forth in Section 3.14(d) of the Disclosure Schedule, no "employee pension benefit plan" sponsored, maintained, contributed to or required to be contributed to by Seller, the Company or any ERISA Affiliate that is subject to ERISA (each an "ERISA Plan") or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each ERISA Plan ended prior to the date hereof. Except as set forth in Section 3.14(d) of the Disclosure Schedule, none of Seller, the Company or any ERISA Affiliate has, since September 26, 1980, incurred any withdrawal liability, within the meaning of Section 4201 of ERISA, which liability has not been fully paid as of the date hereof, or announced an intention to withdraw, but not yet completed such withdrawal, from any multiemployer plan. 3.15 Investments. Except as set forth in Section 3.15 of the Disclosure Schedule, the Company owns no capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust, joint venture or other entity. 3.16 Tax Matters. (a) For purposes of this Agreement, the defined terms set forth below shall have the meaning ascribed thereto: "Taxes" shall mean any U.S. federal, state, county, local or foreign taxes, charges, fees, levies, or other assessments, including, without limitation, all net income, 22 gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties or withholding taxes or charges imposed by any governmental entity, and includes any interest and penalties (civil or criminal) on or additions to any such taxes and any expenses incurred in connection with the determination, settlement or litigation of any tax liability. "Tax Return" shall mean any report, return or other information required to be supplied to any governmental entity with respect to Taxes including, where permitted or required, combined or consolidated returns. "Tax Ruling" shall mean a written ruling relating to Taxes issued to the Company by any taxing authority. (b) Filing of Timely Tax Returns. The Company has filed or will file on or prior to the Closing Date (or there has been filed on their behalf) all Tax Returns required to be filed under applicable law. All such Tax Returns were, to Seller's knowledge, true, complete and correct and filed on a timely basis. (c) Payment of Taxes. The Company has, within the time and in the manner prescribed by law, paid all Taxes that are currently due and payable. (d) Tax Liens. There are no Liens upon the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. (e) Withholding Taxes. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholders or other Persons. 23 (f) Extensions of Time for Filing Tax Returns. The Company has not requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed. (g) Waivers of Statute of Limitations. The Company has not executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns. (h) Audit, Administrative and Court Proceedings. No audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns of the Company, and the Seller has no knowledge of any threatened action, audit or administrative or court proceeding with respect to any such Taxes or Tax Returns. (i) Powers of Attorney. No power of attorney currently in force has been granted by the Company concerning any Tax Matter. (j) Tax Rulings. The Company has not received a Tax Ruling or entered into an agreement relating to Taxes with any taxing authority that would have a continuing effect after the Closing Date. (k) Availability of Tax Returns. The Company has made available to Buyer complete and accurate copies of (i) all Tax Returns, and any amendments thereto, filed by or on behalf of the Company, (ii) all audit reports received from any taxing authority relating to any Tax Return filed by the Company and (iii) agreements relating to Taxes entered into by the Company for the period from January 1, 1994, through the date hereof. 24 (l) Substantial Understatement. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Section 6662 of the Code. (m) Code Section 280G. The Company is not a party to any agreement, contract, or arrangement that could result, on account of the transactions contemplated by this Agreement, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. (n) Liability for Taxes of Other Persons. The Company has no liability for the Taxes of any Person under Treas. Reg. Section 1-1502-6 (or any similar provision of state, local, or foreign law), as transferee or successor, by contract, or otherwise. 3.17 Insurance. Section 3.17 of the Disclosure Schedule contains a true, complete and correct list of all insurance policies currently in effect relating to the properties, assets, business, products, operations or employees of the Company. All such policies are in full force and effect and neither the Seller nor the Company has received notice of cancellation or non-renewal of any such policies. 3.18 Licenses; Permits. (a) To Seller's knowledge, the Company has all licenses, permits or authorizations issued or granted by foreign, local, state or federal governmental authorities or agencies which are required to conduct its business as presently and historically conducted (collectively, the "Permits"). (b) To Seller's knowledge, the Company has complied with all requirements in connection with the Permits. 3.19 Employee and Labor Relations. (a) Except as set forth in Section 3.19(a) of the Disclosure Schedule, there is no labor strike, dispute or work stoppage or lockout 25 pending or threatened, against or affecting the business of the Company and during the past two years there has not been any such action; no union organizational campaign is in progress with respect to any employees or independent contractors of the Company and no question concerning representation exists with respect to such employees or independent contractors; the Company and the Seller with regard to the Company are, and at all times has been, to Seller's knowledge, in compliance with all material respects with all laws applicable to its business and respecting employment and employment practices, occupational safety and health, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice; there is no unfair labor practice charge or complaint against Company or the Seller in connection with the business of the Company pending or threatened before the National Labor Relations Board or any similar entity in any foreign jurisdiction; there is no pending or threatened grievance that, if adversely decided, would have a material adverse effect on the business, operations, affairs, properties, assets or in the financial condition of the Company; no charges with respect to or relating to the business of the Company are pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices; there are no written or oral personnel policies, rules or procedures applicable to employees of the Company including severance policies; neither the Company nor Seller has received a notice of the intent of any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to the Company and no such investigation is in progress; and there are no complaints, lawsuits or other proceedings pending or threatened by or on behalf of any present or former 26 employee of the Company, any applicant for employment or classes of the foregoing alleging breach of any express or implied contract of employment, any law or regulation governing employment or the termination thereof or other discriminatory, wrongful, tortious or actionable conduct in connection with any employment relationship with the Company or, the Seller relating to the Company in any local, state, federal or foreign jurisdiction. (b) Since the enactment of the Workers Adjustment and Retraining Notification Act (the "WARN Act"), the Company has not effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company, or (ii) a " mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Company; nor has the Company been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign plant closing law. Except as set forth in Section 3.19(b) of the Disclosure Schedule, the Company has not suffered an "employment loss" (as defined in the WARN Act) during the prior six (6) months. 3.20 Employee Payments. No oral or written agreement exists between the Company and any person employed by the Company or the Seller pursuant to which such person is entitled to any monetary or other compensation from the Company as a result of the transactions contemplated by this Agreement. 3.21 Disclosure. No representation or warranty by Seller contained in this Agreement, and no statement contained in any Exhibit or Schedule hereto or thereto contains any untrue statement of a material fact or omits to state a material fact necessary 27 in order to make the statements contained herein or therein not misleading or necessary in order to fully and fairly provide the information required to be provided in any such document. 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Seller that the statements contained in this Section 4 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date. 4.1 Organization and Standing of Buyer. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Buyer has all requisite power, authority and capacity to execute and deliver this Agreement and all other agreements, documents and instruments contemplated hereby and to carry out all actions required of it pursuant to the terms of this Agreement. 4.2 Corporate Approval; Binding Effect. The Buyer has obtained all necessary authorizations and approvals from its board of directors and stockholders required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer and constitutes the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms except as such enforcement may be subject to (a) any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereinafter in effect relating to or limiting creditors' rights generally, and (b) the remedy of specific performance and injunctive and other forms of 28 equitable relief may be subject to equitable defenses and the discretion of the court before which any proceeding therefore may be brought. 4.3 Non-Contravention. Neither the execution and delivery of this Agreement by the Buyer nor the consummation by the Buyer of the transactions contemplated hereby will constitute a violation of, or be in conflict with, constitute or create a default under, or result in the creation or imposition of any lien, security interest or other encumbrance upon any property of the Buyer pursuant to (a) the charter or bylaws of the Buyer, each as amended to date; (b) any agreement or commitment to which the Buyer is a party or by which the Buyer or any of its properties is bound or to which the Buyer or any of its properties is subject; or (c) any statute or any judgment, decree, order, regulation or rule of any court or governmental authority. 4.4 Investment. The Buyer is not acquiring the Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended. 5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of the Buyer to consummate the Closing shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (to the extent noncompliance is not waived in writing by the Buyer): 5.1 Representations and Warranties True at Closing. The representations and warranties made by the Seller in this Agreement shall be true and correct at and as of the Closing, except for changes permitted by the terms of this Agreement. 29 5.2 Compliance With Agreement. The Seller shall have performed and complied with all of its obligations under this Agreement to be performed or complied with by it on or prior to the Closing Date. 5.3 No Litigation. No action, suit or proceeding shall be pending or threatened before any court or administrative body in which it will be or is sought to restrain or prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 5.4 Closing Certificate. The Seller shall have delivered to the Buyer in writing, at and as of the Closing, a certificate in form and substance satisfactory to the Buyer and Buyer's counsel, certifying that the conditions in each of Sections 5.1, 5.2, and 5.3 have been satisfied. 6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligation of the Seller to consummate the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions (to the extent noncompliance is not waived in writing by the Seller): 6.1 Representations and Warranties True at Closing. The representations and warranties made by the Buyer in this Agreement shall be true and correct at and as of the Closing. 6.2 Compliance with Agreement. The Buyer shall have performed and complied with all of its obligations under this Agreement that are to be performed or complied with by it on or prior to the Closing. 6.3 No Litigation. No action, suit or proceeding shall be pending or threatened before any court or administrative body in which it will be or is sought to 30 restrain or prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 6.4 Closing Certificate. The Buyer shall have delivered to the Seller in writing, at and as of the Closing, a certificate duly executed by the President of the Buyer, in form and substance satisfactory to the Seller and the Seller's counsel, certifying that the conditions in each of Sections 6.1, 6.2 and 6.3 have been satisfied. 7. OTHER COVENANTS AND AGREEMENTS. 7.1 Confidential Information. Any and all non-public information disclosed by the Buyer to the Seller or by the Seller or the Company to the Buyer as a result of the negotiations leading to the execution of this Agreement, or in furtherance thereof, shall remain confidential, except to the extent that the Buyer in its reasonable judgment must disclose any such information to its advisors and consultants (who shall be under a like obligation of confidentiality). The information intended to be protected hereby shall include, but not be limited to, financial information, customers, sales representatives, and anything else having an economic or pecuniary benefit to the Buyer, the Seller, or the Company. 7.2 Expenses. The Buyer and the Seller will each bear their own costs and expenses (including legal and brokers fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. 7.3 Intercompany Accounts. All amounts owed by the Seller or its affiliates (other than the Company) to any Company shall be cancelled and forgiven as of the Closing Date. 31 7.4 Further Assurances. The Seller and the Buyer shall execute and deliver to the appropriate other party such other instruments as may be reasonably required in connection with the performance this Agreement and each shall take all such further actions as may be reasonably required to carry out the transactions contemplated by this Agreement. 7.5 Satisfaction of Conditions Precedent. The Seller and the Buyer will each use their best efforts to cause the satisfaction of the conditions precedent contained in this Agreement; provided, however, that nothing contained in this Section 7.5 shall obligate any party hereto to waive any right or condition under this Agreement. 7.6 Public Statements or Releases. The Buyer and the Seller agree that, without the other party's prior approval, neither they, nor any of their affiliates will make, issue or release any public or industry announcement, statement or acknowledgment of the existence of the transactions provided for herein, other than as may be legally required or advisable. 7.7 Claims Under Seller Insurance Policies. The Company has been covered for certain periods under insurance policies maintained by the Seller or Nortek, Inc. Coverage under these policies will cease to apply to the Company for occurrences after the Closing Date. Subject always to the provisions of Section 7.9 , the Seller will permit the Company to continue to be covered by the Seller's or Nortek, Inc.'s insurance policies for pre-Closing occurrences related to the Company. With regard to such policies maintained by Seller or Nortek, Inc., Buyer and/or the Company's obligation for any retentions or deductibles or other charges or fees shall be limited, except in 32 circumstances where the Company is pursuing a claim pursuant to Section 9.4(c)(ii), to and capped at the reserve on the Balance Sheet. 7.8 Access to Company Information, Property and Personnel; Record Retention. (a) Following the Closing, the Buyer shall afford the Seller and its accountants, counsel and other representatives: (i) Reasonable access and duplicating rights during normal business hours to all records, books, contracts and other data and information relating to the Company's business or operations prior to the Closing Date reasonably required by Seller in furtherance of its obligations under this Agreement. Without limiting the foregoing, information may be requested under this paragraph for financial reporting and accounting matters, for purposes of preparation of the Preliminary Closing Working Capital Statement and resolving any differences with respect thereto, and for purposes of preparing and filing any tax returns or defending any tax claim or assessment. (ii) Reasonable access upon written request to and use of Company personnel (including, but not limited to, Barry Holden, Thomas Dickson and Timothy Borris) for such reasonable purposes as Seller may request related to matters involving the business of the Company preceding the Closing Date. Without limiting the foregoing, such purposes may include access and use of personnel for information, testimony, statements and similar matters pertaining to litigation, claims, proceedings, tax contests, audits and other matters involving the Company's business or operations prior to the Closing Date (including without 33 limitation relating to FRT Claims, the Indemnified Environmental Matters, or the Company's use of CCA). Such access shall not unreasonably interfere with any employee's performance of his regular duties and will include appearances at court ordered depositions or court dates. (iii) Reasonable access to the Company's properties in furtherance of carrying out Seller's indemnification obligations under Section 9.2(e). (b) The Buyer shall cause the Company to preserve all material information pertaining to the business and operations of the Company prior to the Closing for a period following the Closing Date contemporaneous with the Company's existing document retention policies. Retention of information beyond the Company's existing document retention policy will be at Seller's expense. 7.9 Insurance Coverage for Certain Matters. Except as set forth in the last sentence of this Section 7.9, the Seller shall have the sole and exclusive liability for and concomitant right to assert the Company's claims and receive recoveries under all insurance policies of the Seller or the Company in effect at any time prior to the Closing Date, which cover the matters described in Section 9.2(c) or 9.5(a). Without limiting the foregoing, the Seller shall have all rights against the insurance companies party to the insurance coverage litigation entitled Aetna Casualty & Surety Company v. Ply Gem Industries, Inc. et al, pending in the Superior Court of New Jersey, Docket No.: BER L-5053-60 and all rights to settlement funds under settlement agreements entered into in connection therewith. The provisions of this Section 7.9 shall not apply to restrict Buyer and/or the Company from pursuing insurance recoveries in favor of the Company 34 related to matters identified in Section 9.2(c) to the extent that the $5,000,000 aggregate limitation on Seller's indemnities referenced in 9.4(c) has been reached. 7.10 Reimbursement for Pine Bluff Reconstruction. Seller shall be entitled to any insurance proceeds available in connection with the reconstruction of the Pine Bluff facility and the Buyer and the Company shall provide reasonable cooperation in securing such proceeds. 8. TAX MATTERS. 8.1 Federal, State and Local Income Taxes. The applicable income, deductions and credits with respect to the Company for the period beginning on January 1, 2002 and ending on the day before the Closing Date (the "Short Period") will be included in the consolidated federal income tax return of the affiliated group having Nortek, Inc. as its common parent and will be included in the applicable combined or unitary state or local income tax return of Nortek, Inc. or, where permitted under state or local law, will be included in separate state or local income tax returns to be filed for such period on behalf of the Company by Seller. Seller shall pay the income taxes of the Company as shown on any such separate state or local return. In any case where applicable state or local law does not permit the Company to treat the Short Period as a taxable year, then the Seller shall pay to the Buyer a portion of the state or local income Tax paid by the Company for the taxable year, which includes the Short Period equal to the tax that would have been due if the Short Period were treated as a taxable year. The Seller shall be solely responsible for and shall indemnify and hold harmless the Buyer with respect to all federal, state or local income taxes, and any interest, penalty or additional amounts, with respect to any taxable periods of the Company ending before the 35 Closing Date. The Buyer shall be responsible for, and shall indemnify and hold harmless the Seller with respect to, all such taxes for periods commencing on or after the Closing Date. The foregoing indemnity shall not be subject to any of the limitations specified in Section 9.4. The Seller shall be entitled to all refunds of taxes accruing to the Company with respect to any taxable periods ending before the Closing Date. 8.2 Certain Contest Rights. The Buyer will promptly inform the Seller as to the commencement of any audit or proceeding with respect to the liability for federal, state or local income taxes of the Company for periods ending on or prior to the Closing Date. Similarly, the Seller will promptly inform the Buyer of any such proceedings which would have an effect on the liability for taxes of the Company for periods commencing on or after the Closing Date. The parties will reasonably cooperate with each other with respect to such proceedings, taking into account, among other things, the relevant provisions of Sections 8.1 through 8.6. 8.3 Other Taxes. Except as provided in Sections 8.1, 9.5 and 9.9 and except for any breach of Seller's representations or warranty on taxes contained in Section 3.16, the Buyer shall be solely responsible for and shall indemnify and hold harmless the Seller with respect to all taxes imposed by any taxing authority with respect to the Company. 8.4 Termination of Prior Tax Sharing Agreements. Effective as of the Closing Date, all tax sharing agreements, whether or not written, to which the Seller or Nortek, Inc., and the Company is a party shall be terminated and the provisions of this Section 8.4 shall thereafter govern the obligations of the Seller or Nortek, Inc. and the Company with respect to tax matters. The foregoing provision and the other provisions of this 36 Section 8.4 are not intended to reverse any prior tax payments actually made by the Company to the Seller or Nortek, Inc. 8.5 Cooperation. The Company shall deliver to the Seller, in a timely manner, such information and data as the Seller shall reasonably request, including such information required by Seller's customary tax and accounting questionnaires, in order to enable the Seller to fulfill its obligations under Sections 8.1 through 8.6. 8.6 Section 338(h)(10) Election. In order to treat the sale of the Company hereunder as an asset sale for tax purposes, the Seller and the Buyer agree that they shall take all action necessary to join in the making of a timely election pursuant to Section 338(h)(10) of the Code (and any other relevant section or related regulation) and any similar state law provision in respect to the purchase and sale of the Shares. 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 9.1 Survival of Representations and Warranties. The representations and warranties of the parties hereto contained in this Agreement shall survive the Closing, except for the representations and warranties contained in Section 3.9 which shall terminate and be of no further force and effect immediately after the Closing. All of the representations and warranties of the Seller contained in Sections 2 and 3 (other than the second sentence of Section 3.8(a)) and of the Buyer contained in Section 4 shall expire and be of no further force or effect with respect to any claim for breach thereof not asserted within two years of the Closing Date. The second sentence of Section 3.8(a) shall expire and be of no further force or effect with respect to any claim for breach 37 thereof not asserted within 180 days after the expiration of all statutes of limitations with respect to the title defects described therein. 9.2 Indemnification By the Seller. Subject to the limitations set forth in Sections 9.1 and 9.4, the Seller hereby indemnifies and holds harmless the Buyer against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) incurred by the Buyer or the Company in connection with each and all of the following: (a) any breach by the Seller of any representation or warranty in this Agreement; (b) any breach of any covenant, agreement or obligation of the Seller contained in this Agreement; and (c) any Indemnified Product Liability Claim in accordance with Section 9.4(f). 9.3 Indemnification By the Buyer. The Buyer, hereby indemnifies and holds harmless the Seller and Nortek, Inc. against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) reasonably incurred by the Seller in connection with each and all of the following: (a) any breach by the Buyer of any representation or warranty in this Agreement; (b) any breach of any covenant, agreement or obligation of the Buyer contained in this Agreement; and 38 (c) except to the extent indemnifiable by Seller pursuant to Sections 9.2 or 9.5, the Company or its business operations, whether arising before or after the Closing Date. 9.4 Limitations. (a) Except as otherwise specifically provided for herein, the rights and remedies of the parties under this Section shall be the sole and exclusive remedy for breaches of this Agreement. (b) The Seller shall not be liable for breaches of its representations, warranties and covenants contained in this Agreement pursuant to Section 9.2 until Buyer has suffered aggregate losses in excess of $250,000, after which point, the Seller shall only be obligated to indemnify the Buyer against further losses in excess of such amount. (c) Except as set forth in the immediately succeeding sentence, the aggregate liability of the Seller for all claims arising from breaches of Seller's representations, warranties and covenants contained in this Agreement pursuant to Section 9.2 shall not exceed $5,000,000 (it being understood (i) that, except with regard to FRT Claims payments, all payments made by Seller's products liability policies covering any period prior to the Closing Date shall be deemed a payment by the Seller for purposes of this limitation and (ii) that once the aforesaid $5,000,000 has been exhausted, Buyer and/or the Company shall not be precluded from pursuing amounts in excess of $5,000,000 from insurers with regard to policies applicable to the Company, to the extent available). The limitation of liability set forth in the immediately preceding sentence shall not apply to a breach of representations and warranties contained in Section 3.1 or 3.2. 39 (d) In no event shall Seller be liable pursuant to Section 9.2 for any losses or damages that are consequential, in the nature of lost profits, diminution in value, damage to reputation or the like, special or punitive or otherwise not actual losses or damages. (e) The amount of losses or damages for which indemnification is sought under Section 9.2 shall be reduced by any recoveries which the indemnified party actually receives or gets the benefit of by virtue of a payment directly to a claimant under insurance policies or actually received payments from third parties or any tax benefits actually received, but the foregoing shall not preclude a valid indemnification obligation arising pending an insurance determination. To the extent Seller makes an indemnity payment, Seller will be subrogated to Buyer's rights under insurance policies and against third parties related to such payment, and Buyer will reasonably cooperate in efforts to facilitate collections by Seller. (f) With respect to the Seller's indemnity in Section 9.2(c) for any product liability claim against the Company for any products sold by the Company or its predecessors prior to the Closing Date other than FRT claims referenced in Section 9.5(a) (an "Indemnified Product Liability Claim") the following further limitations shall apply: (i) The Buyer and the Company shall defend, indemnify and hold harmless the Seller, its affiliates and their insurers (including insurers of the Company under policies maintained by the Seller or its affiliates) against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) arising out of or 40 related to any third-party bodily injury or property damage caused by any product sold by the Company after the Closing Date. (ii) The Buyer and the Company shall defend, indemnify and hold harmless the Seller, its affiliates and their insurers (including insurers of the Company under policies maintained by the Seller or its affiliates), and the Seller shall defend, indemnify and hold harmless the Buyer, the Company, and their insurers, against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) arising out of or related to any third-party bodily injury or property damage caused by any product sold by the Company or its predecessors prior to the Closing Date based upon the percentage each party bears of the Exposure Period, as hereafter defined. "Exposure Period" shall mean (i) for claims for third-party property damage relating to release or discharge of hazardous substances, the period from the date of installation of the product through the date the Company is notified in writing of the claim of such third party, (ii) for claims for third-party injury relating to exposure to hazardous substances, including bodily injury, the period from the date of first exposure through the date the Company is notified in writing of the claim of such third party and (iii) for other third-party property damage or injury claims, the occurrence date of such damage or injury. (iii) Whenever the Company shall receive notice of any claim for which clause (ii) above may apply, the Company shall promptly notify Seller of such claim and, when known, the facts constituting the basis of such claim. Such 41 claim shall be defended by defense counsel mutually acceptable to the Buyer and the Seller. (iv) No claim for indemnification may be made under clause (ii) above if notice of such claim is given to Seller after the tenth anniversary of the Closing Date. (g) Seller shall not be liable for any breach of representation or warranty related to Section 3.9 in the event Buyer has actual knowledge as of the Closing Date. 9.5 Retained Liabilities. Notwithstanding anything to the contrary in this Agreement, Seller shall retain the liability for and indemnify and hold harmless the Buyer against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal and accounting or other expenses for investigating or defending any actions or threatened actions) incurred by the Buyer or the Company in connection with each of the following: (a) any existing or future claim regardless of when asserted of any third party for product replacement or repair or for property damage or personal injury relating to the Company's Pro-Tex brand fire retardant treated plywood ("FRT Claims"); (b) any claim of any nature whatsoever regardless of when asserted for benefits to employees or former employees or beneficiaries under the Ply Gem Industries, Inc. Group Pension Plan or the Hoover Treated Wood Products, Inc. Retirement Income Plan and any claim of any nature whatsoever asserted by the Internal Revenue Service or the Pension Benefit Guaranty Corporation; (c) any claim of any nature whatsoever related to federal, state or local income taxes on or prior to the Closing Date as described in Section 8.1; 42 (d) any claim of any nature whatsoever related to Indemnified Environmental Matters (as hereafter defined); and (e) any claim of any nature whatsoever related to Indemnified Consolidated Matters (as hereafter defined) specifically including but not limited to multiemployer pension plan withdrawal liabilities and other matters related to Studley Products Inc. described in Section 3.14(d) of the Disclosure Schedule. Any claim described in this Section 9.5 shall not be subject to any of the limitations on liability described in Section 9.4. 9.6 Claims for Indemnification. Whenever any claim shall arise for indemnification hereunder, the indemnified party shall promptly notify the indemnifying party of the claim and, when known, the facts constituting the basis for such claim; provided, however, that no delay on the part of the indemnified party shall release the indemnifying party of any liability or obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is actually and directly damaged. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third-party, the notice to the indemnifying party shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. 9.7 Defense of Indemnifying Party. In connection with any claim to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person who is not a party to this Agreement, the indemnifying party, at its sole cost and expense may, upon written notice to the indemnified party, assume the defense of any such claim or legal proceeding if it acknowledges to the indemnified party in writing its 43 obligations to indemnify the indemnified party with respect to all elements of such claim. In any such claim or proceeding, the indemnifying party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement, which does not include a provision whereby the plaintiff or claimant in the matter releases the indemnified party from all liability with respect thereto. The indemnified party shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense. If the indemnifying party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made, (a) the indemnified party may defend against such claim or litigation, in such manner it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the indemnifying party, on such terms as the indemnified party may deem appropriate, and (b) the indemnifying party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the indemnifying party thereafter seeks to question the manner in which the indemnified party defended such third party claim or the amount or nature of any such settlement, the indemnifying party shall have the burden to prove by a preponderance of the evidence that the indemnified party did not defend or settle such third party claim in a reasonably prudent manner. 9.8 Indemnified Environmental Matters. As used herein "Indemnified Environmental Matters" shall mean any claim, damage, losses, liabilities, costs and expenses of any nature whatsoever related to the Williams-Mesena Road Landfill located in Thomson, Georgia including but not limited to claims, damages, losses, liabilities, 44 costs and expenses in the action filed in the Superior Court of Richmond County, Georgia styled William F. Brian et al. v. Boone A. Knox et al. 9.9 Indemnified Consolidated Matters. As used herein "Indemnified Consolidated Matters" shall mean any claim, damage, losses, liabilities, costs and expenses related to the Company's prior membership as part of the Nortek, Inc. consolidated group, including without limitation tax and ERISA liabilities. 10. GENERAL. 10.1 Notices. All notices, demands and other communications hereunder shall be in writing and shall be made by hand delivery, telecopier, or overnight air courier guaranteeing next day delivery addressed as follows: (a) if to the Buyer to: c/o Alpha Private Equity Group 499 Park Avenue, 24th Floor New York, New York 10022 1325 Avenue of the Americas Suite 704 New York, NY 10019-6026 Attn: Mr. J. Eric Hanson Fax: (212) 583-0956 with a copy sent contemporaneously to: Andrew J. Ryan, Esq. Salisbury & Ryan LLP 1325 Avenue of the Americas Suite 704 New York, NY 10019-6026 Fax: (212) 977-4668 45 (b) if to the Seller, to: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: President Fax: (401) 751-4610 with a copy sent contemporaneously to the Buyer marked "Attention: General Counsel"; or (c) to such other address as the party receiving such notice shall have properly designated to the other party hereto in writing. Each such notice shall be deemed given at the time delivered by hand, if personally delivered; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 10.2 Entire Agreement. This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof and shall not be amended except by a written instrument hereafter signed by all of the parties hereto. 10.3 Interpretation. This Agreement has been prepared, and negotiations in connection herewith have been carried on, by the joint efforts of the parties hereto and their respective counsel. This Agreement is to be construed fairly and simply and not strictly for or against any of the parties hereto. 10.4 Governing Law. The validity and construction of this Agreement shall be governed by the internal substantive laws of the State of Delaware. 46 10.5 Sections and Section Headings. The headings of sections and subsections are for reference only and shall not limit or control the meaning thereof. 10.6 Assigns. This Agreement shall be binding upon and inure to the benefit of the heirs and successors of each of the parties. Neither this Agreement nor the obligations of any party hereunder shall be assignable or transferable by such party without the prior written consent of the other party hereto; provided, however, that nothing contained in this Section 10.6 shall (i) prevent the Buyer, without the consent of the Seller, from transferring or assigning this Agreement or its rights or obligations hereunder to another entity controlling, under the control of, or under common control with the Buyer or (ii) prevent Buyer from assigning its rights and benefits under this Agreement to SunTrust Bank or to SunTrust Banks Inc. or their respective successors or assigns arising from representations, warranties, covenants and indemnifications made by Seller hereunder. No such transfer or assignment shall relieve the Buyer of its obligations hereunder. 10.7 No Implied Rights or Remedies. Except as otherwise expressly provided herein, nothing herein expressed or implied is intended or shall be construed to confer upon or to give any person, firm or corporation, other than the Seller and the Buyer, any rights or remedies under or by reason of this Agreement. 10.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.9 Amendments. This Agreement may not be changed orally, but only by an agreement in writing signed by the Seller and the Buyer. 47 10.10 Waiver of Compliance. Any failure of the Seller, on the one hand, or the Buyer, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by the Seller (in respect of failures by the Buyer) or the Buyer (in respect of failures by the Seller). 10.11 Seller's Knowledge. As used in this Agreement, "to Seller's knowledge" or "to the best of Seller's knowledge" or similar phrase shall mean the actual knowledge of Richard L. Bready, Kevin W. Donnelly, Almon C. Hall, Bruce E. Fleming after reasonable investigation, including without limitation, reasonable enquiry of Barry W. Holden and Thomas E. Dickson. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed and delivered as of the date and year first above written. BUYER: HOOVER FRT ACQUISITION CO. By: _____________________________________ Title: President SELLER: PLY GEM INDUSTRIES, INC. By: _____________________________________ Title: Vice President & Secretary AMENDMENT OF STOCK PURCHASE AGREEMENT BETWEEN HOOVER FRT ACQUISITION CO. AND PLY GEM INDUSTRIES, INC. WHEREAS, Hoover FRT Acquisition Co. ("FRT") and Ply Gem Industries, Inc. ("Ply Gem") entered in a Stock Purchase Agreement, dated April 2, 2002 ("Agreement"), pursuant to which FRT acquired all of the outstanding shares of Hoover Treated Wood Products, Inc. ("Hoover") from Ply Gem; WHEREAS, Section 9.5 of the Agreement delineates liabilities of Hoover to be retained by Ply Gem after the acquisition of Hoover by FRT, including certain claims defined in subsection (a) thereof as "FRT Claims;" WHEREAS, in connection with executing the Agreement, FRT and Ply Gem executed a letter dated April 2, 2002, to reflect their understanding of what FRT Claims existed on that date (the "Letter"); and WHEREAS, FRT merged with and into Hoover on April 2, 2002 and, as a result, the Agreement and Letter are binding upon and inure to the benefit of Hoover; NOW THEREFORE, FRT and Ply Gem agree as follows: 1. The FRT Claims include all existing or future claims relating to Hoover's Pro-Tex brand fire retardant treated wood, and not just plywood. 2. Subsection (a) of Section 9.5 of the Agreement is hereby amended to read as follows: (a) any existing or future claim regardless of when asserted of any third party for product replacement or repair or for property damage or personal injury in any way relating to the Company's Pro-Tex brand fire retardant treated wood ("FRT Claims"). 3. The last sentence of the first paragraph of the Letter is amended by deleting "plywood" and replacing it with the word "wood." IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have executed this Agreement this 30th day of April, 2002. HOOVER TREATED WOOD PRODUCTS, INC. PLY GEM INDUSTRIES, INC. By: _____________________________ By: _____________________________ Barry W. Holden Kevin W. Donnelly President Vice President EX-10.18 45 y95660exv10w18.txt STOCK PURCHASE AGREEMENT Exhibit 10.18 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of the 22nd day of November, 2002 by and between ALCOA BUILDING PRODUCTS, INC., an Ohio corporation (the "Buyer"), PLY GEM INDUSTRIES, INC., a Delaware corporation (the "Seller"), and NORTEK INC., a Delaware corporation. WHEREAS, The Seller owns all of the authorized, issued and outstanding capital stock (the "Shares") of Richwood Building Products, Inc., a Delaware corporation (the "Company"); and, WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from Seller the Shares upon the terms and subject to the conditions set forth below; and, NOW THEREFORE, in consideration of the premises and of the mutual agreements hereinafter set forth, the parties hereto mutually agree as follows: 1. PURCHASE AND SALE OF SHARES. 1.1. Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Shares for the consideration specified below in this Section 1. 1.2. Purchase Price. (a) As the purchase price for the Shares (the "Purchase Price"), the Buyer agrees to pay to the Seller at the Closing EIGHT MILLION SEVEN HUNDRED THOUSAND ($8,700,000) DOLLARS by wire transfer of immediately available federal funds to a bank account designated by Seller. The Purchase Price shall be subject to a post-Closing adjustment in accordance with the following paragraphs of this Section 1.2. (b) If the Closing Net Working Capital (as defined in paragraph (c) below) exceeds, by more than $100,000, the Target Amount (as defined in paragraph (c) below), the Buyer shall pay to the Seller the amount of the difference between the Closing Net Working Capital and the Target Amount. If the Target Amount exceeds, by more than $100,000, the Closing Net Working Capital, the Seller shall pay to the Buyer the amount of the difference between the Closing Net Working Capital and the Target Amount. Such payments shall be made in cash within five business days after the Closing Working Capital Statement shall have been agreed upon or deemed agreed upon pursuant to paragraph (d) below. (c) The "Target Amount" shall be $2,300,000. The "Closing Net Working Capital" shall mean the sum of the Company's cash and cash equivalents, net accounts receivable, net inventory less the amount of $130,000, and prepaid current assets as of the Closing Date less accounts payable and current accrued expenses (excluding any accruals related to any Employee Benefit Plan identified in Section 10.2(c)) as of the Closing Date as set forth on the Closing Balance Sheet. For purposes of determining Closing Net Working Capital all inter-company balances will be excluded from the calculation. (d) Within 45 days after the Closing, the Seller, at Seller's expense, shall prepare and deliver to the Buyer an unaudited income statement and related balance sheet (together with all footnotes thereto) as of the Closing Date (the "Closing Balance Sheet") and an unaudited statement of Closing Net Working Capital for the Company as of the Closing Date (the "Preliminary Closing Working Capital Statement"). The Seller shall prepare the Closing Balance Sheet and the Preliminary Closing Working Capital Statement on the basis of the accounting methods, treatments, assumptions, principles and procedures used in the preparation of the Financial Statements (as defined in Section 3.5), whether or not such accounting methods, treatments, principles and procedures are in accordance with generally accepted accounting principles. In particular, without limiting the foregoing, Buyer shall not object to the prices used to value inventory nor the calculation of the obsolescence reserve if the costing methodology is consistent with the Financial Statements (defined herein) dated September 28, 2002. Without limiting the generality of the foregoing, the Preliminary Closing Working Capital Statement shall be prepared on the basis of facts relating to the Company's operations prior to the Closing Date known by the management of the Seller, presented to Buyer no later than 45 days after the Closing Date, prepared on the assumption that the Company continues to be a part of the Seller's group of companies and no adjustment, provision, charge, reserve or write-off shall be made or included in respect of any costs, liabilities or charges to be incurred after the Closing Date as a consequence of the change of ownership of the Company or any change in management strategy, direction or priority resulting therefrom or in respect of the complete or partial reorganization or restructuring of any business or operation of the Company. The Buyer shall be entitled to full access to the relevant records and working papers used by the Seller in preparing the Preliminary Closing Working Capital Statement. If the Buyer believes that any change is required to be made to the Preliminary Closing Working Capital Statement, including but not limited to changes that may be required as a result of facts relating to the Company's operations prior to the Closing Date becoming known to Buyer after the date that Seller presents Buyer the Preliminary Closing Working Capital Statement, the Buyer shall, within 45 days after receipt, give written notice and description of, and reasonable basis for, such change to Seller. Seller agrees that following its delivery of the Preliminary Closing Working Capital Statement to Buyer until 45 days after Buyer's receipt of it, Seller shall have a duty to make known to Buyer immediately any facts relating to the Company's operations prior to the Closing Date that had they been known to Seller at the time it was preparing the Preliminary Closing Working Capital Statement would have been reflected in the Preliminary Closing Working Capital Statement. Failure to notify the Seller shall constitute acceptance and approval of the Preliminary Closing Working Capital Statement. If the proposed change is not accepted by the Seller, then the Buyer and the Seller shall negotiate in good faith to resolve the dispute. If, after 30 days, any such proposed change remains disputed, then (i) the Buyer or the Seller, as the case may be, shall immediately pay to the other party the amount, if any, not subject to the dispute and (ii) a mutually agreed upon, nationally recognized accounting firm independent from Seller and Buyer (the "Accounting Firm") shall be instructed to use its best efforts to resolve any such dispute within 45 days after such dispute has been referred to it. The decision of the Accounting Firm shall be final and binding. The fees and expenses of the Accounting Firm shall be allocated between the Buyer and the Seller equally. The "Closing Working Capital 2 Statement" shall mean the Preliminary Closing Working Capital Statement as finally agreed upon or deemed agreed upon pursuant to the foregoing provisions. 1.3. The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place by telephone and facsimile, with the exchange of documents to occur immediately thereafter by courier, commencing at 12:00 p.m. local time on November 22nd, 2002, or such other date and/or time as the Buyer and the Seller may mutually agree (the "Closing Date"). 1.4. Deliveries at the Closing. At the Closing, the Seller will (i) sell, convey, transfer, assign and deliver to the Buyer a stock certificate representing all of the Shares free and clear of any and all restrictions on transfer, encumbrances, claims, taxes, liens or other demands or liabilities, endorsed in blank for transfer or accompanied by duly executed assignment documents; (ii) deliver the resignations of all members of the Board of Directors and officers of the Company; (iii) deliver all documents required to be delivered to Buyer pursuant to this Agreement; and (iv) the Buyer will deliver to the Seller the consideration specified in Section 1.2 above. 1.5. Excluded Liabilities. Buyer will not assume any of the following liabilities whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, of the Company: (i) to any related entities (parent, subsidiary or affiliate) and Seller shall fully discharge and settle all such liabilities as of the Closing Date; and (ii) for any federal, state, local, or foreign income taxes, including any interest, penalty, or addition thereto, whether disputed or not, that have been or may be incurred as a result of operation of the Company or otherwise by Seller for any periods ending on or before the Closing Date, including without limitation (a) any of such taxes that will accrue after such date as a result of operation of the Company for periods ending on or before the Closing Date (b) any liability for the deferral of such taxes, if any, and (c) any liability for such taxes that accrue as a result of Seller's receipt of the Purchase Price (collectively, the Liabilities described in (i) and (ii) shall be referred to herein as the "Excluded Liabilities"). 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to the Buyer that the statements contained in this Section 2 are true, correct and complete as of the Closing Date, except as set forth in the disclosure schedule accompanying this Agreement (the "Disclosure Schedule"). 2.1. Authorization. The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Seller has obtained all necessary approvals from its Board of Directors required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms. Except for the filing of notices under the Hart-Scott-Rodino Antitrust Improvements Act (the "H-S-R Act"), the Seller need not give any notice to, make any filing with, or obtain any 3 authorization, consent or approval of any government or government agency in order to consummate the transactions contemplated by this Agreement. 2.2. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge or other restriction of any government, governmental agency, or court to which the Seller is subject, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement, mortgage, instrument of indebtedness or other arrangement to which the Seller is a party or by which it is bound or to which any of its assets is subject, or (iii) violate or conflict with any provision of the Articles of Incorporation or Bylaws of the Seller or the Company, as amended. 2.3. Broker's Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer or the Company could become liable or obligated. 2.4. Ownership of Shares. The Seller holds of record and owns beneficially all of the Shares, free and clear of any restrictions on transfer, encumbrances, claims, taxes, liens or other demands or liabilities. The Seller is not a party to any option, warrant, right, contract, call, put or other agreement or commitment providing for the disposition or acquisition of the Shares or any capital stock of the Company (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to voting of the Shares. 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER CONCERNING THE COMPANY. The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are in all material respects true, correct and complete as of the Closing Date, except (i) as set forth in the Disclosure Schedule, or (ii) for changes in the business and properties of the Company expressly permitted or required by the terms hereof. 3.1. Organization, Qualification and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company is duly authorized to conduct business and is in good standing under the laws of each jurisdiction in which the nature or conduct of its business or the ownership or leasing of its properties requires such qualification. The Company has all requisite power and authority to carry on its business as now conducted and to own or lease and to operate its properties as such properties are now owned, leased or operated. Section 3.1 of the Disclosure Schedule lists the directors and officers of the Company. The Seller has delivered to the Buyer true, correct and complete copies of the charter and by-laws of the Company (each as amended to date). The term "Material Adverse Effect" as used herein shall mean, with respect to any one or more changes, events, or effects a material adverse effect on the business, the financial condition or the operational results of 4 the Company other than any event, change or effect resulting from, or relating to (a) the economy or financial markets in general or (b) the industries in which the Company operates and not specifically relating to or having a disproportionate effect on the Company. 3.2. Capitalization. The entire authorized, issued and outstanding Shares are as described in Section 3.2 of the Disclosure Schedule. All of the issued and outstanding Shares have been duly authorized and are validly issued, fully paid and nonassessable. All of the issued and outstanding Shares are held of record and beneficially by the Seller. There are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights, or other agreements or commitments to which the Seller or the Company is a party, or which are binding upon the Seller or the Company providing for the issuance, disposition or acquisition of any of the Shares or any capital stock of the Company. There are no outstanding or authorized equity appreciation, phantom equity, or similar rights with respect to the Company. There are no voting trusts, proxies or any other agreements or understandings with respect to the voting of the Shares of the Company. 3.3. Non-Contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation of, or be in conflict with, or constitute or create a default under, or result in the creation or imposition of any lien, security interest or other encumbrance upon the Shares or any property of the Company pursuant to (a) its charter or by-laws, each as amended to date; (b) any agreement or commitment, whether written, verbal or otherwise, to which it is a party or by which it or any of its properties is bound or to which it or any of such properties is subject; or (c) any statute or any judgment, decree, order, regulation or rule of any court or governmental authority. 3.4. Governmental Consent. Except for compliance with the H-S-R Act, no consent, approval or authorization of, or registration, qualification or filing with, any governmental agency or authority is required for the execution and delivery of this Agreement or for the consummation of the transactions contemplated hereby. 3.5. Financial Statements. Attached hereto as Section 3.5 of the Disclosure Schedule are copies of the unaudited income statements of the Company for the period ended December 31, 2001 and for the nine months ended September 28, 2002; and the related balance sheets of the Company as at such dates (together with all footnotes thereto, the "Financial Statements"). Except as disclosed in any footnote thereto, each of such Financial Statements has been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") applied on a consistent basis throughout the periods covered thereby and fairly present, in all material respects, the financial condition and results of operations, cash flow and changes in stockholders' equity of the Company as of and for the periods then ended; provided, however, that the Financial Statements lack all required footnotes and other presentation items. 3.6. Absence of Certain Changes. Since September 28, 2002, the Company has carried on its business only in the ordinary course, has not taken or failed to take any action or engaged or failed to engage in any transaction outside the ordinary course of business the primary purpose or effect of which has been to generate or preserve cash, and there has been 5 no change in the financial condition of the Company that is reasonably likely to result in a material adverse effect on the business, financial condition or results of operations of the Company, and during such period there has not been: (i) (A) any granting by Company to any director or officer of Company of any increase in compensation, except in the ordinary course of business consistent with prior practice or as was required under employment agreements in effect as of December 31, 2001, (B) any granting by Company to any such director or officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of December 31, 2001, (C) any entry by Company into any employment, severance or termination agreement with any such director or officer or (D) any grant of any option or right to acquire any Shares or other capital stock of the Company; (ii) any change in accounting methods, principles or practices by Company materially affecting the consolidated assets, liabilities or results of operations of Company, except insofar as may have been required by a change in GAAP; or (iii) any material elections with respect to taxes of Company (except as required by law or as consistent with prior period tax returns) or settlement or compromise by Company of any material tax liability or refund. 3.7. Title to Properties. The Company has good title to, or a valid leasehold interest in, all of the tangible assets, including, but not limited to inventory, which it uses in the conduct of its business, free and clear of any liens, security interests or other encumbrances, other than (i) liens for current taxes not yet payable, (ii) zoning and building statutes, ordinances, resolutions or regulations which, as to any Company property, do not individually or in the aggregate materially adversely affect the Company's ability to conduct its business as now being conducted, and (iii) other encumbrances identified in Schedule 3.7 (collectively, "Permitted Encumbrances"). 3.8. Real Property. (a) Section 3.8(a) of the Disclosure Schedule lists all real property owned by the Company (the "Owned Real Property"). The Company has good title to its Owned Real Property in fee simple absolute, free and clear of all defects of title and also free and clear of all liens, security interests or other encumbrances, other than Permitted Encumbrances. No party other than the Company is in possession of any portion of the Company's Owned Real Property, whether as lessee or sub lessee thereof, tenant at sufferance or otherwise. There are no pending or, to the Knowledge of the Seller, threatened special assessments affecting all or any portion of the Owned Real Property. All real estate taxes, penalties and interest due and payable on or before the Closing Date with respect to the Owned Real Property have been paid in full. (b) The leases listed in Section 3.8(b) of the Disclosure Schedule (the "Real Property Leases") constitute all leases, subleases, licenses and other agreements under which the Company uses or occupies or has any right to use or occupy, now or in the future, 6 any real property (the "Leased Real Property"). The Seller has heretofore delivered to the Buyer true, correct and complete copies of all Real Property Leases (including all modifications thereof and all amendments and supplements thereto). Each of the Real Property Leases is valid, binding and in full force and effect, all rent and other sums and charges payable by the Company thereto as a tenant thereunder is current, no notice of default or termination under any Real Property Leases is outstanding, no termination or partial termination or retaking event or condition or uncured default on the part of the Company thereto or, to the Knowledge of the Seller, the landlord, exist or will arise as a result of execution of this Agreement under any Real Property Lease that are reasonably likely to result in a Material Adverse Effect, and no event has occurred and no condition exists, including but not limited to the execution of this Agreement, which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event of condition. 3.9. Environmental, Health, and Safety Matters. Except as would not, individually or in the aggregate, have a Material Adverse Effect, the Company is in compliance with Environmental, Health, and Safety Requirements. The Company has not during the last two years received any written notice, report or other information regarding any actual or alleged material violation of Environmental, Health, and Safety Requirements, or any material liabilities or potential material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to the Company or its facilities arising under Environmental, Health, and Safety Requirements other than violations set forth in Schedule 3.9. This Section 3.9 contains the sole and exclusive representations and warranties of the Seller with respect to any environmental, health, or safety matters, including without limitation any arising under any Environmental, Health, and Safety Requirements. As used herein, "Environmental, Health, and Safety Requirements" shall mean all federal, state, local and foreign statutes, regulations, and ordinances concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, as such requirements are enacted and in effect on or prior to the Closing Date. 3.10. Material Contracts. Section 3.10 of the Disclosure Schedule lists all of the following types of contracts written, verbal or otherwise: (i) license, royalty or similar agreements; (ii) collective bargaining agreements; (iii) noncompetition agreements; (iv) leases of real and personal property that involve payments in excess of $50,000 per year; (v) distribution agreements; (vi) marketing agreements; (vii) manufacturing agreements; (viii) purchase and sales orders or other agreements with vendors, contractors or customers in excess of $30,000 individually or $100,000 in the aggregate during calendar year 2002; (ix) instrument, note, loan, financing or other credit agreements (including security agreements relating thereto); (x) outstanding letters of credit, powers of attorney or guarantees; (xi) employment, consulting, stock option, incentive or other compensation agreements; (xii) any transactions, contracts or arrangements between the Company and any officer or director, affiliate or other related party; and (xiii) partnership or joint venture 7 agreements. The Seller has delivered to the Buyer a correct and complete copy of each contract or other agreement listed in Section 3.10 of the Disclosure Schedule (as amended to date). The Company is not in breach of any of the foregoing, and the Company has not waived the future enforceability of any rights under any such contract, agreement or commitment. Company is not aware of any counter-parties in breach of, or which Company has reasonable concerns may be in breach of, any of the foregoing. 3.11. Intellectual Properties. Section 3.11 of the Disclosure Schedule identifies each patent or trademark registration which has been issued to or used by the Company with respect to any of its intellectual property, and identifies each pending patent application or application for trademark registration which the Company has made with respect to any of its intellectual property, as well as all trade names, brand names, service marks and copyrights used or owned by the Company (the Intellectual Property"). Except as set forth on Section 3.11 of the Disclosure Schedule, no items of Intellectual Property are licensed to the Company. To the Knowledge of the Seller, Seller has not received any written notification of infringement of any Intellectual Property by the Company or Seller. To the Knowledge of the Seller, no Intellectual Property infringes on any intellectual property rights of others in any jurisdiction in which such Intellectual Property is used. The Company owns or otherwise has the right to use all of the Intellectual Property material to its business, including without limitation the Internally Flashed Siding Channel and Roof Vent, identified in Section 3.11 of the Disclosure Schedule. 3.12. Litigation. Section 3.12 of the Disclosure Schedule sets forth each instance in which the Company (i) is subject to any unsatisfied judgment, order, decree, stipulation, injunction, or charge or (ii) is a party to any charge, complaint, action, suit, proceeding, hearing, arbitration or investigation pending in any court or quasi-judicial or administrative agency of, any federal, state, local, or foreign jurisdiction or before any arbitrator. 3.13. Legal Compliance. The Company is in compliance with all laws (including rules and regulations thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and any writ, judgment, decree, injunction or similar order of any federal, state, local or foreign governmental or regulatory authority, whether preliminary or final, applicable to the Company, other than failures to comply that would not be reasonably likely to have a Material Adverse Effect. Notwithstanding the foregoing, to the extent that another section of this Agreement requires the Seller to make a representation and warranty concerning one or more specifically identified (either by section number, title name or popular name) federal, state, local or foreign governments' laws (including rules and regulations thereunder), or requires Seller to make a representation and warranty concerning a category of laws as set forth in Sections 3.9, 3.14, 3.20 and 3.22, Seller's obligations set forth in this Section 3.13 shall not apply and shall instead be limited to the obligations set forth therein with respect to such specifically referenced laws. 3.14. Employee Benefits. Section 3.14 of the Disclosure Schedule lists each "employee benefit plan" (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) covering employees of the Company (the "Employee Benefit Plans"). To the Seller's Knowledge, each such Employee Benefit 8 Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan and complies in form and in operation in all respects with the applicable requirements of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). All contributions (including all employer contributions and employee salary reduction contributions) which are due have been made to each such Employee Benefit Plan which is an "employee pension benefit plan" as defined in ERISA (an "Employee Pension Benefit Plan"). All premiums or other payments which are due have been paid with respect to each such Employee Benefit Plan which is an "employee welfare benefit plan" as defined in ERISA ("Employee Welfare Benefit Plan"). Each such Employee Benefit Plan which is intended to meet the requirements of a "qualified plan" under Code Section 401(a) has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of such Section. As of the last day of the most recent prior plan year, the market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan equaled or exceeded the present value of liabilities thereunder (determined in accordance with then current funding assumptions). The Seller has delivered to the Buyer correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent annual report (IRS Form 5500), and all related trust agreements, insurance contracts, and other funding arrangements which implement each such Employee Benefit Plan. Seller has not incurred (i) any obligation to make any contribution to any "multi-employer plan" as defined in Section 4001(a) (3) of ERISA or (ii) any withdrawal liability from any multi-employer plan under Section 4201 of ERISA. There are no pending actions, claims or lawsuits which have been asserted or instituted against any of the Employee Benefit Plan, the assets of any of the trusts or funds under any of such plans or the plan sponsor or the plan administrator of such plans, or against any fiduciary (as defined in Section 3(21) of ERISA) of the Employee Arrangements with respect to the operation or administration of such Employee Benefit Plan (other than routine benefit claims), nor does Seller have knowledge of facts which could reasonably be expected to give rise to an action, claim or lawsuit which could have a Material Adverse Effect upon Buyer. To Seller's Knowledge, there are no pending investigations by any governmental agency involving the Employee Benefit Plan. 3.15. Investments. The Company owns no capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust, joint venture or other entity. 3.16. Taxes. For purposes of this Section 3.16 and Article 9, the definitions appearing on Schedule 3.16 shall apply, provided, however, that for purposes of this Section 3.16, (i) the term "Tax" shall not include any federal or state income tax and (ii) the term "Tax Return" shall not include any federal or state income tax returns. (a) The Company has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all respects. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid or accrued on the Closing Working Capital Statement. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. To Seller's Knowledge, on and after 9 September 4, 1997, no claim has been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no security interests on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. (b) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (c) No Seller or director or officer (or employee responsible for Tax matters) of the Company expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Company either (A) claimed or raised by any authority in writing or (B) as to which any of the Seller and the directors and officers (and employees responsible for Tax matters) of the Company have knowledge based upon personal contact with any agent of such authority. (d) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 3.17. Accounts Receivable. All accounts receivable of the Company that are reflected in the Financial Statements represent valid obligations, free and clear of any liens, arising from bona fide transactions entered into in the ordinary course of business. 3.18. INTENTIONALLY OMITTED. 3.19. Customers and Suppliers. Schedule 3.19 sets forth a complete and correct list of the names of the ten largest suppliers and ten largest customers of Company during the last fiscal year and the total sales to, or purchases from, such customers or suppliers made during such fiscal year. 3.20. Permits. Company possesses all requisite governmental franchises, certificates, registrations, licenses, permits, authorizations, approvals and consents ("Permits") to own its properties and to carry on its business as it is being conducted at the Closing Date. Company holds and is in substantial compliance with all Permits required by it in connection with the conduct of its business, as currently conducted, under all federal, state, local and foreign laws, rules and regulations (each, a "Law") or writ, judgment, decree, injunction or similar order of any federal, state, local or foreign governmental or regulatory authority, whether preliminary or final, (each, an "Order"), except where failure to so hold or be in compliance is not reasonably likely to result in a Material Adverse Effect. 3.21. Insurance. Schedule 3.21 sets forth each insurance policy, surety bond and insurance risk arrangement maintained by or for the benefit of the Company on its properties, assets, products, business or personnel. All such policies are in full force and effect, all premiums have been paid in full, and no written notice of cancellation has been received with respect to any such insurance. The Company is not in default with respect to any provision contained in any insurance policy nor has it failed to give any notice or present 10 any material claim under any insurance policy in due and timely fashion. The Company has not been refused any casualty and property insurance during the three-year period prior to the date of this Agreement. The Company shall retain its rights to coverage under all casualty and property insurance policies existing prior to the Closing Date for occurrences arising prior to the Closing and subject to (a) Section 8.5 herein, and (b) the rights of other insureds under such policies. 3.22. Labor Matters. (a) Seller is not a party to or bound by any collective bargaining agreement. There are no unfair labor practice complaints, strikes or other labor disturbances pending or threatened involving employees of Seller. No question concerning representation (as such term is used in the context of proceedings before the National Labor Relations Board) exists respecting the employees of Seller. No grievance nor any arbitration proceeding arising out of or under any collective bargaining agreement of Seller is pending or threatened. Seller has not in the past three (3) years experienced a work stoppage by its employees which work stoppage caused a significant interruption of normal operations. Seller is in compliance with all applicable federal, state, and local laws with respect to discrimination, hours worked by, working conditions of, and payments made to or on behalf of, its employees, other than failures to comply that would not be reasonably likely to have a Material Adverse Effect. (b) Schedule 3.22(b) identifies each employee of the Company who is actively employed or is on an approved leave of absence, including but not limited to military, disability, sickness, pregnancy or disability leave, immediately prior to the Closing (which Schedule may be updated as of the Closing Date to reflect any change) (the "Company Employees"). Except as set forth on Schedule 3.22(b), there are no third parties who have been treated by the Company as its agents or independent contractors who are entitled to any rights, privileges or benefits under any Employee Benefit Plan. 3.23. No Other Representations or Warranties. Except for the representations and warranties contained in this Article 3, Seller makes no representations or warranties, and Seller hereby disclaims any other representations or warranties (express or implied), whether made by Seller or by any of their officers, directors, employees or agents, if any, with respect to the execution, delivery and performance of this Agreement or the transactions contemplated hereby notwithstanding the delivery or disclosure to the Buyer or any of their representatives of any documentation or other information with respect to any one or more of the foregoing. 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Seller that the statements contained in this Section 4 are true, correct and complete as of the Closing Date. 4.1. Organization and Standing of Buyer. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Buyer has all requisite power, authority and capacity to execute and 11 deliver this Agreement and all other agreements, documents and instruments contemplated hereby and to carry out all actions required of it pursuant to the terms of this Agreement. 4.2. Corporate Approval, Binding Effect. The Buyer has obtained all necessary authorizations and approvals from its board of directors and stockholders required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer and constitutes the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms. 4.3. Non-Contravention. Neither the execution and delivery of this Agreement by the Buyer nor the consummation by the Buyer of the transactions contemplated hereby will constitute a violation of, or be in conflict with, constitute or create a default under, or result in the creation or imposition of any lien, security interest or other encumbrance upon any property of the Buyer pursuant to (a) the charter documents or by-laws of the Buyer, each as amended to date; (b) any agreement or commitment to which the Buyer is a party or by which the Buyer or any of its properties is bound or to which the Buyer or any of its properties is subject; or (c) any statute or any judgment, decree, order, regulation or rule of any court or governmental authority except, in cases of clause (b) of this sentence, for such violations, conflicts, or defaults that are not likely to result in a Material Adverse Effect. 4.4. Investment. The Buyer is not acquiring the Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended. 4.5. No Other Representations or Warranties. Except for the representations and warranties contained in this Article 4, Buyer makes no representations or warranties, and Buyer hereby disclaims any other representations or warranties (express or implied), whether made by Buyer or by any of their officers, directors, employees or agents, if any, with respect to the execution, delivery and performance of this Agreement or the transactions contemplated hereby notwithstanding the delivery or disclosure to the Seller or any of their representatives of any documentation or other information with respect to any one or more of the foregoing. 5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. 5.1. Opinion of Counsel. Seller shall have delivered to Buyer an opinion of counsel for Seller and the Company in form and substance satisfactory to Buyer, acting reasonably, to the effect that: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and is duly registered to carry on business in Delaware and Kentucky; (b) This Agreement has been duly executed and delivered by Seller and the Company and is the valid and binding obligation of each of them enforceable against each in accordance with its terms; 12 (c) The authorized capital of the Company consists of 2000 Shares, of which there are issued and outstanding 10 Shares. All of the Shares are duly authorized and validly issued, and are fully paid-up and non-assessable. Seller has marketable title to the Shares free and clear of all encumbrances with full right, power and authority to transfer and sell said Shares to Buyer; (d) The execution and performance of the Agreement by Seller will not violate or result in a failure to comply with, any U.S. statute, law, ordinance, regulation, rule or order of any federal, state or local government or any other governmental department or agency; (e) Neither the execution and delivery of this Agreement by Seller nor the consummation of the transactions contemplated hereby will (i) violate the Articles of Incorporation or Bylaws of the Company, as amended, (ii) violate, conflict with, or constitute a default under, any material agreement or commitment to which the Company or the Seller is a party; (f) No authorization, consent, order, permit or approval of, or filing with, any U.S. federal, or state governmental body is necessary, for the consummation by Seller of the transactions contemplated on its part hereby; and (g) Such counsel is not aware of any encumbrances with respect to the Shares, and the certificates for the Shares and instruments of transfer relating thereto delivered to Buyer at the Closing are such as to transfer and to vest in Buyer all right, title and interest to the Shares, free and clear of all such encumbrances. 5.2. Corporate Documents. Buyer shall have received from Seller resolutions adopted by the board of directors of Seller approving this Agreement and the transactions contemplated hereby, certified by the corporate secretary of Seller, as well as the Company's minute book(s) and any other corporate records maintained by the Company. 5.3. Financial Transition Services Agreement. The parties agree that Nortek Inc. or one of its affiliates will continue to provide to Company certain financial support services pursuant to the terms and conditions of the Financial Transition Services Agreement, attached hereto as Schedule 5.3. 6. CONFIDENTIAL INFORMATION. 6.1. For purposes of this Agreement, "Confidential Information" shall mean any trade secrets and information, not generally available to the public from sources outside the Seller or Company, in any manner relating to the business or activities of the Company, and any information of others which the Company has a duty to keep confidential. 6.2. Seller shall not and shall require that each of its directors, officers, employees and affiliates does not, directly or indirectly, disclose to any third party or use Confidential Information in any manner unless such disclosure or use is consented to in writing by an officer of Buyer or is explicitly permitted by this Agreement. These obligations of non- 13 disclosure and non-use shall continue for a period of three (3) years from the date of this Agreement. 6.3. Notwithstanding the foregoing, Seller has no obligation to keep confidential any information related to the Company if Seller can establish that the same: (i) is or becomes part of the public knowledge or literature without breach of this Agreement by Seller; (ii) Seller is legally required by law or legal process to disclose all or any part of such information, provided that Seller has given timely written notice to Buyer of this obligation, enabling Buyer a reasonable opportunity to seek a protective order or other appropriate remedy, or waive compliance with the provisions of this Agreement, except for financial information required to be included in the consolidated financial statements of Seller and its affiliates. In such event, Seller shall reveal only so much of such information as it is required by law or legal process to disclose. 7. NON-COMPETITION AND NON-SOLICITATION AGREEMENT. 7.1. Non-Competition. The Seller covenants and agrees that for a period of two (2) years from the execution of this Agreement, Seller will not, directly or indirectly, enter into or take part in either as a partner, owner, consultant or agent, any business or other endeavor which engages primarily in the manufacture of decorative shutters, exterior fixture mounting blocks, gable vents and dryer vents anywhere in the United States or Canada. Seller acknowledges that the provisions of this Section are reasonable and necessary to protect the interests of Buyer, that any violation of this Section will result in irreparable injury to Buyer, and that Buyer shall be entitled to have the provisions of this Section specifically enforced by preliminary and permanent injunctive relief in addition to any other remedies available to Buyer. In the event that the provisions of this Section shall ever be deemed to exceed the time, geographic, product or other limitations permitted by applicable law, then the provisions shall be deemed reformed to the maximum extent permitted by law. Nothing contained herein shall preclude Seller (or any of its affiliates) from acquiring all or a part of Mid-America Building Products Co. ("Mid-America") at anytime, provided however, in the event Seller or any of its affiliates does acquire Mid-America, Seller and its affiliates agree that for a period of two (2) years from the execution of this Agreement, Seller and its affiliates will not solicit any of the Company's current customers as of the date of this Agreement, which are not customers of Mid-America at the time of the closing of the acquisition of Mid-America. 7.2. Non-Solicitation. Seller and Nortek Inc. agree that for a period of two (2) years after the date hereof that neither of them nor their affiliates and representatives will directly or indirectly solicit for employment or by any other contractual arrangement or engagement, employ, engage, interfere with, or endeavor to entice away from Company any of its employees; provided, however, that nothing herein shall restrict Seller or Nortek Inc. from employing any employees that the Company releases from employment. For purposes of Lannie McCoy, the above-restrictions shall apply, provided that neither Seller, Nortek, Inc. nor their affiliates shall be precluded from hiring Mr. McCoy six (6) months after the Closing Date. 14 8. OTHER COVENANTS AND AGREEMENTS. 8.1. Expenses. The Buyer and the Seller will each bear their own costs and expenses (including legal and brokers' fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. 8.2. Further Assurances. The Seller and the Buyer shall execute and deliver to the appropriate other party such other instruments as may be reasonably required in connection with the performance of this Agreement and each shall take all such further actions as may be reasonably required to carry out the transactions contemplated by this Agreement. Without limiting the foregoing, upon Closing Seller agrees that it shall immediately notify the banks at which the Company holds any accounts that any individuals or entities entitled to execute commercial documents on behalf of the Company shall no longer have such authority. 8.3. Satisfaction of Conditions Precedent. The Seller and the Buyer will each use their best efforts to cause the satisfaction of the conditions precedent contained in this Agreement; provided, however, that nothing contained in this Section 8.3 shall obligate any party hereto to waive any right or condition under this Agreement. 8.4. Public Statements or Releases. The Buyer and the Seller agree that, prior to the Closing, without the other party's prior approval, neither they, nor any of their affiliates will make, issue or release any public or industry announcement, statement or acknowledgment of the existence of the transactions provided for herein, other than as may be legally required or advisable. 8.5. Claims Under Seller Insurance Policies. The Company has been covered for certain periods under casualty and property insurance policies (including, but not limited to, auto liability, general liability, product liability and workers' compensation coverage) maintained by the Seller and Seller's parent and covering the Seller and all of its subsidiaries. Coverage under these policies will cease to apply to the Company for occurrences on or after the Closing Date. The Company shall without limitation retain its rights to coverage under all casualty and property insurance policies for pre-Closing occurrences related to the Company on the condition that the Buyer or the Company reimburses the Seller or its parent (as the case may be) for all charges to Seller or its parent in existence on, or incurred after, the Closing Date in connection with claims under such policies (including, without limitation, all retained or deductible amounts, legal fees, premium tax payments and claim administration fees). Accordingly, the Buyer or the Company shall, promptly, after receipt of notice and supporting documentation, to the extent such supporting documentation is applicable, available and/or provided to the Seller, (and in any event within 45 days), reimburse Seller or its parent for all such amounts charged to the Seller or its parent. To the extent applicable, Seller shall put forth all reasonable efforts to supply Buyer supporting documentation for reimbursement that identifies the insurer and/or third-party administrator (TPA), insurance policy number or TPA contract number, date of accident or occurrence, claimant, type of claim and payment financials, itemized per claim. To the extent deductibles apply to auto liability, general liability, product liability and workers' compensation, Seller shall quarterly provide Buyer with insurance company or 15 TPA loss experience reports provided such reports are reasonably available which provide loss estimates by the insurer/TPA for pending claims. 8.6. Access to Seller Information, Property and Personnel; Record Retention. (a) Following the Closing, the Seller shall afford the Buyer and its accountants, counsel and other representatives upon receipt of not less than five (5) business days' prior notice: (i) Reasonable access and duplicating rights (at Buyer's expense) during normal business hours to all records, books, contracts and other data and information relating to the Company's business or operations prior to the Closing Date reasonably required by Buyer. Without limiting the foregoing, information may be requested under this paragraph for financial reporting and accounting matters, for purposes of reviewing the Preliminary Closing Working Capital Statement and resolving any differences with respect thereto, for purposes of insurance claim history, and for purposes of preparing and filing any tax returns or defending any tax claim or assessment. (ii) Reasonable access to Seller personnel for such reasonable purposes as Buyer may request. Without limiting the foregoing, such purposes may include access and use of personnel for information, testimony, statements and similar matters pertaining to litigation, claims, proceedings, tax contests, audits and other matters involving the Company's business or operations prior to the Closing Date (with the exception of any litigation or claim existing between the Buyer and Seller, except such access as Seller may agree to or as Seller is compelled to provide to Buyer). Such access shall not unreasonably interfere with any employee's performance of his regular duties. Buyer shall be responsible for all out-of-pocket expenses (such as travel and lodging) incurred in connection with such access and use. (b) The Seller shall preserve all material information which remains in its possession following the Closing pertaining to the business and operations of the Company prior to the Closing for a period of seven (7) years following the Closing Date, provided, however, that the Seller may offer in writing to Buyer to deliver any such information to Buyer and, if such offer is not accepted within 90 days, such offered information may be disposed of. 8.7. Access to Company Information, Property and Personnel; Record Retention. (a) Following the Closing, the Buyer shall afford the Seller and its accountants, counsel and other representatives upon receipt of not less than five (5) business days' prior notice: (i) Reasonable access and duplicating rights (at Seller's expense) during normal business hours to all records, books, contracts and other data and information relating to the Company's business or operations prior to the Closing Date reasonably required by Seller. Without limiting the foregoing, information may be requested under this paragraph for financial reporting and accounting matters, for purposes of preparation of the 16 Preliminary Closing Working Capital Statement and resolving any differences with respect thereto, and for purposes of preparing and filing any tax returns or defending any tax claim or assessment. (ii) Reasonable access to Company personnel for such reasonable purposes as Seller may request. Without limiting the foregoing, such purposes may include access and use of personnel for information, testimony, statements and similar matters pertaining to litigation, claims, proceedings, tax contests, audits and other matters involving the Company's business or operations prior to the Closing Date (with the exception of any litigation or claim existing between the Buyer and Seller, except such access as Buyer may agree to or as Buyer is compelled to provide to Seller). Such access shall not unreasonably interfere with any employee's performance of his regular duties. Seller shall be responsible for all out-of-pocket expenses (such as travel and lodging) incurred in connection with such access and use. (b) The Buyer shall cause the Company to preserve all material information pertaining to the business and operations of the Company prior to the Closing for a period of seven (7) years following the Closing Date, provided, however, that the Buyer may offer in writing to Seller to deliver any such information to Seller and, if such offer is not accepted within 90 days, such offered information may be disposed of. 8.8. Employee Benefit Plans. Effective as of Closing Date, the Buyer will become the sponsor of the Employee Benefit Plans identified on Schedule 8.8. Prior to the Closing Date, Seller will take all actions necessary to terminate the Company's participation in any Employee Benefit Plans not identified in Schedule 8.8. Specifically, on the Closing Date the Seller shall assume sponsorship of the Company 401(k) Savings Plan identified in Section 3.14 of the Disclosure Schedule (the "Plan"). Buyer and the Company agree that all contributions made by the Company and/or its employees under the Plan though the Closing Date shall be remitted to State Street Bank that acts as trustee of the Nortek, Inc. Master Trust for Defined Contribution Plans within the period required by ERISA for such remittals. 9. TAX MATTERS. 9.1. Federal, State and Local Income Taxes. (a) (i) Federal Consolidated Returns for Periods Through the Closing Date. Nortek, Inc. will include the income of the Company (including any deferred income triggered into income by Reg.Section1.1502-13 and Reg. Section1.1502-14 and any excess loss accounts taken into income under Reg.Section1.1502-19) on the Nortek Group consolidated federal income Tax Returns for all periods through the Closing Date and pay any federal income Taxes attributable to such income. The Company will furnish Tax information to Nortek, Inc. for inclusion in the Nortek Group's federal consolidated income Tax Return for the period which includes the Closing Date in accordance with the Company's past custom and practice. Nortek, Inc. will allow the Buyer an opportunity to review and comment upon such Tax Returns (including any amended returns) to the extent that they relate to the Company. 17 Nortek, Inc. will take no position on such returns that relate to the Company that would adversely affect the Company after the Closing Date. The income of the Company will be apportioned to the period up to and including the Closing Date and the period after the Closing Date by closing the books of the Company as of the end of the Closing Date. (ii) Kentucky Tax Returns for Periods Ending on or Before the Closing Date. Seller shall prepare or cause to be prepared for Kentucky all Tax Returns for the Company for all periods ending on or prior to the Closing Date which are filed after the Closing Date, and shall be liable for all Taxes due with respect to such Tax Returns. Seller shall permit the Buyer to review and comment on each such Tax Return described in the preceding sentence prior to Buyer's filing of such Tax Return. Not less than ten (10) days prior to the due date for filing such Tax Return, Seller shall provide to Buyer the amount of any Taxes due with respect to such Tax Return. (iii) Tax Periods Beginning Before and Ending After the Closing Date. Buyer shall prepare or cause to be prepared and file or cause to be filed any Tax Returns of the Company for Tax periods which begin before the Closing Date and end after the Closing Date (other than income Tax Returns with respect to periods for which a consolidated, unitary or combined income Tax Return of Seller will include the operations of the Company). Seller shall pay to Buyer within fifteen (15) days after the date on which Taxes are paid with respect to such periods an amount equal to the portion of such Taxes which relates to the portion of such Taxable period ending on the Closing Date to the extent such Taxes are not reflected in the reserve for Tax Liability (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) shown on the face of the Closing Working Capital Statement. For purposes of this Section, in the case of any Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the portion of such Taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction the numerator of which is the number of days in the Taxable period ending on the Closing Date and the denominator of which is the number of days in the entire Taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant Taxable period ended on the Closing Date. Any credits relating to a Taxable period that begins before and ends after the Closing Date shall be taken into account as though the relevant Taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with prior practice of the Company. (b) The Seller and Nortek, Inc. agree to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Liability of the Company for Taxes of any Person other than the Company (i) under Reg. Section1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. The obligation of Seller and Nortek, Inc. to indemnify the Buyer pursuant to this paragraph (b) shall not be subject to any limitations on liability set forth in this 18 Agreement, including but not limited to those set forth in Section 10.4, and shall forever survive the termination of this Agreement. 9.2. Certain Contest Rights. (a) Nortek, Inc. will allow the Company and its counsel to participate in any audits of Nortek Group consolidated federal income Tax Returns to the extent that such returns relate to the Company. Nortek Group will not settle any such audit in a manner which would adversely affect the Company after the Closing Date without the prior written consent of the Buyer, which consent shall not unreasonably be withheld. (b) Buyer, the Company and The Seller shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and The Seller agree (A) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the Company, as the case may be, shall allow the other party to take possession of such books and records. (c) Buyer and Seller further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder. 9.3. INTENTIONALLY OMITTED. 9.4. Termination of Prior Tax Sharing Agreements. Effective as of the Closing Date, all tax sharing agreements, whether or not written, to which the Seller or Nortek, Inc. and the Company is a party will have no further effect for any taxable year (whether the current year, a future year, or a past year) and the provisions of this Section 9 shall thereafter govern the obligations of the Seller or Nortek, Inc. and the Company with respect to tax matters. 9.5. INTENTIONALLY OMITTED. 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1. Survival of Representations and Warranties. The representations and warranties of the parties hereto contained in this Agreement shall survive the Closing, unless the damaged party knew of any misrepresentation or breach of warranty at the time of 19 Closing. All of the representations and warranties of the Seller contained in Sections 2 and 3 (other than Sections 3.9 and 3.16) and of the Buyer contained in Section 4 shall expire and be of no further force or effect with respect to any claim for breach thereof not asserted within two (2) years of the Closing Date. Section 3.9 shall expire and be of no further force or effect with respect to any claim for breach thereof not asserted within five (5) years of the Closing Date. Section 3.16 shall expire and be of no further force or effect with respect to any claim for breach thereof not asserted within 60 days after the expiration of all statutes of limitations, and, to the extent notified by Buyer or Seller, any extensions thereof, with respect to the assessment of any liability described therein. 10.2. Indemnification By the Seller. The Seller hereby indemnifies and holds harmless the Buyer against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) reasonably incurred by the Buyer or the Company in connection with each and all of the following: (a) subject to the limitations set forth in Section 10.4, any breach by the Seller of any representation or warranty in this Agreement; and (b) subject to the limitations set forth in Section 10.4, any breach of any covenant, agreement or obligation of the Seller contained in this Agreement; (c) any claim of any nature for benefits to employees or former employees or beneficiaries under the following Employee Benefit Plans identified in Disclosure Schedule 3.14: (i) the Ply Gem Industries, Inc. Group Pension Plan; (ii) the Short Term Disability Plan; (iii) the Long Term Disability Plan; (iv) the Life Insurance Plan; (v) the 401(k) Savings Plan; and, (vi) the Multiemployer Plans; and (d) any claim of any nature related to any Excluded Liabilities. Seller's obligations to indemnify and hold harmless the Buyer with respect to any claim made pursuant to paragraphs (c) and (d) shall forever survive the termination of this Agreement. 10.3. Indemnification By the Buyer. Subject to the limitations set forth in Section 10.4, the Buyer, hereby indemnifies and holds harmless the Seller against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) reasonably incurred by the Seller in connection with each and all of the following: (a) any breach by the Buyer of any representation or warranty in this Agreement; (b) any breach of any covenant, agreement or obligation of the Buyer contained in this Agreement; and 20 (c) except to the extent indemnifiable by Seller pursuant to Section 10.2 above, the Company or its business operations, whether arising before or after the Closing Date. 10.4. Limitations. (a) Except as otherwise specifically provided for herein, the rights and remedies of the parties under this Section shall be the sole and exclusive remedy for breaches of this Agreement. (b) Neither party shall not be liable for breaches of its representations and warranties contained in this Agreement until the other has suffered aggregate losses in excess of $250,000 after which point, the party in breach shall only be obligated to indemnify the other against further losses in excess of such amount. (c) The aggregate liability of a party hereto for all claims arising from breaches of its representations and warranties contained in this Agreement shall not exceed 50% of the Purchase Price. (d) No individual claim or series of related claims arising from breaches of a party's representations and warranties contained in this Agreement shall be valid and assertable unless it is (or they are) for an amount in excess of $10,000. (e) In no event shall either party be liable for any losses or damages that are consequential, in the nature of lost profits, diminution in value, damage to reputation or the like, special or punitive or otherwise not actual losses or damages. (f) The amount of losses or damages for which indemnification is sought shall be reduced by any recoveries which the indemnified party is entitled to under insurance policies or other payments received or receivable from third parties and any tax benefits actually received or for which the indemnified is eligible. (g) Notwithstanding anything herein to the contrary, Seller's obligation to indemnify and hold harmless Buyer against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) reasonably incurred by the Buyer or the Company in connection with any claims set forth in Section 10.2(c) and (d) shall not be limited in any manner by the terms of this Agreement, including but not limited to the limitations on liability set forth in this Section 10.4. 10.5. Claims for Indemnification. Whenever any claim shall arise for indemnification hereunder, the indemnified party shall promptly notify the indemnifying party of the claim and, when known, the facts constituting the basis for such claim, provided however, that no delay on the part of the indemnified party shall release the indemnifying party of any liability or obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is damaged. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third-party, the notice to the indemnifying party shall specify, if known, the amount or an estimate 21 of the amount of the liability arising therefrom. The indemnified party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent of the indemnifying party, which shall not be unreasonably withheld, unless suit shall have been instituted against it and the indemnifying party shall not have taken control of such suit after notification thereof. 10.6. Defense of Indemnifying Party. In connection with any claim to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person who is not a party to this Agreement, the indemnifying party, at its sole cost and expense may, upon written notice to the indemnified party, assume the defense of any such claim or legal proceeding if it acknowledges to the indemnified party in writing its obligations to indemnify the indemnified party with respect to all elements of such claim. In any such claim or proceeding, the indemnifying party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement, which does not include a provision whereby the plaintiff or claimant in the matter releases the indemnified party from all liability with respect thereto. The indemnified party shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense. If the indemnifying party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made, (a) the indemnified party may defend against such claim or litigation, in such manner it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the indemnifying party, on such terms as the indemnified party may deem appropriate, and (b) the indemnifying party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the indemnifying party thereafter seeks to question the manner in which the indemnified party defended such third party claim or the amount or nature of any such settlement, the indemnifying party shall have the burden to prove by a preponderance of the evidence that the indemnified party did not defend or settle such third party claim in a reasonably prudent manner. 11. GENERAL. 11.1. Notices. All notices, demands and other communications hereunder shall be in writing and shall be made by hand delivery, or overnight air courier guaranteeing next day delivery addressed as follows: (a) if to the Buyer to: Alcoa Building Products, Inc. 1590 Omega Drive Pittsburgh, PA 15205 Attention: President with a copy sent contemporaneously to: Alcoa Inc. 201 Isabella Street 22 Pittsburgh, PA 15212-5858 Attention: General Counsel (b) if to the Seller, to: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: President with a copy sent contemporaneously to the Buyer marked "Attention: General Counsel"; or (c) to such other address as the party receiving such notice shall have properly designated to the other party hereto in writing. Each such notice shall be deemed given at the time delivered by hand, if personally delivered; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 11.2. Entire Agreement. This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof and shall not be amended except by a written instrument hereafter signed by all of the parties hereto. 11.3. Interpretation. This Agreement has been prepared, and negotiations in connection herewith have been carried on, by the joint efforts of the parties hereto and their respective counsel. This Agreement is to be construed fairly and simply and not strictly for or against any of the parties hereto. 11.4. Governing Law. The validity and construction of this Agreement shall be governed by the internal substantive laws of the State of Delaware, without respect to its conflict of laws provisions, except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. 11.5. Table of Contents: Sections and Section Headings. The table of contents hereto, and the headings of sections and subsections are for reference only and shall not limit or control the meaning thereof. 11.6. Assigns. This Agreement shall be binding upon and inure to the benefit of the heirs and successors of each of the parties. Neither this Agreement nor the obligations of any party hereunder shall be assignable or transferable by such party without the prior written consent of the other party hereto; provided, however, that nothing contained in this Section 11.6 shall prevent the Buyer, without the consent of the Seller, from transferring or assigning this Agreement or its rights or obligations hereunder to another entity controlling, 23 under the control of, or under common control with the Buyer. No such transfer or assignment shall relieve the Buyer of its obligations hereunder. 11.7. No Implied Rights or Remedies. Except as otherwise expressly provided herein, nothing herein expressed or implied is intended or shall be construed to confer upon or to give any person, firm or corporation, other than the Seller and the Buyer, any rights or remedies under or by reason of this Agreement. 11.8. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9. Amendments. This Agreement may not be changed orally, but only by an agreement in writing signed by the Seller and the Buyer. 11.10. Waiver of Compliance. Any failure of the Seller, on the one hand, or the Buyer, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by the Seller (in respect of failures by the Buyer) or the Buyer (in respect of failures by the Seller). 11.11. Seller's Knowledge. As used in this Agreement, "to Seller's Knowledge" or "to the best of Seller's Knowledge" or similar phrase shall mean the actual knowledge of the following officers and directors of Seller and Company: Richard L. Bready, Edward J. Cooney, Kevin W. Donnelly, Almon C. Hall, Bruce E. Fleming, Kurt Kuhnke, Shawn Poe, Lee Meyer, Richard Veach, Mark Watson, and John Wayne. For the purposes of this Agreement, where any statement is expressed to be given or made to Seller's Knowledge, to the best of Seller's Knowledge or is qualified in some other manner having substantially the same effect, such statement shall be deemed to be qualified by the additional statement that reasonable enquiries of the management of Seller have been made prior to the date of this Agreement in respect of the subject matter of the relevant statement. 11.12. Final Deferred Tax Balances. On or before April 15, 2003, Seller will provide Buyer the final deferred tax balances of the Company as of the Closing Date. Buyer shall timely provide to Seller related information reasonably necessary for Seller's preparation of such balances. 24 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed and delivered as of the date and year first above written. BUYER: ALCOA BUILDING PRODUCTS, INC; By: /s/ Gary A. A -------------------------------------- Title: President PLY GEM INDUSTRIES, INC. By: -------------------------------------- NORTEK INC. By: -------------------------------------- 25 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed and delivered as of the date and year first above written. BUYER: ALCOA BUILDING PRODUCTS, INC; By: /s/ -------------------------------------- Title SELLER: PLY GEM INDUSTRIES, INC. By: /s/ Edward J. Coomey -------------------------------------- Vice President & Treasurer NORTEK INC. By: /s/ Edward J. Coomey -------------------------------------- Vice President & Treasurer 26 Table of Contents 1. PURCHASE AND SALE OF SHARES.................................................................... 1 1.1. Basic Transaction..................................................................... 1 1.2. Purchase Price........................................................................ 1 1.3. The Closing........................................................................... 3 1.4. Deliveries at the Closing............................................................. 3 1.5. Excluded Liabilities.................................................................. 3 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER................................................... 3 2.1. Authorization......................................................................... 3 2.2. Noncontravention...................................................................... 4 2.3. Broker's Fees......................................................................... 4 2.4. Ownership of Shares................................................................... 4 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER CONCERNING THE COMPANY............................ 4 3.1. Organization, Qualification and Corporate Power....................................... 4 3.2. Capitalization........................................................................ 5 3.3. Non-Contravention..................................................................... 5 3.4. Governmental Consent.................................................................. 5 3.5. Financial Statements.................................................................. 5 3.6. Absence of Certain Changes............................................................ 5 3.7. Title to Properties................................................................... 6 3.8. Real Property......................................................................... 6 3.9. Environmental, Health, and Safety Matters............................................. 7 3.10. Material Contracts.................................................................... 7 3.11. Intellectual Properties............................................................... 8 3.12. Litigation............................................................................ 8 3.13. Legal Compliance...................................................................... 8 3.14. Employee Benefits..................................................................... 8 3.15. Investments........................................................................... 9 3.16. Taxes................................................................................. 9 3.17. Accounts Receivable................................................................... 10 3.18. INTENTIONALLY OMITTED................................................................. 10 3.19. Customers and Suppliers............................................................... 10 3.20. Permits............................................................................... 10 3.21. Insurance............................................................................. 10 3.22. Labor Matters......................................................................... 11 3.23. No Other Representations or Warranties................................................ 11 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.................................................... 11 4.1. Organization and Standing of Buyer.................................................... 11 4.2. Corporate Approval, Binding Effect.................................................... 12

i 4.3. Non-Contravention..................................................................... 12 4.4. Investment............................................................................ 12 4.5. No Other Representations or Warranties................................................ 12 5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.................................................... 12 5.1. Opinion of Counsel.................................................................... 12 5.2. Corporate Documents................................................................... 13 5.3. Financial Transition Services Agreement............................................... 13 6. CONFIDENTIAL INFORMATION....................................................................... 13 6.1. ...................................................................................... 13 6.2. ...................................................................................... 13 6.3. ...................................................................................... 14 7. NON-COMPETITION AND NON-SOLICITATION AGREEMENT................................................. 14 7.1. Non-Competition....................................................................... 14 7.2. Non-Solicitation...................................................................... 14 8. OTHER COVENANTS AND AGREEMENTS................................................................. 15 8.1. Expenses.............................................................................. 15 8.2. Further Assurances.................................................................... 15 8.3. Satisfaction of Conditions Precedent.................................................. 15 8.4. Public Statements or Releases......................................................... 15 8.5. Claims Under Seller Insurance Policies................................................ 15 8.6. Access to Seller Information, Property and Personnel; Record Retention................ 16 8.7. Access to Company Information, Property and Personnel; Record Retention............... 16 8.8. Employee Benefit Plans................................................................ 17 9. TAX MATTERS.................................................................................... 17 9.1. Federal, State and Local Income Taxes................................................. 17 9.2. Certain Contest Rights................................................................ 19 9.3. INTENTIONALLY OMITTED................................................................. 19 9.4. Termination of Prior Tax Sharing Agreements........................................... 19 9.5. INTENTIONALLY OMITTED................................................................. 19 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.................................... 19 10.1. Survival of Representations and Warranties............................................ 19 10.2. Indemnification By the Seller......................................................... 20 10.3. Indemnification By the Buyer.......................................................... 20 10.4. Limitations........................................................................... 21 10.5. Claims for Indemnification............................................................ 21 10.6. Defense of Indemnifying Party......................................................... 22

ii 11. GENERAL........................................................................................ 22 11.1. Notices............................................................................... 22 11.2. Entire Agreement...................................................................... 23 11.3. Interpretation........................................................................ 23 11.4. Governing Law......................................................................... 23 11.5. Table of Contents: Sections and Section Headings...................................... 23 11.6. Assigns............................................................................... 23 11.7. No Implied Rights or Remedies......................................................... 24 11.8. Counterparts.......................................................................... 24 11.9. Amendments............................................................................ 24 11.10. Waiver of Compliance.................................................................. 24 11.11. Seller's Knowledge.................................................................... 24 11.12. Final Deferred Tax Balances........................................................... 24

~~iii~~ EX-12.1 46 y95660exv12w1.txt COMPUTATION OF RATIOS OF EARNINGS & FIXED CHARGES . . . EXHIBIT 12.1 ------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES PRE-RECAPITALIZATION ------------------------------------------------------------------- JAN. 1, 2003 TO JAN. 9, (dollars in thousands) 1999 2000 2001 2002 2003 -------- -------- -------- -------- -------- EARNINGS: (unaudited) - -------- Earnings from continuing operations before provision (benefit) for income taxes $ 30,100 $ 700 $ 13,000 $ 23,900 $ (1,400) Fixed Charges $ 8,094 $ 18,647 $ 30,267 $ 36,836 $ 1,019 Earnings from continuing operations -------- -------- -------- -------- --------- plus fixed charges $ 38,194 $ 19,347 $ 43,267 $ 60,736 $ (381 ======== ======== ======== ======== ========= FIXED CHARGES: - -------------- Interest charges, net 6,888 16,997 28,657 35,031 976 Plus interest factor in operating rent expense 1,206 1,650 1,610 1,805 43 -------- -------- -------- -------- --------- Total fixed charges 8,094 18,647 30,267 36,836 1,019 ======== ======== ======== ======== ========= Ratio of earnings to fixed charges (excess of fixed charges over earnings)(4) 4.7x 1.x 1.4x 1.6x (0.4)x ======== ======== ======== ======== =========

POST-NORTEK RECAPITALI- ZATION (1) ------------- COMBINED PRO FORMA FISCAL YEAR FISCAL YEAR JAN. 10, 2003 ENDED ENDED TO DEC. 31, DECEMBER 31, DECEMBER 31, (dollars in thousands) 2003 2003 2003 -------- -------- -------- EARNINGS: (unaudited) - -------- Earnings from continuing operations before provision (benefit) for income taxes $ 18,200 $ 16,800 $ 26,884 Fixed Charges $ 35,106 $ 36,125 $ 34,123 Earnings from continuing operations plus fixed charges -------- -------- -------- $ 53,306 $ 52,925 $ 61,007 ======== ======== ======== FIXED CHARGES: - -------------- Interest charges, net 33,117 34,093 32,091 Plus interest factor in operating rent expense 1,989 2,032 2,032 Total fixed charges -------- -------- -------- 35,106 36,125 34,123 ======== ======== ======== Ratio of earnings to fixed charges (excess of fixed charges over earnings)(4) 1.5x 1.5x 1.8x ======== ======== ========
EX-21.1 47 y95660exv21w1.txt LIST OF SUBSIDIARIES . . . Exhibit 21.1 LIST OF SUBSIDIARIES
Subsidiary Jurisdiction of Organization - ---------- ---------------------------- Great Lakes Window, Inc. Ohio Kroy Building Products, Inc. Delaware Napco, Inc. Delaware Thermal-Gard, Inc. Pennsylvania Variform, Inc. Missouri Napco Window Systems, Inc. Delaware CWD Windows and Doors, Inc. Canada
EX-23.1 48 y95660exv23w1.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 Consent of Independent Public Accountants To Ply Gem Industries, Inc. We consent to the reference to our firm under the caption "Experts" and to the use of our reports dated March 26, 2004, with respect to the combined financial statements and schedule of Ply Gem Industries, Inc. and subsidiaries and CWD Windows and Doors, a division of Broan-Nutone Canada Inc. included in the Registration Statement on Form S-4 and related Prospectus of Ply Gem Industries, Inc. for the registration of $225,000,000 9% Senior Subordinated Notes due 2012. /s/ Ernst & Young LLP Boston, Massachusetts March 26, 2004 EX-23.2 49 y95660exv23w2.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report on the balance sheet of Ply Gem Holdings, Inc. dated March 26, 2004, in the Registration Statement on Form S-4 and related Prospectus of Ply Gem Industries, Inc. for the registration of $225,000,000 of 9% Senior Subordinated Notes due 2012. /s/ Ernst & Young LLP Kansas City, Missouri March 26, 2004 EX-25.1 50 y95660exv25w1.txt FORM T-1 EXHIBIT 25.1 ------------ ================================================================================ 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) _______________________________________________________ U.S. BANK NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) 31-0841368 I.R.S. Employer Identification No. - -------------------------------------------------------------------------------- 800 Nicollet Mall Minneapolis, Minnesota 55402 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) - -------------------------------------------------------------------------------- Richard Prokosch U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107 (651) 495-3918 (Name, address and telephone number of agent for service) Ply Gem Industries, Inc. (Issuer with respect to the Securities) - -------------------------------------------------------------------------------- Delaware 11-1727150 - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 303 West Major Street Kearney, Missouri 64060 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) - -------------------------------------------------------------------------------- 9% SENIOR SUBORDINATED NOTES DUE 2012 (TITLE OF THE INDENTURE SECURITIES) ================================================================================ TABLE OF ADDITIONAL REGISTRANTS PRIMARY STATE OR OTHER STANDARD IRS JURISDICTION OF INDUSTRIAL EMPLOYER INCORPORATION OR CLASSIFICATION IDENTIFICATION NAME ORGANIZATION CODE NUMBER NUMBER - ---------------------------- ---------------- -------------- -------------- Ply Gem Holdings, Inc. Delaware 3089 20-0645710 Great Lakes Window, Inc. Ohio 3089 34-1548026 Kroy Building Products, Inc. Delaware 3089 04-3248415 Napco, Inc. Delaware 3089 13-3637496 Thermal-Gard, Inc. Pennsylvania 3089 25-1832352 Variform, Inc. Missouri 3089 43-0799731 Napco Window Systems, Inc. Delaware 3089 06-1592534 The address of each of the additional registrants is c/o Ply Gem Industries, Inc., 303 West Major Street, Kearney, Missouri 64060, (800) 800-2244. 2 FORM T-1 -------- ITEM 1. GENERAL INFORMATION. Furnish the following information as to the Trustee. a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of the Currency Washington, D.C. b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None ITEMS 3-15 ITEMS 3-15 ARE NOT APPLICABLE BECAUSE TO THE BEST OF THE TRUSTEE'S KNOWLEDGE, THE OBLIGOR IS NOT IN DEFAULT UNDER ANY INDENTURE FOR WHICH THE TRUSTEE ACTS AS TRUSTEE. ITEM 16. LIST OF EXHIBITS: LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION. 1. A copy of the Articles of Association of the Trustee.* 2. A copy of the certificate of authority of the Trustee to commence business.* 3. A copy of the certificate of authority of the Trustee to exercise corporate trust powers.* 4. A copy of the existing bylaws of the Trustee.* 5. A copy of each Indenture referred to in Item 4. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6. 7. Report of Condition of the Trustee as of December 31, 2003, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7. * Incorporated by reference to Registration Number 333-67188. 3 NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 23rd day of March, 2004. U.S. BANK NATIONAL ASSOCIATION By: /s/ Richard Prokosch --------------------------------------- Richard Prokosch Vice President By: /s/ Benjamin J. Krueger ----------------------------- Benjamin J. Krueger Trust Officer 4 EXHIBIT 6 --------- CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: March 23, 2004 U.S. BANK NATIONAL ASSOCIATION By: /s/ Richard Prokosch --------------------------------------- Richard Prokosch Vice President By: /s/ Benjamin J. Krueger ----------------------------- Benjamin J. Krueger Trust Officer 5 EXHIBIT 7 --------- U.S. BANK NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 12/31/2003 ($000'S) 12/31/2003 -------------- ASSETS Cash and Due From Depository Institutions $8,631,361 Federal Reserve Stock 0 Securities 42,963,396 Federal Funds 2,585,353 Loans & Lease Financing Receivables 114,718,888 Fixed Assets 1,911,662 Intangible Assets 10,254,736 Other Assets 8,093,654 -------------- TOTAL ASSETS $189,159,050 LIABILITIES Deposits $128,249,183 Fed Funds 5,098,404 Treasury Demand Notes 3,585,132 Trading Liabilities 213,447 Other Borrowed Money 21,664,023 Acceptances 123,996 Subordinated Notes and Debentures 5,953,524 Other Liabilities 5,173,011 -------------- TOTAL LIABILITIES $170,060,720 EQUITY Minority Interest in Subsidiaries $1,002,595 Common and Preferred Stock 18,200 Surplus 11,677,397 Undivided Profits 6,400,138 -------------- TOTAL EQUITY CAPITAL $19,098,330 TOTAL LIABILITIES AND EQUITY CAPITAL $189,159,050 - -------------------------------------------------------------------------------- To the best of the undersigned's determination, as of the date hereof, the above financial information is true and correct. 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Delaware	3089	11-1727150
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)






		Proposed Maximum	Proposed Maximum	Amount of
Title of Each Class	Amount to be	Offering Price	Aggregate	Registration
of Securities to be Registered	Registered	Per Share	Offering Price(1)	Fee(2)


9% Senior Subordinated Notes Due 2012	$225,000,000	100%	$225,000,000	$28,507.50

Guarantees of 9% Senior Subordinated Notes Due 2012	N/A	N/A	N/A	N/A(3)



Sources (dollars in millions)

Revolving credit facility(1)	$	3.0
Term loan facilities(2)		190.0
Senior subordinated notes		225.0
Net assumed indebtedness(3)		29.1
Sponsor and management equity(4)		141.0
Acquisition costs funded with acquired cash		1.9

Total sources	$	590.0



Uses (dollars in millions)

Purchase price of equity(5)	$	526.6
Net assumed indebtedness(3)		29.1
Cancellation of management stock options(6)		4.3
Estimated transaction costs and expenses(7)		30.0

Total uses	$	590.0


			Actual			Pro Forma
			as of			as of
			December 31,			December 31,
			2003			2003

(Dollars in thousands)						(Unaudited)
Debt:
	Senior revolving credit facility(1)		$	—		$	3,000
	Senior term loan facilities(2)			—			190,000
	Assumed indebtedness(3)			29,562			29,562
	Senior subordinated notes			—			225,000
	Intercompany debt			394,735			—

		Total debt		424,297			447,562
Stockholder’s equity:
	Parent company investment			(27,699	)		—
	Common stock			—			1
	Additional paid-in capital			—			140,999

		Total stockholder’s equity		(27,699	)		141,000

		Total capitalization	$	396,598		$	588,562


	Page

Forward-Looking Statements		i
Industry Data		ii
Trademarks and Patents		ii
Acquisition Entities		ii
Prospectus Summary		1
Risk Factors		17
The Transactions		26
Use of Proceeds		28
Capitalization		29
Unaudited Pro Forma Financial Information		30
Selected Historical Financial Information		35
Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Industry Overview and Trends		49
Business		51
Management		59
Security Ownership of Certain Beneficial Owners and Management		66
Certain Relationships and Related Transactions		68
Description of Other Indebtedness		70
The Exchange Offer		73
Description of the Notes		82
Certain U.S. Federal Income Tax Considerations		128
Plan of Distribution		133
Legal Matters		134
Experts		134
Where You Can Find More Information		134
Ply Gem Industries, Inc. index to Combined Financial Statements		F-1
Ply Gem Holdings, Inc. index to Balance Sheet		F-46
STOCK PURCHASE AGREEMENT
AMENDED & RESTATED CERTIFICATE OF INCORPORATION
AMENDED BYLAWS
CERTIFICATE OF INCORPORATION
BYLAWS
ARTICLES OF INCORPORATION
CERTIFICATE OF AMENDMENT TO ARTICLES
BY-LAWS
RESTATED CERTIFICATE OF INCORPORATION
BY-LAWS
CERTIFICATE OF INCORPORATION
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INC.
CERTIFICATE OF MERGER
BY-LAWS
ARTICLES OF INCORPORATION
BY-LAWS
CERTIFICATE OF INCORPORATION
CERTIFICATE OF MERGER AND ARTICLES OF MERGER
CERTIFICATE OF AMENDMENT TO ARTICLES OF INC.
CERTIFICATE OF AMENDMENT TO ARTICLES OF INC.
BY-LAWS
CERTIFICATE OF INCORPORATION
BY-LAWS
INDENTURE
REGISTRATION RIGHTS AGREEMENT
AMENDED & RESTATED CREDIT AGREEMENT
CREDIT AGREEMENT
U.S. SECURITY AGREEMENT
PHANTOM STOCK PLAN
2004 STOCK OPTION PLAN
CHANGE IN CONTROL SEVERANCE BENEFIT PLAN
LETTER TO LEE MEYER
LETTER TO SHAWN POE
LETTER TO JOHN WAYNE
LETTER TO MARK WATSON
LETTER TO BRYAN SEVEINSON
SEPARATION CONSULTING & NONCOMPETITION AGREEMENT
DEBT FINANCING ADVISORY AGREEMENT
GENERAL ADVISORY AGREEMENT
TAX SHARING AGREEMENT
TRANSITION SERVICES AGREEMENT
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT
COMPUTATION OF RATIOS OF EARNINGS & FIXED CHARGES
LIST OF SUBSIDIARIES
CONSENT OF ERNST & YOUNG LLP
CONSENT OF ERNST & YOUNG LLP
FORM T-1


	•	the Acquisition;

	•	the Equity Contribution;

	•	the Bank Financing; and

	•	the offering of the initial notes.


(a)	Net earnings (loss) for historical periods have not been adjusted to eliminate Nortek’s historical allocations to Ply Gem for Nortek’s management fees and Nortek’s historical allocation to Ply Gem of corporate expenses, which will be replaced with our stand-alone costs estimated to be $2.4 million annually, following consummation of the Acquisition. Historical management fees were $5.4 million, $10.2 million and $7.2 million for the fiscal years ended December 31, 2001, 2002 and 2003, respectively. Historical allocations of corporate expenses were $(0.3) million, $3.5 million and $3.4 million for the fiscal years ended December 31, 2001, 2002 and 2003, respectively.

(b)	Pro forma EBITDA for the fiscal year ended December 31, 2003 has not been adjusted to account for:


	(i)	losses of $0.6 million from our Thermal-Gard, Inc. subsidiary, the operations of which we intend to close in 2004;


	(ii)	the additional savings of $1.9 million that we would have realized from lower PVC resin costs that were renegotiated effective July 2003 had they been in place for the entire fiscal year ended December 31, 2003.

	(iii)	the additional savings of $1.3 million that we would have realized from the closure of our Butler, PA vinyl siding facility in May 2003 had it been closed for the entire fiscal year ended December 31, 2003.

	(iv)	the severance and direct costs of $0.8 million, including removal and transfer of equipment, we incurred in connection with the closure of our Butler, PA vinyl siding facility.

	(v)	the direct costs of $1.9 million we incurred in establishing our new retail fencing business, including the net cost of the buy-out of competitors’ material, and excess manufacturing and freight cost associated with the start-up of a new fabrication process at our Fairbluff, NC facility.

	(vi)	the severance and relocation costs of $0.7 million we incurred in connection with changes in senior management at a windows products subsidiary.


	*Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations on the notes.*


	*We face competition from other vinyl exterior building products manufacturers and alternative building materials.*


	*Downturns in the home repair and remodeling and new home construction sectors or the economy could negatively affect our business, operating results and the value of the notes.*


	*Changes in PVC resin and aluminum costs and availability can adversely affect our profit margin.*


	Because we depend on a core group of significant customers, our sales, cash flows from operations and results of operations may be negatively affected if our key customers reduce the amount of products they purchase from us.


	*Our business is seasonal and can be affected by inclement weather conditions.*


	*If we are unable to meet future capital requirements, our business may be adversely affected.*


	*Increases in the cost of labor, union organizing activity and work stoppages at our facilities or the facilities of our suppliers could materially affect our financial performance.*


	*We may be adversely affected by the separation of our business from Nortek.*


	We may be subject to claims arising from our former operations as a Nortek subsidiary, including claims arising from disposal of operations. Nortek may not have the ability to fulfill its indemnification obligations to us in connection with the Acquisition.


	*Our acquisitions may expose us to unanticipated negative consequences.*


	*We could face potential product liability claims relating to products we manufacture.*


	*We are dependent on certain key personnel, the loss of whom could materially affect our financial performance and prospects.*


	*Interruptions in deliveries of raw materials or finished goods could adversely affect our profitability or revenues.*


	*Environmental requirements may impose significant costs and liabilities on us.*


	*Manufacturing or assembly realignments may result in a decrease in our near-term earnings.*


	*We rely on a variety of intellectual property rights. Any threat to, or impairment of, these rights could negatively affect our business.*


	*We are controlled by our principal equity holder, which has the power to take unilateral action.*


	*Your right to receive payments on the exchange notes is subordinated to our senior debt.*


	*Our Canadian subsidiary and our other future foreign subsidiaries will not be guarantors, and your claims will be subordinated to all of the creditors of the non-guarantor subsidiaries.*


	*We may not be able to satisfy our obligations to holders of the exchange notes upon a change of control.*


	*There is no established trading market for the notes, and you may not be able to sell them quickly or at the price that you paid.*


	*Any guarantees of the notes by our subsidiaries may be voidable, subordinated or limited in scope under laws governing fraudulent transfers and insolvency.*


	*The issuance of the exchange notes may adversely affect the market for the initial notes.*


	*Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes.*