-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYbAk6ZYjxMg+iNncpzaBHPxEq8wHstWFTE+6Wua+woywKNs7SsjTXqe9i6OLoYW POdhuKDeAiGGJtIXybd9XA== 0000950123-97-006439.txt : 19970806 0000950123-97-006439.hdr.sgml : 19970806 ACCESSION NUMBER: 0000950123-97-006439 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19970805 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PLY GEM INDUSTRIES INC CENTRAL INDEX KEY: 0000079209 STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430] IRS NUMBER: 111727150 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-31639 FILM NUMBER: 97651743 BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-1401 BUSINESS PHONE: 2128321550 MAIL ADDRESS: STREET 1: PLY GEM INDUSTRIES INC STREET 2: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-1401 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL PLYWOOD CO INC DATE OF NAME CHANGE: 19680729 FORMER COMPANY: FORMER CONFORMED NAME: CRAFTMAN PLYWOOD CORP DATE OF NAME CHANGE: 19680212 FORMER COMPANY: FORMER CONFORMED NAME: CRAFTSMAN PLYWOOD CORP DATE OF NAME CHANGE: 19661006 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SNYDER DANA R CENTRAL INDEX KEY: 0001041742 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128321550 MAIL ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No.1)* Ply Gem Industries, Inc. ------------------------ (Name of Issuer) Common Stock, par value $.25 per share -------------------------------------- (Title of Class of Securities) 72941610 (CUSIP Number) Richard D. Bohm, Esq. Debevoise & Plimpton, 875 Third Avenue, New York, NY 10022 (212) 909-6000 --------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 24, 1997 ------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d- 1(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 7 2 CUSIP No. 72941610 13D (1) Names of Reporting Persons S.S. or I.R.S. Identifica- tion Nos. of Above Persons Dana R. Snyder SS: ###-##-#### - -------------------------------------------------------------------------------- (2) Check the Appropriate Box (a) if a Member of a Group (b) - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Source of Funds 00 - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization U.S.A. - -------------------------------------------------------------------------------- Number of Shares (7) Sole Voting Power 920,589 Beneficially Owned -------------------------------------------------- by Each Reporting (8) Shared Voting Power 0 Person With -------------------------------------------------- (9) Sole Dispositive Power 920,589 -------------------------------------------------- (10) Shared Dispositive Power 0 - -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 920,589 - -------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares - -------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row 11 5.9% - -------------------------------------------------------------------------------- (14) Type of Reporting Person IN Page 2 of 7 3 CUSIP No. 72941610 13D CONTINUATION PAGES OF AMENDMENT NO. 1 TO SCHEDULE 13D FILED BY DANA R. SNYDER Item 1. Security and Issuer. The title of the class of equity securities to which this Amendment relates is the Common Stock, par value $.25 per share (the "Common Stock"), of Ply Gem Industries, Inc. a Delaware corporation (the "Issuer"). This Amendment No. 1 amends the Schedule 13D filed on June 27, 1997 (the "Original Filing"). The address of the principal executive offices of the Issuer is 777 Third Avenue, New York, New York 10017. Item 2. Identity and Background. (a) The name of the person filing this statement is Dana R. Snyder. (b) The business address of Mr. Snyder is 777 Third Avenue, New York, New York 10017. (c) The present principal occupation of Mr. Snyder is President and Chief Operating Officer of the Issuer. See Item 1 for the address of the Issuer. Mr. Snyder is also a director of the Issuer. (d) Mr. Snyder has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Mr. Snyder has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Snyder is a U.S. citizen. Item 3. Source and Amount of Funds or Other Consideration. Of the 920,589 shares of Common Stock beneficially owned by Mr. Snyder, 3,747 shares of Common Stock are owned by Mr. Snyder. The remaining 916,842 shares represent options to acquire Common Stock. Of the owned shares, 1,000 shares were aquired on the open market with the use of Page 3 of 7 4 CUSIP No. 72941610 13D personal funds of Mr. Snyder and the remaining owned shares were acquired through the Issuer's employee stock purchase plan through a combination of regular payroll deductions and matching contributions by the Issuer. The options owned by Mr. Snyder were acquired through the grant of such options by the Issuer pursuant to various option plans of the Issuer. Item 4. Purpose of Transaction. The Common Stock to which this statement relates were originally acquired for investment purposes. On June 24, 1997, the Issuer entered into an Agreement and Plan of Merger with Atrium Acquisition Holdings Corp. (the "Parent") and Atrium/PG Acquisition Corp. (the "Subsidiary") (such agreement, the "Atrium Merger Agreement"). A copy of the Atrium Merger Agreement was attached to the Original Filing as Exhibit 1. On July 18, 1997, the Issuer notified the Parent and Subsidiary of its intent to exercise its right under Section 8.1(i) of the Atrium Merger Agreement to terminate the Atrium Merger Agreement in Connection with an acquisition proposal by Nortek, Inc., a Delaware corporation ("Nortek"). NKT Sub, Inc., a Delaware corporation (the "Offeror") and a wholly-owned subsidiary of Nortek, on July 29, 1997, commenced a tender offer to purchase all outstanding shares of Common Stock at the purchase price of $19.50 per share of Common Stock (the "Offer Price"), net to the tendering holder, in cash (without interest thereon), on the terms and subject to the conditions set forth in the Offer to Purchase dated July 29, 1997 and the related Letter of Transmittal (which together constitute the "Offer"). The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 of Nortek dated July 29, 1997. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 24, 1997 (the "Nortek Merger Agreement"), among the Issuer, Nortek and the Offeror. A copy of the Nortek Merger Agreement is filed as Exhibit 1 to this Amendment. The Nortek Merger Agreement provides that following completion of the Offer, the Offeror will be merged into the Issuer, with the Issuer continuing as a wholly-owned subsidiary of Nortek (the "Merger"). In the Merger, all remaining shares of Common Stock not purchased in the tender offer (other than shares of Common Stock owned by the Issuer or any subsidiary of the Issuer and shares of Common Stock held by stockholders who perfect any available appraisal rights under Delaware General Corporation Law) will be converted into the right to receive Page 4 of 7 5 CUSIP No. 72941610 13D $19.50 per share in cash or such higher price, if any, as is paid in the Offer. Contemporaneously with the execution of the Atrium Merger Agreement, Mr. Snyder and two current executives of the Issuer (each a "Relevant Stockholder") entered into a Stockholders Agreement with the Parent and the Subsidiary (the "Stockholders Agreement"). The Stockholders Agreement was an exhibit to the Atrium Merger Agreement and, as such, was attached as an exhibit to the Original Filing. The Stockholders Agreement was amended and restated as of July 24, 1997, with Nortek and Offeror becoming parties thereto (as amended and restated, the "Amended Stockholders Agreement"). Pursuant to the Amended Stockholders Agreement, each Relevant Stockholder has agreed to tender all shares of Common Stock owned by him pursuant to the Offer, with 75% of the excess of the Offer Price over $18.75 per share of Common Stock (the price per share payable pursuant to the Atrium Merger Agreement) to be paid to the Subsidiary and the remainder of the Offer Price to be paid to the Relevant Stockholder. Upon cancellation of the options (including stock purchase rights and unrestricted stock awards) to purchase or acquire shares of Common Stock under the Issuer stock option plans (the "Options") owned by the Relevant Stockholders, the Subsidary will be entitled to receive 75% of the excess of the Offer Price over $18.75, multiplied by the number of shares of Common Stock issuable pursuant to such Options (including the additional shares of Common Stock issuable by reason of a "change of control"), and the Relevant Stockholders will be entitled to receive the remainder of the Option Consideration (as defined in the Nortek Merger Agreement). In addition, pursuant to the Amended Stockholders Agreement, each Relevant Stockholder granted the Subsidiary an irrevocable option to purchase (collective, the "Purchase Options") all outstanding shares of Common Stock owned by them, together with all the shares of Common Stock (including any additional shares that may be issuable as a result of a "change of control") owned by the Relevant Stockholders as a result of their exercise of any Options held by them (collective, the "Option Shares") at a purchase price per share equal to $18.75, which may be exercised if the Offer is not consummated or under certain other circumstances. In the event that the Subsidiary purchases the Option Shares pursuant to the Purchase Options and, within one year after the closing of such purchase, sells, transfers or disposes of any of the Option Shares in a transaction with an unaffiliated third party, the Subsidiary shall pay to each Relevant Stockholder his respective pro rata share of 25% of the net profit realized by the Subsidiary in connection with such disposition. The foregoing summary of the Amended Stockholders Agreement is Page 5 of 7 6 CUSIP No. 72941610 13D qualified in its entirety by reference to the text of the Amended Stockholders Agreement, a copy of which is attached hereto as Exhibit 2. Except as provided in the Nortek Merger Agreement and the Amended Stockholders Agreement, Mr. Snyder has no plans or proposals which relate or would result in any of the actions specified in clauses (a) through (j) of item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a) The equity securities to which this statement relates consists of: (i) 3,747 shares of Common Stock and (ii) 916,842 options to acquire shares of Common Stock, all of which are beneficially owned by Mr. Snyder. These equity securities represent approximately 5.9% of the outstanding shares of Common Stock. (b) Mr. Snyder has the sole power to vote and dispose of each of these equity securities, subject to the Stockholders Agreement referred to in Item 4. (c) Except as described in Item 4, Mr. Snyder has not participated in any transaction involving Common Stock within the past sixty days other than through the Issuer's employee stock purchase plan. (d) N/A (e) N/A Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. See Item 4 Item 7. Material to be Filed as Exhibits. Exhibit 1 Nortek Merger Agreement. Exhibit 2 Amended Stockholders Agreement. Page 6 of 7 7 CUSIP No. 72941610 13D Signature. After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: August 5, 1997 Signature: /s/ Dana R. Snyder ------------------ Name/Title: Dana R. Snyder Page 7 of 7 EX-99.1 2 NORTEK MERGER AGREEMENT 1 Exhibit 1 ================================================================================ AGREEMENT AND PLAN OF MERGER among NORTEK, INC., NTK SUB, INC. and PLY GEM INDUSTRIES, INC. dated as of July 24, 1997 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 THE OFFER................................................................................................2 1.1. THE OFFER................................................................................2 1.2. COMPANY ACTIONS..........................................................................3 1.3. STOCKHOLDER LISTS........................................................................4 1.4. SUB STOCKHOLDER APPROVAL.................................................................5 1.5. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(f).....................................5 1.6. ACTION BY CONTINUING DIRECTORS...........................................................5 ARTICLE 2 THE MERGER...............................................................................................6 2.1. THE MERGER...............................................................................6 2.2. CLOSING..................................................................................6 2.3. EFFECTIVE TIME OF THE MERGER.............................................................6 2.4. EFFECTS OF THE MERGER....................................................................6 2.5. STOCKHOLDERS' MEETING....................................................................7 ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF THE CERTIFICATES...............................................8 3.1. EFFECT ON CAPITAL STOCK..................................................................8 3.2. CONVERSION OF SHARES.....................................................................8 3.3. PAYMENT FOR SHARES.......................................................................9 3.4. STOCK TRANSFER BOOKS....................................................................11 3.5. STOCK OPTION PLANS......................................................................11 3.6. DISSENTING SHARES.......................................................................12 ARTICLE 4 REPRESENTATIONS AND WARRANTIES..........................................................................13 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................13 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........................................35
-i- 3 ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................38 5.1. Covenants of the Company................................................................38 ARTICLE 6 ADDITIONAL AGREEMENTS...................................................................................43 6.1. ACCESS TO INFORMATION...................................................................43 6.2. ASSISTANCE..............................................................................43 6.3. COMPLIANCE WITH NEW JERSEY ISRA.........................................................44 6.4. FEES AND EXPENSES.......................................................................44 6.5. BROKERS OR FINDERS......................................................................45 6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.....................................46 6.7. REASONABLE EFFORTS......................................................................49 6.8. PUBLICITY...............................................................................49 6.9. WITHHOLDING RIGHTS......................................................................49 6.10. REAL ESTATE TAXES......................................................................50 6.11. HSR AND OTHER GOVERNMENTAL APPROVALS...................................................50 6.12. NOTIFICATION OF CERTAIN MATTERS........................................................51 6.13. SOLVENCY LETTER. ......................................................................51 6.14. CONTINUATION OF EMPLOYEE BENEFITS......................................................51 6.15. TRUSTEES...............................................................................52 6.16. WITHDRAWAL LIABILITY...................................................................52 ARTICLE 7 CONDITIONS PRECEDENT....................................................................................52 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER..............................52 ARTICLE 8 TERMINATION AND AMENDMENT...............................................................................53 8.1. TERMINATION.............................................................................53 8.2. EFFECT OF TERMINATION...................................................................56 8.3. AMENDMENT...............................................................................56 8.4. EXTENSION; WAIVER.......................................................................56 ARTICLE 9 GENERAL PROVISIONS......................................................................................56 9.1. NONSURVIVAL OF COVENANTS AND AGREEMENTS.................................................56 9.2. CONFIDENTIALITY AGREEMENT...............................................................56
-ii- 4 9.3. NOTICES.................................................................................57 9.4. INTERPRETATION..........................................................................57 9.5. COUNTERPARTS............................................................................58 9.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.....................58 9.7. GOVERNING LAW...........................................................................58 9.8. ASSIGNMENT..............................................................................58 9.9. DIRECTOR AND OFFICER LIABILITY..........................................................59 9.10. SPECIFIC PERFORMANCE....................................................................59
-iii- 5 Schedules Schedule 3.5(a) -- Cancellation of Stock Options Schedule 4.1(a) -- Subsidiaries Schedule 4.1(b) -- Capital Structure Schedule 4.1(c) -- Violations (Transaction Documents) Schedule 4.1(f) -- Violations (General) Schedule 4.1(g) -- Permits Schedule 4.1(h) -- Litigation Schedule 4.1(i) -- Taxes Schedule 4.1(j) -- Employment Agreements Schedule 4.1(k) -- Benefit Plans and Employee Arrangements Schedule 4.1(l) -- Absence of Certain Changes or Events Schedule 4.1(m) -- Material Liabilities Schedule 4.1(n) -- Agreements with Financial Advisor Schedule 4.1(p) -- Labor Matters Schedule 4.1(r) -- Environmental Matters Schedule 4.1(s) -- Real Property Schedule 4.1(v) -- Material Contracts Schedule 4.1(w) -- Related Party Transactions Schedule 4.2(e) -- Financing Commitments Schedule 5.1(n) -- Capital Expenditures Schedule 6.5(a) -- Brokers or Finders -iv- 6 Schedule 9.4--Atrium Agreements -v- 7 Exhibits Exhibit A -- Conditions to the Offer Exhibit B -- Option Surrender Agreement, Release and Waiver Exhibit C -- Non-Compete and Termination Agreement Exhibit D -- Termination and Release Agreement -vi- 8 LIST OF DEFINED TERMS A Acquisition Proposal............................ 40 Agreement....................................... 1 Antitrust Division.............................. 50 Atrium Agreements............................... 58 B Benefit Liabilities............................. 24 Benefit Plans................................... 22 Board........................................... 3 Board of Directors.............................. 3 Bylaws.......................................... 7 C Capitalization Date............................. 13 CERCLA.......................................... 30 Certificate of Merger........................... 6 Certificates.................................... 10 Closing......................................... 6 Closing Date.................................... 6 Code............................................ 21 Company......................................... 1 Company Common Stock............................ 2 Company Intangible Property..................... 30 Company Litigation.............................. 19 Company Order................................... 19 Company Permits................................. 18 Company SEC Documents........................... 17 Company Stockholder Approval.................... 16 Company Voting Debt............................. 14 Conditions...................................... 2 Confidentiality Agreement....................... 43 Constituent Corporations........................ 6 Continuing Directors............................ 5 D DGCL............................................ 4 Dissenting Shares............................... 12 E Effective Time.................................. 6 Employee Arrangements........................... 22 Environmental Costs and Liabilities................................... 30 Environmental Law............................... 30 ERISA Affiliate................................. 22 Exchange Act.................................... 4 F Fairness Opinion................................ 4 Financial Advisor............................... 4 Financing Commitment............................ 37 FTC............................................. 50 G GAAP............................................ 17 Gains and Transfer Taxes........................ 16 Governmental Entity............................. 16 H Hazardous Material.............................. 31 HSR Act......................................... 16 I Indemnified Liabilities......................... 46 Indemnified Parties............................. 46 Injunction...................................... 53 IRS............................................. 20 ISRA............................................ 16 -vii- 9 L Laws............................................ 16 M Material Adverse Effect......................... 13 Material Contracts.............................. 34 Meeting Date.................................... 17 Merger.......................................... 6 Merger Consideration............................ 8 Multiemployer Plan.............................. 26 N NJDEPE.......................................... 44 Non-Compete and Termination Agreement........... 1 O Offer........................................... 2 Offer Documents................................. 3 Offer Price..................................... 2 Options......................................... 11 Option Consideration............................ 11 Option Release Agreement........................ 1 OSHA............................................ 30 P Parent.......................................... 1 Paying Agent.................................... 9 Payment Fund.................................... 9 PBGC............................................ 24 Person.......................................... 3 Preferred Stock................................. 13 Proxy Statement................................. 7 R Real Property Leases............................ 33 Release......................................... 31 Remedial Action................................. 31 Representatives................................. 39 S Schedule 14D-1.................................. 4 Schedule 14D-9.................................. 4 SEC............................................. 3 Securities Act.................................. 17 Shares.......................................... 2 Stock Option Plans.............................. 11 Stockholders' Meeting........................... 7 Sub............................................. 1 Subsidiary...................................... 3 Surviving Corporation........................... 6 T Tax............................................. 21 Tax Return...................................... 21 Taxes........................................... 21 Termination and Release Agreement............... 1 Transaction Documents........................... 3 U Unvested Stock.................................. 11 Unvested Stock Consideration.................... 11 V Violation....................................... 15 W Withdrawal Liability............................ 52 -viii- 10 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, dated as of July 24, 1997 (the "Agreement"), is made and entered into by and among NORTEK, INC., a Delaware corporation ("Parent"), NTK SUB, INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and PLY GEM INDUSTRIES, INC., a Delaware corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, Sub and the Company deem it advisable and in the best interests of their respective stockholders that Parent acquire the Company pursuant to the terms and subject to the conditions set forth in this Agreement; WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless certain beneficial and record holders of Options or Unvested Stock enter into an Option Surrender Agreement, Release and Waiver substantially in the form of Exhibit B hereto (an "Option Release Agreement"); WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless, contemporaneously with the execution and delivery hereof, Jeffrey S. Silverman enters into a Non-Compete and Termination Agreement substantially in the form of Exhibit C hereto (the "Non-Compete and Termination Agreement"), which shall establish (i) the terms and provisions under which such individual's employment contract with the Company shall terminate and (ii) the terms and provisions of a non-competition agreement between the Company and such individual and, in order to induce Parent and Sub to enter into this Agreement, the Company and such individual are executing and delivering concurrently herewith the Non-Compete and Termination Agreement; WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless, contemporaneously with the execution and delivery hereof, Herbert P. Dooskin enters into a Termination and Release Agreement substantially in the form of Exhibit D hereto (the "Termination and Release Agreement"), which shall establish the terms and provisions under which such individual's employment contract with the Company shall terminate and, in order to induce Parent and Sub to enter into this Agreement, the Company and such individual are executing and delivering concurrently herewith the Termination and Release Agreement; WHEREAS, the Company is unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless, contemporaneously with the execution and delivery hereof, the Company has received true and complete copies of the financing commitment described in Section 4.2(e); and 11 WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and the transactions contemplated hereby and also to prescribe various conditions to the consummation thereof. NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 THE OFFER 1.1. The Offer. --------- (a) Subject to this Agreement not having theretofore been terminated in accordance with the provisions of Section 8.1 hereof, Sub shall, and Parent shall cause Sub to, as promptly as practicable after, but in no event later than five business days from, the date of this Agreement, commence an offer to purchase for cash (as it may be amended in accordance with the terms of this Agreement, the "Offer") all shares of common stock, par value $0.25 per share (the "Company Common Stock"), of the Company outstanding immediately prior to the consummation of the Offer (the "Shares"), subject only to the conditions set forth in Exhibit A hereto (the "Conditions"), at a price of $19.50 (the "Offer Price") per Share, net to the seller in cash. Subject only to the Conditions, Sub shall, and Parent shall cause Sub to, accept for payment and pay for all Shares validly tendered pursuant to the Offer and not withdrawn prior to the expiration date of the Offer as promptly as practicable following the expiration date of the Offer. Sub expressly reserves the right to amend the terms and conditions of the Offer, PROVIDED that without the consent of the Company, no amendment may be made which (i) decreases the price per Share or changes the form of consideration payable in the Offer, (ii) decreases the number of Shares sought, or (iii) changes any of the Conditions or imposes additional conditions to the Offer or amends any other term of the Offer in either case in any manner adverse to the holders of Shares (it being understood that extensions of the Offer as contemplated by this Section 1.1(a) are not adverse to the holders of Shares); and PROVIDED, FURTHER, that the Minimum Condition (as defined in Exhibit A hereto) is for the benefit of the Company and may not be waived without the Company's consent. The Offer may only be extended with the prior written consent of the Company or as required by law; PROVIDED, HOWEVER, Parent and Sub may extend the Offer without the consent of the Company (A) if at the scheduled expiration date of the Offer any of the Conditions shall not have been satisfied or waived or (B) for any period required by any Laws (as hereinafter defined) applicable to the Offer and PROVIDED, FURTHER, that if the Conditions are not satisfied or, to the extent permitted by this Agreement, waived as of any scheduled expiration date, Parent and Sub shall extend the Offer from time to time for up to five (5) business days at a time (or such longer period as shall be approved by the Company) until the earlier of the consummation of the Offer or sixty (60) calendar days after the date hereof, provided that such extension shall -2- 12 not be required if in the reasonable judgment of Parent or Sub, any Condition is incapable of being satisfied prior to the expiration of the sixty (60) calendar days. Upon the terms hereof and subject to the Conditions, Sub will accept for payment and purchase all Shares validly tendered and not withdrawn prior to the expiration of the Offer. (b) The Company will not, nor will it permit any of its Subsidiaries (as defined below) to, tender into the Offer any Shares beneficially owned by it. For purposes of this Agreement, "Subsidiary" means, as to any Person (as defined below), any corporation, limited liability company, partnership or joint venture, whether now existing or hereafter organized or acquired: (i) in the case of a corporation, of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (other than stock having such voting power solely by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person and/or one or more of its Subsidiaries or (ii) in the case of a limited liability company, partnership or joint venture, in which such Person or Subsidiary of such Person is a managing member, general partner or joint venturer or of which a majority of the partnership or other ownership interests are at the time owned by such Person and/or one or more of its Subsidiaries. For purposes of this Agreement, "Person" means any individual, corporation, company, voluntary association, limited liability company, partnership, joint venture, trust, unincorporated organization or other entity. (c) On the date of the commencement of the Offer, Sub shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will contain an offer to purchase and form of the related letter of transmittal (together with any supplements or amendments thereto, the "Offer Documents"). The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to the filing of such Offer Documents with the SEC. Sub agrees to provide the Company and its counsel copies of any written comments Sub and its counsel may receive from the SEC or its staff with respect to the Offer Documents and a summary of any such comments received orally promptly after the receipt thereof. Parent, Sub and the Company each agree promptly to correct any information provided by it for use in the Offer Documents if and to the extent that any such information shall have become false or misleading in any material respect and Parent and Sub further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to the stockholders of the Company, in each case as and to the extent required by applicable securities laws. 1.2. COMPANY ACTIONS. The Company hereby consents to the Offer and represents that (a) its Board of Directors (the "Board" or "Board of Directors") (at a meeting duly called and held) has (i) determined that this Agreement, the Option Release Agreement, the Non-Compete and Termination Agreement and the Termination and Release Agreement (collectively, the "Transaction Documents") and the transactions contemplated hereby or thereby, including the Offer and the Merger (as defined in Section 2.1 hereof), are fair to and -3- 13 in the best interests of the stockholders of the Company, (ii) approved the execution, delivery and performance of the Transaction Documents by the Company and the consummation of the transactions contemplated thereby, including the Offer and the Merger, and such approval constitutes approval for purposes of Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"), (iii) resolved to recommend acceptance of the Offer and approval and adoption of this Agreement by the holders of Company Common Stock; and (b) Furman Selz LLC (the "Financial Advisor") has delivered to the Board its opinion to the effect that, as of the date of this Agreement and based upon and subject to the matters set forth therein, the cash consideration to be received by the holders of Company Common Stock in the Offer and the Merger is fair to such holders from a financial point of view (the "Fairness Opinion"). Subject to its fiduciary duties under applicable Laws (as defined in Section 4.1(c)(ii)) after consultation with independent counsel, the Company hereby agrees to file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") containing the recommendation referred to in clause (iii) above (and the information required by Section 14(f) of the Securities Exchange Act of 1934, as amended (together with all rules and regulations thereunder, the "Exchange Act"), so long as Parent shall have furnished such information to the Company in a timely manner) and to mail such Schedule 14D-9 to the stockholders of the Company. The Company will use its best efforts to cause the Schedule 14D-9 to be filed on the same date as Sub's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") is filed and mailed together with the Offer Documents; PROVIDED that in any event the Schedule 14D-9 shall be filed and mailed no later than 10 business days following the commencement of the Offer. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company agrees to provide Parent and its counsel copies of any written comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 and a summary of any such comments received orally promptly after the receipt thereof. Parent, Sub and the Company each agree promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that any such information shall have become false or misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the stockholders of the Company, in each case as and to the extent required by applicable securities laws. 1.3. STOCKHOLDER LISTS. In connection with the Offer, at the request of Parent or Sub, from time to time after the date hereof, the Company will promptly furnish Sub with mailing labels, security position listings and any available listing or computer file maintained for or by the Company containing the names and addresses of the record holders of the Shares as of a recent date and shall furnish Sub with such additional information reasonably available to the Company and assistance as Sub or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable Laws, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Sub and its affiliates and associates shall hold in confidence the information contained in any such labels, listings and files, will -4- 14 use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will deliver to the Company all copies of such information in their possession. 1.4. SUB STOCKHOLDER APPROVAL. Parent, in its capacity as the sole stockholder of Sub, by its execution hereof, approves and adopts this Agreement and the transactions contemplated hereby. 1.5. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(f). In the event that Sub acquires at least a majority of the Shares outstanding pursuant to the Offer, Parent shall be entitled to designate for appointment or election to the Board, upon written notice to the Company, such number of persons so that the designees of Parent constitute the same percentage (but in no event less than a majority) of the Board (rounded up to the next whole number) as the percentage of Shares acquired pursuant to the Offer. Effective upon such purchase of at least a majority of the Shares pursuant to the Offer (sometimes referred to herein as the "consummation" of the Offer), the Company will increase the size of the Board or obtain the resignation of such number of directors as is necessary to enable such number of Parent designees to be so elected. In connection therewith, the Company will mail to the stockholders of the Company the information required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder unless such information has previously been provided to such stockholders in the Schedule 14D-9. Parent and Sub shall provide to the Company in writing, and will be solely responsible for, any information with respect to such companies and their nominees, officers, directors and affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Notwithstanding the provisions of this Section 1.5, at least two of the members of the Board shall, at all times prior to the Effective Time (as defined in Section 2.3 hereof) be, Continuing Directors (as defined below). For purposes hereof, the term "Continuing Director" shall mean (i) any member of the Board as of the date hereof or (ii) any successor of a Continuing Director who is (A) unaffiliated with, and not a designee or nominee, of Parent or Sub, and (B) recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board, and in each case under clause (ii), who is not an employee of the Company. 1.6. ACTION BY CONTINUING DIRECTORS. Following the election or appointment of Parent's designees pursuant to Section 1.5 and prior to the Effective Time, such designees shall abstain from acting upon, and the approval of a majority of the Continuing Directors shall be required to authorize and shall be sufficient to authorize, any resolution with respect to any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors of the Company, any extension of time for the performance of any of the obligations or other acts of Parent or Sub under this Agreement, any waiver of compliance with any of the agreements or conditions under this Agreement for the benefit of the Company, and any action to seek to enforce any obligation of Parent or Sub under this Agreement. If at any time the Continuing Directors reasonably deem it necessary to consult independent counsel in connection with their duties as Continuing Directors or actions -5- 15 to be taken by Company, the Continuing Directors may retain counsel for such purpose and Parent or Sub shall pay the reasonable fees and expenses incurred in connection therewith. ARTICLE 2 THE MERGER 2.1. THE MERGER. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Sub shall be merged (the "Merger") with and into the Company at the Effective Time (as defined in Section 2.3). At the Effective Time the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving corporation and a direct wholly owned subsidiary of Parent or its successor (Sub and the Company are sometimes hereinafter referred to as "Constituent Corporations" and, as the context requires, the Company is sometimes hereinafter referred to as the "Surviving Corporation") and shall continue under the name "Ply Gem Industries, Inc." 2.2. CLOSING. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8.1, and subject to the satisfaction or waiver of the conditions set forth in Article 7, the closing of the Merger (the "Closing") shall take place at 10:00 a.m., New York time, on the second business day after satisfaction and/or waiver of all of the conditions set forth in Section 7.1 (the "Closing Date"), at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006, unless another date, time or place is agreed to in writing by the parties hereto. 2.3. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, as provided in the DGCL, as soon as practicable on or after the Closing Date. The Merger shall become effective upon such filing or at such time thereafter as is provided in the Certificate of Merger as the Company and Sub shall agree (the "Effective Time"). 2.4. Effects of the Merger. --------------------- (a) The Merger shall have the effects as set forth in the applicable provisions of the DGCL. (b) The directors and officers of Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the initial directors and officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. (c) At the Effective Time, Article IV of the Certificate of Incorporation of the -6- 16 Company, as in effect immediately prior to the Effective Time, shall be amended to increase the number of authorized shares of Company Common Stock to an aggregate amount of Four Hundred Sixty Million (460,000,000) as of the Effective Time, by operation of this Agreement and by virtue of the Merger without any further action by the stockholders or directors of the Surviving Corporation and, as so amended, such Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with the terms thereof and the DGCL. (d) The By-Laws of the Company shall be the bylaws (the "Bylaws") of the Surviving Corporation until thereafter amended as provided by applicable law, the Certificate of Incorporation or the Bylaws. 2.5. Stockholders' Meeting. --------------------- (a) If required by applicable Laws in order to consummate the Merger, the Company, acting through the Board shall, in accordance with applicable Laws, its Certificate of Incorporation and its Bylaws, as soon as practicable following the consummation of the Offer: (i) duly call, give notice of, convene and hold a special meeting of its stockholders as soon as practicable following the consummation of the Offer for the purpose of considering and taking action upon this Agreement (the "Stockholders' Meeting"); (ii) subject to its fiduciary duties under applicable Laws after consultation with independent counsel, include in the proxy statement or information statement prepared by the Company for distribution to stockholders of the Company in advance of the Stockholders' Meeting in accordance with Regulation 14A or Regulation 14C promulgated under the Exchange Act (the "Proxy Statement") the recommendation of the Board referred to in Section 1.2 hereof; and (iii) use its reasonable efforts to (A) obtain and furnish the information required to be included by it in the Proxy Statement and, after consultation with Parent, respond promptly to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof and cause the Proxy Statement to be mailed to its stockholders following the consummation of the Offer and (B) obtain the necessary approvals of this Agreement and the Merger by its stockholders. Parent will provide the Company with the information concerning Parent and Sub required to be included in the Proxy Statement and will vote, or cause to be voted, all Shares owned by it or its Subsidiaries in favor of approval and adoption of this Agreement and the transactions contemplated hereby. -7- 17 (b) Notwithstanding Section 2.5(a), if Parent and Sub and their affiliates shall collectively own, following consummation of the Offer, at least 90 percent of the outstanding Shares, each of Parent, Sub and the Company shall take all necessary and appropriate action to cause the Merger to become effective, as soon as practicable after the consummation of the Offer (but in no event later than ten (10) business days thereafter), without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF THE CERTIFICATES 3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and without any action on the part of any holder of shares of Company Common Stock or any holder of shares of capital stock of Sub: (a) Capital Stock of Sub. Each share of the capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become a number of fully paid and nonassessable shares of common stock, par value $0.25 per share, of the Surviving Corporation equal to the quotient realized by dividing (i) the sum of (A) the aggregate number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, (B) the aggregate number of shares of Company Common Stock that are owned by and held in the treasury of the Company immediately prior to the Effective Time and (C) the aggregate number of shares of Company Common Stock issuable, immediately prior to the Effective Time, in respect of all then outstanding Options, by (ii) the aggregate number of shares of capital stock of Sub issued and outstanding immediately prior to the Effective Time. (b) Cancellation of Treasury Stock. Each share of Company Common Stock and all other shares of capital stock of the Company that are owned by the Company shall be canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor. 3.2. CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger and without any action on the part of Sub, the Company or the holders of the Company Common Stock: (a) Subject to the other provisions of this Section 3.2, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares owned, directly or indirectly, by the Company and Dissenting Shares (as defined in Section 3.6) shall be converted into the right to receive the Offer Price or such higher price, if any, as is paid in the Offer (the "Merger Consideration"), payable to the holder thereof in -8- 18 cash, without any interest thereon, upon surrender and exchange of the Certificate (as defined in Section 3.3) representing such share of Company Common Stock. (b) All such shares of Company Common Stock, when converted as provided in Section 3.2(a), no longer shall be outstanding and shall automatically be canceled and retired and shall cease to exist, and each Certificate previously evidencing such Company Common Stock shall thereafter represent only the right to receive the Merger Consideration. The holders of Certificates previously evidencing Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to the Company Common Stock except as otherwise provided herein or by law and, upon the surrender of Certificates in accordance with the provisions of Section 3.3, shall only have the right to receive for their Company Common Stock, the Merger Consideration, without any interest thereon. Notwithstanding the foregoing, if between the date of this Agreement and the Effective Time the outstanding shares of Company Common Stock shall have been changed into a different number of shares or a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Merger Consideration shall be correspondingly adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, with the aggregate Merger Consideration payable to each stockholder in such case being rounded to the nearest penny. 3.3. Payment for Shares. ------------------ (a) Paying Agent. Prior to the Effective Time, Parent shall appoint a United States bank or trust company reasonably acceptable to the Company to act as paying agent (the "Paying Agent") for the payment of the Merger Consideration, and Parent shall contribute the Merger Consideration to the Surviving Corporation and shall cause the Surviving Corporation to deposit the Merger Consideration so contributed with the Paying Agent in a separate fund established for the benefit of the holders of shares of Company Common Stock, for payment in accordance with this Article 3, through the Paying Agent (the "Payment Fund"), and such contribution by Parent and payment by the Surviving Corporation shall be in immediately available funds in amounts necessary to make the payments pursuant to Section 3.2 and this Section 3.3 to holders (other than the Company or holders of Dissenting Shares). The Paying Agent shall, pursuant to irrevocable instructions, pay the Merger Consideration out of the Payment Fund. If for any reason (including losses) the Payment Fund is inadequate to pay the amounts to which holders of shares of Company Common Stock shall be entitled under this Section 3.3, Parent shall take all steps necessary to enable or cause the Surviving Corporation promptly to deposit in trust additional cash with the Paying Agent sufficient to make all payments required under this Agreement, and Parent and the Surviving Corporation shall in any event be liable for payment thereof. The Payment Fund shall not be used for any purpose except as expressly provided in this Agreement. -9- 19 (b) Payment Procedures. As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall instruct the Paying Agent to mail to each holder of record (other than the Company) of a certificate or certificates which, immediately prior to the Effective Time, evidenced outstanding shares of Company Common Stock (the "Certificates"), (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent, and shall be in such form and have such other provisions as the Surviving Corporation reasonably may specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent together with such letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in respect thereof cash in an amount equal to the product of (x) the number of shares of Company Common Stock represented by such Certificate and (y) the per share Merger Consideration, and the Certificate so surrendered shall forthwith be canceled. No interest shall be paid or accrued on the Merger Consideration payable upon the surrender of any Certificate. If any holder of Shares shall be unable to surrender such holder's Certificates because such Certificates have been lost, mutilated or destroyed, such holder may deliver in lieu thereof an affidavit and indemnity bond in form and substance and with surety reasonably satisfactory to the Surviving Corporation. If payment is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 3.3(b), each Certificate (other than Certificates representing Shares owned by the Company or holders of Dissenting Shares) shall be deemed at any time after the Effective Time to represent for all purposes only the right to receive the Merger Consideration. (c) Termination of Payment Fund; Interest. Any portion of the Payment Fund which remains undistributed to the holders of Company Common Stock for 180 days after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Company Common Stock who have not theretofore complied with this Article 3 and the instructions set forth in the letter of transmittal mailed to such holder after the Effective Time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration to which they are entitled. All interest accrued in respect of the Payment Fund shall inure to the benefit of and be paid to the Surviving Corporation. (d) No Liability. None of Parent, the Company or the Surviving Corporation shall be liable to any holder of shares of Company Common Stock for any cash from the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. -10- 20 3.4. STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of shares of Company Common Stock thereafter on the records of the Company. On or after the Effective Time, any Certificates presented to the Paying Agent or Parent for any reason, except notation thereon that a stockholder has elected to exercise his rights to appraisal pursuant to the DGCL, shall be converted into the Merger Consideration as provided in this Article 3. 3.5. Stock Option Plans. ------------------ (a) Cancellation of Options and Unvested Stock. At the Effective Time, each then outstanding option (including stock purchase rights and unrestricted stock awards) to purchase or acquire shares of Company Common Stock under the Company's 1989 Senior Executive Stock Option Plan, 1989 Employee Incentive Stock Plan, Executive Incentive Stock Option Plan, 1994 Employee Incentive Stock Plan and 1994 Incentive Compensation Plan (collectively, the "Stock Option Plans"), or otherwise as set forth on Schedule 4.1(b), whether or not then exercisable or vested (collectively, the "Options"), and each share of not yet vested restricted stock granted under any such Stock Option Plan ("Unvested Stock") shall be canceled and shall represent the right to receive the following consideration in settlement thereof as follows: (i) as to all Options, for each share of Company Common Stock subject to such Option, including any additional shares subject thereto by reason of their terms upon consummation of the "change of control" resulting from the Merger, such holder shall receive an amount (subject to any applicable withholding tax) in cash equal to the difference between the per share Merger Consideration and the per share exercise price of such Option to the extent such difference is a positive number (such amount in cash being hereinafter referred to as the "Option Consideration"), and (ii) as to the holders of Unvested Stock identified in Schedule 3.5(a), for each share of Unvested Stock, cash in an amount equal to the product of (x) the number of shares of Unvested Stock and (y) the per share Merger Consideration (such amount in cash being hereinafter referred to as the "Unvested Stock Consideration"); provided, however, that with respect to any person subject to Section 16(a) of the Exchange Act, any such Option Consideration or Unvested Stock Consideration shall not be payable until the first date payment can be made without liability to such person under Section 16(b) of the Exchange Act, but shall be paid as soon as practicable thereafter. Upon consummation of the Offer, all Options shall immediately vest and become exercisable. (b) Termination of Rights. The surrender of an Option to the Company in exchange for the Option Consideration shall be deemed a release of any and all rights the holder had or may have had in respect of such Option. The Stock Option Plans shall terminate as of the Effective Time, and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary thereof shall be canceled as of the Effective Time. Prior to the Closing, the Company shall use its best efforts to take all action necessary (including causing the Board of Directors of the Company (or any committees thereof) to take such actions as are -11- 21 allowed by the Stock Option Plans) to (i) ensure that, following the Effective Time, no participant in the Stock Option Plans or any other plans, programs or arrangements shall have any right thereunder to acquire equity securities of the Company, the Surviving Corporation or any Subsidiary thereof and (ii) terminate all such plans, programs and arrangements as of the Effective Time. (c) Payment Procedures. Upon the later of the consummation of the Offer or the delivery of a duly executed Option Release Agreement by a holder of Options to be canceled or Unvested Stock, such holder shall be entitled to receive in respect thereof the Option Consideration or the Unvested Stock Consideration, as applicable. No interest shall be paid or accrued on the cash portion of the Option Consideration or the Unvested Stock Consideration, as applicable. Until settled in accordance with the provisions of this Section 3.5(c), each Option or share of Unvested Stock shall be deemed at any time after the Effective Time to represent for all purposes only the right to receive the Option Consideration or the Unvested Stock Consideration, as applicable. (d) The Company shall use its best efforts to obtain, within 30 days from the date of this Agreement, from each beneficial and record holder of Options as identified by Parent to the Company, an Option Release Agreement duly executed and delivered by each such holder. 3.6. DISSENTING SHARES. Notwithstanding any other provisions of this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and which are held by stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration. Such stockholders instead shall be entitled to receive payment of the appraised value of such shares of Company Common Stock held by them in accordance with the provisions of such Section 262 of the DGCL, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares of Company Common Stock under such Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 3.3 of the Certificate or Certificates that, immediately prior to the Effective Time, evidenced such shares of Company Common Stock. -12- 22 ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Parent and Sub as follows: (a) Organization, Standing and Power. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business as a foreign corporation and in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not (i) have a Material Adverse Effect (as defined below) with respect to the Company or (ii) materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. The Company has heretofore made available to Parent complete and correct copies of its Certificate of Incorporation and Bylaws and its Subsidiaries' respective certificates of incorporation (or comparable charter or organizational documents) and bylaws. All Subsidiaries of the Company, their respective jurisdictions of incorporation or organization, and their respective jurisdictions of qualification to do business are identified on Schedule 4.1(a). As used in this Agreement, a "Material Adverse Effect" shall mean, with respect to any party, any events, changes or effects which, individually or in the aggregate, would have a material adverse effect on the business, operations, assets, condition (financial or otherwise) or results of operations of such party and its Subsidiaries, taken as a whole. (b) Capital Structure. As of the date hereof, the authorized capital stock of the Company consists of 60,000,000 shares of common stock, par value $0.25 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). As of June 23, 1997 (the "Capitalization Date"), (i) 13,983,679 Shares were issued and outstanding, (ii) no shares of Preferred Stock were issued and outstanding, (iii) no Shares were issuable in respect of outstanding Unvested Stock, (iv) no Shares were issuable in respect of outstanding securities convertible into, or exchangeable or exercisable for Shares of Company Common Stock, other than Options or Unvested Stock issued pursuant to a Stock Option Plan and Company Common Stock issuable pursuant to the Stock Purchase Agreement dated the date hereof between the Company and Parent and (v) 5,513,695 Shares (or 6,263,695 Shares after a "change of control") were issuable in respect of outstanding Options, of which (A) 1,136,415 Shares were issuable pursuant to Options outstanding under the 1989 Senior Executive Stock Option Plan, (B) 1,625,276 Shares (or 2,000,276 Shares after a "change of control") were issuable pursuant to Options outstanding under the 1989 Employee Incentive Stock Plan, (C) 511,842 Shares (or 886,842 after a "change in control") were issuable -13- 23 pursuant to Options outstanding under the Executive Incentive Stock Option Plan, (D) 2,240,162 Shares were issuable pursuant to Options outstanding under the 1994 Employee Incentive Stock Plan, (E) 100,000 Shares of Unvested Stock were outstanding under the 1989 Employee Incentive Stock Plan, (F) no Shares of Unvested Stock were outstanding under the 1994 Employee Incentive Stock Plan and (G) no Shares were issuable in respect of outstanding rights under the 1994 Incentive Compensation Plan. Except for the issuance of Company Common Stock pursuant to the exercise of outstanding Options and except as provided in Schedule 4.1(b), there are no employment, executive termination or similar agreements providing for the issuance of Company Common Stock. As of the date hereof, 3,764,278 shares of Company Common Stock are held by the Company and no Shares are held by Subsidiaries of the Company. Since the Capitalization Date, no shares of preferred stock have been issued and no shares of Company Common Stock have been issued, except Shares issued pursuant to the exercise of options outstanding on such date as set forth in clauses (iii), (iv) and (v) above. No bonds, debentures, notes or other instruments or evidence of indebtedness having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which the Company stockholders may vote ("Company Voting Debt") are issued or outstanding. All outstanding Shares are validly issued, fully paid and nonassessable and are not subject to preemptive or other similar rights. Except as set forth on Schedule 4.1(b), all outstanding shares of capital stock of the Subsidiaries of the Company are owned by the Company or a direct or indirect Subsidiary of the Company, free and clear of all liens, charges, encumbrances, claims and options of any nature. Except as set forth in this Section 4.1(b), there are outstanding: (A) no shares of capital stock, Company Voting Debt or other voting securities of the Company; (B) no securities of the Company or any Subsidiary of the Company convertible into, or exchangeable or exercisable for, shares of capital stock, Company Voting Debt or other voting securities of the Company or any Subsidiary of the Company; and (C) no options, warrants, calls, rights (including preemptive rights), commitments or agreements to which the Company or any Subsidiary of the Company is a party or by which it is bound, in any case obligating the Company or any Subsidiary of the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional shares of capital stock or any Company Voting Debt or other voting securities of the Company or of any Subsidiary of the Company, or obligating the Company or any Subsidiary of the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. Except as set forth on Schedule 4.1(b), since December 31, 1996, the Company has not (1) granted any options, warrants or rights to purchase shares of Company Common Stock or (2) amended or repriced any Option or any of the Stock Option Plans. Set forth on Schedule 4.1(b) is a list of all outstanding options, warrants and rights to purchase shares of Company Common Stock and the exercise prices relating thereto. Except as set forth on Schedule 4.1(b) and in the Transaction Documents, there are not as of the date hereof and there will not be at the Effective Time any stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting of any shares of the capital stock of the Company which will limit in any way the solicitation of proxies by or on behalf of the Company from, or the casting of votes by, the stockholders -14- 24 of the Company with respect to the Merger. Except as set forth on Schedule 4.1(b), there are no restrictions on the Company to vote the stock of any of its Subsidiaries. (c) Authority; No Violations; Consents and Approvals. (i) The Company has all requisite corporate power and authority to enter into the Transaction Documents and, subject to the Company Stockholder Approval (as defined in Section 4.1(c)(iii)), to consummate the transactions contemplated in the Transaction Documents. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company, subject, if required with respect to the consummation of the Merger, to the Company Stockholder Approval, unless the Merger may be effected pursuant to Section 253 of the DGCL. The Transaction Documents have been duly executed and delivered by the Company and, subject, with respect to the consummation of the Merger, to the Company Stockholder Approval unless the Merger may be effected pursuant to Section 253 of the DGCL, and assuming that each of the Transaction Documents to which Parent or Sub is a party constitutes the valid and binding agreement of Parent or Sub, constitute valid and binding obligations of the Company enforceable in accordance with their respective terms and conditions except that the enforcement thereof may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (ii) Except as set forth on Schedule 4.1(c), the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby by the Company will not (A) conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration (including pursuant to any put right) of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest or other encumbrance on assets or property, or right of first refusal with respect to any asset or property (any such conflict, violation, default, right of termination, cancellation or acceleration, loss, creation or right of first refusal, a "Violation"), pursuant to any provision of the Certificate of Incorporation or By-Laws of the Company or any comparable charter or organizational documents of its Subsidiaries or (B) except as to which requisite waivers or consents have been obtained and assuming the consents, approvals, authorizations or permits and filings or notifications referred to in paragraph (iii) of this Section 4.1(c) are duly and timely obtained or made and, if required, the Company Stockholder Approval has been obtained, result in any Violation of (1) any loan or credit agreement, note, mortgage, deed of trust, indenture, lease, Benefit Plan (as defined in Section 4.1(k)), Company -15- 25 Permit (as defined in Section 4.1(g)), or any other agreement, obligation, instrument, concession, franchise or license or (2) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or assets (collectively, "Laws"), except in the case of clauses (1) and (2) for any Violations that, individually or in the aggregate, would not have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. The Board of Directors of the Company has taken all actions necessary under the DGCL, including approving the transactions contemplated by the Transaction Documents, to ensure that Section 203 of the DGCL does not, and will not, apply to the transactions contemplated thereby. (iii) No consent, approval, order or authorization of, or registration, declaration or filing with, notice to, or permit from any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a "Governmental Entity"), is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of any of the Transaction Documents by the Company or the consummation by the Company of the transactions contemplated thereby, except for (A) the filing of a pre-merger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or termination of the applicable waiting period thereunder; (B) the filing with the SEC of (1) the Proxy Statement in definitive form relating to the Stockholders' Meeting, (2) the Schedule 14D-9 and (3) such reports under and such other compliance with the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions contemplated hereby; (C) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company does business; (D) such filings and approvals as may be required by any applicable state securities, "blue sky" or takeover laws; (E) such filings in connection with any state or local tax which is attributable to the beneficial ownership of the Company's or its Subsidiaries' real property, if any (collectively, the "Gains and Transfer Taxes"); (F) such other filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval necessitated by the Merger or the transactions contemplated by this Agreement; (G) the approval of this Agreement by the holders of a majority of the outstanding Shares ("Company Stockholder Approval"); (H) such filings, consents, approvals and authorizations under the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA") and (I) such other consents, approvals, orders, authorizations, registrations, declarations, filings, notices or permits the failure of which to be obtained or made would not have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. -16- 26 (d) SEC Documents. The Company has made available to Parent a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by the Company with the SEC since January 1, 1995 and prior to the date of this Agreement (the "Company SEC Documents"), which are all the documents (other than preliminary material) that the Company was required to file with the SEC since such date. As of their respective dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company SEC Documents complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to year-end audit adjustments, as permitted by Rule 10-01, and any other adjustments described therein) the consolidated financial position of the Company and its consolidated Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of the Company and its consolidated Subsidiaries for the periods presented therein. (e) Information Supplied. None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in the Proxy Statement will, on the date it is first mailed to the holders of the Company Common Stock or at the date of the related stockholder meeting (the "Meeting Date"), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If, at any time prior to the Meeting Date, any event with respect to the Company or any of its Subsidiaries, or with respect to other information supplied by the Company specifically for inclusion in the Proxy Statement, shall occur which is required to be described in an amendment of, or a supplement to, the Proxy Statement, such event shall be so described, and such amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of the Company. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein, including the Schedule 14D-9 or the Proxy Statement, insofar as it relates to the Company or its Subsidiaries or other information supplied by the Company specifically for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act, the Exchange Act or the rules and regulations thereunder, and each such document required to be filed with any Governmental Entity other than the SEC will comply -17- 27 in all material respects with the provisions of applicable law as to the information required to be contained therein. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to the information supplied or to be supplied by Parent or Sub for inclusion in the Proxy Statement. (f) No Default. Except as may result from the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby (which is subject to Section 4.1(c)(ii)) and except as set forth on Schedule 4.1(f), no Violation exists (and no event has occurred which, with notice or the lapse of time or both, would constitute a Violation) of any term, condition or provision of (i) the Certificate of Incorporation or By-Laws of the Company or the comparable charter or organizational documents of any of its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license to which the Company or any of its Subsidiaries is now a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound or (iii) any law, order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its Subsidiaries, except in the case of (ii) and (iii) for Violations which, in the aggregate, would not have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. (g) Compliance with Applicable Laws. Except as set forth on Schedule 4.1(g), the Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except where the failure to hold any such Company Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. Except as set forth on Schedule 4.1(g), the Company and its Subsidiaries are in compliance with the terms of the Company Permits, except where the failure to be in compliance would not, individually or in the aggregate, have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. As of the date of this Agreement, except as set forth on Schedule 4.1(g), no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, has been threatened which would have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. (h) Litigation. Except as set forth on Schedule 4.1(h) or disclosed in the Company SEC Documents, there is no suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary of the Company -18- 28 ("Company Litigation") the loss of which would have a Material Adverse Effect on the Company, nor is there any material judgment, decree, unfunded settlement, conciliation agreement, letter of deficiency, award, temporary restraining order, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company or any Subsidiary of the Company ("Company Order") that would have a Material Adverse Effect on the Company. In addition, except as expressly set forth on Schedule 4.1(h) as having such effect, none of the claims and judgments pending or, to the knowledge of the Company, threatened pursuant to all Company Litigation and Company Orders, would, individually or in the aggregate, have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated thereby. (i) Taxes. Except as set forth on Schedule 4.1(i) hereto: (i) All material Tax Returns required to be filed by or with respect to the Company, each of its Subsidiaries, and any affiliated, consolidated, combined, unitary or similar group of which the Company or any of its Subsidiaries is or was a member, have been duly and timely filed (taking into account all valid extensions of filing dates), and all such Tax Returns are true, correct and complete in all material respects. The Company, each of its Subsidiaries, and any affiliated, consolidated, combined, unitary or similar group of which the Company or any of its Subsidiaries is or was a member, has duly and timely paid (or there has been paid on its behalf) all material Taxes that are due, except for Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the Company's unaudited financial statements for the quarter ended March 31, 1997 in accordance with GAAP. With respect to any period for which Taxes are not yet due with respect to the Company, any Subsidiary, and any affiliated, consolidated, combined, unitary or similar group of which the Company or any of its Subsidiaries is or was a member, the Company and each of its Subsidiaries has made due and sufficient current accruals for such Taxes in accordance with GAAP in the most recent financial statements contained in the Company SEC Documents. The Company and each of its Subsidiaries has withheld and paid all material Taxes required by all applicable laws to be withheld or paid in connection with any amounts paid or owing to any employee, creditor, independent contractor, stockholder or other third party. (ii) There are no outstanding agreements, waivers, or arrangements extending the statutory period of limitation applicable to any claim for, or the period for the collection assessment of, material Taxes due from or with respect to or the Company, any of its Subsidiaries, or any affiliated, consolidated, combined, unitary or similar group of which the Company or any of its Subsidiaries is or was a member, for any taxable period. No audit or other proceeding by any court, governmental or regulatory authority, or similar person is pending in regard to any material Taxes due from or with respect to the Company or any of its Subsidiaries or any material Tax -19- 29 Return filed by or with respect to the Company, any Subsidiary, or any affiliated, consolidated, combined, unitary or similar group of which the Company or any of its Subsidiaries is or was a member, other than normal and routine audits by nonfederal governmental authorities. All material deficiencies of Taxes assessed by any applicable taxing authority have been paid, fully settled or adequately provided for in the financial statements contained in the Company SEC Documents. Neither the Company nor any Subsidiary of the Company has received written notice that any assessment of material Taxes is proposed against the Company or any of its Subsidiaries or any of their assets. (iii) No consent to the application of Section 341(f)(2) of the Code (or any predecessor provision) has been made or filed by or with respect to the Company or any of its Subsidiaries or any of their assets. None of the Company or any of its Subsidiaries has agreed to make any material adjustment pursuant to Section 481(a) of the Code (or any predecessor provision) by reason of any change in any accounting method, and there is no application pending with any taxing authority requesting permission for any changes in any accounting method of the Company or any of its Subsidiaries which, in each respective case, will or would reasonably cause the Company or any of its Subsidiaries to include any material adjustment in taxable income for any taxable period (or portion thereof) ending after the Closing Date. (iv) Except as set forth in the Company SEC Documents, neither the Company nor any of its Subsidiaries is a party to, is bound by, or has any obligation under, any Tax sharing agreement, Tax allocation agreement or similar contract, agreement or arrangement. (v) Neither the Company nor any of its Subsidiaries has executed or entered into with the Internal Revenue Service ("IRS"), or any taxing authority, a closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local, foreign or other income tax law, which will require any increase in taxable income or alternative minimum taxable income, or any reduction in tax credits for, the Company or any of its Subsidiaries for any taxable period ending after the Closing Date. (vi) There are no requests for rulings from any taxing authority for information with respect to Taxes of the Company or any of its Subsidiaries and, to the knowledge of the Company, no material reassessments (for property or ad valorem Tax purposes) of any assets or any property owned or leased by the Company or any of its Subsidiaries have been proposed in written form. (vii) None of the property of the Company or any Subsidiary is subject to a safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in effect after the Economic Recovery Tax Act of 1981 and before the Tax Reform Act of 1986) or is "tax-exempt use property" (within the meaning of Section -20- 30 168(h) of the Code) or "tax-exempt bond financed property" (within the meaning of Section 168(g)(5) of the Code). (viii) The term "Code" shall mean the Internal Revenue Code of 1986, as amended. The term "Tax" (and, with correlative meaning, "Taxes") shall mean (i) any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding on amounts paid by the Company or any of its Subsidiaries, payroll, employment, excise, production, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and/or any penalty, addition to tax or additional amount imposed by any taxing authority, (ii) any liability of the Company or any of its Subsidiaries for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated or consolidated group or arrangement whereby liability of the Company or any of its Subsidiaries for the payment of such amounts was determined or taken into account with reference to the liability of any other person for any period and (iii) liability of the Company or any of its Subsidiaries with respect to the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnify any other Person. The term "Tax Return" shall mean all returns, declarations, reports, estimates, information returns and statements required to be filed by or with respect to the Company or any of its Subsidiaries in respect of any Taxes, including, without limitation, (i) any consolidated federal income Tax return in which the Company or any of its Subsidiaries is included and (ii) any state, local or foreign income Tax returns filed on a consolidated, combined or unitary basis (for purposes of determining tax liability) in which the Company or any of its Subsidiaries is included. (j) Employment Agreements. Schedule 4.1(j) contains a complete list of each management, employment, consulting or other agreement, contract or commitment, in each case, in writing, between the Company or any of its Subsidiaries and any employee, officer or director thereof (A) providing for the employment of any person or providing for retention of management, executive or consulting services and providing for an obligation to pay or accrue compensation of $50,000 or more per annum, or (B) except for severance agreements or arrangements with an employee or officer of only a Subsidiary of the Company and which do not provide for any severance agreement or arrangement in excess of $75,000, providing for the payment or accrual of any compensation or severance upon (i) a change in control of the Company or any of its Subsidiaries or (ii) any termination of such management, employment, consulting or other relationship. (k) Pension and Benefit Plans; ERISA. (i) Schedule 4.1(k) sets forth a complete and correct list of: -21- 31 (A) all "employee benefit plans," as defined in Section 3(3) of ERISA, maintained by the Company or any trade or business (whether or not incorporated) which is under common control, or which is treated as a single employer, with the Company under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate"), or to which the Company or any of its ERISA Affiliates has any obligation or liability, contingent or otherwise, other than any multiemployer plan as defined in either Section 3(37) or Section 4001(a)(3) of ERISA ("Benefit Plans"); and (B) all stock award, stock option or stock purchase benefit policies or arrangements and all material bonus or other incentive compensation, deferred compensation, salary continuation, disability, or other material employee benefit policies or arrangements which the Company or any of its ERISA Affiliates maintains or to which the Company or any of its ERISA Affiliates has any material obligation or liability (contingent or otherwise) (together with the agreements disclosed on Schedule 4.1(j), the "Employee Arrangements"). (ii) With respect to each Benefit Plan for which a Form 5500 is required to be filed, the Company or one of its Subsidiaries has timely filed such form with the Department of Labor for the last three years, and except as otherwise noted in Schedule 4.1(k), with respect to each Benefit Plan and Employee Arrangement, a complete and correct copy of each of the following documents (if applicable) has been made available to Sub: (A) the most recent plan and related trust documents, and all amendments thereto; (B) the most recent summary plan description, and all related summaries of material modifications thereto; (C) Form 5500 (including schedules and attachments) for the last three years; (D) the most recent IRS determination letter; and (E) actuarial reports for the last three years. (iii) Except as disclosed on Schedule 4.1(k), the Benefit Plans and their related trusts intended to qualify under Sections 401(a) and 501(a) of the Code, respectively, have received favorable determination letters from the IRS regarding the Tax Reform Act of 1986 with respect to such qualified status and nothing, to the best knowledge of the Company or any of its Subsidiaries, has occurred that could reasonably be expected to cause any such qualified status to change, which change would be material. (iv) All material contributions or other material payments required to have been made by the Company or any of its ERISA Affiliates to or under any Benefit Plan or Employee Arrangement by applicable law or the terms of such Benefit Plan or Employee Arrangement (or any agreement relating thereto) have been timely and properly made or are properly accrued on the Company's unaudited financial statements in accordance with generally accepted accounting principles. -22- 32 (v) The Benefit Plans and Employee Arrangements have been maintained and administered in all material respects in accordance with their terms and applicable laws, and all filings of applicable reports, documents and notices, the non-filing of which would have a Material Adverse Effect, have been timely made with the appropriate governmental agencies and plan participants and beneficiaries. (vi) Except as disclosed on Schedule 4.1(k), there are no pending or, to the best knowledge of the Company or any of its Subsidiaries, threatened actions, claims or proceedings against or relating to any Benefit Plan or Employee Arrangement (other than routine benefit claims by persons entitled to benefits thereunder) that would have a Material Adverse Effect. (vii) Except for the Employee Arrangements and as disclosed on Schedule 4.1(k), the Company and its ERISA Affiliates do not maintain or have an obligation to contribute to retiree life or retiree health plans which provide for continuing benefits or coverage, for 18 months or more, for current or former officers, directors, nonemployees or employees of the Company or any of its ERISA Affiliates except (A) as may be required under Part 6 of Title I of ERISA and at the sole expense of the participant or the participant's beneficiary or (B) a medical expense reimbursement account plan pursuant to Section 125 of the Code. (viii) Except as disclosed on Schedule 4.1(k) or specifically provided for herein, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any material payment becoming due to any employee or group of employees of the Company or any of its Subsidiaries; (B) increase materially any benefits otherwise payable under any Benefit Plan or Employee Arrangement; or (C) result in the acceleration of the time of payment or vesting of any such material benefits. (ix) Except as disclosed on Schedule 4.1(k), no stock or other security issued by the Company or any ERISA Affiliate forms a part of the assets of any Benefit Plan. (x) The Company and its Subsidiaries have maintained workers' compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise, except as disclosed on Schedule 4.1(k). (xi) As to each Benefit Plan subject to Title IV of ERISA, since January 1, 1990, to the best knowledge of the Company and each of its Subsidiaries, no notice of intent to terminate has been given under Section 4041 of ERISA and no proceeding has been instituted under Section 4042 of ERISA to terminate, such that -23- 33 would result in a material liability to the Company or any ERISA Affiliates; no material unsatisfied liability to the Pension Benefit Guaranty Corporation ("PBGC") has been incurred; no material unsatisfied accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred; and the most recent financial statements and actuarial valuations including information regarding the assets and liabilities of each such Benefit Plan have been supplied to Parent. (xii) The provisions of this Section 4.1(k)(xii) shall only apply to Benefit Plans subject to Title IV of ERISA and Benefit Plans subject to Section 412 of the Code; concerning each Benefit Plan that is or has been subject to the funding requirements of Title I, Subtitle B, Part 3 of ERISA, the funding method used in connection with such plan is, and at all times has been, acceptable under ERISA, the actuarial assumptions employed in connection with determining the funding of each such plan are, and at all times have been, reasonable and satisfy the requirements of Section 412(c)(3) of the Code and Section 302(c)(3) of ERISA; Schedule 4.1(k) sets forth as of December 31, 1996, any premiums due to the PBGC for the most recently completed year; Schedule 4.1(k) sets forth a reasonable good faith estimate of material changes between December 31, 1996 and the date hereof in the actuarially determined present value of all benefit liabilities within the meaning of Section 4001(a)(16) of ERISA (determined on the basis of the assumptions used for funding purposes in the most recent actuarial reports for such Benefit Plans) ("Benefit Liabilities") or plan assets with respect to such Benefit Plans; the sum of the amount of unfunded Benefit Liabilities under all Benefit Plans (excluding each such plan with an amount of unfunded Benefit Liabilities of zero or less) is not more than $1,300,000, with respect to any such Benefit Plan, no such plan has been terminated or subject to a "spin-off" or "spin-off termination" or partial termination and no assets of any such plan have been used or employed in a manner so as to subject them to a material excise tax imposed under Section 4980 of the Code; each such Benefit Plan permits termination thereof, and any assets in excess of those required to pay Benefit Liabilities may be distributed to or for the benefit of the Company or its ERISA Affiliates, and Section 4044(d) of ERISA would not prevent such reversion; with respect to any such Benefit Plan, any significant reduction in the rate of future benefit accrual was preceded by an adequate and appropriate notice to the parties described in and as required by Section 204(h) of ERISA. (xiii) Neither the Company nor any of its ERISA Affiliates has, or will have, incurred by reason of the transactions contemplated by this Agreement any material liability under Section 4062(e) of ERISA. Except as disclosed on Schedule 4.1(k), neither the Company nor any of its ERISA Affiliates is a participant in any plan to which Sections 4063 or 4064 of ERISA apply. -24- 34 (xiv) Neither the Company nor any of its ERISA Affiliates has engaged in any transaction described under Section 4069 of ERISA nor has any lien been imposed with respect to a material amount on any of the Company, any ERISA Affiliate or any of their respective assets under Section 4068 of ERISA. (xv) The Company and its ERISA Affiliates have complied in all material respects with all requirements for premium payments, including any interest and penalty charges for late payment, due the PBGC with respect to each Benefit Plan and each separate plan year for which any premiums are required. Except as set forth in Schedule 4.1(k), and except for transactions required by this Agreement, since January 1, 1990, there has been no "reportable event" (within the meaning of Section 4043(b) or (c) of ERISA and regulations promulgated by the PBGC thereunder) with respect to any Benefit Plan subject to Title IV of ERISA for which notice to the PBGC has not, by rule or regulations, been waived which would have a Material Adverse Effect. Concerning both the Company and any ERISA Affiliate (A) since January 1, 1990, there has been no cessation of operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA which would have a Material Adverse Effect, (B) since January 1, 1990, there has been no withdrawal of a substantial employer from any Benefit Plan so as to become subject to the provisions of Section 4063 of ERISA which would have a Material Adverse Effect, (C) since January 1, 1990, there has been no cessation of contributions to any Benefit Plan subject to Section 4064(a) of ERISA which would have a Material Adverse Effect, (D) there is not now any material liability under Section 4064 of ERISA to any of Parent, Sub or any affiliates of Parent or Sub or the Company by reason of the termination of any Benefit Plan, (E) since January 1, 1990, there has been no amendment to any Benefit Plan that would require the furnishing of security under Section 401(a)(29) of the Code, and (F) there has been no event or circumstance, and, to the best knowledge of the Company or any of its Subsidiaries, there exists no event or circumstance which could reasonably be expected to result in any material liability being asserted by any Benefit Plan, the PBGC or any other person or entity under Title IV of ERISA against the Company or any ERISA Affiliate. With respect to any Benefit Plan, no lien has been imposed under Section 412(n) of the Code or Section 302(f) of ERISA with respect to a material amount nor is there any material liability for excise taxes imposed under Section 4971 of the Code; any notices to the PBGC delivered since January 1, 1990, under Section 412(n) of the Code or Section 302(f) of ERISA have heretofore been delivered to Parent; and copies of any notices required to be given to participants since January 1, 1990, under either Section 101(d) or Section 4011 of ERISA have previously been delivered to Parent. Except as described in Schedule 4.1(k), the PBGC has not communicated with the Company, its ERISA Affiliates or any of its agents or representatives concerning the transactions contemplated by the Agreement, nor any other transactions implemented by the Company or any of its ERISA Affiliates within the preceding five calendar years. -25- 35 (xvi) Since January 1, 1990, neither the Company nor any of its Subsidiaries has taken any action to vest participants in any overfunding in any Benefit Plans subject to Title IV of ERISA. (xvii) No act, omission or transaction has occurred which would result in imposition on the Company or an ERISA Affiliate of (A) material liability under Section 409 of ERISA for breach of fiduciary duty , (B) a material civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (C) a material tax imposed pursuant to Chapter 43 of Subtitle D of the Code. (xviii) (A) Except as disclosed on Schedule 4.1(k), neither the Company nor any ERISA Affiliate contributes to, or has an obligation to contribute to, and has not within the preceding five years contributed to, or had an obligation to contribute to, a multiemployer plan subject to Title IV of ERISA as defined in Section 4001(a)(3) of ERISA (each such disclosed plan, a "Multiemployer Plan"), (B) all material contributions or other material payments required to have been made by the Company or any of its ERISA Affiliates to or under any Multiemployer Plan by applicable law or the terms of such Multiemployer Plan (or any agreement relating thereto) have been timely and properly made or are properly accrued on the Company's unaudited financial statements in accordance with GAAP, (C) there has been no complete or partial withdrawal from a Multiemployer Plan by the Company or any ERISA Affiliate so as to incur any material withdrawal liability as defined in Section 4201 of ERISA (without regard to any subsequent reduction or waiver of such liability under Section 4207 or 4208 of ERISA), (D) if prior to the Effective Time any Multiemployer Plan were in "reorganization" (as defined in Section 4241 of ERISA) or "insolvent" as defined in Section 4245 of ERISA, the estimated present value of the aggregate increase in contributions to such Multiemployer Plan by the Company and its ERISA Affiliates over the estimated present value of contributions to such Multiemployer Plan by the Company and its ERISA Affiliates without regard to such reorganization or insolvency would not exceed $6,000,000 and would not have a Material Adverse Effect, (E) Schedule 4.1(k) sets forth the dollar amount of contributions made by the Company and its ERISA Affiliates with respect to each Multiemployer Plan for the current year and preceding five years, and (F) the aggregate dollar amount of withdrawal liability as defined in Section 4201 of ERISA (without regard to any subsequent reduction or waiver of such liability under Section 4207 or 4208 of ERISA) which would be owed by the Company and its ERISA Affiliates to all Multiemployer Plans if the Company and its ERISA Affiliates ceased contributing to all such Multiemployer Plans immediately before the consummation of the transactions contemplated by this Agreement would not exceed $6,000,000, with respect to each multiemployer plan as defined in Section 3(37) of ERISA that is not a "Multiemployer Plan", as defined above, all material contributions or other material payments, required to have been made by the Company or any of the ERISA Affiliates to or under any such multiemployer plan by applicable law or the terms of such -26- 36 multiemployer plan (or any agreement relating thereto) have been, to the best knowledge of the Company of any of its Subsidiaries, timely and properly made or are properly accrued on the Company's unaudited financial statements in accordance with GAAP. (l) Absence of Certain Changes or Events. Since March 31, 1997, except as disclosed in Schedule 4.1(l), the Company and the Subsidiaries have conducted their business, in all material respects, only in the ordinary course and in a manner consistent with past practice (except in connection with the negotiation and execution and delivery of this Agreement and the other Transaction Documents and the Atrium Agreements (as hereinafter defined) in connection with discussions with other parties regarding possible Acquisition Proposals) and since March 31, 1997, except as disclosed in Schedule 4.1(l), there has not been (i) any event or events (whether or not covered by insurance), individually or in the aggregate, having a Material Adverse Effect on the Company, (ii) any material change by the Company in its accounting methods, principles or practices, (iii) any entry by the Company or any Subsidiary into any commitment or transaction material to the Company, except in the ordinary course of business and consistent with past practice or except in connection with the negotiation and execution and delivery of this Agreement and the other Transaction Documents and the Atrium Agreements (as hereinafter defined), (iv) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any of the Company's or its Subsidiaries' securities (except for cash dividends paid to the Company by its wholly owned Subsidiaries with regard to its capital stock, and the declaration and payment to the holders of Shares regular quarterly dividends to stockholders of record with such record dates and payment dates as are consistent with past practice), (v) other than pursuant to the Benefit Plans and the Employee Arrangements or as required by law, any increase in, amendment to, or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option, stock purchase or other employee benefit plan, (vi) granted any general increase in compensation, bonus or other benefits payable to the employees of the Company or its Subsidiaries, except for increases occurring in the ordinary course of business in accordance with its customary practice, (vii) paid any bonus to the employees of the Company or its Subsidiaries except for bonuses accrued on the Company's unaudited balance sheet for the quarter ending March 31, 1997, (viii) any incurrence of indebtedness for borrowed money or assumption or guarantee of indebtedness for borrowed money by the Company or any of its Subsidiaries (other than loans from the Company to any wholly owned Subsidiary or from any wholly owned Subsidiary to the Company or any other wholly owned Subsidiary), or the grant of any lien on the material assets of the Company or its Subsidiaries to secure indebtedness for borrowed money except, in any such case, any drawdowns by the Company under its revolving credit facility or its accounts receivable facility, (ix) any sale or transfer of any material assets of the Company or its Subsidiaries other than in the ordinary course of business and consistent with past practice, or (x) any loan, advance or capital contribution to or investment in any person in an aggregate amount in excess of $100,000 by the Company or any Subsidiary (excluding any loan, advance or capital contribution to, or -27- 37 investment in, the Company or any wholly owned Subsidiary and except for drawdowns by the Company under its revolving credit facility or its accounts receivable facility). (m) No Undisclosed Material Liabilities. Except as set forth on Schedule 4.1(m), there are no liabilities of the Company or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that are material to the Company and its Subsidiaries considered as a whole and that are required to be disclosed in an audited balance sheet (or in the notes thereto) prepared in accordance with GAAP, other than (i) liabilities reflected on the Company's unaudited financial statements (together with the related notes thereto) filed with the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (as filed with the SEC), (ii) liabilities under this Agreement, (iii) any liabilities that have occurred in the ordinary course of business since March 31, 1997, (iv) liabilities, individually or in the aggregate, not having a Material Adverse Effect on the Company and (v) liabilities for professional fees and expenses in connection with the transactions contemplated hereby and by the Atrium Agreements. (n) Opinion of Financial Advisor. The Company has received the opinion of the Financial Advisor to the effect that, as of the date thereof, the cash consideration to be received by the holders of Company Common Stock in the Offer and the Merger is fair from a financial point of view to such holders. The Company has been authorized by the Financial Advisor to include the Fairness Opinion in the Offer Documents and the Proxy Statement and such opinion has not been withdrawn or modified. True and complete copies of all agreements and understandings between the Company or any of its affiliates and the Financial Advisor relating to the transactions contemplated by this Agreement are attached hereto as Schedule 4.1(n). (o) Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock is the only vote of the holders of any class or series of the Company's capital stock necessary (under applicable law or otherwise) to approve the Merger and this Agreement and the transactions contemplated hereby. (p) Labor Matters. Except to the extent as such would not have a Material Adverse Effect on the Company or as set forth on Schedule 4.1(p) or in the Company SEC Documents: (i) Neither the Company nor any of its Subsidiaries is a party to any labor or collective bargaining agreement, and no employees of the Company or any of its Subsidiaries are represented by any labor organization. Within the preceding three years, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority. Within the preceding three years, to the best knowledge of the Company, there have been no organizing activities involving the -28- 38 Company or any of its Subsidiaries with respect to any group of employees of the Company or any of its Subsidiaries. (ii) There are no strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances or other material labor disputes pending or, to the knowledge of the Company, threatened against or involving the Company or any of its Subsidiaries. There are no unfair labor practice charges or complaints pending or, to the best knowledge of the Company, threatened by or on behalf of any employee or group of employees of the Company or any of its Subsidiaries. (iii) There are no complaints, charges or claims against the Company or any of its Subsidiaries pending or, to the best knowledge of the Company, threatened to be brought or filed, with any Governmental Entity or arbitrator(s) based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by the Company or any of its Subsidiaries. (iv) To the best knowledge of the Company, each of the Company and its Subsidiaries is in compliance in all material respects with all laws, regulations and orders relating to employment and labor, including but not limited to all such laws, regulations and orders relating to wages and hours, collective bargaining, equal employment opportunity, affirmative action, discrimination, civil rights, employee benefits, plant closing and mass layoff, immigration, medical and family leave, safety and health, workers' compensation and the collection and payment of withholding and/or social security taxes and any similar tax. (v) As of the date hereof, there is no proceeding, claim, suit, action or governmental investigation pending or, to the best knowledge of the Company or any of its Subsidiaries, threatened, with respect to which any current or former director, officer, employee or agent of the Company or any of its Subsidiaries is entitled, or has asserted he is entitled, to claim indemnification from the Company or any of its Subsidiaries pursuant to the Certificate of Incorporation or By-Laws of the Company or any provision of the comparable charter or organizational documents of any of its Subsidiaries, as provided in any indemnification agreement to which the Company or any Subsidiary of the Company is a party or pursuant to applicable law, that has a Material Adverse Effect on the Company, materially impairs the ability of the Company to perform its obligations under any of the Transaction Documents or prevents the consummation of any of the transactions contemplated thereby. (q) Intangible Property. Each of the Company and its Subsidiaries owns or has a right to use each trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design and copyright required, owned or used in connection with the operation of its businesses, including any registrations thereof and pending -29- 39 applications therefor, and each license or other contract relating thereto that is material to the conduct of its business (collectively, the "Company Intangible Property"), free and clear of any and all liens, claims or encumbrances, except where the failure to own or have a right to use such property or such lien, claim or encumbrance would not have a Material Adverse Effect on the Company. Except to the extent that such would not have a Material Adverse Effect on the Company, the use of the Company Intangible Property by the Company or its Subsidiaries does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including, without limitation, any intellectual property right, trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design, copyright or any pending application therefor of any other person. (r) Environmental Matters. (i) For purposes of this Agreement: (A) "Environmental Costs and Liabilities" means any and all losses, liabilities, obligations, damages, fines, penalties, judgments, actions, claims, costs and expenses (including, without limitation, fees, disbursements and expenses of legal counsel, experts, engineers and consultants and the reasonable costs of investigation and feasibility studies and the reasonable costs to clean up, remove, treat, or in any other way address any Hazardous Materials) arising with respect to any violation of or liability arising pursuant to or under any Environmental Law or as the result of any exposure or alleged exposure of any person or property to any Hazardous Material. (B) "Environmental Law" means any applicable law regulating or prohibiting Releases of Hazardous Materials into any part of the natural environment, or pertaining to the protection of natural resources, the environment and public and employee health and safety from Hazardous Materials including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) ("OSHA") and the regulations promulgated pursuant thereto, and any such applicable state or local statutes, including, without limitation, ISRA, and the regulations promulgated pursuant -30- 40 thereto, as such laws have been and may be amended or supplemented through the Closing Date; (C) "Hazardous Material" means any substance, material or waste which is regulated with respect to its toxic or otherwise hazardous character or the potential deleterious effects arising from its improper management by any public or governmental authority in the jurisdictions in which the applicable party or its Subsidiaries conducts business, or the United States, including, without limitation, any material or substance which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste" or "restricted hazardous waste," "contaminant," "solid waste," "toxic waste" or "toxic substance" under any provision of Environmental Law and shall also include, without limitation, petroleum, petroleum products, asbestos, polychlorinated biphenyls and radioactive materials; (D) "Release" means any release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the environment; and (E) "Remedial Action" means all actions, including, without limitation, any capital expenditures, required by a governmental entity or required under any Environmental Law, or voluntarily undertaken to (1) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Materials or other substance in the environment; (2) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public health or welfare or the environment; (3) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (4) bring the applicable party into compliance with any Environmental Law. (ii) Except as set forth on Schedule 4.1(r) hereto: (A) The operations of the Company and its Subsidiaries have been and, as of the Closing Date, will be, in compliance in all respects with all Environmental Laws except for any such noncompliance which would not result in a Material Adverse Effect on the Company; (B) The Company and its Subsidiaries have obtained and will, as of the Closing Date, maintain all permits required under applicable Environmental Laws for the continued operations of their respective businesses, except such permits the lack of which would not materially -31- 41 impair the ability of the Company and its Subsidiaries to continue operations; (C) The Company and its Subsidiaries are not subject to any outstanding written orders from, or written agreements with, any Governmental Entity respecting (A) violations or liability pursuant to Environmental Laws, (B) Remedial Action or (C) any Release or threatened Release of a Hazardous Material; (D) The Company and its Subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability under any Environmental Law, which violation or liability is outstanding, except for any such violation or liability which would not result in a Material Adverse Effect on the Company; (E) Neither the Company nor any of its Subsidiaries has any contingent liability in connection with the Release of any Hazardous Material into the environment (whether on-site or off-site) which would result in the Company and its Subsidiaries incurring Environmental Costs and Liabilities which would result in a Material Adverse Effect on the Company; (F) The Company or its Subsidiaries do not engage in the transportation, treatment, storage or disposal of hazardous waste, as defined and regulated under permit requirements set forth in 40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement) or any state equivalent; (G) Except as would not have a Material Adverse Effect on the Company, here is not now nor has there been in the past, on or in any property of the Company or its Subsidiaries any of the following: (A) any underground storage tanks or surface impoundments containing Hazardous Materials, (B) any asbestos-containing materials, or (C) any polychlorinated biphenyls in regulated quantities; and (H) No judicial or administrative proceedings or governmental investigations are pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging the violation of or seeking to impose liability pursuant to any Environmental Law or as the result of the Release or alleged Release of a Hazardous Material, except for any such proceedings or investigations that would not result in a Material Adverse Effect on the Company. -32- 42 (iii) This Section 4.1(r) sets forth the sole and exclusive representations and warranties of the Company relating to Environmental Matters, including, without limitation, any matters arising under Environmental Laws. (s) Real Property. (i) Schedule 4.1(s) sets forth all of the real property owned in fee by the Company and its Subsidiaries that are material to the conduct of the businesses of the Company and its Subsidiaries, taken as a whole. Each of the Company and its Subsidiaries has good and marketable title to each parcel of real property owned by it free and clear of all mortgages, pledges, liens, encumbrances and security interests, except (1) those described in the Company SEC Documents or listed on Schedule 4.1(s), (2) those reflected or reserved against in the unaudited balance sheet of the Company dated as of March 31, 1997, and (3) mortgages, pledges, liens, encumbrances and security interests that would not have a Material Adverse Effect on the Company. (ii) Schedule 4.1(s) sets forth each lease, sublease or other agreement (collectively, the "Real Property Leases") under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property material to the conduct of the businesses of the Company and its Subsidiaries, taken as a whole. Except to the extent that it would not have a Material Adverse Effect on the Company, each Real Property Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by the Company and its Subsidiaries as tenants thereunder are current, no termination event or condition or uncured default on the part of the Company or any Subsidiary of the Company exists under any Real Property Lease. Each of the Company and its Subsidiaries has a good and valid leasehold interest in each parcel of real property leased by it free and clear of all mortgages, pledges, liens, encumbrances and security interests, except (A) those disclosed in the Company SEC Documents, (B) those reflected or reserved against in the unaudited balance sheet of the Company dated as of March 31, 1997, (C) taxes and general and special assessments not in default and payable without penalty and interest and (D) those which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. (t) Tangible Property. With respect to the tangible properties and assets of the Company and its Subsidiaries (excluding real property) that are material to the conduct of the businesses of the Company and its Subsidiaries, the Company and its Subsidiaries have good title to, or hold pursuant to valid and enforceable leases, all such properties and assets, with only such exceptions as, individually or in the aggregate, would not have a Material Adverse Effect on the Company. All of the assets of the Company and its Subsidiaries have been maintained and repaired for their continued operation and are in good operating condition, reasonable wear and tear excepted, and usable in the ordinary course of business, except -33- 43 where the failure to be in such repair or condition or so usable would not individually or in the aggregate have a Material Adverse Effect on the Company. (u) Board Recommendation. As of the date hereof, the Board of Directors of the Company, at a meeting duly called and held, has by the vote of those directors present (i) determined that the Transaction Documents and the transactions contemplated thereby, including the Offer and the Merger, taken together, are fair to and in the best interests of the stockholders of the Company and has approved the same and (ii) resolved to recommend that the holders of the shares of Company Common Stock accept the Offer and approve this Agreement and the transactions contemplated herein, including the Merger. (v) Material Contracts. The Company has made available to Parent (i) true and complete copies of all written contracts, agreements, commitments, arrangements, leases (including with respect to personal property), policies and other instruments to which it or any of its Subsidiaries is a party or by which it or any such Subsidiary is bound which (A) require payments to be made in excess of $250,000 per year for goods and/or services, (B) require payments to be made in excess of $100,000 with respect to any licenses granted to the Company or any of its Subsidiaries, or (C) require payments to be made in excess of $100,000 per year for goods and/or services and do not by their terms expire and are not subject to termination within 60 days from the date of the execution and delivery thereof (collectively, "Material Contracts"), and (ii) a written description of each Material Contract of which the Company is aware that has not been reduced to writing; provided, however, that blanket purchase orders or similar arrangements shall not be considered Material Contracts for purposes of this Agreement. Each of the Material Contracts is listed on Schedule 4.1(v). Neither the Company nor any of its Subsidiaries is, or has received any written notice that any other party is, in default in any respect under any such Material Contract, except as listed on Schedule 4.1(v) and except for those defaults which would not, either individually or in the aggregate, have a Material Adverse Effect with respect to the Company; and, to the Company's knowledge, there has not occurred any event or events that with the lapse of time or the giving of notice or both would constitute such a material default, except as listed on Schedule 4.1(v) and except for those defaults which would not, either individually or in the aggregate, have a Material Adverse Effect with respect to the Company. (w) Related Party Transactions. Except as set forth on Schedule 4.1(w) and except for the Transaction Documents, the Employee Arrangements or the Benefit Plans or as otherwise disclosed hereunder, no director, officer, "affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of the Company or any of its Subsidiaries (i) has borrowed any monies from or has outstanding any indebtedness or other similar obligations to the Company or any of its Subsidiaries or (ii) is otherwise a party to any contract, arrangement or understanding with the Company or any of its Subsidiaries. -34- 44 (x) Schedule 14D-9, Offer Documents and Schedule 14D-1. The Schedule 14D-9 and any amendments and supplements thereto will, when filed with the SEC and when published, sent or given to holders of Company Common Stock, comply as to form in all material respects with the Exchange Act and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Sub in writing for inclusion therein. None of the information supplied by the Company for inclusion in the Offer Documents or the Schedule 14D-1, and any amendments thereof, or supplements thereto, will, when such materials are filed with the SEC and when published, sent or given to holders of Company Common Stock, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub represent and warrant to the Company as follows: (a) Organization, Standing and Power. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. All of the issued and outstanding capital stock of Sub is owned directly by Parent free and clear of any lien, mortgage, pledge, charge or encumbrance of any kind. Parent and Sub have heretofore made available to the Company complete and correct copies of their respective Certificates of Incorporation and Bylaws. (b) Authority; No Violations; Consents and Approvals. (i) Each of Parent and Sub has all requisite corporate power and authority to enter into each of the Transaction Documents to which it is a party and to consummate the transactions contemplated thereby. The execution and delivery of each of the Transaction Documents to which Parent or Sub is a party and the consummation of the transactions contemplated thereby have been respectively duly authorized by all necessary corporate action on the part of Parent and Sub. Each of the Transaction Documents to which Parent or Sub is a party have been respectively duly executed and delivered by each of Parent and Sub and, assuming that such constitute the valid and binding agreements of the other parties thereto respectively constitute valid and binding obligations of Parent and Sub enforceable in accordance with their terms and conditions except that the enforcement hereof or thereof may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (b) -35- 45 general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (ii) The execution and delivery of each of the Transaction Documents to which the Parent or Sub is a party and the consummation of the transactions contemplated thereby by each of Parent and Sub will not (A) result in any Violation pursuant to any provision of the respective Certificates of Incorporation or Bylaws of Parent or Sub or (B) except as to which requisite waivers or consents have been obtained and assuming the consents, approvals, authorizations or permits and filings or notifications referred to in paragraph (iii) of this Section 4.2(b) are duly and timely obtained or made and, if required, the Company Stockholder Approval has been obtained, result in any Violation of (1) any loan or credit agreement, note, mortgage, indenture, lease, or other agreement, obligation, instrument, concession, franchise or license or (2) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or Sub or their respective properties or assets, except in the case of clauses (1) and (2), for any Violations that, individually or in the aggregate, would not have a Material Adverse Effect on Parent, materially impair the ability of either Parent or Sub to perform its obligations hereunder or under any of the Transaction Documents or prevent the consummation of any of the transactions contemplated hereby or thereby. (iii) No consent, approval, order or authorization of, or registration, declaration or filing with, notice to, or permit from any Governmental Entity is required by or with respect to Parent or Sub in connection with their respective execution and delivery of each of the Transaction Documents to which it is a party or the consummation by each of Parent and Sub of the transactions contemplated thereby, except for: (A) filings under the HSR Act; (B) the filing with the SEC of such reports under and such other compliance with the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions contemplated hereby, including the Schedule 14D-1; (C) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (D) such filings and approvals as may be required by any applicable state securities, "blue sky" or takeover laws; (E) such filings in connection with any Gains and Transfer Taxes; (F) such filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval necessitated by the Merger or the transactions contemplated by this Agreement; and (G) filings, consents, approvals and authorizations under ISRA. (c) Information Supplied for Proxy Statement. None of the information supplied or to be supplied by Parent or Sub specifically for inclusion or incorporation by reference in the Proxy Statement will, on the date it is first mailed to the holders of Company Common Stock or at the Meeting Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the -36- 46 statements therein, in light of the circumstances under which they are made, not misleading. If, at any time prior to the Meeting Date, any event with respect to Parent or Sub, or with respect to information supplied by Parent or Sub specifically for inclusion in the Proxy Statement, shall occur which is required to be described in an amendment of, or a supplement to, such document, such event shall be so described to the Company. All documents that Parent or Sub is responsible for filing with the SEC in connection with the transactions contemplated herein will comply as to form, in all material respects, with the provisions of the Securities Act, the Exchange Act or the rules and regulations thereunder, and each such document required to be filed with any Governmental Entity other than the SEC will comply in all material respects with the provisions of applicable law as to the information required to be contained therein. Notwithstanding the foregoing, Parent and Sub make no representation or warranty with respect to the information supplied or to be supplied by the Company for inclusion in the Proxy Statement. (d) Board Recommendation. As of the date hereof, the Board of Directors of Parent has determined that each of the Transaction Documents to which it is a party and the transactions contemplated thereby, including the Offer and the Merger, taken together, are fair to and in the best interests of Parent and has approved the same. (e) Financing. Parent and Sub have delivered to the Company a true and complete copy of a letter of commitment obtained by Parent from Wasserstein Perella & Co., Inc. with respect to the debt financing for the transactions contemplated hereby (the "Financing Commitment"). An executed copy of the Financing Commitment is attached hereto as Schedule 4.2(e). Assuming that the financing contemplated by the Financing Commitment is consummated in accordance with the terms thereof, the funds to be borrowed and/or provided thereunder, together with Parent's available cash, will provide sufficient funds to pay the Offer Price upon consummation of the Offer, the Merger Consideration, the refinancing of all indebtedness for borrowed money of the Company which is required to be refinanced pursuant to the terms of such indebtedness in connection with the Offer or the Merger, and all related fees and expenses. As of the date of this Agreement, Parent is not aware of any facts or circumstances that create a reasonable basis for Parent to believe that Parent will not be able to obtain financing in accordance with the terms of the Financing Commitment. Parent agrees to promptly notify the Company if the statements in the immediately preceding sentence are no longer true and correct. (f) Schedule 14D-1, Offer Documents and Schedule 14D-9. The Offer Documents and the Schedule 14D-1 and all amendments and supplements thereto, will, when filed with the SEC and when published, sent or given to holders of Company Common Stock, comply as to form in all material respects with the Exchange Act and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Sub with respect to information supplied by or on behalf of the Company for inclusion -37- 47 therein. None of the information supplied by Parent or Sub for inclusion in the Schedule 14D-9 and any amendments thereof or supplements thereto will, when such materials are filed with the SEC and when published, sent or given to holders of Company Common Stock contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1. COVENANTS OF THE COMPANY. During the period from the date of this Agreement and continuing until the Effective Time, the Company agrees as to the Company and its Subsidiaries that (except as expressly contemplated or permitted by the Transaction Documents, or to the extent that Parent shall otherwise consent in writing): (a) Ordinary Course. Subject to the other terms and provisions of this Agreement, each of the Company and its Subsidiaries shall carry on its businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and shall use all reasonable efforts to preserve intact its present business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it, in each case in all material respects. (b) Dividends; Changes in Stock. The Company shall not, nor shall it permit any of its Subsidiaries to (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock (except for cash dividends paid to the Company by its wholly-owned Subsidiaries with regard to its capital stock); provided, however, that the Company may declare and pay to holders of Shares regular quarterly dividends to stockholders of record with such record dates as are consistent with past practice, which payments in no event shall exceed $0.03 per share per quarter; (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; or (iii) repurchase or otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire, any shares of its capital stock, except (A) as contemplated by Section 3.5 of this Agreement and (B) as required by the terms of its securities outstanding or any employee benefit plan in effect on the date hereof. (c) Issuance of Securities. Except as contemplated by Section 3.5 of this Agreement and except for Shares issuable pursuant to outstanding Options, Unvested Stock and rights as described in Section 4.1(b) and except as contemplated by the Stock Purchase Agreement dated the date hereof between the Company and Parent, the Company shall not, nor shall it permit any of its Subsidiaries to, (i) grant any options, warrants or rights, to purchase shares of capital stock of the Company, (ii) amend the terms of or reprice any Option or amend the terms of any of the Stock Option Plans, or (iii) issue, deliver or sell, or authorize -38- 48 or propose to issue, deliver or sell, any shares of its capital stock of any class or series (except for issuances of capital stock of the Company's Subsidiaries to the Company or to a wholly-owned Subsidiary of the Company), any Company Voting Debt or any securities convertible into, or any rights, warrants or options to acquire, any such shares, Company Voting Debt or convertible securities, other than the issuance of Shares upon the exercise of Options that are outstanding on the date hereof. (d) Governing Documents. The Company shall not amend or propose to amend its Certificate of Incorporation or By-Laws. (e) No Solicitation. From and after the date hereof until the termination of this Agreement, neither the Company nor any of its Subsidiaries, nor any of their respective officers, directors, representatives, agents or affiliates (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its Subsidiaries) (such officers, directors, employees, representatives, agents, affiliates, investment bankers, attorneys and accountants being referred to herein, collectively, as "Representatives") will, and the Company will cause the employees of the Company and its Subsidiaries not to, directly or indirectly, initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (as defined below), or enter into or maintain or continue discussions or negotiate with any person or entity in furtherance of such inquiries or for the purpose of obtaining an Acquisition Proposal, or agree to or endorse any Acquisition Proposal, and neither the Company nor any of its Subsidiaries will authorize or permit any of its Representatives to take any such action, and the Company shall (except with respect to any inquiry or proposal covered by the proviso to this sentence) notify Parent orally (within one business day) and in writing (as promptly as practicable) of all of the relevant details relating to, and all material aspects of, all inquiries and proposals which it or any of its Subsidiaries or any of their respective Representatives may receive relating to any of such matters and, if such inquiry or proposal is in writing, the Company shall deliver to Parent a copy of such inquiry or proposal as promptly as practicable; provided, however, that, prior to the receipt of the Company Stockholder Approval, nothing contained in this Section 5.1(e) shall prohibit the Board of Directors of the Company from: (i) following the receipt of an unsolicited written, bona fide Acquisition Proposal from any person or entity, (x) furnishing information to, or entering into discussions or negotiations with, the person or entity that makes such Acquisition Proposal, or (y) withdrawing, modifying or not making its recommendations referred to in Section 1.2 or terminating this Agreement pursuant to Section 8.1(i) (provided that, in the case of clause (y) above, such person or entity has the necessary funds or shall have obtained customary commitments to provide the funds to effect such Acquisition Proposal) if, and only to the extent that, (A) in the case of either clause (x) or (y) above, the Board of Directors of the Company, after consultation with its independent legal counsel (who may be the Company's regularly engaged independent -39- 49 legal counsel), determines in good faith that such action is advisable for the Board of Directors of the Company to comply with its fiduciary duties to stockholders under applicable law, (B) prior to taking such action, the Company (1) in the case of either clause (x) or (y) above, provides reasonable prior notice to Parent to the effect that it is taking such action, which notice shall (to the extent consistent with the fiduciary duties of the Board of Directors to stockholders under applicable law) include the identity of the person or entity engaging in such discussions or negotiations, requesting such information or making such Acquisition Proposal, and the material terms and conditions of any Acquisition Proposal and (2) in the case of clause (x) above, receives from such person or entity an executed confidentiality agreement in reasonably customary form on terms no less favorable to the Company than those contained in the Confidentiality Agreement (as defined in Section 6.1) (except that such confidentiality agreement need not require approval of the Board of Directors of the Company prior to the making of an offer or a proposal to such Board of Directors), and (C) in the case of clause (x) above, the Company shall, to the extent consistent with the fiduciary duties of the Board of Directors to stockholders under applicable law, promptly and continuously advise Parent as to all of the relevant details relating to, and all material aspects, of any such discussions or negotiations; or (ii) taking and disclosing to the stockholders of the Company a position contemplated by Rule 14e-2 under the Exchange Act if, after the receipt of an unsolicited written, bona fide Acquisition Proposal, the Board of Directors of the Company, after consultation with its independent legal counsel (who may be the Company's regularly engaged independent counsel), determines in good faith that such action is advisable for the Board of Directors of the Company to comply with its fiduciary duties to holders of Shares under applicable law. Except for the confidentiality agreement referred to in clause (i) above and subject to Section 8.1(i), nothing in this Section 5.1(e) shall permit the Company to enter into any agreement with respect to any Acquisition Proposal during the term of this Agreement (it being agreed that during the term of this Agreement, the Company shall not enter into any agreement with any person that provides for, or in any way facilitates, any Acquisition Proposal other than a confidentiality agreement in reasonably customary form following receipt from a third party of an unsolicited written, bona fide Acquisition Proposal). The Company shall immediately cease and cause to be terminated any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any parties conducted heretofore by the Company or any Representatives with respect to any Acquisition Proposal existing on the date hereof. For purposes of this Agreement, "Acquisition Proposal" shall mean any proposal or offer (other than the transactions among the Company, Parent and Sub contemplated hereunder) involving the Company or any of its Subsidiaries for, or an inquiry or indication of interest that reasonably could be expected to lead to: (A) any -40- 50 merger, consolidation, share exchange, recapitalization, business combination, or other similar transaction; (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a material portion of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or series of transactions; or (C) any tender offer or exchange offer for all or any portion of the outstanding shares of capital stock of the Company or any of its Subsidiaries or the filing of a registration statement under the Securities Act in connection therewith. (f) No Acquisitions. The Company shall not, nor shall it permit any of its Subsidiaries to, (i) merge or consolidate with, or acquire any equity interest in, any corporation, partnership, association or other business organization, or enter into an agreement with respect thereto or (ii) acquire or agree to acquire any assets of any corporation, partnership, association or other business organization or division thereof, except for the purchase of inventory and supplies in the ordinary course of business or the acquisition by the Company or any Subsidiary of equity interests in any customer or supplier of the Company in satisfaction of outstanding claims against such party in bankruptcy proceedings consistent with past practice. (g) No Dispositions. Other than sales of inventory or sales or returns of obsolete or surplus equipment in the ordinary course of business consistent with past practice, the Company shall not, nor shall it permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease (whether such lease is an operating or capital lease), encumber or otherwise dispose of, any of its material assets (including, without limitation, any capital stock or other ownership interest of any Subsidiary of the Company). (h) Governmental Filings. The Company shall promptly provide Parent (or its counsel) with copies of all filings made by the Company with the SEC or any other state or federal Governmental Entity in connection with this Agreement and the transactions contemplated hereby. (i) Termination of Affiliate Agreements. Effective as of the Closing, the Company shall cause each of the agreements described on Schedule 4.1(w) (and that are indicated thereon as being subject to this Section 5.1(i)) to be terminated without any liability to the Company or any of its Subsidiaries. (j) No Dissolution, Etc. The Company shall not authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the Company or any of its Subsidiaries. (k) Certain Employee Matters. The Company and its Subsidiaries shall not (without the prior written consent of Parent, which consent will not be unreasonably withheld) (i) grant any increases in the compensation of any of its directors, officers, management employees or key employees, except as may be required pursuant to any of the existing Benefit -41- 51 Plans or Employee Arrangements as disclosed in a Schedule hereto; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated to be paid prior to the Effective Time by any of the existing Benefit Plans or Employee Arrangements as in effect on the date hereof to any such director, officer, management employee or key employee, whether past or present; (iii) enter into any new, or materially amend any existing, employment or severance or termination agreement with any such director, officer, management employee or key employee; (iv) except as may be required to comply with applicable law, become obligated under any new Benefit Plan or Employee Arrangement, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder; or (v) extend any loans or advances to any of its directors, officers, management employees or key employees, except as expressly permitted under the Transaction Documents. (l) Indebtedness; Agreements. (i) The Company shall not, nor shall the Company permit any of its Subsidiaries to, without the prior written consent of Parent (which shall not be unreasonably withheld), assume or incur any indebtedness for borrowed money (except for drawdowns by the Company under its revolving credit facility or its accounts receivable facility) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any of its Subsidiaries or guarantee any debt securities of any other person except wholly-owned Subsidiaries of the Company or enter into any lease (whether such lease is an operating or capital lease) or create any mortgages, liens, security interests or other encumbrances on the property of the Company or any of its Subsidiaries in connection with any indebtedness thereof, or enter into any "keep well" or other agreement or arrangement to maintain the financial condition of any other person except wholly-owned Subsidiaries of the Company. (ii) Except as set forth in Schedule 5.1(n), without the prior written consent of Parent (which shall not be unreasonably withheld), the Company shall not, nor shall the Company permit any of its Subsidiaries to, (A) enter into any contracts involving aggregate annual payments in excess of $250,000 or (B) modify, rescind, terminate, waive, release or otherwise amend in any material respect any of the terms or provisions of any Material Contract in any manner that is material and adverse to the Company or the respective Subsidiary of the Company party thereto. (m) Accounting. The Company shall not take any action, other than in the ordinary course of business, consistent with past practice or as required by the SEC, by law or by changes in GAAP, with respect to accounting policies, procedures and practices. -42- 52 (n) Capital Expenditures. Except for the capital expenditures set forth on Schedule 5.1(n), the Company and its Subsidiaries shall not incur any capital expenditures in excess of $100,000. (o) Other Actions. Except as expressly permitted by the terms of this Agreement, the Company will not knowingly or intentionally take or agree or commit to take, nor will it permit any of its Subsidiaries to take or agree or commit to take, any action that is reasonably likely to result in any of the Company's representations or warranties hereunder being untrue in any material respect or any of the conditions to the Merger not being satisfied in all material respects. (p) Tax Matters. Neither the Company nor any of its Subsidiaries will take any action that would cause the transactions contemplated by this Agreement to fail to qualify for the exceptions described in former Treas. Regs. ss. 1.1502-13(f)(2)(i), Treas. Regs. ss. 1. 1502- 13(f)(5), former Treas. Regs. ss. 1.1502-19(g)(1) and Treas. Regs. ss. 1.1502-19(c)(3). (q) Appraisal Rights. The Company shall not settle or compromise any claim for appraisal rights in respect of the Merger without the prior written consent of Parent or Sub. ARTICLE 6 ADDITIONAL AGREEMENTS 6.1. ACCESS TO INFORMATION. Upon reasonable notice, the Company shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel and other representatives of Parent and Sub (including potential financing sources and their employees, accountants, counsel and other representatives), access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, the Company shall (and shall cause each of its Subsidiaries to) furnish promptly to Parent and Sub, (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to SEC requirements and (b) all other information concerning its business, properties and personnel as Parent and Sub may reasonably request. Subject to Section 9.2, the Confidentiality Agreement, dated as of September 27, 1995, as amended to date, between Parent and the Company (the "Confidentiality Agreement") shall apply with respect to information furnished thereunder or hereunder and any other activities contemplated thereby or hereby. 6.2. ASSISTANCE. If Parent requests, the Company will cooperate, and will cause its accountants to cooperate, in all reasonable respects with any financing efforts of Parent or its affiliates (including providing assistance in the preparation of one or more registration statements or other offering documents relating to debt and/or equity financing) and any other -43- 53 filings that may be made by Parent or its affiliates with the SEC, all at the sole expense of Parent. The Company (a) shall furnish to its independent accountants (or, if requested by Parent to Parent's independent public accountants), such customary management representation letters as its accountants may require of the Company as a condition to its execution of any required accountants' consents necessary in connection with the delivery of any "comfort" letters requested by financing sources of Parent or its affiliates and (b) shall furnish to Parent all financial statements (audited and unaudited) and other information in the possession of the Company or its representatives or agents as Parent shall reasonably determine is necessary or appropriate in connection with such financing. Without limiting the generality of the foregoing, the Company agrees to cooperate with Parent's and Sub's efforts to secure the financing contemplated by the Financing Commitment, such cooperation to include providing such information to Parent's and Sub's financing sources as Parent or Sub may reasonably request and making available to such financing sources senior officers and such other employees of the Company as Parent and Sub may reasonably request to assist in the preparation of one or more offering documents and other appropriate marketing materials and to otherwise participate in such marketing and sales efforts relating to the Financing Commitment as Parent and Sub may reasonably request upon reasonable notice and consistent with such officers' and employees' other business responsibilities to the Company. 6.3. Compliance with New Jersey ISRA. ------------------------------- (a) The Company shall make all reasonable efforts to comply with all obligations imposed by ISRA with respect to the transactions contemplated by this Agreement. The Company's obligations shall include, as appropriate: (i) timely submission of notice to the New Jersey Department of Environmental Protection and Energy (the "NJDEPE") and (ii) preparation and filing with NJDEPE of a proposed negative declaration, a proposed remedial action workplan, appropriate documents for a remediation agreement, a deferral of the remedial action workplan, or an area of concern waiver; provided that the Company shall obtain the approval and consent of Parent and Sub, which approval and consent shall not be unreasonably withheld, prior to entering into any remediation agreement with, or making any other enforceable commitment to, NJDEPE to satisfy the requirements of ISRA. (b) Parent and the Sub shall use their reasonable efforts to assist and cooperate with the Company and its representatives, in a prompt and timely manner, in connection with the preparation and filing of all necessary documents under ISRA. 6.4. Fees and Expenses. ----------------- (a) Except as otherwise provided in this Section 6.4 and except with respect to claims for damages incurred as a result of the material breach of this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. -44- 54 (b) In the event of the termination of this Agreement under (i) Section 8.1(b)(ii) (with respect to the Company's stockholder vote) if, at the time of such termination or after the date hereof and prior to the Stockholders' Meeting, there shall have been any public announcement of an Acquisition Proposal (other than an Acquisition Proposal that shall have been publicly withdrawn at least 15 days prior to the taking of the vote at the Stockholders' Meeting), (ii) Section 8.1(h) or (iii) Section 8.1(i), then, except as provided in Section 6.4(c), the Company shall pay to Parent or Parent's designee, contemporaneously with the termination of this Agreement, the following amounts in immediately available funds: (x) a fee in the amount of $9,500,000, and (y) such amount, not to exceed $2,500,000, as may be required to reimburse Parent and its affiliates for all reasonable out-of-pocket fees, costs and expenses incurred by any of them in connection with their due diligence efforts or the transactions contemplated in the Transaction Documents or in the Financing Commitment, including, without limitation, (A) fees, costs and expenses of accountants, escrow agents, counsel, financial advisors and other similar advisors, (B) fees paid to any Governmental Entity, (C) fees, costs and expenses paid or payable to third parties under the Financing Commitment or in connection with the transactions contemplated therein, including, without limitation, any purchaser or underwriter's discounts relating to the sale of the subordinated debt financing contemplated therein or (except for the principal amount payable in connection therewith, but including all accrued interest payable in connection therewith) the making of any repurchase offer in respect of such subordinated debt financing. (c) Any amounts that may be due and payable under this Section 6.4 as a result of the event described in Section 6.4(b)(i) shall be due and payable only if, within 12 months after such termination, the Company consummates an Acquisition Proposal and in such case such amounts shall be due and payable at the closing or other consummation of such Acquisition Proposal. (d) Any amounts due under this Section 6.4 that are not paid when due shall bear interest at the prime rate of interest as announced from time to time by The Chase Manhattan Bank plus 1% from the date due through and including the date paid. 6.5. Brokers or Finders. ------------------ (a) The Company represents, as to itself, its Subsidiaries and its affiliates, that, except as set forth in Schedule 6.5(a), no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finders fee or any other commission or similar fee in connection with any of the transactions contemplated by this -45- 55 Agreement, except the Financial Advisor, whose fees and expenses will be paid by the Company in accordance with the Company's agreements with such firm (copies of which have been delivered by the Company to Parent prior to the date of this Agreement). (b) Parent represents, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except for Wasserstein Perella & Co., Inc., whose fees and expenses will be paid by Parent in accordance with the Parent's agreements with such firm. 6.6. Indemnification; Directors' and Officers' Insurance. --------------------------------------------------- (a) The Company shall, and from and after the Effective Time, the Surviving Corporation and Parent shall, indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer, director, employee or agent of the Company or any of its Subsidiaries (the "Indemnified Parties") against all losses, claims, damages, costs, expenses (including attorneys' fees and expenses), liabilities or judgments or amounts that are paid in settlement with the approval of the indemnifying party (which approval shall not be unreasonably withheld) of or in connection with any threatened or actual claim, action, suit, proceeding or investigation based in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer, employee or agent of the Company or any of its Subsidiaries or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise or by reason of anything done or not done by such person in any such capacity whether pertaining to any matter existing or occurring at or prior to the Effective Time or any acts or omissions occurring or existing at or prior to the Effective Time and whether asserted or claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities"), including all Indemnified Liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to this Agreement or the transactions contemplated hereby, in each case to the full extent permitted by applicable law (and the Company, the Surviving Corporation, and Parent, as the case may be, shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the full extent permitted by law). In determining whether an Indemnified Party is entitled to indemnification under this Section 6.6, if requested by such Indemnified Party, such determination shall be made by special, independent counsel selected by the Surviving Corporation and Parent and approved by the Indemnified Party (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Surviving Corporation, Parent or their respective affiliates within the last three years (other than in connection with such matters). Without limiting the foregoing, in the event any such claim, action, suit, proceeding or investigation is brought against any Indemnified Parties (whether arising before or after the Effective Time), (i) the Indemnified Parties may retain the Company's regularly engaged -46- 56 independent legal counsel or counsel satisfactory to them and reasonably satisfactory to the Company (or satisfactory to them and reasonably satisfactory to the Surviving Corporation and Parent after the Effective Time), and the Company (or after the Effective Time, the Surviving Corporation and Parent) shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties as promptly as statements therefor are received; and (ii) the Company (or after the Effective Time, the Surviving Corporation and Parent) will use all reasonable best efforts to assist in the vigorous defense of any such matter, provided that none of the Company, the Surviving Corporation or Parent shall be liable for any settlement effected without its prior written consent which consent shall not unreasonably be withheld. Any Indemnified Party wishing to claim indemnification under this Section 6.6, upon learning of any such claim, action, suit, proceeding or investigation, shall notify the Company (or after the Effective Time, the Surviving Corporation and Parent) (but the failure so to notify shall not relieve a party from any liability which it may have under this Section 6.6 except to the extent such failure materially prejudices such party's position with respect to such claims) and shall deliver to the Company (or after the Effective Time, the Surviving Corporation and Parent) the undertaking contemplated by Section 145(e) of the DGCL, but without any requirement for the posting of a bond. The Indemnified Parties as a group may retain only one law firm (plus one local counsel, if necessary) to represent them with respect to each such matter unless the use of counsel chosen to represent the Indemnified Parties would present such counsel with a conflict of interest, or the representation of all of the Indemnified Parties by the same counsel would be inappropriate due to actual or potential differing interests between them, in which case such additional counsel as may be required (as shall be reasonably determined by the Indemnified Parties and the Company, the Surviving Corporation or Parent, as the case may be) may be retained by the Indemnified Parties at the cost and expense of the Company, Surviving Corporation or Parent, as the case may be. The Company and Sub agree that the foregoing rights to indemnification, including provisions relating to advances of expenses incurred in defense of any action or suit, existing in favor of the Indemnified Parties with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time; provided, however, that all rights to indemnification (including rights relating to advances of expenses) in respect of any Indemnified Liabilities asserted or made within such period shall continue until the disposition of such Indemnified Liabilities. Furthermore, the provisions with respect to indemnification set forth in the Certificate of Incorporation or Bylaws of the Surviving Corporation shall not be amended for a period of six years following the Effective Time if such amendment would adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers, employees or agents of the Company in respect of actions or omissions occurring at or prior to the Effective Time. (b) The Company (or after the Effective Time, the Surviving Corporation and Parent) shall indemnify any Indemnified Party against all reasonable costs and expenses (including attorney's fees and expenses), such amounts to be payable in advance upon request as provided in Section 6.6(a), relating to the enforcement of such Indemnified Party's rights -47- 57 under this Section 6.6 or under the documents referred to in this Section 6.6 regardless of whether or not such Indemnified Party is ultimately determined to be entitled to indemnification hereunder or thereunder. Any amounts due pursuant to the preceding sentence shall be payable upon request by the Indemnified Party and shall bear interest from the date that such were originally due and payable at a rate equal to the prime rate of interest as announced by The Chase Manhattan Bank plus 1% as in effect on the date of such initial request. (c) For a period of six years after the Effective Time, the Surviving Corporation shall cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the Indemnified Parties) with respect to matters arising before and acts or omissions occurring or existing at or prior to the Effective Time including the transactions contemplated by this Agreement, provided that Parent shall not be required to pay an annual premium for such insurance in excess of 125% of the last annual premium paid by the Company prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. The last annual premium paid by the Company was $523,720. (d) For a period of 6 years after the Effective Time, the Surviving Corporation shall cause to be maintained in effect the current policies of fiduciary liability insurance maintained by the Company and its Subsidiaries (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the Indemnified Parties who are covered thereby) with respect to matters arising before and acts or omissions occurring or existing at or prior to the Effective Time, provided that Parent shall not be required to pay an annual premium for such insurance in excess of 200% of the last annual premium paid by the Company prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. The last annual premium paid by the Company was $13,500. Furthermore, the provisions with respect to indemnification provided for under any Benefit Plan or Employee Arrangement shall not be amended for a period of six years following the Effective Time if such amendment would adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers, employees or agents of the Company in respect of actions or omissions occurring at or prior to the Effective Time. (e) The provisions of this Section 6.6 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his heirs and his personal representatives and shall be binding on all successors and assigns of Sub, the Company and the Surviving Corporation. (f) The Company will honor the indemnification agreements identified in Schedule 4.1(w), except for the provisions relating to the establishment of trusts. The -48- 58 Company may enter into substantially similar indemnification agreements with other directors of the Company, provided that such agreements shall not contain any provisions for the establishment of trusts. (g) Nothing in this Section 6.6 shall be interpreted as obligating the Company (or from and after the Effective Time, the Surviving Corporation), Parent, Sub or any of their respective successors or assigns, to pay, make reimbursement for or otherwise assume responsibility for any Taxes or penalties imposed on any officer, director, employee or agent or for any other amount relating to any of such Person's Tax obligations or liabilities. 6.7. REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, under applicable laws and regulations or otherwise, to consummate and make effective the transactions contemplated by the Transaction Documents, subject, as applicable, to the Company Stockholder Approval, including cooperating fully with the other party, including by provision of information and making of all necessary filings in connection with, among other things, approvals under the HSR Act. The Company will use all reasonable efforts to obtain any consent from third parties necessary to allow the Company to continue operating its business as presently conducted as a result of the consummation of the transactions contemplated hereby. In case at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of either of the Constituent Corporations, the proper officers and directors of each party to this Agreement shall take all such necessary action. 6.8. PUBLICITY. The parties will consult with each other and will mutually agree upon any press release or public announcement pertaining to the Merger and shall not issue any such press release or make any such public announcement prior to such consultation and agreement, except as may be required by applicable law (or stock exchange rules), in which case the party proposing to issue such press release or make such public announcement shall use reasonable efforts to consult in good faith with the other party before issuing any such press release or making any such public announcement. 6.9. WITHHOLDING RIGHTS. Subject to Section 6.10, Parent and Sub, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement (including pursuant to the Offer) to any holder of shares of Company Common Stock, Options or Unvested Stock such amounts as Parent or Sub, as applicable, is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or Sub, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock, Options or Unvested Stock in respect of which such deduction and withholding was made by Parent or Sub. -49- 59 6.10. REAL ESTATE TAXES. Parent and Sub shall pay the full amount (on behalf of themselves, the Company and the shareholders of the Company) of any and all transfer, capital gains and other taxes, fees or costs incurred or assessed by any New York City or New York State (or other state or local) taxing authority for which Parent, Sub, the Company or the shareholders of the Company are liable in connection with the sale or transfer of real estate pursuant to the Offer or the Merger. Parent and Sub shall not be entitled to and shall not deduct from the consideration otherwise payable to a holder of Shares pursuant to the Offer or the Merger any amounts required to be paid by Parent and Sub pursuant to the immediately preceding sentence. 6.11. HSR and Other Governmental Approvals. ------------------------------------ (a) HSR Act. Each party hereto shall file or cause to be filed with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") any notification required to be filed by their respective "ultimate parent" companies under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. Such parties will use all reasonable efforts to make such filings promptly and to respond on a timely basis to any requests for additional information made by either of such agencies. Each of the parties hereto agrees to furnish the other with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and its affiliates and their respective representatives, on the one hand, and the FTC, the Antitrust Division or any other Governmental Entity or members or their respective staffs, on the other hand, with respect to this Agreement and the transactions contemplated hereby, other than personal financial information filed therewith. Each party hereto agrees to furnish the others with such necessary information and reasonable assistance as such other parties and their respective affiliates may reasonably request in connection with their preparation of necessary filings, registrations or submissions of information to any Governmental Entities, including without limitation any filings necessary under the provisions of the HSR Act. (b) Other Regulatory Approvals. Each party hereto shall cooperate and use its reasonable best efforts to promptly prepare and file all necessary documentation to effect all necessary applications, notices, petitions, filings and other documents, and use all reasonable efforts to obtain (and will cooperate with each other in obtaining) any consent, acquiescence, authorization, order or approval of, or any exemption or nonopposition by, any Governmental Entity required to be obtained or made by Parent or the Company or any of their respective Subsidiaries in connection with the Offer and the Merger or the taking of any other action contemplated by this Agreement. 6.12. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt written notice to the other of (a) the occurrence, or failure to occur, of any event of which it becomes aware that has caused or that would be likely to cause any representation or warranty of such party -50- 60 contained in this Agreement to be untrue or inaccurate (in any material respect for any representation or warranty not already qualified for materiality) at any time from the date hereof to the Closing Date, (b) the failure of such party to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder and (c) in the case of the Company, the occurrence of any threat by any executive officer or senior management employee of the Company or any of its Subsidiaries to resign or otherwise terminate their employment relationship with the Company or any of its Subsidiaries. 6.13. SOLVENCY LETTER. Parent shall deliver to the Board of Directors of the Company any solvency letter from any third party appraisal or similar firm that Parent provides to the providers of the financing under the Financing Commitment. 6.14. Continuation of Employee Benefits. --------------------------------- (a) On and after the Effective Time, directors, officers and employees of the Company and its Subsidiaries shall be provided employee benefits, plans and programs (including but not limited to incentive compensation, deferred compensation, pension, life insurance, medical (which eligibility shall not be subject to any exclusions for any pre-existing conditions if such individual has met the participation requirements of such benefits, plans or programs of the Company or its Subsidiaries), profit sharing (including 401(k)), severance salary continuation and fringe benefits) which are no less favorable in the aggregate than those generally available to similarly situated directors, officers and employees of Parent and its significant Subsidiaries. For purposes of eligibility to participate and vesting in all benefits provided to directors, officers and employees, the directors, officers and employees of the Company and its Subsidiaries will be credited with their years of service with the Company and its Subsidiaries and prior employers to the extent service with the Company and its Subsidiaries and prior employers is taken into account under plans of the Company and its Subsidiaries. Upon termination of any medical plan of the Company or any of its Subsidiaries, individuals who were directors, officers or employees of the Company or its Subsidiaries at the Effective Time shall become eligible to participate in the medical plan of Parent. Amounts paid before the Effective Time by directors, officers and employees of the Company and its Subsidiaries under any medical plans of the Company shall after the Effective Time be taken into account in applying deductible and out-of-pocket limits applicable under the medical plan of Parent provided as of the Effective Time to the same extent as if such amounts had been paid under such medical plan of Parent. (b) This Section 6.14, which shall survive the Effective Time and shall continue without limit, is intended to benefit and bind the Company and the Surviving Corporation, each of whom may enforce the provisions of this Section 6.14. Nothing contained in this Section 6.14 shall create any third party beneficiary rights in any director, officer or employee or former director, officer or employee (including any beneficiary or dependent thereof) of the Company, any of its Subsidiaries or the Surviving Corporation in -51- 61 respect of continued employment for any specified period of any nature or kind whatsoever, and nothing contained in this Section 6.14 shall create such third party rights in any such person in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement. 6.15. TRUSTEES. The Company will use its reasonable efforts to obtain from each officer or director of the Company or any of its Subsidiaries who is serving as a trustee of any Benefit Plan a duly executed resignation letter resigning from such position effective as of the Effective Time. On or prior to the Effective Time, the Company and its Subsidiaries may appoint a fiduciary or advisor independent of the Company to vote, or advise on the vote of, as the case may be, the Shares held by Benefit Plans, other than those required under the Code to pass through voting rights to participants, in connection with the solicitation of approval by the stockholders of this Agreement and the transactions contemplated hereby. 6.16. WITHDRAWAL LIABILITY. The Company will cooperate with Parent and use its best efforts to obtain from each Multiemployer Plan as soon as possible following the execution of this Agreement (i) a copy of each Multiemployer Plan and all amendments thereto and (ii) an estimate of the withdrawal liability as defined in Section 4201 of ERISA (without regard to any subsequent reduction or waiver of such liability under Section 4207 or 4208 of ERISA) which would be owed by the Company or its ERISA Affiliates to such Multiemployer Plan if the Company or its ERISA Affiliates ceased contributing to such Multiemployer Plan immediately before the consummation of the transactions contemplated by this Agreement (the "Withdrawal Liability"); the Company will cooperate with Parent and use reasonable efforts to obtain (and provide to Parent) from each Multiemployer Plan as soon as possible following the execution of this Agreement all information necessary for the Company to compute the Withdrawal Liability; the Company will provide all such documents, information and estimates requested in this Section 6.16 to Parent upon receipt. ARTICLE 7 CONDITIONS PRECEDENT 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each party to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions: (a) Stockholder Approval. This Agreement and the Merger shall have been approved and adopted by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon if such vote is required by applicable law. (b) HSR Act. The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired, and no restrictive -52- 62 order or other requirements shall have been placed on the Company, Parent, Sub or the Surviving Corporation in connection therewith. (c) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger shall be in effect; provided, however, that prior to invoking this condition, each party shall use all commercially reasonable efforts to have any such decree, ruling, injunction or order vacated. (d) Statutes. No statute, rule, order, decree or regulation shall have been enacted or promulgated by any government or governmental agency or authority which prohibits the consummation of the Merger. (e) Consummation of the Tender Offer. Parent and Sub shall have accepted for purchase and paid for Shares tendered pursuant to the Offer (PROVIDED, HOWEVER, that this condition will be deemed satisfied with respect to Parent and Sub if Sub shall have failed to purchase Shares pursuant to the Offer in violation of the terms of the Offer or this Agreement). ARTICLE 8 TERMINATION AND AMENDMENT 8.1. TERMINATION. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of the Company or by Parent: (a) by mutual written consent of the Company and Parent, or by mutual action of their respective Boards of Directors; (b) by either the Company or Parent (i) if any permanent injunction or other order of a court or other competent authority preventing the consummation of the Merger shall have become final and non-appealable or (ii) if the Company Stockholder Approval shall not have been obtained by reason of the failure to obtain the required vote upon a vote held at the Stockholders' Meeting, or at any adjournment thereof; (c) by either the Company or Parent if the Offer shall not have been consummated by October 31, 1997 or the Merger has not been consummated by December 31, 1997; provided, however, that the right to terminate this Agreement under this Section 8.1(c) shall not be available to any party whose breach of any representation or warranty or failure to -53- 63 fulfill any covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Offer to be consummated or the Merger to occur on or before such date; (d) by Parent prior to the consummation of the Offer, so long as Parent is not then in material breach of its obligations hereunder, if there has been a breach of any representation or warranty (when made on or at the time of termination as if made on such date of termination, except to the extent it relates to a particular date) on the part of the Company (provided that any representation or warranty of the Company contained herein that is subject to a "materiality," "Material Adverse Effect" or similar qualification shall not be so qualified for purposes of determining the existence of any breach thereof on the part of the Company), and which breach has not been cured within ten calendar days following receipt by the Company of notice of such breach and is existing at the time of the termination of this Agreement, except for such breaches that would not, individually or in the aggregate with any other breaches on the part of the Company, (A) have a Material Adverse Effect on the Company or (B) materially adversely affect the ability of the parties hereto to consummate the transactions contemplated hereby; (e) by Parent prior to the consummation of the Offer, so long as Parent is not then in material breach of its obligations hereunder, if there has been a breach of Section 5.1(e) or a material breach of any other covenant or agreement on the part of the Company set forth in this Agreement (provided that any covenant or agreement of the Company contained herein the performance of which is subject to a "materiality," "Material Adverse Effect" or similar qualification shall not be so qualified for purposes of determining the existence of any nonperformance thereof on the part of the Company), and which breach (other than a breach of any covenant or agreement set forth in Section 5.1(e)) has not been cured within ten calendar days following receipt by the Company of notice of such breach and is existing at the time of the termination of this Agreement; (f) by the Company prior to the consummation of the Offer, so long as the Company is not then in material breach of its obligations hereunder, if there has been a breach of any representation or warranty (when made on or at the time of termination as if made on such date of termination, except to the extent it relates to a particular date) on the part of Parent or Sub (provided that any representation or warranty of Parent or Sub contained herein that is subject to a "materiality," "Material Adverse Effect" or similar qualification shall not be so qualified for purposes of determining the existence of any breach thereof on the part of Parent or Sub), and which breach has not been cured within ten calendar days following receipt by Parent or Sub of notice of such breach and is existing at the time of the termination of this Agreement, except for such breaches that would not, individually or in the aggregate with any other breaches on the part of Parent or Sub, (A) have a Material Adverse Effect on Parent or Sub or (B) materially adversely affect the ability of the parties hereto to consummate the transactions contemplated hereby; -54- 64 (g) by the Company prior to the consummation of the Offer, so long as the Company is not then in material breach of its obligations hereunder, if there has been a material breach of any covenant or agreement on the part of Parent or Sub set forth in this Agreement (provided that any covenant or agreement of Parent or Sub contained herein the performance of which is subject to a "materiality," "Material Adverse Effect" or similar qualification shall not be so qualified for purposes of determining the existence of any nonperformance thereof on the part of Parent or Sub), and which breach has not been cured within ten calendar days following receipt by Parent or Sub of notice of such breach and is existing at the time of the termination of this Agreement; (h) by Parent prior to the consummation of the Offer if (i) the Board of Directors of the Company (whether or not under circumstances permitted by this Agreement) shall have failed to make the recommendation contemplated by Section 1.2 in the Schedule 14D-9 or shall have withdrawn or modified, in any manner which is adverse to Parent, its recommendation or approval of the Offer, the Merger or this Agreement and the transactions contemplated hereby, or shall have resolved to do so, (ii) the Board of Directors of the Company shall have recommended to the stockholders of the Company any Acquisition Proposal, or shall have resolved to do so, or (iii) a tender offer or exchange offer for 50% or more of the outstanding shares of capital stock of the Company is commenced (other than by the Company or its affiliates) and the Board of Directors of the Company fails to timely recommend against the stockholders of the Company tendering their shares into such tender offer or exchange offer; or (i) by the Company prior to the consummation of the Offer, pursuant to the termination right permitted by clause (y) of Section 5.1(e)(i) of this Agreement; provided that the Company may not effect such termination pursuant to this Section 8.1(i) unless and until (i) Parent receives at least five days prior written notice (which notice shall include the identity of the person or entity making the relevant Acquisition Proposal, the material terms and conditions of such Acquisition Proposal and the material terms and conditions of any agreements or arrangements to be entered into in connection with such Acquisition Proposal with Jeffrey S. Silverman with respect to his then existing agreements and arrangements with the Company) from the Company of its intention to effect such termination pursuant to this Section 8.1(i), and (ii) during such five-day period, the Company shall, and shall cause its respective financial and legal advisors to, consider any adjustment in the terms and conditions of this Agreement that Parent may propose; provided further that the Company may not effect such termination pursuant to this Section 8.1(i) unless the Company has contemporaneously with such termination tendered payment to Parent or Parent's designee of the amounts that are due Parent or Parent's designee under Section 6.4; or (j) by either the Company or Parent if such party is not then in material breach of its obligations hereunder, if upon the expiration of the Offer, no Shares shall have been purchased in connection with the Offer. -55- 65 8.2. EFFECT OF TERMINATION. In the event of termination of this Agreement by either the Company or Parent as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their respective affiliates, officers, directors or shareholders except (a) with respect to this Section 8.2, the second sentence of Section 6.1, and Sections 6.4 and 9.2 and (b) that no such termination shall relieve any party from liability for a breach hereof. 8.3. AMENDMENT. Subject to applicable law and the provisions of Section 1.6 hereof, this Agreement may be amended, modified or supplemented only by written agreement of Parent, Sub and the Company at any time prior to the Effective Time with respect to any of the terms contained herein; provided, however, that, after the Company Stockholder Approval, no term or condition contained in this Agreement shall be amended or modified in any manner that would reduce the amount of or change the form of the Merger Consideration. 8.4. EXTENSION; WAIVER. Subject to the provisions of Section 1.6 hereof, at any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights. ARTICLE 9 GENERAL PROVISIONS 9.1. NONSURVIVAL OF COVENANTS AND AGREEMENTS. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the covenants and agreements contained in Article 3 and Sections 6.4, 6.6, 6.10 and 6.14 hereof and any other covenant or agreement that contemplates performance after the Effective Time. 9.2. CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement shall survive the execution and delivery of this Agreement or any termination of this Agreement, and the provisions of the Confidentiality Agreement shall apply to all information and material delivered by any party hereunder; provided, however, that the terms and provisions of the Confidentiality Agreement are hereby waived, amended or modified to the extent necessary to permit the consummation of the transactions contemplated by this Agreement. Upon the Closing, the terms and provisions of the Confidentiality Agreement shall terminate in full. -56- 66 9.3. NOTICES. Any notice or communication required or permitted hereunder shall be in writing and either delivered personally, telegraphed or telecopied or sent by certified or registered mail, postage prepaid, and shall be deemed to be given, dated and received when so delivered personally, telegraphed or telecopied or, if mailed, five business days after the date of mailing to the following address or telecopy number, or to such other address or addresses as such person may subsequently designate by notice given hereunder: (a) if to Parent or Sub, to: Nortek, Inc. and NTK Sub, Inc. 50 Kennedy Plaza Providence, RI 02903 Attn: Richard L. Bready Telecopy: (401) 751-4610 with copies to: Ropes & Gray One International Place Boston, MA 02110 Attn: David C. Chapin, Esq. Telecopy: (617) 951-7050 (b) if to the Company, to: Ply Gem Industries, Inc. 777 Third Avenue New York, New York 10017 Attn: Jeffrey S. Silverman Telecopy: (212) 888-0472 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attn: Victor I. Lewkow, Esq. Telecopy: (212) 225-3999 9.4. INTERPRETATION. When a reference is made in this Agreement to Articles or Sections, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. The table of contents, list of defined terms and headings contained in this -57- 67 Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the word "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The inclusion by the Company of any information or matter on a Schedule hereto is not an admission on the part of the Company that such information or matter is either required by the terms of this Agreement to be listed on such Schedule or is otherwise material. Schedule 9.4 sets forth a list of all agreements or understandings under which the Company or any of its subsidiaries has an obligation pursuant to or in connection with the Agreement and Plan of Merger, dated as of June 24, 1997 by and among Atrium Acquisition Holdings Corp., Atrium/PG Acquisition Corp. and the Company and the agreements and transactions contemplated thereby (collectively, the "Atrium Agreements"). All obligations of the Company or its subsidiaries contained in any document set forth on Schedule 9.4 shall be deemed disclosed for purposes of Schedules 4.1(a)-(x). 9.5. COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP. This Agreement (together with the Confidentiality Agreement (as amended by Section 9.2), the other Transaction Documents, the schedules and exhibits thereto, and any other documents and instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and, except as provided in Section 6.6, is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 9.7. GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. 9.8. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder (a) to any newly-formed direct wholly-owned Subsidiary of Parent or Sub or (b) in the form of a collateral assignment to any institutional lender who provides funds to Sub for the consummation of the transactions contemplated hereby. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. -58- 68 9.9. DIRECTOR AND OFFICER LIABILITY. The directors, officers, and stockholders of each of the parties and their affiliates acting in such capacity shall not in such capacity have any personal liability or obligation arising under this Agreement (including any claims that the other parties may assert) other than as an assignee of this Agreement. 9.10. SPECIFIC PERFORMANCE. The parties recognize that in the event the Company should refuse to perform under the provisions of this Agreement, monetary damages alone will not be adequate. Parent and Sub shall therefore be entitled, in addition to any other remedies which may be available, including money damages, to obtain specific performance of the terms of this Agreement. In the event of any action to enforce this Agreement specifically, the Company hereby waives the defense that there is an adequate remedy at law. -59- 69 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. PARENT: NORTEK, INC. By: /s/ Kevin W. Donnelly ---------------------------------------- Name: Kevin W. Donnelly Title: Vice President and General Counsel SUB: NTK SUB, INC. By: /s/ Kevin W. Donnelly ---------------------------------------- Name: Kevin W. Donnelly Title: Vice President COMPANY: PLY GEM INDUSTRIES, INC. By: /s/ Jeffrey S. Silverman ---------------------------------------- Name: Jeffrey S. Silverman Title: Chairman -60- 70 Exhibit A CONDITIONS OF THE OFFER Reference is made to the Agreement and Plan of Merger, dated as of July 24, 1997 (the "Agreement"), by and among Nortek, Inc., a Delaware corporation ("Parent"), NTK Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and Ply Gem Industries, Inc., a Delaware corporation (the "Company"). Capitalized terms defined in the Agreement and not otherwise defined herein are used herein with the meanings so defined. Notwithstanding any other provision of the Offer, Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including without limitation, Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return Shares promptly after termination or withdrawal of the Offer), pay for, or may delay the acceptance for payment of or payment for, any tendered shares, if (i) any applicable waiting period under the HSR Act shall not have expired or been terminated, (ii) the number of Shares validly tendered and not withdrawn, when added to the Shares then beneficially owned by Parent, does not constitute a majority of the shares of Company Common Stock then outstanding on a fully diluted basis (the "Minimum Condition"), (iii) Parent and Sub shall not have received the debt financing for the transactions contemplated by the Agreement on terms substantially as outlined in the Financing Commitment, or (iv) on or after the date of the Agreement and at or before the time of payment for the Shares, any of the following events shall occur and be continuing: (a) there shall have occurred and be continuing (1) any general suspension of trading in, or general limitation on prices for, securities on the New York Stock Exchange, Inc. (other than suspensions of not more than one business day), (2) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (3) the commencement of a war, armed hostilities or other international or national calamity involving the United States and having had or being reasonably likely to have a Material Adverse Effect or materially adversely affecting (or materially delaying) the consummation of the Offer, (4) any material limitation or proposed material limitation (whether or not mandatory) by any Governmental Entity, or any other event, that materially adversely affects generally the extension of credit by banks or other financial institutions or (5) in the case of any of the situations described in clauses (1) through (4) inclusive, existing at the date of the Agreement, a material acceleration, escalation or worsening thereof; (b) the representations and warranties of the Company set forth in the Agreement shall not have been true and correct in all respects (provided that any representation or warranty of the Company contained in the Agreement that is subject to a materiality, Material Adverse Effect or similar qualification shall not be so qualified for purposes of determining the existence of any breach thereof on the part of the Company) as of the date of the Agreement 71 and (except to the extent such representations and warranties speak as of an earlier date) as of the scheduled expiration date of the Offer as though made on and as of such scheduled expiration date, except for such breaches that would neither, individually or in the aggregate with any other breaches on the part of the Company, (i) have a Material Adverse Effect on the Company nor (ii) materially adversely affect the ability of the parties to the Agreement to consummate the transactions contemplated by the Agreement; or the Company shall not have performed in all material respects (provided that any obligation the performance of which is subject to a materiality, Material Adverse Effect or similar qualification shall not be so qualified for purposes of determining the existence of any nonperformance thereof) all obligations required to be performed by it under the Agreement; (c) there shall be any action or proceeding commenced by any Governmental Entity, which has a reasonable likelihood of success and which, if decided adversely to the Company, would have a Material Adverse Effect or would restrain, prohibit or materially delay the consummation of the Offer, and if decided adversely to Parent, would have the effect of (i) making the purchase of, or payment for, some or all of the Shares pursuant to the Offer or the Merger or otherwise illegal, or resulting in a material delay in the ability of Parent or Sub to accept for payment or pay for some or all of the Shares, (ii) compelling Parent or Sub to dispose of or hold separately all or any material portion of the Company's or Parent's business or assets, (iii) making illegal, or otherwise directly or indirectly restraining or prohibiting or imposing material financial burdens, penalties or, fines or requiring the payment of material damages in connection with the making of, the Offer, the acceptance for payment of, payment for, or ownership, directly or indirectly, of some of or all the Shares by Parent or Sub, the consummation of the Offer or the Merger, (iv) otherwise preventing consummation of the Offer or the Merger, or (v) imposing material limitations on the ability of Parent or Sub effectively (A) to acquire, hold or operate the business of the Company and its Subsidiaries taken as a whole or (B) to exercise full rights of ownership of the Shares acquired by it, including, but not limited to, the right to vote the Shares purchased by it on all matters properly presented to the stockholders of the Company, which, in either case, would effect a material diminution in the value of the Company or the Shares; (d) there shall have been any Law enacted, promulgated, entered or deemed applicable to the Offer or the Agreement or any other action shall have been taken by any Governmental Entity on or after the date of the Offer that would result in any of the consequences referred to in clauses (i) through (v) of paragraph (c) above (other than with respect to clause (i) of paragraph (c), if there shall have been a material delay in the ability of Parent or Sub to accept for payment or pay for some or all of the Shares due to a request for additional information under the HSR Act); (e) the Board of Directors of the Company shall have publicly (including by amendment of its Schedule 14D-9) withdrawn or adversely modified its recommendation of acceptance of the Offer; -2- 72 (f) since the date of the Agreement, there shall have occurred any event or events that, singly or in the aggregate, have had or would have a Material Adverse Effect; or (g) the Agreement shall have been terminated in accordance with its terms, or Parent or Sub shall have reached an agreement or understanding in writing with the Company providing for termination or amendment of the Offer; which, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Sub other than a breach by Parent or Sub of the Agreement) giving rise to any such conditions, makes it in the reasonable judgment of Parent inadvisable to proceed with the Offer and/or with such acceptance for payment of the Shares. The foregoing conditions are for the sole benefit of Parent and Sub and may be asserted by Parent or Sub regardless of the circumstances giving rise to any such condition (other than a breach by Parent or Sub of the Agreement) and may be waived by Parent or Sub, in whole or in part, at any time and from time to time, in the sole discretion of Parent or Sub; provided, that the Minimum Condition is also for the benefit of the Company and may not be waived without the Company's consent. The failure by Parent or Sub at any time to exercise any of the foregoing rights will not be deemed a waiver of any right and each right will be deemed an ongoing right which may be asserted at any time and from time to time. -3- 73 Exhibit B OPTION SURRENDER AGREEMENT, RELEASE AND WAIVER NOTE: SIGNATURE MUST BE PROVIDED BELOW AND ON THE SCHEDULE OF OWNERSHIP. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. To Ply Gem Industries, Inc., a Delaware corporation (the "Company"): The undersigned acknowledges that pursuant to Section 3.5(a)(i) of the Agreement and Plan of Merger among Nortek, Inc., NTK Sub, Inc. ("NTK Sub") and the Company, dated as of July 24, 1997 (the "Merger Agreement"), the Company will be canceling Options (as defined below) in return for cash consideration effective at the time the proposed merger of NTK Sub with and into the Company (the "Merger") becomes effective (the "Effective Time"). Receipt of such consideration by the undersigned will be subject to the receipt by the Company of this Option Surrender Agreement, Release and Waiver (the "Surrender Agreement") surrendering Options for such cancellation. Subject to, and effective upon, acceptance of the surrender of the Options surrendered herewith, the undersigned hereby surrenders for cancellation to the Company all of his rights, title and interest in and to all options (whether vested or unvested) to purchase shares of common stock, $.25 par value per share (the "Shares"), of the Company pursuant to the Company's Executive Incentive Stock Option Plan, 1989 Employee Incentive Stock Plan, 1989 Senior Executive Stock Option Plan and 1994 Employee Incentive Stock Plan (such options, the "Options" and such plans, the "Option Plans"), listed on the attached Schedule of Ownership (the "Ownership Schedule"), for a per Share amount equal to the Merger Consideration (as defined in the Merger Agreement), minus the exercise price per Share, multiplied by the number of Shares subject to such Options, upon the terms and subject to the conditions set forth in this Surrender Agreement. The undersigned hereby represents and warrants that the undersigned holds the Options surrendered hereby free and clear of all claims, liens, restrictions, charges, encumbrances, security interests, voting agreements and commitments of any kind and has full power and authority to surrender for cancellation such Options, subject to other agreements involving the Merger being executed simultaneously herewith. This surrender is irrevocable by the undersigned but will not be effective if the Merger is not consummated on or before December 31, 1997. The undersigned, on behalf of himself or herself, and on behalf of all spouses, heirs, predecessors, successors, assigns, representatives or agents of the undersigned (including 74 without limitation any trust of which the undersigned is the trustee or which is for the benefit of the undersigned or a member of his or her family), to the greatest extent permitted by law, hereby acknowledges that the payments made pursuant to the Surrender Agreement are in full satisfaction of any and all rights the undersigned may have under the Option Plans with respect to Options being surrendered hereby. The undersigned hereby acknowledges that the Ownership Schedule enclosed herewith correctly and completely sets forth the Options held by the undersigned being surrendered hereunder, and that except as set forth therein the undersigned does not have the right to acquire any stock in the Company or any options, warrants or other rights to acquire shares of capital stock of or equity interests in the Company, or similar securities or contractual obligations the value of which is derived from the value of an equity interest in the Company, or securities convertible into or exchangeable for capital stock of or equity interests in, or similar securities or contractual obligations of, the Company. The undersigned also acknowledges that all payments to be made pursuant to the Surrender Agreement are expected to be paid by check at the Effective Time. The undersigned also acknowledges that the Company is not required to make any payments to the undersigned pursuant to the Surrender Agreement unless his or her Options are outstanding at the Effective Time. The undersigned also acknowledges that all payments to be made pursuant to the Surrender Agreement may be subject to applicable withholding taxes and other similar charges. The undersigned, upon request, will execute and deliver any additional documents deemed by the Company to be reasonably necessary or desirable to complete the surrender of the Options surrendered hereby. The undersigned recognizes that the Merger is subject to various conditions and the Company may not be required to accept the surrender of any of the Options surrendered hereby. INSTRUCTIONS 1. EXECUTION OF THE SURRENDER AGREEMENT AND THE OWNERSHIP SCHEDULE. This Surrender Agreement is to be completed by the optionholder. In order to validly surrender such Options, an optionholder must complete and sign this Surrender Agreement and the Ownership Schedule in accordance with the instructions herein and mail or deliver them in the enclosed envelope to the Company prior to [ ]. THE OWNERSHIP SCHEDULE MUST BE SIGNED BY THE OPTIONHOLDER AS EVIDENCE OF SUCH ACKNOWLEDGMENT AND RETURNED TOGETHER WITH 2 75 THIS SURRENDER AGREEMENT. A second copy of the Ownership Schedule for the optionholder's records has also been included herewith. 2. DELIVERY. This Surrender Agreement and the enclosed Ownership Schedule, when executed, should be mailed or delivered to: [ ]. THE METHOD OF DELIVERY OF THE SURRENDER AGREEMENT AND THE OWNERSHIP SCHEDULE IS AT THE OPTION AND RISK OF THE SURRENDERING OPTIONHOLDER. DELIVERY BY EXPEDITED MAIL, COURIER OR OTHER SIMILAR SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. OPTIONHOLDERS ARE ALSO ADVISED TO RETAIN A COPY OF ALL DOCUMENTS DELIVERED. 3. SIGNATURE ON THE SURRENDER AGREEMENT. The signature on this Surrender Agreement must correspond exactly with the optionholder's name in the records of the Company. 4. REQUESTS FOR ASSISTANCE. If you have questions or need assistance please call [ ]. 3 76 IMPORTANT: OPTIONHOLDER: (1) SIGN HERE; AND (2) CONFIRM AND SIGN THE ENCLOSED OWNERSHIP SCHEDULE. - -------------------------------------------------------------------------------- (Signature of Optionholder) Dated: -------------------------- Name: --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Type or Print) Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number: ----------------------------------------------- (Home) ----------------------------------------------- (Business) Taxpayer Identification or Social Security No.: -------------------------------- - -------------------------------------------------------------------------------- , 1997 - --------------------------- 4 EX-99.2 3 AMENDED STOCKHOLDERS AGREEMENT 1 Exhibit 2 FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT THIS FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated as of July 24, 1997 (the "Agreement"), is made and entered into by Atrium Acquisition Holdings Corp., a Delaware corporation ("Parent"), Atrium/PG Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), Jeffrey S. Silverman, Dana R. Snyder and Herbert P. Dooskin (collectively, the "Stockholders" and individually a "Stockholder"), Ply Gem Industries, Inc., a Delaware corporation (the "Company"), Nortek, Inc., a Delaware corporation ("Nortek") and NTK Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Nortek ("NTK"). WITNESSETH: ----------- WHEREAS, prior to the date hereof Parent, Sub, the Company and, for limited purposes, Atrium Corporation, entered into that certain Agreement and Plan of Merger dated as of June 24, 1997 (the "Merger Agreement"); WHEREAS, on July 24, 1997 the Merger Agreement was terminated in accordance with its terms; WHEREAS, on July 24, 1997 Nortek, NTK and the Company entered into an Agreement and Plan of Merger (as such agreement may hereafter be amended, restated or renewed from time to time, the "Nortek Agreement"), pursuant to which NTK will commence a tender offer for Shares (as defined below) of the Company and NTK will be merged with and into the Company; WHEREAS, as a result of the termination of the Merger Agreement and Nortek, NTK and the Company entering into the Nortek Agreement, the parties desire to amend and restate that certain Stockholders Agreement between certain of the parties hereto dated as of June 24, 1997 in accordance with the terms and provisions of this Agreement; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. For purposes of this Agreement: (a) "Acquisition Proposal" shall mean any proposal or offer (other than the transactions among the Company, Parent and Sub previously contemplated in the Merger Agreement) involving the Company or any of its subsidiaries for, or an inquiry or indication of interest that reasonably could be expected to lead to: (i) any merger, consolidation, share exchange, recapitalization, business combination, or other similar transaction, (ii) any sale, lease, exchange, 2 mortgage, pledge, transfer or other disposition of a material portion of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or series of transactions, or (iii) any tender offer or exchange offer for all or any portion of the outstanding shares of capital stock of the Company or any of its subsidiaries or the filing of a registration statement under the Securities Act of 1933 in connection therewith. The term "Acquisition Proposal" shall include the Offer and the Merger. (b) "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a "group" within the meanings of Section 13(d)(3) of the Exchange Act. (c) "Merger" shall mean the merger contemplated by the Nortek Agreement. (d) "Offer" shall mean the cash tender offer contemplated by the Nortek Agreement for all of the outstanding Shares. (e) "Offer Price" shall mean the greater of $19.50 or the highest per share price paid in the Offer. (f) "Options" shall mean all outstanding options or warrants (including stock purchase rights and stock awards) to purchase or acquire Shares and shall include the right under the Options to acquire additional Shares upon a "change of control" with respect to the Company. (g) "Person" shall mean an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. (h) "Purchase Price" shall mean a per share purchase price equal to $18.75. (i) "Shares" shall mean shares of common stock, par value $0.25 per share, of the Company. The term "Shares" shall include, without limitation, shares of Unvested Stock and any restricted Shares. (j) "Termination Event" shall mean the first to occur of (i) the termination of the Nortek Agreement by any party thereto, (ii) the termination, withdrawal, abandonment or expiration of the Offer without the Shares of each Stockholder as set forth on Schedule I hereto being accepted for purchase thereunder (collectively an "Offer Termination Event") or (iii) the material breach on the part of any party of any of their respective obligations under Section 2. 2 3 In addition to the terms otherwise defined herein, the following terms shall have the meaning set forth in Nortek Agreement: "Company Stockholder Approval"; "Offer Documents"; "Proxy Statement"; "SEC"; and "Unvested Stock". 2. THE NORTEK OFFER. (a) Each Stockholder hereby severally and not jointly and severally, agrees to validly tender (and not to withdraw) pursuant to and in accordance with the terms of the Offer, not later than one business day prior to the expiration date of the Offer pursuant to the Nortek Agreement and Rule 14d-2 under the Exchange Act, the number of Shares set forth opposite such Stockholder's name on Schedule I hereto. Each party hereto acknowledges and agrees that NTK's obligation to accept for payment Shares purchased pursuant to the Offer, including the Shares tendered pursuant to the Agreement by the Stockholders, is subject to the terms and conditions of the Offer. The obligations of the Stockholders under this Section 2(a) shall terminate upon a Termination Event (except a Termination Event resulting from a breach by a Stockholder). (b) Each Stockholder hereby agrees to permit Nortek and NTK to publish and disclose in the Offer Documents and, if Company Stockholder Approval is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC) such Stockholder's identity and ownership of Shares and the nature of such Stockholder's commitments, arrangements and understandings under this Agreement. (c) Immediately after the acceptance of any Shares for payment pursuant to the Offer, Nortek and NTK shall take such actions as may be necessary (including, without limitation, the giving to the "Depositary " such instructions as may be necessary) to cause payment of the aggregate Offer Price due in respect of the Shares properly tendered hereunder by each Stockholder to be paid, no later than on the first business day following the date that any Shares have been accepted for purchase pursuant to the Offer (the "Purchase Date"), as follows: (i) The Sub, or its permitted assign, in respect of the Shares that have been so tendered by each Stockholder and not withdrawn, shall receive an amount equal to 75% of the excess of (A) the aggregate Offer Price payable in respect of such Stockholder's Shares so tendered over (B) the product of (1) the number of Shares so tendered, multiplied by (2) the Purchase Price; and (ii) Each Stockholder (or his designee), in respect of the Shares that have been so tendered by such Stockholder, shall receive the amount of the aggregate Offer Price payable in respect of the Shares so tendered after deducting therefrom the amount payable pursuant to clause (i) above. 3 4 (d) On the Purchase Date, the Company, Nortek, NTK and each of the Stockholders, severally and not jointly severally, shall take such actions as may be necessary for each of the Options set forth next to each Stockholder's name on Schedule II hereto to be cancelled in consideration of an amount in cash (subject to any applicable withholding tax), in respect of each of the Shares subject to each of such Options (including any additional Shares subject thereto by the reason of the occurrence of a "change of control" in the Company, and Unvested Stock to the extent not tendered in the Offer) equal to the difference between the per share Offer Price and the per Share exercise price of each such Option to the extent such difference is a positive number (such amount as to the Options of each Stockholder being collectively referred to herein as the "Option Consideration"). On the Purchase Date, Nortek, NTK and the Company shall pay or shall cause to be paid the Option Consideration due in respect of each Stockholder's Options as follows: (i) The Sub, or its permitted assign, in respect of the Options of each Stockholder, shall receive from the Option Consideration (A) in respect of Options having a per Share exercise price equal to or less than the Purchase Price, an amount equal to 75% of the excess of (x) the product of (1) the Offer Price, multiplied by (2) the number of Shares subject to such Options, including any "change of control" Shares, over (y) the product of (1) the number of Shares subject to such Options, including any "change of control" Shares, multiplied by (2) the Purchase Price and (B) in respect of Options having a per Share exercise price greater than the Purchase Price (as set forth on Schedule II hereto) an amount equal to 100% of the excess of (x) the product of (1) the Offer Price, multiplied by (2) the number of Shares subject to such Options, including any "change of control" Shares, over (y) the product of (1) the number of Shares subject to such Options, including any "change of control" Shares multiplied by (2) the applicable per Share exercise price of such Options; and (ii) Each Stockholder (or his designee), in respect of the Options of such Stockholder, shall receive the amount of the Option Consideration payable in respect of the Options of such Stockholder after deducting therefrom the amount payable pursuant to clause (i) above, provided, that as to any Stockholder (excluding Mr. Snyder) subject to Section 16(a) of the Exchange Act, payment to such Stockholder of any portion of the Option Consideration payable under this clause (ii) will be deferred (if necessary to avoid Section 16(b) liability) until the first date such payment can be made without liability to such Stockholder under Section 16(b) of the Exchange Act, but shall be paid as soon as practicable thereafter. The Company, Nortek and NTK hereby agree to extend to each holder of Options who is not a party to this Agreement the opportunity to cash out such Options on the Purchase Date in the manner contemplated in this Section 2(d). 3. OPTIONS. (a) Each of the Stockholders hereby grants to Sub an irrevocable option (each, a "Purchase Option" and collectively, the "Purchase Options") to purchase the number of Shares set forth opposite such Stockholder's name on Schedule I hereto together with all of the Shares (including any additional Shares that may be issuable as a result of a "change of control") Beneficially Owned by such Stockholder as a result of the Stockholder's exercise of the Options set forth opposite such Stockholder's name on Schedule II hereto (collectively, with the Shares described on Schedule I, the "Option Shares") at a purchase price per share equal to the Purchase Price. Subject to the last sentence of this Section 3(a), each Purchase Option is currently exercisable in whole but not in part, and shall remain exercisable in whole but not in part until 5:00 p.m. (Dallas, Texas time) on the date which is 120 days after a Termination Event (the "Option Period"), so long as: (i) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), required for the purchase by Sub of the Option Shares upon such exercise shall have expired or been waived, and (ii) there shall not be in effect any preliminary or final injunction or other order issued by any court or governmental, administrative or regulatory agency or authority prohibiting the exercise of the 4 5 Purchase Options pursuant to this Agreement. The Option Period shall be extended for the time period that any such preliminary injunction or order shall be in effect that otherwise prohibits the exercise of a Purchase Option. To exercise the Purchase Options, Sub shall send a written notice (the "Notice") to the Stockholders identifying the place and date (not less than one nor more than 20 business days from the date of the Notice) for the closing of such purchase. The Sub shall not exercise the Purchase Options prior to the occurrence of a Termination Event. (b) Upon receipt of the Notice to the extent not previously exercised, contemporaneously with the closing of the purchase of the Option Shares, each Stockholder shall exercise in full the Options set forth opposite such Stockholder's name on Schedule II hereto. Subject to Section 2(d), for convenience purposes, in connection with such exercise of the Options, each Stockholder hereby gives the Company irrevocable notice of the exercise of his Options effective contemporaneously with the closing of the purchase of the Option Shares pursuant to the Purchase Option and the Company hereby acknowledges the effectiveness of such exercise. Each Stockholder also hereby irrevocably instructs the Company to issue (and the Company hereby agrees to issue) the Shares issuable upon such exercise in the name of Sub or its permitted assignee (and Sub or its permitted assignee shall be deemed the record owner thereof as of the date of such exercise so long as Sub or its permitted assignee timely tenders payment of the Purchase Price as provided herein) and Sub hereby agrees, on behalf of each Stockholder, to pay directly to the Company (by means of wire transfer or official bank check) such amount as may be necessary to fund the payment of the exercise price (without regard to any applicable withholding taxes) due and payable to the Company as a result of such exercise (with the aggregate amount of the Purchase Price due and payable to each Stockholder (or his designee) being reduced by the amount of any such payment made by Sub on behalf of such Stockholder and with the remaining amount of the Purchase Price otherwise due and payable to each Stockholder being paid directly to such Stockholder, as may be requested by the Company, net of any applicable withholding taxes required to be paid to the Company, by means of wire transfer or official bank check). Such payments to the Company (including such requested withholding taxes) and the Stockholders shall be made contemporaneously with the exercise of the Purchase Options and the delivery of the Option Shares thereunder, provided, that as to any Stockholder subject to Section 16(a) of the Exchange Act, payment to such Stockholder of any portion of the Purchase Price will be deferred (if necessary to avoid Section 16(b) liability) until the first date such payment can be made without liability to such Stockholder under Section 16(b) of the Exchange Act, but shall be paid as soon as practicable thereafter. (c) In the event that Sub has purchased the Option Shares pursuant to the Purchase Options, and, within one year after the date of such purchase, the Sub or any affiliate thereof sells, transfers, exchanges or disposes of any of the Option Shares in a transaction with a non-affiliate of Sub (a "Disposition") then, within two business days after the closing of such Disposition, Sub shall tender and pay to each Stockholder, in immediately available funds, their respective pro-rata share (calculated based on the respective amount of the Option Shares purchased from each Stockholder pursuant to the Purchase Options) of 25% of the Net Profit realized by Sub in connection with such Disposition. As used in this Section 3(c), Net Profit shall mean an amount equal to (i) the excess, if any, of the gross amount realized by Sub from a Disposition over (ii) the aggregate Purchase Price paid with respect to the Option Shares subject to such Disposition, with such excess being reduced by the sum of (A) all reasonable out-of-pocket fees, costs and expenses incurred by Sub and its affiliates in connection 5 6 with such Disposition, (including, without limitation, all fees, costs and expenses of counsel) which in no event shall exceed 1% of such Net Profit, and (B) all customary brokerage fees and commissions, if any, incurred in connection with such Disposition. (d) In the event that within the Option Period a Stockholder sells, transfers, exchanges, cancels or disposes of any of his Option Shares or Options in connection with or as a result of an Acquisition Proposal (an "Alternative Disposition") other than pursuant to Section 2 then, within two business days after the closing of such Alternative Disposition, such Stockholder shall tender and pay to Sub, in immediately available funds, its pro-rata share of 75% of the Net Profit realized by such Stockholder in connection with such Alternative Disposition. As used in this Section 3(d), Net Profit shall mean (i) in the case of outstanding Option Shares, an amount equal to the excess, if any, of (A) the gross amount realized by such Stockholder from an Alternative Disposition of outstanding Option Shares, over (B) the product of (x) the number of such Option Shares subject to such Alternative Disposition, multiplied by (y) the Purchase Price and (ii) in the case of Options, an amount equal to the excess, if any, of (A) the product of (x) the gross underlying per Share price otherwise paid in the Alternative Disposition and used in calculating the amount so realized by such Stockholder with respect to such Options in connection with such Alternative Disposition, multiplied by (y) the number of Option Shares subject to such Options, over (B) the product of (x) the number of Option Shares subject to such Options, multiplied by (y) the Purchase Price, with the aggregate of such excesses being reduced by the sum of (1) all reasonable out-of-pocket fees, costs and expenses incurred by such Stockholder in connection with such Alternative Disposition, (including, without limitation, all fees, costs and expenses of counsel, but excluding any withholding taxes) which in no event shall exceed 1% of such Net Profit, and (2) all customary brokerage fees and commissions, if any, incurred in connection with such Alternative Disposition. (e) As may be requested by Sub subsequent to a Termination Event but prior to the expiration of the Option Period each Stockholder shall tender his Shares as set forth on Schedule I hereto pursuant to any tender offer being made (at a per Share price greater than the Purchase Price) in connection with an Acquisition Proposal. (f) The Purchase Options shall terminate in full upon the consummation of the transactions (including, the tendering of all payments to be made thereunder) contemplated by Section 2. 4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. (a) Each Stockholder hereby, severally and not jointly and severally, represents and warrants to the other parties hereto as follows: (i) OWNERSHIP BY SHARES. Such Stockholder is either (A) the record and Beneficial Owner of, or (B) the Beneficial Owner but not the record holder of, the number of Shares and Options respectively set forth opposite the Stockholder's name on Schedule I and II hereto. As of June 24, 1997, the Shares and Options respectively set forth opposite such Stockholder's name on Schedules I and II hereto constitute all of the Shares and Options owned of record or Beneficially Owned by such Stockholder. Such Stockholder has sole 6 7 power to issue instructions with respect to the matters set forth in Sections 2 and 3 hereof, sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares set forth opposite such Stockholder's name on Schedule I hereto and all of the Options set forth opposite such Stockholder's name on Schedule II hereto, with no material limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (ii) POWER; BINDING AGREEMENT. Such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder's obligations under this Agreement. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by such Stockholder of the transactions contemplated hereby. If such Stockholder is married and such Stockholder's Shares or Options constitute community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, such Stockholder's spouse, enforceable against such person in accordance with its terms. (iii) NO CONFLICTS. Except for filings under the Exchange Act or if applicable the HSR Act (as to which, to the extent necessary, each Stockholder shall promptly make all such filings and use all reasonable efforts to respond to any requests for additional information) (A) no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with such Stockholder's ability to perform its obligations hereunder, and (B) none of the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to such Stockholder, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which such Stockholder is a party or by which such Stockholder or any of such Stockholder's properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or any of such Stockholder's properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of such Stockholder to perform its obligations hereunder. 7 8 (iv) NO ENCUMBRANCES. Except as required by Sections 2 and 3 and liens or security interests that will be released at the closing, if any, of a purchase under the Purchase Options or a closing under Section 2 as may be applicable, such Stockholder's Shares and the certificates representing such Shares are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever. (v) NO FINDER'S FEES. No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Stockholder. (vi) NO SOLICITATION. Each Stockholder shall, in its capacity as such, comply with the terms of Section 5.1(e) of the Nortek Agreement. (vii) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. During the Option Period, except as required by this Agreement, such Stockholder shall not, directly or indirectly without the consent of Sub: (A) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of such Stockholder's Shares, Options or any interest therein, (B) grant any proxies of powers of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares, or (C) exercise any of his Options (except to prevent the impending expiration thereof), or (D) take any action that could reasonably be expected to have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement, except in the case of clause (A) or (D) any transfer of Shares that occurs by operation of law. (viii) WAIVER OF APPRAISAL RIGHTS. Such Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that the Stockholder may have. (ix) FURTHER ASSURANCES. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. (b) Parent and Sub hereby represents and warrants to each of the other parties hereto as follows: (i) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with adequate corporate power and authority to own its properties and carry on its business as presently conducted. Each of Parent and Sub has the corporate power 8 9 and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. (ii) NO CONFLICTS. Except, if applicable, for filings under the HSR Act, (A) no filing with, and no permit, authorization, consent or approval of, any state or federal pubic body or authority is necessary for the execution of this Agreement by either Parent or Sub and the consummation by Parent and Sub of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with its ability to perform its obligations hereunder, and (B) none of the execution and delivery of this Agreement by Parent or Sub, the consummation by Parent or Sub of the transactions contemplated hereby or compliance by Parent and Sub with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to Parent or Sub, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Parent or Sub is a party or by which Parent or Sub or any of Parent's or Sub's properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Parent or Sub or any of Parent's or Sub's properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Parent or Sub to perform its obligations hereunder. (iii) EXECUTION, DELIVERY AND PERFORMANCE BY PARENT AND SUB. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Parent and Sub, and each of Parent and Sub has taken all other actions required by law, its Certificate of Incorporation and its Bylaws in order to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and binding obligations of Parent and Sub and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally. (c) Nortek and NTK hereby represents and warrants to each of the other parties hereto as follows: (i) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Nortek and NTK is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with adequate corporate power and authority to own its properties and carry on its business as presently conducted. Each of Nortek and NTK has the corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. 9 10 (ii) NO CONFLICTS. Except, if applicable, for filings under the Exchange Act and the HSR Act, (A) no filing with, and no permit, authorization, consent or approval of, any state or federal pubic body or authority is necessary for the execution of this Agreement by either Nortek or NTK and the consummation by Nortek and NTK of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with its ability to perform its obligations hereunder, and (B) none of the execution and delivery of this Agreement by Nortek or NTK, the consummation by Nortek or NTK of the transactions contemplated hereby or compliance by Nortek and NTK with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to Nortek or NTK, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Nortek or NTK is a party or by which Nortek or NTK or any of Nortek's or NTK's properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Nortek or NTK or any of Nortek's or NTK's properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of Nortek or NTK to perform its obligations hereunder. (iii) EXECUTION, DELIVERY AND PERFORMANCE BY NORTEK AND NTK. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Nortek and NTK, and each of Nortek and NTK has taken all other actions required by law, its Certificate of Incorporation and its Bylaws in order to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and binding obligations of Nortek and NTK and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally. (d) The Company hereby represents and warrants to each of the other parties hereto as follows: (i) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with adequate corporate power and authority to own its properties and carry on its business as presently conducted. The Company has the corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. (ii) NO CONFLICTS. Except, if applicable, for filings under the HSR Act, (A) no filing with, and no permit, authorization, consent or approval of, any state or federal pubic body or authority is necessary for the execution of this Agreement by the Company 10 11 and the consummation by the Company of the transactions contemplated hereby, except where the failure to obtain such consent, permit, authorization, approval or filing would not interfere with its ability to perform its obligations hereunder, and (B) none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to the Company, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which the Company is a party or by which the Company or any of the Company's properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Company or any of the Company's properties or assets, in each such case except to the extent that any conflict, breach, default or violation would not interfere with the ability of the Company to perform its obligations hereunder. (iii) EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company, and the Company has taken all other actions required by law, its Certificate of Incorporation and its Bylaws in order to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and binding obligations of the Company and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally. 5. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Sub that during the Option Period such Stockholder shall not request that the Company register (and the Company agrees not to register) the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholder's Shares, unless such transfer is made in compliance with this Agreement. 6. RECAPITALIZATION. In the event of a stock dividend or distribution, or any change in the Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged and the Purchase Price shall be amended as may be appropriate to reflect such event. 7. MERGER AGREEMENT. Parent, Sub and the Company hereby agree that the provisions of Section 6.11 (insofar as it relates to the transactions contemplated by this Agreement) and Section 9.2 of the Merger Agreement remain in full force and effect notwithstanding the termination of the Merger Agreement and that such Sections of the Merger Agreement are by reference 11 12 incorporated herein and made a part hereof. In addition, the Company hereby acknowledges that the transactions contemplated herein have been previously approved by its Board of Directors for purposes of Section 203 of the Delaware General Corporation Law, as amended. Atrium Corporation, Parent and Sub hereby acknowledge that the Merger Agreement has been properly terminated by the Company in accordance with its terms. 8. STOCKHOLDER CAPACITY. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such director or officer and nothing herein shall limit or affect any action taken by such person in his or her capacity as a director or officer. Each Stockholder signs solely in his or her capacity as the record and beneficial owner of, or the trustee of a trust whose beneficiaries are the beneficial owners of, such Stockholder's Shares or Options. 9. OTHER ACTIONS. Except as contemplated by Section 2 or by operation of law, during the Option Period no Stockholder may take any action (including, without limitation, any cashless exercise of any Option except with respect to an Option that would otherwise expire unless so exercised) or enter into any agreement or waiver, which would adversely affect Sub's rights under the Purchase Options or the benefits to be derived by Sub from an exercise of the Purchase Options. 10. RELEASE. Effective as of an Acquisition Event, each of the Company, Nortek and NTK hereby releases and discharges Parent, Sub and Atrium Corporation, together with their respective officers, directors, employees, representatives and agents (collectively the "Released Parties") from any and all liabilities, claims, causes of actions or demands of any nature whatsoever (including, without limitation, arising under the Merger Agreement) that any of them may have or claim to have (including, without limitation, the reservation made in that certain letter of July 24, 1997 from the Company to Parent, Sub and Atrium Corporation giving notice of the Company's termination of the Merger Agreement) which are directly or indirectly attributable to or otherwise related to the payment of $12,000,000 made by the Company on July 24, 1997 pursuant to that certain letter of July 24, 1997 from the Parent to the Company, regardless of whether any such liabilities, claim, cause of action or demand is known or unknown, matured or contingent or liquidated or unliquidated. Prior to the occurrence of an Offer Termination Event, the Company agrees not to initiate any proceedings against any of the Released Parties with respect to any of the liabilities, claims, causes of actions or demands described in the foregoing release. Notwithstanding any provision contained herein to the contrary, the provisions of this Section 10 shall remain in full force and effect and shall survive any termination or expiration of this Agreement and the consummation of any of the transactions contemplated herein. As used in this Section 10, an "Acquisition Event" shall mean the first to occur of (i) the acceptance of any Shares for payment pursuant to the Offer, (ii) the consummation of the Merger or (iii) the consummation of any Acquisition Proposal with Nortek or any of its affiliates. 11. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. (b) CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and Options and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares or Options shall pass, whether by operation of law or otherwise, including, without limitation, such Stockholder's heirs, guardians, administrators or successors. Notwithstanding any transfer of Shares or Options, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. 12 13 (c) ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other parties, provided that Parent may assign, in its sole discretion, its rights and obligations hereunder to any affiliate of Parent or, after a Termination Event, to any person making an Acquisition Proposal, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. (d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto; provided that either Schedule I or II hereto may be supplemented by Parent by adding the name and other relevant information concerning any stockholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement; provided further that after a Termination Event, this Agreement may be amended, changed, supplemented, waived or otherwise modified or terminated without the consent of, or the execution of any written agreement on the part of, Nortek and NTK, so long as such amendment, change, supplement, waiver or modification does not increase the obligations of either Nortek or NTK hereunder. (e) NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses or the addresses set forth on the signature pages hereto: If to Mr. Silverman: Jeffrey S. Silverman At his home address as supplementally provided to the parties hereto. copy to: Squadron Ellenoff Plesent & Sheinfeld 551 5th Avenue New York, New York 10176 Attn: Joel I. Papernik Telecopy: (212) 697-6686 If to Mr. Dooskin: Herbert P. Dooskin At his home address as supplementally provided to the parties hereto. copy to: Squadron Ellenoff Plesent & Sheinfeld 551 5th Avenue New York, New York 10176 13 14 Attn: Joel I. Papernik Telecopy: (212) 697-6686 If to Mr. Snyder: Dana R. Snyder At his home address as supplementally provided to the parties hereto. copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attn: Richard D. Bohm Telecopy: (212) 909-6836 If to Parent or Sub: Atrium Acquisition Holdings Corp. and Atrium/PG Acquisition Corp. 1341 West Mockingbird Lane Suite 1200 West Dallas, Texas 75247 Attn: Randall Fojtasek Telecopy: (214) 630-5013 copies to: Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court, Suite 1600 Dallas, Texas 75201 Attn: Jeffrey S. Fronterhouse Telecopy: (214) 740-7313 Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court, Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. Telecopy: (214) 740-7313 Vinson & Elkins L.L.P. 3700 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201-2975 Attn: A. Winston Oxley Telecopy: (214) 999-7891 14 15 If to the Company: Ply Gem Industries, Inc. 777 Third Avenue New York, New York 10017 Attn: Jeffrey S. Silverman Telecopy: (212) 888-0472 copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attn: Victor Lewkow Telecopy: (212) 225-3999 If to Nortek or NTK: Nortek, Inc. and NTK Sub, Inc. 50 Kennedy Plaza Providence, RI 02903 Attn: Richard L. Bready Telecopy: (401) 751-4610 copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attn: David C. Chapin, Esq. Telecopy: (617) 951-7050 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. (f) SEVERABILITY. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. (g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 15 16 (h) REMEDIES CUMULATIVE. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. (i) NO WAIVER. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. (j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto; provided that, in the event of a Stockholder's death, the benefits to be received by the Stockholder hereunder shall inure to his successors and heirs. (k) GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (l) JURISDICTION. Each party hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery in the State of Delaware in any action, suit or proceeding arising in connection with this Agreement, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein); provided, however, that such consent to jurisdiction is solely for the purpose referred to in this paragraph (l) and shall not be deemed to be a general submission to the jurisdiction of said Court or in the State of Delaware other than for such purposes. Each party hereto hereby waives any right to a trial by jury in connection with any such action, suit or proceeding. (m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. (n) COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. This Agreement shall not be effective as to any party hereto until such time as this Agreement or a counterpart thereof has been executed and delivered by each party hereto. (o) PRIOR AGREEMENT. This agreement is executed and delivered as an Amendment and Restatement of that certain Stockholders Agreement dated as of June 24, 1997, between the parties hereto and this Agreement shall supersede such prior agreement in its entirety. 16 17 (p) TRUST FUNDS. In the event that any party hereto should receive any funds that are to be paid to another party pursuant to the terms of this Agreement, then the receiving party shall hold such funds in trust for the benefit of the party entitled to receive such funds and shall promptly pay such funds to the party entitled to receive such funds in accordance with this Agreement. 12. ACKNOWLEDGMENT BY COMPANY. The parties hereby acknowledge and agree that the acceptance of any Shares for payment pursuant to the Offer or other tender offer for a majority of the outstanding Shares will constitute a "change of control" under the terms of the various agreements governing the Options set forth on Schedule II hereto and that for purposes of the transactions contemplated by this Agreement all restrictions on transferability and vesting applicable to any of the Unvested Stock or restricted Shares on Schedule I hereto shall be terminated. 17 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this 24th day of July, 1997. /s/ Jeffrey S. Silverman ----------------------------------- Jeffrey S. Silverman /s/ Dana R. Snyder ----------------------------------- Dana R. Snyder /s/ Herbert P. Dooskin ----------------------------------- Herbert P. Dooskin Atrium Acquisition Holdings Corp. By: /s/ Jeffrey Fronterhouse -------------------------------- Name: Jeffrey Fronterhouse ------------------------------ Title: Executive Vice President ----------------------------- Atrium/PG Acquisition Corp. By: /s/ Jeffrey Fronterhouse ---------------------------------- Name: Jeffrey Fronterhouse -------------------------------- Title: Executive Vice President ------------------------------- Ply Gem Industries, Inc. By: /s/ Jeffrey S. Silverman ---------------------------------- Name: Jeffrey S. Silverman -------------------------------- Title: Chairman ------------------------------- 18 19 Nortek, Inc. By: /s/ Kevin W. Donnelly -------------------------------------- Name: Kevin W. Donnelly ------------------------------------ Title: Vice President and General Counsel ----------------------------------- NTK Sub, Inc. By: /s/ Kevin W. Donnelly -------------------------------------- Name: Kevin W. Donnelly ------------------------------------ Title: Vice President ----------------------------------- 19 20 SCHEDULE I TO STOCKHOLDERS AGREEMENT
NAME OF STOCKHOLDER NUMBER OF SHARES OWNED ------------------- ---------------------- Herbert P. Dooskin 1,337 Dana R. Snyder 3,747 Jeffrey S. Silverman 1,130,177 Jeffrey S. Silverman, Restricted Stock 100,000
Excludes shares owned by pension/profit share/401(K)/TRA Plans. 21 SCHEDULE II TO STOCKHOLDERS AGREEMENT
OPTION NUMBER OF OPTION NAME DATE SHARES PRICE TYPE - ------------------------------------ -------- --------- -------- -------- Herbert P. Dooskin 01/28/88 8,000 $10.750 ISO 01/28/88 75,000 10.750 NQSO 01/28/88 75,000 10.750 Note 1 01/26/89 75,000 12.250 NQSO 01/26/89 75,000 12.250 Note 1 01/26/89 8,000 12.250 ISO 01/23/92 10,000 9.750 ISO 11/24/92 75,000 10.250 NQSO 01/29/93 75,000 12.000 NQSO 05/20/93 9,000 10.375 ISO 11/07/94 50,000 19.125 NQSO Jeffrey S. Silverman 01/28/88 300,000 10.750 NQSO 01/28/88 300,000 10.750 Note 1 01/26/89 300,000 12.250 NQSO 01/26/89 300,000 12.250 Note 1 11/24/92 325,000 10.250 NQSO 01/29/93 513,500 12.000 NQSO 05/20/93 9,000 10.375 ISO 11/07/94 750,000 19.125 NQSO 08/20/96 750,000 12.500 NQSO Note 1. Options on Change of Control Dana R. Snyder 06/02/95 6,250 16.000 ISO 06/02/95 293,750 16.000 NQSO 10/27/95 250,000 16.000 NQSO 01/02/96 6,060 16.500 ISO 01/02/96 210,782 16.500 NQSO 08/20/96 33,158 12.500 NQSO 08/20/96 116,842 12.500 NQSO
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