-----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, NQ3jOOVx1W3l+Z/Q6rCUYl7W67ODSOXEHCtmYdybIdvA4hZSSgflDULpMP9dJp1w BB19ZcvnMp6VCodcYNy55Q== 0000950123-02-006776.txt : 20020703 0000950123-02-006776.hdr.sgml : 20020703 20020703173020 ACCESSION NUMBER: 0000950123-02-006776 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 21 FILED AS OF DATE: 20020703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATED MATERIALS INC CENTRAL INDEX KEY: 0000802967 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 751872487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-92010 FILM NUMBER: 02696847 BUSINESS ADDRESS: STREET 1: 2200 ROSS AVE STE 4100 E CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2142204600 MAIL ADDRESS: STREET 1: 2200 ROSS AVENUE STREET 2: SUITE 4100 EAST CITY: DALLAS STATE: TX ZIP: 75201 S-4 1 y61690sv4.txt ASSOCIATED MATERIALS INCORPORATED AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 2002 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- ASSOCIATED MATERIALS INCORPORATED (Exact Name of Registrant as Specified in Its Charter) DELAWARE 3089 75-1872487 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number)
--------------------- 3773 STATE ROAD CUYAHOGA FALLS, OHIO 44223 (800) 257-4335 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) --------------------- D. KEITH LAVANWAY ASSOCIATED MATERIALS INCORPORATED 3773 STATE ROAD CUYAHOGA FALLS, OHIO 44223 (800) 257-4335 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) --------------------- WITH COPIES TO: JOHN M. REISS, ESQ. JONATHAN E. KAHN, ESQ. WHITE & CASE LLP 1155 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10036 (212) 819-8200 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this registration statement. --------------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) FEE(2)(3) - --------------------------------------------------------------------------------------------------------------------------- 9 3/4% Senior Subordinated Notes due 2012................................. $165,000,000 100% $165,000,000 $15,180.00 - --------------------------------------------------------------------------------------------------------------------------- Guarantees of Senior Subordinated Notes due 2012............................. -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee in accordance with Rule 457 under the Securities Act. (2) The registration fee for the securities offered hereby has been calculated under Rule 457(f)(2) of the Securities Act. (3) No separate consideration will be received for the Guarantees, and, therefore, no additional registration fee is required. --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JULY 3, 2002 PROSPECTUS ASSOCIATED MATERIALS INCORPORATED OFFER TO EXCHANGE REGISTERED 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 FOR ALL ISSUED AND OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 --------------------- This prospectus and the accompanying letter of transmittal relate to the proposed offer by Associated Materials Incorporated ("we," "us" or "our company") to exchange up to $165,000,000 in aggregate principal amount of our new 9 3/4% senior subordinated notes due 2012 for a like aggregate principal amount of our issued and outstanding 9 3/4% senior subordinated notes due 2012. We refer to the new notes we are issuing in this exchange offer as the exchange notes. We sometimes refer to the outstanding notes and the exchange notes collectively as the notes. Material terms of the exchange offer: - The terms of the exchange notes we will issue in the exchange offer will be substantially identical to the terms of the outstanding notes, except that transfer restrictions and registration rights relating to the outstanding notes will not apply to the exchange notes. - The exchange offer expires at 5:00 p.m., New York City time, , 2002, unless we extend it. - All outstanding notes that are validly tendered in the exchange offer and not withdrawn will be exchanged. - Tenders of outstanding notes may be withdrawn at any time before the expiration of the exchange offer. - Any outstanding notes not validly tendered will remain subject to existing transfer restrictions. - There is no public market for the notes. We do not intend to have the notes listed on any securities exchange or quoted on any quotation system. - The exchange of outstanding notes for exchange notes will not be a taxable transaction for U.S. federal income tax purposes, but you should see the discussion under the heading "Certain United States Federal Income Tax Considerations" on page 126 for more information. - We will not receive any proceeds from the exchange offer and we will pay the expenses of the exchange offer. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal relating to the exchange offer states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Investing in the exchange notes involves risks. SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- The date of this prospectus is , 2002. TABLE OF CONTENTS
PAGE ---- AVAILABLE INFORMATION................. i NOTICE TO NEW HAMPSHIRE RESIDENTS..... ii FORWARD-LOOKING STATEMENTS.......................... ii MARKET DATA........................... iii PROSPECTUS SUMMARY.................... 1 RISK FACTORS.......................... 14 USE OF PROCEEDS....................... 22 CAPITALIZATION........................ 23 THE TRANSACTIONS...................... 24 UNAUDITED PRO FORMA FINANCIAL INFORMATION......................... 25 SELECTED HISTORICAL FINANCIAL DATA.... 35 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 37 BUSINESS.............................. 49
PAGE ---- THE EXCHANGE OFFER.................... 58 MANAGEMENT............................ 69 DESCRIPTION OF CAPITAL STOCK.......... 74 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................ 75 PRINCIPAL STOCKHOLDERS................ 78 DESCRIPTION OF CERTAIN INDEBTEDNESS... 80 DESCRIPTION OF THE NOTES.............. 83 BOOK-ENTRY, DELIVERY AND FORM......... 122 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.................. 126 PLAN OF DISTRIBUTION.................. 127 LEGAL MATTERS......................... 127 EXPERTS............................... 127 INDEX TO FINANCIAL STATEMENTS......... F-1
--------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT. We have not authorized any dealer, salesperson, or other person to give any information or represent anything not contained in this prospectus or the accompanying letter of transmittal. You must not rely on any unauthorized information. This prospectus and the accompanying letter of transmittal do not offer to sell or ask you to buy any securities in any jurisdiction where it is unlawful. The information contained in this prospectus is current as of , 2002. AVAILABLE INFORMATION This prospectus forms a part of a registration statement that we filed with the Securities and Exchange Commission, or the Commission, on Form S-4 under the Securities Act of 1933, as amended, in connection with the offering of the exchange notes. You will find additional information about us and the exchange notes in the registration statement. We are currently not subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, but will become subject to those requirements in connection with the exchange offer. Accordingly, we will file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the Commission as long as we are required to do so under the Exchange Act. You may read and copy any document we file at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. Our Commission filings also will be available to the public from commercial document retrieval services and at the Internet world wide website maintained by the Commission at http: www.sec.gov. In addition, you may request a copy of these documents at no cost to you, by writing or telephoning us at: Associated Materials Incorporated, 3773 State Road, Cuyahoga Falls, Ohio 44223, telephone number: (800) 257-4335 (Attention: Corporate Secretary). Our common stock was traded on The Nasdaq National Market (Symbol: SIDE). Following the completion of the merger, our common stock was delisted from The Nasdaq National Market. On April 19 and April 24, 2002, we filed a Form 15 with the Commission suspending our obligations to file reports under Sections 12(g) and 15(d) of the Exchange Act. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED, 1955, AS AMENDED ("RSA 421-B"), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this prospectus, including, without limitation, statements under the captions "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and other statements located elsewhere in this prospectus, in each case regarding the prospects of our industry and our prospects, plans, financial position and business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "intend," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives of these terms or variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. The following factors are among those that may cause actual results to differ materially from our forward-looking statements: - changes in home building industry, economic, interest rates and other conditions; - changes in availability of consumer credit, employment trends, levels of consumer confidence and consumer preferences; - changes in raw material costs and availability; - changes in national and regional trends in new housing starts; - changes in weather conditions; - our ability to comply with certain financial covenants in our loan documents; - increase in competition from other manufacturers of vinyl building products as well as alternative building products; ii - increase in our indebtedness; - increase in costs of environmental compliance; and - the other factors discussed under the heading "Risk Factors" and elsewhere in this prospectus. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. These forward-looking statements speak only as of the date of this prospectus. We do not intend to update these statements unless the securities laws require us to do so. MARKET DATA Market data and other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well as the independent sources listed above. Industry reports referred to herein are from the most recently available industry study jointly prepared by Sabre Associates, Inc. and Pure Strategy in 1998 and other independent industry sources. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness. iii PROSPECTUS SUMMARY This summary may not contain all of the information that may be important to you. You should read this summary together with the entire prospectus, including the more detailed information in our financial statements and the accompanying notes appearing elsewhere in this prospectus. Unless otherwise indicated, information presented on a pro forma basis gives effect to the merger and related transactions discussed under "The Transactions" and the sale of our AmerCable division. Unless the context otherwise requires, all references to "us," "we," "our" and "our company" refer to Associated Materials Incorporated both before and after the merger, in each case, with its subsidiaries. COMPANY OVERVIEW We are a leading, vertically integrated manufacturer and nationwide distributor of exterior residential building products. These products are marketed through our Alside division on a wholesale basis to more than 35,000 professional contractors engaged in home repair and remodeling and new home construction. We distribute our products primarily through our nationwide network of over 80 supply centers operating under the Alside(R) brand name. In 2001, Alside accounted for more than 88% of our total net sales and, following the sale of our AmerCable division, currently represents all of our operations. See "-- Recent Developments". For the twelve months ended December 31, 2001, on a pro forma basis, we generated total net sales and Adjusted EBITDA of $524.5 million and $56.6 million, respectively. For the twelve months ended December 31, 2001, on a pro forma basis including our AmerCable division, we generated total net sales and Adjusted EBITDA of $595.8 million and $64.9 million, respectively. For the quarter ended March 31, 2002, on a pro forma basis, we generated total net sales and Adjusted EBITDA of $111.1 million and $4.1 million, respectively. For the quarter ended March 31, 2002, on a pro forma basis including our AmerCable division, we generated total net sales and Adjusted EBITDA of $123.2 million and $4.7 million, respectively. The core products we manufacture and distribute are vinyl siding and vinyl windows which together comprised approximately 71% of Alside's 2001 net sales. We also manufacture and distribute vinyl fencing, decking and railing, and vinyl garage doors and distribute other complementary products which are manufactured by third parties. Approximately two thirds of Alside's products are sold to contractors engaged in the home repair and remodeling market with one third sold to the new construction market. Our supply centers provide "one stop" shopping to our contractor customers, carrying products, accessories and tools necessary to complete a vinyl siding or window project. In addition, our supply centers provide high quality product literature, product samples and installation training to these customers. We believe that the strength of our products and distribution network has developed strong brand loyalty and long-standing relationships with local contractors and has enabled us to consistently gain market share over the last five years. Approximately 80% of Alside's 2001 net sales were generated through our network of supply centers with the remainder sold through independent distributors primarily in markets where we currently do not have supply centers. Due to our vertically integrated distribution strategy, innovative new product development and operational excellence, we have consistently generated sales growth in excess of industry averages. From 1996 to 2001, we generated a compounded annual growth rate in our net sales and EBITDA of 10.7% and 16.2%, respectively. In 2001, our net sales and EBITDA grew by 19.3% and 28.8%, respectively, over the prior year. We believe that our historical investment in manufacturing and distribution capabilities and our initiatives to reduce costs and enhance operating efficiencies throughout our production, distribution and supply chain provide us with a strong platform for future growth and profitability. INDUSTRY OVERVIEW Demand for residential building products is driven by a number of factors, including consumer confidence, availability of credit, new housing starts and general economic cycles. Historically, the demand for repair and remodeling products, where we are primarily focused, has been less cyclical than demand for 1 new home construction and is less sensitive to these factors. Drivers of repair and remodeling demand include: - Favorable demographics. The segment of the population age 55 years and above, which favors professionally installed, low maintenance home improvements, is estimated to grow by 25% over the next five years and 50% over the next ten years. - Aging of the housing stock. The average home age increased from 23 years in 1985 to 29 years in 2000, and over 70% of the current housing stock was built prior to 1980. - Increase in average home size. The average home size increased over 25% from 1,785 square feet in 1985 to 2,306 square feet in 2000. In addition, repair and remodeling projects tend to utilize a greater mix of premium products with higher margins than those used in new construction projects. We estimate that the residential vinyl siding and vinyl window markets are approximately $1.7 billion and $3.4 billion in size, respectively. Over the last 15 years, vinyl has commanded an increasing share of the total residential siding and window markets. Vinyl has greater durability, requires less maintenance and provides greater energy efficiency than many competing siding and window products. According to industry reports, based on unit sales, vinyl accounted for approximately 50% of the exterior siding market and approximately 51% of the residential window market in 1998. Vinyl competes with wood, masonry, fiber cement and metal in the siding market and wood and aluminum in the window market. OUR COMPETITIVE STRENGTHS The following competitive strengths have contributed to our growth and have enabled us to gain market share over the last five years within the U.S. siding and window markets. Nationwide Distribution Network of Company-Owned Supply Centers. We are one of only two major vinyl siding manufacturers in the United States that markets products primarily through a company-owned distribution network. Our national distribution network offers us a dedicated channel compared to most of our competitors who rely on local third party distributors who generally carry an assortment of brands and may not focus on any particular brand. We believe that distributing our vinyl siding and window products through our nationwide network of over 80 Alside supply centers helps us to: (1) build long-standing customer relationships and Alside brand loyalty; (2) develop comprehensive, customized marketing programs to assist our contractor customers; (3) closely monitor developments in local customer preferences; and (4) ensure product availability through integrated logistics between our manufacturing and distribution. Our supply center network has enabled us to grow substantially faster than the industry. Our vinyl siding unit sales grew at a five year compounded annual growth rate of 9.2% as compared to an industry average of 2.0% over the same period and our vinyl window unit sales grew at a five year compounded annual growth rate of 12.7% as compared to an industry average of 5.8%. Broad Product Offering. We offer a diverse mix of vinyl siding and vinyl window products to both the repair and remodeling and new construction markets across all price points: premium, standard and economy. Including our manufactured products and products manufactured by third parties, our supply centers sell more than 2,000 building and remodeling products. Our broad product offering enables us to meet the specialized needs of our customers and diversify our sales across all segments of the market. Most of these products are sold under the Alside brand and are recognized for their quality and durability. Our product offering includes the well-known Charter Oak, Preservation, Seneca, Conquest and Landscape vinyl siding products, and the UltraMaxx, Excalibur, Centurion and Alpine vinyl window products. Low-Cost and Vertically Integrated Operations. We believe that we are a low-cost manufacturer as a result of our manufacturing expertise, state-of-the-art technology and economies of scale. Our Alside division has seven manufacturing facilities that produce vinyl siding, windows and other vinyl 2 products. During the last three years, we invested approximately $35 million of capital in Alside, most of which was used in upgrading our manufacturing facilities. This has resulted in significant operating efficiency and increased capacity for meeting future growth needs. Within our window operations, our ability to produce vinyl extrusions, coupled with our high-speed welding and cleaning equipment, provides us with cost and quality advantages over other vinyl window manufacturers. BUSINESS STRATEGY We seek to distinguish ourselves from other suppliers of residential building products and to sustain our profitability momentum through a business strategy focused on the following: Increase Sales at Existing Supply Centers. We plan to increase sales at each of our supply centers by continuing to: (1) enhance the vinyl siding and window product offering and expand third party products to offer a comprehensive package to appeal to a broad range of market segments; (2) utilize our highly trained sales force to maximize opportunities with existing customers and identify and capture new customers; and (3) allow supply centers to quickly respond to local market dynamics and take advantage of local market opportunities. Expand Supply Center Network. We intend to selectively expand our distribution network. We will continue to open additional supply centers in markets where we already have a presence, allowing us to gain additional market share in these attractive markets. Increase Focus on other Distributed Products. We will continue to focus on maximizing incremental revenue and margin opportunities from products which Alside does not manufacture. As part of this strategy we plan to identify additional products to sell through our supply centers to better serve our contractor customers. In addition, we intend to leverage our purchasing power by centralizing the purchasing decisions for high-volume distributed products. Develop Innovative Products. We plan to capitalize on our vinyl manufacturing expertise by continuing to develop and introduce innovative new products that offer performance, cost and other advantages. These efforts have led to several new product introductions in recent years including Preservation, the first bundled vinyl siding and vinyl window program in the industry; CenterLock, a vinyl siding product with a unique locking mechanism; Eclipse, the industry's only flat-seam vinyl siding; and Landscape, an economy vinyl siding product with enhanced rigidity providing the appearance of a higher end product. Our strong customer relationships provide valuable insight into the latest consumer preferences and product attributes that appeal to contractors. Drive Operational Excellence. We will continue to capitalize on opportunities to reduce costs, increase customer service levels and reduce lead times. We have historically identified similar opportunities and have subsequently executed strategic initiatives that resulted in increased profitability and revenue growth. For example, in 2000 and 2001 we targeted process efficiency opportunities in our window operations through system upgrades, flow realignment, and personnel-related initiatives. The successful implementation of this strategy raised our on-time deliveries to over 98% while increasing unit volume by over 48% (excluding our acquisition of Alpine) in 2001. THE TRANSACTIONS On March 16, 2002, Associated Materials Incorporated, Associated Materials Holdings Inc. and its wholly owned subsidiary, Simon Acquisition Corp. entered into a merger agreement pursuant to which, among other things, each stockholder of Associated Materials Incorporated received $50.00 in cash for each share of Associated Materials Incorporated stock. Associated Materials Holdings Inc. is controlled by affiliates of Harvest Partners, Inc. In connection with the merger agreement and related documents, the following transactions were completed, which we refer to as the "transactions": - a cash tender offer by Simon Acquisition Corp. for 100% of the shares of common stock of Associated Materials Incorporated at a price of $50.00 per share; 3 - an investment in Associated Materials Holdings Inc. made by affiliates of Harvest Partners, Inc. and other equity investors, including $7.2 million of rollover equity by certain members of management, totaling approximately $172 million; - the merger of Simon Acquisition Corp. into Associated Materials Incorporated, with Associated Materials Incorporated as the surviving corporation; - the borrowing by Associated Materials Incorporated of approximately $125 million in term loans under a new credit facility. The new credit facility includes a $40 million revolving credit facility for working capital and general corporate purposes; - a debt tender offer and consent solicitation by Associated Materials Incorporated for all $75 million aggregate principal amount of its 9 1/4% senior subordinated notes; and - the offering of $165 million aggregate principal amount of the outstanding notes. The equity tender offer expired on April 18, 2002. Over 90% of the outstanding shares of common stock of Associated Materials Incorporated were tendered and Simon Acquisition Corp. merged into Associated Materials Incorporated on April 19, 2002. Associated Materials Incorporated is now a wholly owned subsidiary of Associated Materials Holdings Inc., which is controlled by affiliates of Harvest Partners, Inc. The debt tender offer expired on April 18, 2002. Approximately $74 million aggregate principal amount of the existing 9 1/4% notes was tendered. Subsequent to the merger, we commenced a change of control offer pursuant to the indenture governing the existing 9 1/4% notes to purchase the existing 9 1/4% notes not tendered in the debt tender offer. The change of control offer expired on June 21, 2002 and approximately $0.1 million aggregate principal amount of such notes was tendered and accepted. We intend to discharge the remaining approximately $0.9 million outstanding 9 1/4% notes pursuant to the indenture governing the such notes. We may also, from time to time, purchase such notes through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine. We expect that all discharged notes will be redeemed on or after March 1, 2003 at 104.625% of the principal amount of such notes ($1,046.25 per $1,000 principal amount of such notes), plus accrued and unpaid interest, if any, to the date of purchase. We have summarized below the sources and uses of funds for the above mentioned transactions (other than the change of control offer related to the existing 9 1/4% notes).
SOURCES ($ IN MILLIONS) ------- --------------- New credit facility........... $125.0 9 3/4% senior subordinated notes due 2012(1)........... 165.0 Equity financing(2)........... 172.0 Cash on hand.................. 4.8 ------ $466.8 ======
USES ($ IN MILLIONS) - ---- --------------- Purchase of equity of Associated Materials Incorporated............... $360.8 Debt tender offer(3)......... 82.3 Transaction costs(4)......... 23.7 ------ $466.8 ======
- --------------- (1) The equity tender offer closed on April 19, 2002, prior to the closing of the offering of the notes on April 23, 2002, and we borrowed under a $215 million unsecured interim credit facility to complete the equity tender offer. The proceeds from the offering of the notes along with proceeds from the term loan under the new credit facility was used to repay the interim credit facility. (2) Approximately $172 million of the equity financing was contributed by affiliates of Harvest Partners, Inc. and other equity investors, including members of management. (3) Represents the purchase of approximately $74 million aggregate principal amount of the 9 1/4% senior subordinated notes plus a tender premium of $7.3 million and accrued interest. 4 (4) Includes discounts to the initial purchasers, bank fees, financial advisory fees and legal, accounting and other costs payable or reimbursable in connection with the transactions. RECENT DEVELOPMENTS On June 24, 2002, we completed the sale of our AmerCable division to AmerCable Incorporated, a newly-formed entity controlled by members of AmerCable management and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. We used the net proceeds to repay a portion of our new credit facility in accordance with certain terms thereof. AmerCable is a leading manufacturer of specialty electrical cable products primarily used in the mining, marine and offshore drilling industries. In 2001, AmerCable accounted for approximately 12% of our total net sales. ------------------------ OUR SPONSOR Affiliates of Harvest Partners, Inc. control our board of directors. Harvest Partners, Inc., founded in 1981, is a private equity sponsor with approximately $1 billion of invested and committed capital. Harvest Partners, Inc., whose investments include Career Horizons, Inc., Global Power Equipment Group Inc. (NYSE: GEG), Home Care Industries, Inc., Home Care Supply, Inc., IntelliRisk Management Corp., and Symbol Technologies, Inc., focuses on management buyouts and growth financings of profitable, middle-market specialty services, manufacturing and value-added distribution businesses, with a particular emphasis on multinational transactions. Harvest Partners, Inc. has significant capital available through its managed funds, into which numerous U.S., European and Asian industrial corporations and financial institutions have invested. ------------------------ Our principal executive office is located at 3773 State Road, Cuyahoga Falls, Ohio 44223 and our telephone number there is (800) 257-4335. We were incorporated in Delaware in 1983. 5 THE EXCHANGE OFFER The following is a summary of the principal terms of the exchange offer. A more detailed description is contained in this prospectus under the section entitled "The Exchange Offer." The Exchange Offer............ We are offering to exchange all of our outstanding notes for $165 million principal amount of exchange notes. The terms of the exchange and outstanding notes are substantially identical in all respects, including principal amount, interest rate and maturity, except that the exchange notes are in general freely transferable and are not subject to any covenant regarding registration under the Securities Act. To be exchanged, an outstanding note must be properly tendered and accepted. Unless we terminate the exchange offer, all outstanding notes that are validly tendered and not validly withdrawn will be exchanged. We will issue the exchange notes promptly after the expiration of the exchange offer. Expiration Date............... The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we decide to extend this expiration date. In that case, the phrase "expiration date" will mean the latest date and time to which we extend the exchange offer. Conditions to the Exchange Offer......................... We may terminate or amend the exchange offer if: - any legal proceeding or government action materially impairs our ability to complete the exchange offer, or - any SEC rule, regulation or interpretation materially impairs the exchange offer. We may waive any or all of these conditions. At this time, there are no adverse proceedings, actions or developments pending or, to our knowledge, threatened, and no governmental approvals are necessary to complete the exchange offer. The exchange offer is not conditioned upon any minimum principal amount of outstanding notes tendered. Withdrawal Rights............. You may withdraw the tender of your outstanding notes at any time before the expiration date. The Registration Rights Agreement..................... You have the right to exchange your outstanding notes for exchange notes with substantially identical terms. This exchange offer is being made to satisfy these rights. Except in limited circumstances described under "The Exchange Offer -- Background and Purpose of the Exchange Offer," after the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your notes. Resales of the Exchange Notes......................... We believe that the exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: - you are acquiring the exchange notes in the ordinary course of your business; 6 - you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the exchange notes; and - you are not an "affiliate" of our company or any of our subsidiaries, as that term is defined in Rule 405 of the Securities Act. See "The Exchange Offer -- Resale of the Exchange Notes." The Commission, however, has not considered this exchange offer in the context of a no-action letter, and we cannot be sure that the staff of the Commission would make the same determination with this exchange offer as it has in other circumstances. Furthermore, if you do not meet the above conditions, you may incur liability under the Securities Act. We do not assume, or indemnify you against, this liability. Each broker-dealer that is issued exchange notes in the exchange offer for its own account in exchange for outstanding notes which were acquired by it as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes issued in the exchange offer. A broker- dealer may use this prospectus for an offer to resell, resale or other retransfer of the exchange notes issued to it in the exchange offer. The exchange offer is not being made to, nor will we accept surrenders for exchange from, the following: - holders of outstanding notes in any jurisdiction in which this exchange offer or the acceptance of the exchange offer would not be in compliance with the applicable securities or "blue sky" laws of that jurisdiction, and - holders of outstanding notes who are "affiliates" of our company or any of our subsidiaries. Procedures for Tendering...... If you wish to tender outstanding notes, you must (a)(1) complete, sign and date the letter of transmittal, or a facsimile of it, according to its instructions and (2) send the letter of transmittal, together with your outstanding notes to be exchanged and other required documentation, to Wilmington Trust Company who is the exchange agent, at the address provided in the letter of transmittal; or (b) tender through DTC pursuant to DTC's Automated Tender Offer Program, or ATOP system. The letter of transmittal or a valid agent's message through ATOP must be received by Wilmington Trust Company by 5:00 p.m., New York City time, on the expiration date. See "The Exchange Offer -- Procedures for Tendering," and "-- Book-Entry Tender." By executing the letter of transmittal, you are representing to us that you are acquiring the exchange notes in the ordinary course of your business, that you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of exchange notes, and that you are not an "affiliate" 7 of ours. See "The Exchange Offer -- Procedures for Tendering," and "-- Book-Entry Tender." Special Procedures for Beneficial Owners........... If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender your outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you are a beneficial owner and wish to tender on your own behalf, you must, before completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. See "The Exchange Offer -- Procedure if the Outstanding Notes Are Not Registered in Your Name," and "-- Beneficial Owner Instructions to Holders of Outstanding Notes." The transfer of registered ownership may take considerable time and may not be possible to complete before the expiration date. Guaranteed Delivery Procedures.................... If you wish to tender your outstanding notes and time will not permit your required documents to reach the exchange agent by the expiration date, or you cannot complete the procedure for book-entry transfer on time or you cannot deliver certificates for your outstanding notes on time, then before the expiration date you may tender your outstanding notes as described in this prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." Failure to Tender Outstanding Notes......................... If you are eligible to participate in the exchange offer and you do not tender your outstanding notes, you will not have any further registration or exchange rights and your outstanding notes will continue to have restrictions on transfer. Outstanding notes may not be offered or sold, unless registered under the Securities Act and applicable state securities laws or under an exemption from the Securities Act and applicable state securities laws. We do not currently plan to register the outstanding notes under the Securities Act after the completion of the exchange offer. Accordingly, the liquidity of the market for the outstanding notes could be adversely affected. Acceptance of Outstanding Notes and Delivery of Exchange Notes................ In general, we will accept any and all outstanding notes that are properly tendered in the exchange offer and not withdrawn before 5:00 p.m., New York City time, on the expiration date. The exchange offer will be considered consummated when we, as soon as practicable after the expiration date, accept for exchange the outstanding notes tendered, deliver them to the trustee for cancellation and issue the exchange notes. We will deliver the exchange notes as soon as practicable after the expiration date. Interest on the Outstanding Notes......................... Interest will not be paid on outstanding notes that are tendered and accepted in the exchange offer. 8 Interest on the Exchange Notes......................... The exchange notes will bear interest at the rate of 9 3/4% per year, payable semi-annually in arrears on April 15 and October 15, commencing October 15, 2002. Federal Income Tax Considerations................ We believe that the exchange of outstanding notes for exchange notes generally will not be a taxable event for United States federal income tax purposes. Please see "Certain U.S. Federal Income Tax Considerations" for more information. Appraisal Rights.............. You do not have any appraisal or dissenters' rights in connection with this exchange offer. Use of Proceeds............... We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. Fees and Expenses............. We will pay all of the expenses incident to the exchange offer. Exchange Agent................ Wilmington Trust Company is serving as the exchange agent in connection with the exchange offer. Please review the information in the section captioned "The Exchange Offer" for more detailed information concerning the exchange offer. 9 THE EXCHANGE NOTES Issuer........................ Associated Materials Incorporated Notes Offered................. We are offering up to a total of $165 million in principal amount of our 9 3/4% Senior Subordinated Notes due 2012, which have been registered under the Securities Act. The exchange notes will evidence the same debt as the outstanding notes and will be issued under, and entitled to the benefits of, the same indenture. The terms of the exchange notes are the same as the terms of the outstanding notes in all material respects except that the exchange notes: - have been registered under the Securities Act; - do not include rights to registration under the Securities Act; and - do not contain transfer restrictions applicable to the outstanding notes. Maturity Date................. April 15, 2012. Interest...................... 9 3/4% per year, payable semi-annually in arrears on April 15 and October 15, commencing October 15, 2002. Ranking....................... The exchange notes and the guarantees will rank: - junior to all of our and our guarantors' existing and future senior indebtedness and secured indebtedness, including any borrowings under our new credit facility; - equally with any of our and our guarantors' existing and future senior subordinated indebtedness, including trade payables; - senior to any of our and our guarantors' future subordinated indebtedness; and - effectively junior to all liabilities of our future subsidiaries that have not guaranteed the exchange notes. At March 31, 2002, on a pro forma basis, we would have had $96.7 million of indebtedness, all of which would be senior indebtedness. At March 31, 2002, on a pro forma basis before application of the proceeds from the sale of AmerCable, we would have had $125 million of senior indebtedness. Optional Redemption........... Before April 15, 2005, we may redeem exchange notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the notes originally issued in one or more equity offerings, as long as: - we pay to holders of the exchange notes 109.75% of the principal amount of notes plus accrued and unpaid interest; - we redeem the exchange notes within 90 days of completing the equity offering; and - at least 65% of the original principal amount of notes issued under the indenture remains outstanding afterward. 10 We may redeem the exchange notes, in whole or in part, on or after April 15, 2007, at the redemption price set forth in this prospectus under "Description of the Notes -- Optional Redemption." Optional Redemption Upon a Change of Control........... At any time on or prior to April 15, 2007, we may redeem the exchange notes upon a change of control at a price equal to 100% of the principal amount plus a make-whole premium. See "Description of the Notes -- Redemption Upon a Change of Control." Change of Control............. If a change of control occurs, we will be required to make an offer to purchase the exchange notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. Subsidiary Guarantees......... The exchange notes will be jointly and severally guaranteed on a senior subordinated basis by our existing domestic subsidiaries and certain of our future domestic subsidiaries. Restrictive Covenants......... The indenture contains covenants that limit our ability and that of our subsidiaries to: - incur additional indebtedness; - pay dividends or distributions on, or redeem or repurchase, our capital stock; - make investments; - engage in transactions with affiliates; - transfer or sell assets; - incur liens; - restrict dividend or other payments to us from our subsidiaries; - issue or sell capital stock of our subsidiaries; and - consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries. These covenants are subject to important exceptions and qualifications, which are described in "Description of the Notes -- Certain Covenants." Use of Proceeds............... We will not receive any proceeds from the issuance of the exchange notes. RISK FACTORS See "Risk Factors" for a discussion of the factors you should carefully consider before deciding to invest in the notes. 11 SUMMARY FINANCIAL DATA The following table sets forth our summary historical financial data for the first quarter of 2002 and the first quarter of 2001 and for each of the three years in the period ended December 31, 2001. The statement of operations data for each of the three years in the period ended December 31, 2001 and the balance sheet data as of December 31, 1999, 2000 and 2001 were derived from our audited financial statements included elsewhere in this prospectus. The financial data for the first quarter of 2002 and the first quarter of 2001 have been derived from our unaudited interim financial information, which, in the opinion of our management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The operating results for the first quarter of 2002 are not necessarily indicative of the operating results for the full fiscal year. The historical financial data does not reflect the consummation of the transactions and the sale of AmerCable or our capital structure following the transactions and the sale of AmerCable and is not indicative of results that would have been reported had the transactions and the sale of AmerCable occurred, nor is it indicative of our future financial position or operating results. The following table also presents unaudited summary pro forma statements of operations data for the year ended December 31, 2001 and the quarter ended March 31, 2002, which have been prepared assuming the transactions and the sale of AmerCable had occurred on January 1, 2001, and the pro forma balance sheet data at March 31, 2002, which has been prepared as if the transactions and the sale of AmerCable occurred on March 31, 2002. The summary pro forma data does not purport to represent what our results of operations or financial position would have been if the transactions and the sale of AmerCable had occurred at any date, nor does this data purport to represent the results of operations for any future period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The summary historical and pro forma financial data should be read in conjunction with "Unaudited Pro Forma Financial Information," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical financial statements and the notes thereto included elsewhere herein.
PRO FORMA QUARTER ENDED PRO FORMA YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31, QUARTER ENDED ------------------------------ DECEMBER 31, ------------------- MARCH 31, 1999 2000 2001 2001 2001 2002 2002 -------- -------- -------- ------------ -------- -------- ------------- INCOME STATEMENT DATA: Total net sales........................... $455,268 $499,393 $595,819 $524,528 $108,611 $123,198 $111,062 Cost of sales............................. 317,596 353,994 425,366 367,398 81,414 90,778 80,104 -------- -------- -------- -------- -------- -------- -------- Gross profit.............................. 137,672 145,399 170,453 157,130 27,197 32,420 30,958 Selling, general and administrative expenses................................ 96,028 107,255 119,945 111,701 28,127 31,219 29,287 -------- -------- -------- -------- -------- -------- -------- Income (loss) from operations............. 41,644 38,144 50,508 45,429 (930) 1,201 1,671 Interest expense.......................... 6,779 6,046 6,795 24,800 1,579 1,669 5,777 Net income (loss)......................... 20,490 23,555 25,412 11,215 (3,015) (1,519) (2,525) OTHER DATA: Depreciation and amortization............. $ 8,519 $ 9,550 $ 10,919 $ 8,151 $ 2,661 $ 2,979 $ 2,066 Capital expenditures...................... 18,915 11,925 15,022 11,663 6,765 3,118 1,476 EBITDA(1)................................. 50,163 47,694 61,427 53,580 1,731 4,180 3,737 Adjusted EBITDA(2)........................ 56,575 4,115 Pro forma interest expense................ 24,800 5,777 Ratio of Adjusted EBITDA to interest expense................................. 2.3x 0.7x Ratio of earnings to fixed charges(3)..... 3.9x 4.3x 4.1x 1.6x -- -- -- Cash provided by (used in) operating activities.............................. 15,244 22,968 43,989 (10,127) (12,001) Cash used in investing activities......... (17,619) (5,538) (9,861) (1,726) (3,110) Cash used in financing activities......... (9,157) (4,983) (21,138) (1,980) (245)
12
PRO FORMA QUARTER ENDED PRO FORMA YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31, QUARTER ENDED ------------------------------ DECEMBER 31, ------------------- MARCH 31, 1999 2000 2001 2001 2001 2002 2002 -------- -------- -------- ------------ -------- -------- ------------- BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents................. $ 3,432 $ 15,879 $ 28,869 $ -- $ 2,046 $ 13,513 $ 9,140 Working capital........................... 85,878 102,064 106,188 -- 95,334 105,069 86,963 Total assets.............................. 206,296 231,141 254,307 -- 223,631 241,169 534,020 Total debt................................ 75,000 75,000 75,000 -- 75,000 75,000 262,656 Stockholders' equity...................... 79,326 97,990 102,675 -- 92,995 101,024 165,645
- --------------- (1) EBITDA is calculated as income from operations plus depreciation and amortization. We have included information concerning EBITDA because we believe that EBITDA is used by certain investors as one measure of a company's historical ability to service its debt. EBITDA should not be considered as an alternative to, or more meaningful than, net income as an indicator of our operating performance or to cash flows as a measure of liquidity. EBITDA has not been prepared in accordance with generally accepted accounting principles. EBITDA, as presented by us, may not be comparable to similarly titled measures reported by other companies. (2) Adjusted EBITDA represents EBITDA plus certain non-recurring expenses. We believe that Adjusted EBITDA presents a more meaningful discussion than EBITDA since Adjusted EBITDA excludes non-recurring expenses, which are expected to have no ongoing cash requirements and no impact on our ongoing operations. EBITDA reconciles to Adjusted EBITDA as follows:
PRO FORMA PRO FORMA PRO FORMA INCLUDING AMERCABLE PRO FORMA INCLUDING AMERCABLE YEAR ENDED YEAR ENDED QUARTER ENDED QUARTER ENDED DECEMBER 31, 2001 DECEMBER 31, 2001 MARCH 31, 2002 MARCH 31, 2002 ----------------- ------------------- -------------- ------------------- (IN THOUSANDS) EBITDA................................. $53,580 $61,941 $3,737 $ 4,296 Cost savings from closing of corporate office, net(a)....................... 1,166 1,166 378 378 Severance(b)........................... 1,041 1,041 -- -- Non-cash stock compensation expense(c)........................... 588 588 -- -- Investment banking and related fees(d).............................. 200 200 -- -- ------- ------- ------ ------- Adjusted EBITDA........................ $56,575 $64,936 $4,115 $ 4,674 ======= ======= ====== =======
- --------------- Adjustments to EBITDA represent: (a) the elimination of facilities and corporate overhead costs related to the Dallas corporate office, which was closed in connection with the transactions. For the year ended December 31, 2001, the adjustments include rent of $0.1 million, outside director fees of $0.2 million, investor relations expenses of $0.2 million, travel and entertainment costs of $0.2 million, charitable contributions of $0.4 million, and other expenses of $0.1 million. For the quarter ended March 31, 2002, the adjustments include outside director fees of $0.1 million, investor relations expenses of $0.1 million, travel and entertainment costs of $0.1 million and charitable contributions of $0.1 million; (b) severance of four Alside vice presidents as part of the senior management restructuring completed in 2001; (c) a non-cash stock compensation expense related to the modification of a stock option grant for an executive who retired in 2001; and (d) investment banking fees related to obtaining a fairness opinion for the repurchase of one million shares of our Class B common stock. (3) The deficiency in the ratio of earnings to fixed charges is approximately $4.9 million and $2.5 million for the quarters ended March 31, 2001 and 2002, respectively on a historical basis and $4.1 million for the quarter ended March 31, 2002 on a pro forma basis. 13 RISK FACTORS You should consider carefully the information set forth in this section along with all the other information provided to you in this prospectus before tendering your outstanding notes for exchange notes in the exchange offer. RISKS RELATING TO THE NOTES OUR SUBSTANTIAL LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS ON THE NOTES. We have a substantial amount of indebtedness, which will require significant interest payments. As of March 31, 2002, on a pro forma basis, we would have had approximately $262.7 million of indebtedness and our interest expense for the quarter ended March 31, 2002 would have been approximately $5.8 million. In addition, subject to restrictions in the indenture for the notes and our credit facilities, we may incur additional indebtedness. Our substantial level of indebtedness could have important consequences to you, including the following: - our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; - we must use a substantial portion of our cash flow from operations to pay interest and principal on the notes and other indebtedness, which will reduce the funds available to us for other purposes such as potential acquisitions and capital expenditures; - we are exposed to fluctuations in interest rates, because our new credit facility has a variable rate of interest; - we have a higher level of indebtedness than some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in planning for, or responding to, changing conditions in our industry, including increased competition; - we are more vulnerable to general economic downturns and adverse developments in our business; and - our failure to comply with financial and other restrictive covenants in the indenture governing the notes and our other debt obligations, some of which require us to maintain specified financial ratios and limit our ability to incur additional debt and sell assets, could result in an event of default that, if not cured or waived, could harm our business or prospects and could result in our bankruptcy. We expect to obtain money to pay our expenses and to pay the principal and interest on the notes, our new credit facility and other debt from cash flow from our operations. Our ability to meet our expenses depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors. We cannot be certain that our cash flow will be sufficient to allow us to pay principal and interest on our debt, including the notes, and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, including the notes, sell assets or borrow more money. We cannot guarantee that we will be able to do so on terms acceptable to us, if at all. In addition, the terms of existing or future debt agreements, including our credit facilities and the indenture, may restrict us from pursuing any of these alternatives. The failure to generate sufficient cash flow or to achieve such alternative could significantly adversely affect the value of the notes. 14 WE WILL BE ABLE TO INCUR MORE INDEBTEDNESS AND THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE, INCLUDING OUR ABILITY TO SERVICE OUR INDEBTEDNESS, WILL INCREASE. The indenture relating to the notes and the credit agreement governing our new credit facility will permit us, subject to specified conditions, to incur a significant amount of additional indebtedness. In addition, we may incur an additional $40 million of indebtedness under our new revolving credit facility. If we incur additional debt, the risks associated with our substantial leverage, including our ability to service our debt, would increase. YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES AND GUARANTEES IS SUBORDINATED TO OUR SENIOR DEBT. Payment on the notes and guarantees are subordinated in right of payment to all of our and the guarantors' senior debt. As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our guarantors or our or their property, the holders of our senior debt will be entitled to be paid in full in cash before any payment may be made on the notes or the guarantees thereof. In these cases, we and the guarantors may not have sufficient funds to pay all of our creditors, and holders of senior subordinated notes may receive less, ratably, than the holders of our senior debt. In addition, all payments on the notes and the related guarantees will be blocked in the event of a payment default on our designated senior debt and may be blocked for up to 179 consecutive days in the event of certain non-payment defaults on our designated senior debt. In connection with the transactions, we entered into a new credit facility which provides for a $125 million term loan which was fully drawn upon closing of the merger and a $40 million revolving credit facility. Upon the closing of the merger, we borrowed approximately $2.0 million under our revolving credit facility in order to temporarily cash collateralize existing letters of credit. We repaid such borrowings promptly thereafter and have been issued new letters of credit. As of March 31, 2002, on a pro forma basis, the notes and the related guarantees would have been subordinated to approximately $96.7 million of senior debt, and $37.4 million of additional senior debt would have been available for borrowing under our new credit facility. In addition, the indenture governing the notes and our new credit facility permit us, subject to specified limitations, to incur additional debt, some or all of which may be senior debt. In addition, the notes are structurally subordinated to all of the liabilities of our subsidiaries that do not guarantee the notes in the future. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment on their claims from assets of those subsidiaries before any assets are made available for distribution to us. However, under some circumstances, the terms of the notes will permit our non- guarantor subsidiaries to incur additional specified indebtedness. IF WE FAIL TO MEET OUR PAYMENT OR OTHER OBLIGATIONS UNDER THE NEW CREDIT AGREEMENT, THE LENDERS UNDER OUR NEW CREDIT AGREEMENT COULD FORECLOSE ON, AND ACQUIRE CONTROL OF, SUBSTANTIALLY ALL OF OUR ASSETS. In connection with the incurrence of indebtedness under the new credit facility, the lenders under the new credit facility received a pledge of all of the equity interests of our existing domestic subsidiaries and will receive a pledge of all of the equity interests of any future domestic subsidiary and the voting stock of any of our future foreign subsidiaries that are held directly by us or our domestic subsidiaries (but not to exceed in most cases 66 2/3% of the voting stock of such subsidiaries). Additionally, these lenders generally have a lien on substantially all of our accounts receivables, cash, general intangibles, investment property and future acquired material property. As a result of these pledges and liens, if we fail to meet our payment or other obligations under the new credit facility, the lenders under the credit agreement would be entitled to foreclose on substantially all of our assets and liquidate these assets. Under those circumstances, we may not have sufficient funds to pay principal, premium, if any, and interest on the notes. As a result, the holders of the notes may lose a portion of or the entire value of their investment. 15 THE INDENTURE FOR THE NOTES AND OUR NEW CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING AND FINANCIAL RESTRICTIONS ON US, WHICH MAY PREVENT US FROM CAPITALIZING ON BUSINESS OPPORTUNITIES AND TAKING SOME CORPORATE ACTIONS. The indenture for the notes and our new credit facility impose, and the terms of any future debt may impose, significant operating and financial restrictions on us. These restrictions, among other things, limit our ability and that of our subsidiaries to: - incur or guarantee additional indebtedness; - pay dividends or make other distributions; - repurchase our stock; - make investments; - sell or otherwise dispose of assets including capital stock of subsidiaries; - create liens; - enter into agreements restricting our subsidiaries' ability to pay dividends; - enter into transactions with affiliates; and - consolidate, merge or sell all of our assets. We cannot assure you that these covenants will not adversely affect our ability to finance our future operations or capital needs to pursue available business opportunities. In addition, our new credit facility requires us to maintain other specified financial ratios. We cannot assure you that these covenants will not adversely affect our ability to finance our future operations or capital needs or to pursue available business opportunities or limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans. A breach of any of these covenants or our inability to maintain the required financial ratios could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that indebtedness. THE GUARANTEES MAY BE VOIDED UNDER SPECIFIC LEGAL CIRCUMSTANCES. The notes are guaranteed by certain of our existing domestic restricted subsidiaries and will be guaranteed by certain of our future domestic restricted subsidiaries. The guarantees may be subject to review under U.S. federal bankruptcy law and comparable provisions of state fraudulent conveyance laws if a bankruptcy or reorganization case or lawsuit is commenced by or on behalf of our guarantor's unpaid creditors. Under these laws, if a court were to find in such a bankruptcy or reorganization case or lawsuit that, at the time any guarantor issued a guarantee of the notes, the guarantor: - issued the guarantee with the intent of hindering, delaying or defrauding current or future creditors; - was a defendant in an action for money damages or had a judgment for money damages docketed against it if, in either case, after final judgment, the judgment is unsatisfied; or - received less than reasonably equivalent value or fair consideration for issuing the guarantee of the notes and such guarantor: - was insolvent or was rendered insolvent by reason of issuing the guarantee; - was engaged, or about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business; or 16 - intended to incur, or believed that it would incur, debts beyond its ability to pay as such debts matured (as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes); then such court could void the guarantee of such guarantor, subordinate the amounts owing under such guarantee to such guarantor's presently existing or future debt or take other actions detrimental to you. The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. Generally, a company would be considered insolvent if, at the time it incurred the debt or issued the guarantee: - the sum of its debts (including contingent liabilities) was greater than its assets, at fair valuation; - the present fair saleable value of its assets at the time was less than the amount required to pay the probable liability on its total existing debts and liabilities (including contingent liabilities) as they become absolute and mature; or - it could not pay its debts as they become due. If the guarantees of the notes were challenged, we cannot be sure as to the standard that a court would use to determine whether any of the guarantors was solvent at the relevant time or, regardless of the standard that the court uses, that the issuance of the guarantees would not be voided or the guarantees would not be subordinated to the guarantor's other debt. If such a case were to occur, the guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit and that of our parent holding company, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration. If a guarantee is voided as a fraudulent conveyance or otherwise found to be unenforceable, you will not have a claim against that guarantor but will remain a creditor of ours and any guarantor whose obligation was not set aside or found to be unenforceable. THE EXCHANGE OFFER MAY REDUCE THE MARKET FOR OUR OUTSTANDING NOTES. There currently is a limited trading market for the outstanding notes. After the consummation of the exchange offer, it is anticipated that the outstanding principal amount of the outstanding notes available for trading will be significantly reduced. A debt security with a smaller outstanding principal amount available for trading, known as a smaller "float", may command a lower price than would a comparable debt security with a greater float. Because the principal amount of outstanding notes exchanged under the exchange offer will reduce the float of the outstanding notes, the liquidity and market price of the outstanding notes may be adversely affected. The reduced float may also tend to make the trading price more volatile. Holders of outstanding notes may attempt to obtain quotations for the outstanding notes from their brokers; however, there can be no assurance that any trading market will exist for the outstanding notes following consummation of the exchange offer. The extent of the public market for the outstanding notes following consummation of the exchange offer will depend upon, among other things, the remaining outstanding principal amount of the outstanding notes after the exchange offer, the number of holders remaining at the time and the interest in maintaining a market in the outstanding notes on the part of securities firms. THERE COULD BE ADVERSE CONSEQUENCES OF FAILURE TO EXCHANGE YOUR OUTSTANDING NOTES FOR EXCHANGE NOTES. The outstanding notes were not registered under the Securities Act or under the securities laws of any state and may not be resold, offered for resale or otherwise transferred unless they are subsequently registered or resold based on an exemption from the registration requirements of the Securities Act and applicable state securities laws. If you do not exchange your outstanding notes for exchange notes under this exchange offer, you will not be able to resell, offer to resell or otherwise transfer the outstanding notes unless they are registered under the Securities Act or unless you resell them, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction exempt from, the Securities Act. In addition, we will no longer be under an obligation to register the outstanding notes 17 under the Securities Act except in the limited circumstances provided under the registration rights agreement. In addition, to the extent that outstanding notes are tendered for exchange and accepted in the exchange offer, the trading market for the untendered and tendered but unaccepted outstanding notes could be adversely affected. IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP FOR THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO RESELL THEM. Although holders of exchange notes who are not our "affiliates" within the meaning of the Securities Act may resell or otherwise transfer their exchange notes without compliance with the registration requirements of the Securities Act, there is currently no existing market for the exchange notes, and we cannot assure you that a public market for the exchange notes will develop in the future or, if developed, will continue. If no active trading market develops, you may not be able to resell your exchange notes at their fair market value or at all. Future trading prices of the exchange notes will depend on many factors, including, among other things, our ability to effect this exchange offer, prevailing interest rates, our operating results and the market for similar securities. We have been informed by the initial purchasers of the outstanding notes, that they intend to make a market in the exchange and the outstanding notes. However, they may cease their market-making at any time. There has also been no public market for the outstanding notes. To the extent that outstanding notes are tendered and accepted in the exchange offer, the market for the remaining untendered outstanding notes could be adversely affected. See "The Exchange Offer -- Consequences of Failure to Exchange." Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in trading prices and market liquidity. It is possible that the market for the exchange notes will be subject to disruptions. Any disruptions may have a negative effect on noteholders, regardless of our prospects and financial performance. WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL. Upon a "change of control," as defined in the indenture, we will be required under certain circumstances to make an offer to repurchase the notes at a price equal to 101% of the principal amount thereof, together with any accrued and unpaid interest and additional interest to the date of repurchase. If a change of control were to occur, there can be no assurance that we would have sufficient funds to pay the purchase price for all of the notes that we might be required to purchase. Our failure to purchase, or give notice of purchase of, the notes would be a default under the indenture, which would in turn be a default under our new credit facility. In addition, a change of control may constitute an event of default under our new credit facility. A default under our new credit facility would result in an event of default under the indenture governing the notes if the lenders were to accelerate the debt under our new credit facility. If the foregoing occurs, we may not have enough assets to satisfy all obligations under our new credit facility and the indenture related to the notes. The source of funds for any purchase of notes will be our available cash or cash generated from our operations or other sources, including borrowing, sales of assets or sales of equity. If we do not have sufficient cash on hand, we will seek to refinance the indebtedness under our new credit facility and the notes or obtain a waiver from the lenders or you, as a holder of the notes. We cannot assure you, however, that we will be able to obtain a waiver or refinance our indebtedness on commercially reasonable terms, if at all. In addition, the terms of our senior credit facilities may limit our ability to repurchase all of the notes in such event. The financial effect of this repurchase could cause a default under our other debt, even if the event itself would not cause a default. Accordingly, it is possible that we will not have sufficient funds at the time of such event to make the required repurchase of notes or that restrictions in our new credit facility will not allow such repurchases. 18 RISKS RELATING TO OUR COMPANY OUR BUSINESS WILL BE AFFECTED BY CHANGES IN GENERAL INDUSTRY, ECONOMIC, INTEREST RATE AND OTHER CONDITIONS. The exterior residential building products industry in which we operate may be significantly affected by changes in national and local economic and other conditions, including employment levels, changing demographic considerations, availability of financing, interest rates and consumer confidence, all of which are outside of our control. A prolonged recession affecting the residential construction industry could result in a significant decrease in our financial performance. THE HOME BUILDING INDUSTRY IS CYCLICAL AND DOWNTURNS IN THE INDUSTRY OR THE ECONOMY COULD NEGATIVELY AFFECT OUR BUSINESS, OPERATING RESULTS AND THE VALUE OF THE NOTES. The home building industry is cyclical and is significantly affected by changes in economic and other conditions such as employment levels, migration trends, availability of financing, interest rates and consumer confidence. These factors can negatively affect the demand for and pricing of our products. The occurrence or continuation of any of the above items and the items described below could have a negative impact on our business and adversely affect the value of the notes. INCREASES IN INTEREST RATES AND THE REDUCED AVAILABILITY OF FINANCING FOR HOME IMPROVEMENTS MAY CAUSE OUR SALES AND PROFITABILITY TO DECREASE. In general, demand for home improvement products is adversely affected by increases in interest rates and the reduced availability of financing. If interest rates increase and consequently, the ability of prospective buyers to finance purchases of home improvement products is adversely affected, our sales, gross margins and cash flow may also be adversely impacted and the impact may be material. WE HAVE SUBSTANTIAL FIXED COSTS. A significant portion of our selling, general and administrative expenses are fixed costs, which do not fluctuate proportionately with sales. As a result, a percentage decline in our net sales has a greater percentage effect on our operating income. CHANGES IN RAW MATERIAL COSTS AND AVAILABILITY CAN ADVERSELY AFFECT OUR PROFIT MARGIN. Our principal raw material, vinyl resin, has been subject to rapid price changes, particularly in 1999 and 2000. We expect the price of vinyl resin to increase significantly in 2002. Through price increases to our customers, we have historically been able to pass on significant resin cost increases. The results of operations for individual quarters can and have been negatively impacted by a delay between the time of vinyl resin cost increases and price increases in our products. While we expect that any significant resin cost increases in 2002 will be offset by price increases to our customers, there can be no assurances that we will be able to pass on any future price increases. Additionally a major interruption in the delivery of vinyl resin to us would disrupt our operations and could have an adverse effect on our financial condition and results of operations. We have a contract with a vendor to supply substantially all of our vinyl resin requirements and believe our requirements could also be met by other suppliers. WEATHER IMPACTS OUR QUARTERLY RESULTS. Because most of our building products are intended for exterior use, sales tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year usually result in that quarter producing significantly less sales revenue than in any other period of the year. Consequently, we have historically had small profits or losses in the first quarter and reduced profits from operations in the fourth quarter of each calendar year. 19 WE FACE COMPETITION FROM OTHER VINYL BUILDING PRODUCT MANUFACTURERS AND ALTERNATIVE BUILDING MATERIALS. We believe that no other company within the vinyl building product market competes with us in both manufacturing and distribution, except for Owens Corning. However, we do compete with other manufacturers of vinyl building products. Some of these companies are larger and have greater financial resources than us. We also compete with Owens Corning and numerous large and small distributors of building products in our capacity as a distributor of these products. Additionally, our products face competition from alternative materials: wood and aluminum in the window market, and wood, masonry, fiber cement and metal in the siding market. There can be no assurance we will not be adversely impacted by our competitors or alternative materials. WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL STATUTES AND REGULATIONS, WHICH MAY RESULT IN SIGNIFICANT COSTS IN ENVIRONMENTAL COMPLIANCE AND REMEDIATION. Our operations are subject to various environmental statutes and regulations, including laws and regulations addressing materials used in the manufacturing of our products. In addition, certain of our operations are subject to federal, state and local environmental laws and regulations that impose limitations or other requirements on the discharge of pollutants into the air, water and soil, establish standards for the treatment, transport, storage and disposal of solid and hazardous wastes, and remediation of soil and groundwater contamination. Such laws and regulations may also impact the availability of materials used in manufacturing our products. We believe we are in material compliance with applicable environmental requirements, and do not expect these requirements to result in material expenditures in the foreseeable future. However, additional future expenditures may be necessary as compliance standards and technology change, and unforeseen significant expenditures required to maintain compliance, including unforeseen liabilities, could have an adverse effect on our business and financial condition. We entered into a Consent Order dated August 25, 1992 with the United States Environmental Protection Agency pertaining to corrective action requirements associated with the use of hazardous waste storage facilities at our Akron, Ohio location. With the exception of a small container storage area, the use of these facilities was terminated prior to our acquisition of the Alside assets from USX Corporation in 1984. The effects of the past practices at this facility are continuing to be investigated (through continued groundwater monitoring) pursuant to the terms of the consent order. We believe that USX bears responsibility for substantially all of the direct costs of corrective action at these facilities under the relevant contract terms and under statutory and common law. To date, USX has reimbursed us for substantially all of the direct costs of corrective action at these facilities. We expect that USX will continue to reimburse us. However, there can be no assurance that payments will continue to be made by USX or that it will have adequate financial resources to fully reimburse us for these costs. Certain environmental laws, including the federal Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, ("CERCLA"), and comparable state laws, impose strict, and in certain circumstances joint and several, liability upon specified responsible parties, which include certain former owners and operators of waste sites designated for clean up by environmental regulators. A facility formerly owned by our company in Lumber City, Georgia, which is now owned by Amercord Inc., a company in which we currently hold a minority interest, is currently undergoing soil and groundwater investigation, pursuant to a Consent Order entered into by Amercord Inc. with the Georgia Department of Natural Resources in 1994. We are not a party to these activities. We also understand that soil and groundwater in certain areas of the site (including in the area of two industrial waste landfills) are being investigated under CERCLA by the United Stated Environmental Protection Agency to determine whether remediation of those areas may be required and whether the site should be listed on the state or federal list of priority sites requiring remediation. There can be no assurance that Amercord Inc., the current site owner, would have adequate financial resources to carry out additional remediation that may be required, or that if substantial remediation is required, claims will not be made against us, which could result in material expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Amercord Inc." 20 Also, we cannot be certain that we have identified all environmental matters giving rise to potential liability. More stringent future environmental requirements or stricter enforcement of existing requirements, the discovery of unknown conditions, or our past use of hazardous materials could result in increased expenditures or liabilities which could have an adverse effect on our business and financial condition. WE COULD FACE POTENTIAL PRODUCT LIABILITY CLAIMS RELATING TO PRODUCTS WE MANUFACTURE OR DISTRIBUTE. We face a business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in injury or other adverse effects. We currently maintain product liability insurance coverage but we cannot assure you that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate coverage against potential claims. Product liability claims can be expensive to defend and can divert management and other personnel for months or years regardless of the ultimate outcome. An unsuccessful product liability defense could have a material adverse effect on our business, financial condition, results of operations or prospects or our ability to make payments on the notes when due. THE LOSS OF OUR KEY PERSONNEL COULD HARM OUR BUSINESS. Our success largely depends on the continuing services of our key employees and our ability to attract new personnel. Although we intend to enter into employment agreements with various key officers, loss of their services could harm our business. WE HAVE GROWN SIGNIFICANTLY DURING THE PAST FIVE YEARS WHICH HAS PLACED SIGNIFICANT DEMANDS ON OUR RESOURCES AND WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE THE GROWTH OR FUTURE GROWTH. We have grown significantly in recent years from total net sales of $400.0 million in 1997 to $595.8 million in 2001. During the same period, on a pro forma basis, we have grown from total net sales of $345.1 million in 1997 to $524.5 million in 2001. This historical growth and any future growth will continue to place demands on our resources. Accordingly, our future success and profitability will depend, in part, on our ability to enhance our management and operating systems, respond and adapt to rapid changes in technology, obtain financing for strategic acquisitions and investments in new supply centers, retain employees due to policy and procedural changes and retain customers due to our ability to manage change. We may not be able to successfully manage any significant expansion or obtain adequate financing on favorable terms to manage our growth. WE ARE CONTROLLED BY AFFILIATES OF HARVEST PARTNERS, INC., WHOSE INTERESTS IN OUR BUSINESS MAY BE DIFFERENT THAN YOURS. By reason of Harvest Partners, Inc.'s and its affiliates' ownership of us and the ability of Harvest Partners, Inc. and its affiliates, pursuant to a stockholders agreement among stockholders of Associated Materials Holdings Inc., to designate a majority of the members of the Board of Directors of Associated Materials Holdings Inc., Harvest Partners, Inc. will control actions to be taken by our stockholder and/or board of directors, including amendments to our certificate of incorporation and by-laws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. You should consider that the interests of Harvest Partners, Inc. and its affiliates will likely differ from yours in material respects. 21 USE OF PROCEEDS The exchange offer is intended to satisfy certain of our obligations under the registration rights agreement dated as of April 23, 2002. We will not receive any cash proceeds from this exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange the outstanding notes in like principal amount. The outstanding notes surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. The issuance of the exchange notes will not result in any increase in our indebtedness. 22 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2002, on an actual basis and on a pro forma as adjusted basis, to reflect the Transactions and the sale of AmerCable. This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical financial statements and the related notes thereto and our unaudited pro forma financial information and the related notes thereto, each included elsewhere herein.
AS OF MARCH 31, 2002 ---------------------- PRO FORMA ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Cash and cash equivalents................................... $ 13,513 $ 9,140 ======== ======== Long-term debt: Existing Credit Agreement................................. $ -- $ -- New Credit Facility(1).................................... -- 96,668 9 1/4% Senior Subordinated Notes(2)....................... 75,000 988 9 3/4% Senior Subordinated Notes.......................... -- 165,000 -------- -------- Total long-term debt................................... 75,000 262,656 Total stockholders' equity.................................. 101,024 165,645 -------- -------- Total capitalization........................................ $176,024 $428,301 ======== ========
- --------------- (1) In connection with the transactions, we entered into a new credit facility which provides for a $125 million term loan which was fully drawn and a $40 million revolving credit facility. Upon the closing of the merger, we borrowed approximately $2.0 million under our revolving credit facility in order to temporarily cash collateralize existing letters of credit. We repaid such borrowings promptly thereafter and have been issued new letters of credit in the amount of $2.6 million. As of March 31, 2002, on a pro forma basis, we would have availability of approximately $37.4 million under the new credit facility. We used the $28.3 million of net proceeds from the sale of AmerCable to repay a portion of the term loan under the new credit facility. (2) $74 million aggregate principal amount of our 9 1/4% senior subordinated notes were purchased in the debt tender offer. Subsequent to the merger, we commenced a change of control offer pursuant to the indenture governing the 9 1/4% notes to purchase the 9 1/4% notes not tendered in the debt tender offer. The change of control offer expired on June 21, 2002 and approximately $0.1 million aggregate principal amount of such notes were tendered and accepted. We intend to discharge the remaining approximately $0.9 million outstanding 9 1/4% notes pursuant to the indenture governing such notes. We may also, from time to time, purchase such notes through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine. We expect that all discharged notes will be redeemed on or after March 1, 2003 at 104.625% of the principal amount of such notes ($1,046.25 per $1,000 principal amount of such notes), plus accrued and unpaid interest, if any, to the date of purchase. 23 THE TRANSACTIONS The outstanding notes were issued in connection with the merger of Simon Acquisition Corp. with and into us. On March 16, 2002, we entered into a merger agreement with Associated Materials Holdings Inc., a Delaware corporation, and Simon Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Associated Materials Holdings Inc. Pursuant to the merger agreement, Simon Acquisition Corp. commenced a tender offer to purchase all of the outstanding shares of our common stock at a price of $50.00 per share. The merger was consummated on April 19, 2002. Our common stock was delisted from The Nasdaq National Market. After the merger, we continued as the surviving corporation and became a wholly owned subsidiary of Associated Materials Holdings Inc., which is controlled by affiliates of Harvest Partners, Inc. Our business and operations continued as they were being conducted prior to the merger. In addition, we commenced a tender offer and consent solicitation to purchase all of our outstanding 9 1/4% senior subordinated notes due March 1, 2008 and to receive consents from the holders of such notes to amend the terms of the indenture governing such notes. The debt tender offer expired on April 18, 2002. Approximately $74 million aggregate principal amount of the $75 million outstanding 9 1/4% notes were tendered. We amended the indenture governing the 9 1/4% notes to remove substantially all the restrictive covenants pursuant to a supplemental indenture dated as of April 4, 2002, which became effective on April 23, 2002. The indenture governing the 9 1/4% notes is subject to a "change of control" provision pursuant to which the notes outstanding after the completion of the debt and equity tender offers are redeemable at an amount equal to 101% of the principal amount of the 9 1/4% notes at the option of the holder, plus accrued and unpaid interest, if any, to the date of purchase. Subsequent to the merger, we commenced a change of control offer pursuant to such provision to purchase the 9 1/4% notes not tendered in the debt tender offer. The change of control offer expired on June 21, 2002 and approximately $0.1 million aggregate principal amount of the 9 1/4% notes was tendered and accepted. We intend to discharge the remaining approximately $0.9 million outstanding 9 1/4% notes pursuant to the indenture governing the 9 1/4% notes. We may also, from time to time, purchase such notes through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine. We expect that all discharged notes will be redeemed on or after March 1, 2003 at 104.625% of the principal amount of such notes ($1,046.25 per $1,000 principal amount of such notes), plus accrued and unpaid interest, if any, to the date of purchase. In connection with the merger, we terminated our previous credit facility and entered into a new $165 million senior secured credit facility. The new credit facility consists of a $125 million term loan, which is fully drawn, and a $40 million revolving loan. The net proceeds from the AmerCable sale of approximately $28.3 million were used to repay a portion of our indebtedness under our new credit facility in accordance with certain terms thereof. The equity tender offer closed prior to the closing of the offering of the outstanding notes and we borrowed under a $215 million unsecured interim credit facility to complete the equity tender offer. The proceeds from the offering of the outstanding notes along with proceeds from the term loan under the new credit facility were used to repay such interim credit facility. For more information regarding the merger agreement and the related agreements entered into in connection with the merger, see "Certain Relationships and Related Transactions." 24 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information has been derived by the application of pro forma adjustments to our historical financial statements included elsewhere in this prospectus. The unaudited pro forma balance sheet as of March 31, 2002 was prepared as if the transactions and the sale of AmerCable had occurred on such date. The unaudited pro forma statements of operations for the year ended December 31, 2001 and the quarter ended March 31, 2002 give effect to the transactions as if the transactions and the sale of AmerCable had occurred as of January 1, 2001. The pro forma adjustments are based upon available information, preliminary estimates and certain assumptions that we believe are reasonable, and are described in the accompanying notes. On March 16, 2002, Associated Materials Incorporated, Associated Materials Holdings Inc. and its wholly owned subsidiary, Simon Acquisition Corp., entered into a merger agreement pursuant to which, among other things, each of our stockholders received $50.00 in cash for each share of our stock. The equity tender offer expired on April 18, 2002, with over 90% of the outstanding shares of our common stock being tendered. Simon Acquisition Corp. merged with and into us on April 19, 2002, with Associated Materials Incorporated continuing as the surviving corporation and becoming a wholly owned subsidiary of Associated Materials Holdings Inc. The merger and related refinancing transactions required total cash of approximately $466.8 million, which was used to purchase our common stock in the equity tender offer, to consummate the debt tender offer for our 9 1/4% senior subordinated notes due 2008 and to pay fees and expenses related to the transactions. The transactions were financed through an equity contribution of approximately $172 million by Associated Materials Holdings Inc. (who received an equity contribution of approximately $164.8 million of cash from the equity investors and $7.2 million of rollover equity by certain members of management), cash on hand of approximately $4.8 million, a new term loan of $125 million from the new credit facility and proceeds from the issuance of the outstanding notes. The equity tender offer closed prior to the closing of the offering of the outstanding notes and we borrowed under a $215 million interim credit facility to complete the equity tender offer. The proceeds from the issuance of the outstanding notes along with proceeds from the term loan under the new credit facility were used to repay the interim credit facility. The net proceeds of approximately $28.3 million from the sale of AmerCable were used to repay a portion of our indebtedness under our new credit facility in accordance with certain terms thereof. The acquisition was accounted for under the purchase method of accounting. The total cost of the transactions will be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values as of the date of the transactions. The excess of the purchase price over the historical basis of the net assets acquired has been allocated in the accompanying unaudited pro forma financial information based on preliminary valuation estimates and certain assumptions that management believes are reasonable. As a result, the actual allocation is subject to the valuation of our assets and liabilities being finalized. Therefore, the actual allocation of purchase price and the resulting effect on income from operations may differ from the pro forma amounts included herein. The pro forma statements should not be considered indicative of actual balance sheet data or results that would have been achieved had the transactions or the sale of AmerCable been consummated on the dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period. The unaudited pro forma financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "The Transactions," "Use of Proceeds," "Prospectus Summary -- Recent Developments" and the historical financial statements and the notes thereto included elsewhere in this prospectus. 25 ASSOCIATED MATERIALS INCORPORATED UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 2002 (IN THOUSANDS)
AMERCABLE TRANSACTION PRO FORMA PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA ---------- ----------- ------------ --------- ASSETS Current assets: Cash and cash equivalents................. $ 13,513 $ -- $ (4,373)(f) $ 9,140 Accounts receivable, net.................. 61,658 (6,132)(a) -- 55,526 Inventories............................... 79,412 (18,317)(a) 1,800(g) 62,895 Income taxes receivable................... 940 328(b) 1,047(h) 5,690 1,871(i) 578(g) 926(g) Other current assets...................... 3,637 (49)(a) -- 3,588 -------- -------- --------- -------- Total current assets.............. 159,160 (24,170) 1,849 136,839 Property, plant and equipment, net.......... 77,897 (12,723)(a) 24,932(g) 90,106 Goodwill and other intangible assets........ -- 1,121(c) 292,581(g) 293,702 Other assets................................ 4,112 (853)(b) (1,324)(g) 13,373 (1,501)(g) 12,939(j) -------- -------- --------- -------- Total assets................................ $241,169 $(36,625) $ 329,476 $534,020 ======== ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................... $ 33,187 $ (5,280)(a) $ -- $ 27,907 Accrued liabilities....................... 20,904 (570)(a) 770(g) 20,719 177(g) (562)(k) Current maturity of new credit facility... -- -- 1,250(f) 1,250 -------- -------- --------- -------- Total current liabilities......... 54,091 (5,850) 1,635 49,876 Deferred income taxes....................... 4,996 46,039(g) 51,035 Other liabilities........................... 6,058 -- -- 6,058 New credit facility......................... -- (28,332)(d) 123,750(f) 95,418 Senior subordinated notes................... -- -- 165,000(f) 165,000 Long-term debt.............................. 75,000 -- (74,012)(f) 988 Total stockholders' equity.................. 101,024 (1,918)(e) 164,807(l) 165,645 (525)(b) 7,941(m) (101,024)(g) (1,672)(h) (2,988)(i) -------- -------- --------- -------- Total liabilities and stockholders' equity.................................... $241,169 $(36,625) $ 329,476 $534,020 ======== ======== ========= ========
26 NOTES TO UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 2002 (IN THOUSANDS) (a) These pro forma adjustments reflect Associated Materials Incorporated's sale of the AmerCable division and the resulting elimination of AmerCable's assets and liabilities. We completed the sale of AmerCable on June 24, 2002. (b) Accelerated amortization of deferred financing fees related to the new credit facility resulting from payment of a portion of the term loan, net of related tax benefit of $328 in connection with the sale of AmerCable. (c) Adjustment to reflect net book value of AmerCable in excess of fair value of net assets sold. (d) Payment of a portion of the term loan with the net proceeds from the sale of AmerCable. (e) Represents redemption of fully vested options held by certain members of AmerCable's management. (f) Represents the sources and uses of the transactions (as of March 31, 2002) Sources: New credit facility....................................... $125,000 Notes offered hereby...................................... 165,000 Equity financing.......................................... 171,964 -------- 461,964 -------- Uses: Purchase of Associated Materials Incorporated's common stock and options...................................... 360,778 Debt tender offer -- Notes............................... 74,012 -- Premium.............................. 7,264 -- Accrued Interest since last payment................................ 562 Transaction costs......................................... 23,721 -------- 466,337 -------- Net cash used in transaction................................ $ 4,373 ========
27 NOTES TO UNAUDITED PRO FORMA BALANCE SHEET -- (CONTINUED) (g) Represents the purchase price allocated to fair value of net assets acquired in connection with the transactions as follows: Total cash consideration.................................... $353,621 Fair value of options granted to employees in exchange for fully vested options...................................... 7,941 Fees in connection with the merger.......................... 8,063 Severance in connection with closing corporate office....... 770 -------- Total purchase consideration................................ 370,395 Less: historical net book value of assets acquired.......... 101,024 -------- Purchase price in excess of historical net book value of assets acquired........................................... 269,371 Adjustments to reflect fair market value: Inventory................................................. (1,800) Fixed Assets.............................................. (24,932) Write-off of deferred fees of 9 1/4% senior subordinated notes, net of $578 tax benefit......................... 923 Reduction of pension asset................................ 1,324 Increase in pension liability............................. 177 9 1/4% senior subordinated notes, net of $926 tax benefit................................................ 1,479 Deferred tax liability as a result of the merger.......... 46,039 -------- Goodwill and other intangible assets as a result of the merger.................................................... $292,581 ========
(h) Write-off of debt issuance cost in connection with unsecured interim credit facility, net of related tax benefit of $1,047. (i) Expense of tender offer premium in excess of market value of the existing 9 1/4% senior subordinated notes, net of related tax benefit of $1,871. (j) Represents financing fees in connection with the issuance of the 9 3/4% senior subordinated notes and the new credit facility. (k) Payment of accrued interest assuming tender of the existing 9 1/4% senior subordinated notes on March 31, 2002. (l) Cash equity contribution in connection with merger. (m) Fair value of vested employee stock options issued in exchange for fully vested employee stock options of Associated Materials Holdings Inc. 28 ASSOCIATED MATERIALS INCORPORATED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS QUARTER ENDED MARCH 31, 2002 (IN THOUSANDS)
AMERCABLE TRANSACTION PRO FORMA PRO FORMA HISTORICAL ADJUSTMENTS(A) ADJUSTMENTS PRO FORMA ---------- -------------- ----------- --------- Total net sales............................ $123,198 $(12,136) $ -- $111,062 Cost of sales.............................. 90,778 (10,407) (267)(b) 80,104 -------- -------- ------- -------- Gross profit............................... 32,420 (1,729) 267 30,958 Selling, general and administrative expenses................................. 31,219 (1,647) (285)(b) 29,287 -------- -------- ------- -------- Income from operations..................... 1,201 (82) 552 1,671 Interest expense, net...................... 1,669 -- 4,108(c) 5,777 -------- -------- ------- -------- Loss before other non-operating expenses and income taxes......................... (468) (82) (3,556) (4,106) Merger transaction costs................... 2,002 -- (2,002)(d) -- -------- -------- ------- -------- Loss before income taxes................... (2,470) (82) (1,554) (4,106) Income tax benefit......................... (951) (32) (598)(e) (1,581) -------- -------- ------- -------- Net loss (f)............................... $ (1,519) $ (50) $ (956) $ (2,525) ======== ======== ======= ======== Ratio of earnings to fixed charges(g)...... -- --
29 NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS QUARTER ENDED MARCH 31, 2002 (IN THOUSANDS) (a) These pro forma adjustments reflect Associated Materials Incorporated's sale of the AmerCable division and the resulting elimination of AmerCable's results of operations. We completed the sale of AmerCable on June 24, 2002. (b) Details of the pro forma adjustments to cost of sales and selling, general and administrative expenses reflect the following: (i) the elimination of compensation expense related to the corporate chief executive officer ("CEO") and the corporate chief financial officer ("CFO"), who were terminated upon consummation of the transactions, (ii) incremental depreciation and amortization of tangible and intangible assets recorded in conjunction with the acquisition, (iii) the annual management services fee payable to Harvest Partners for services including those historically provided by the CEO and corporate CFO and (iv) elimination of historical amortization of deferred financing costs.
FOR THE QUARTER ENDED MARCH 31, 2002 --------------------- Cost of sales: Net decrease in depreciation and amortization............... $(267) ===== Selling, general and administrative expenses: CEO and CFO compensation.................................... $(303) Decrease in depreciation and amortization................... (100) Management services fee..................................... 187 Amortization of historical deferred financing costs......... (69) ----- $(285) =====
The acquisition will be accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" and the resulting goodwill and other intangible assets will be accounted for under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." The estimated increase in fair value of property, plant and equipment is approximately $24.9 million, with estimated useful lives ranging between 5 and 25 years. In addition, we believe we have intangible assets related to patents and trademarks that will ultimately be assigned fair market values in the final purchase price allocation. Based on the preliminary purchase price allocation, the value assigned to patents is approximately $8.6 million with estimated useful lives of 10 years, and the value assigned to trademarks with indefinite lives is $86.5 million. The purchase price in excess of fair value of net assets acquired, including identifiable intangibles, will be recorded as goodwill. Based on the preliminary purchase price allocation, the value assigned to goodwill is approximately $198.6 million. The purchase price allocation and the lives assigned to the assets are preliminary and have been made solely for the purpose of developing the pro forma financial information. Accordingly, the allocation of the purchase price, the related assignment of asset lives, and resulting depreciation and amortization expense are based on preliminary estimates, which may differ from the final purchase price allocation and the final lives assigned to the assets. Any change in the fair value or lives assigned to amortizable or depreciable assets may impact future operating results. 30 NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED) (c) The pro forma adjustments to interest expense reflect the following:
FOR THE QUARTER ENDED MARCH 31, 2002 --------------------- Commitment fee on revolving credit facility................. $ 49 Term loan................................................... 1,320 9 3/4% Senior Subordinated Notes............................ 4,022 Existing 9 1/4% Senior Subordinated Notes not tendered...... 23 Amortization of debt issuance costs......................... 363 ------- Pro forma interest expense.................................. 5,777 Less: historical interest expense, net...................... (1,669) ------- Total adjustment............................................ $ 4,108 =======
Interest expense was calculated as follows: (i) commitment fee on unused portion of the revolving credit facility of 1/2%; (ii) a rate of 5 4/10% (average London Interbank Offered Rate ("LIBOR") for the quarter ended March 31, 2002 of 1 9/10% + 3 1/2%) on the new credit facility net of repayment using the proceeds from the AmerCable sale; (iii) one fourth of annual administration fee of $75,000 on the new credit facility; and (iv) an interest rate of 9 3/4% on the notes. The effect of a 1/8% increase or decrease in interest rates would increase or decrease total pro forma interest expense by $30,000 for the quarter ended March 31, 2002. (d) Represents the elimination of merger transaction costs incurred by Associated Materials Incorporated prior to the merger directly related to the transactions. (e) Represents the estimated tax effect of the pro forma adjustments at an effective rate of 38.5%. (f) The pro forma statement of operations does not include pro forma adjustments for the increase in cost of sales due to the adjustment of inventory to fair value recorded as part of the purchase price allocation, the write-off of debt issuance costs in connection with the unsecured interim credit facility, the accelerated amortization of the debt issuance costs related to the repayment of a portion of the new credit facility with the proceeds from the sale of AmerCable or the portion of the tender offer premium in excess of market value of the existing 9 1/4% senior subordinated notes. These costs represent non-recurring expenses which we anticipate will be recorded in the statement of operations in the twelve months subsequent to the date of the transactions. (g) The deficiency in the ratio of earnings to fixed charges is approximately $2.5 million on an historical basis and $4.1 million on a pro forma basis. 31 ASSOCIATED MATERIALS INCORPORATED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS)
AMERCABLE TRANSACTION PRO FORMA PRO FORMA HISTORICAL ADJUSTMENTS(A) ADJUSTMENTS PRO FORMA ---------- -------------- ----------- --------- Total net sales............................. $595,819 $(71,291) $ -- $524,528 Cost of sales............................... 425,366 (57,464) (504)(b) 367,398 -------- -------- -------- -------- Gross profit................................ 170,453 (13,827) 504 157,130 Selling, general and administrative expenses.................................. 119,945 (7,174) (1,070)(b) 111,701 -------- -------- -------- -------- Income from operations...................... 50,508 (6,653) 1,574 45,429 Interest expense, net....................... 6,795 -- 18,005(c) 24,800 Write-down of investment in Amercord Inc.... 2,393 -- -- 2,393 -------- -------- -------- -------- Income before income taxes.................. 41,320 (6,653) (16,431) 18,236 Income tax expense.......................... 15,908 (2,561) (6,326)(d) 7,021 -------- -------- -------- -------- Net income(e)............................... $ 25,412 $ (4,092) $(10,105) $ 11,215 ======== ======== ======== ======== Ratio of earnings to fixed charges.......... 4.1x 1.6x
32 NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS) (a) These pro forma adjustments reflect Associated Materials Incorporated's sale of the AmerCable division and the resulting elimination of AmerCable's results of operations. We completed the sale of AmerCable on June 24, 2002. (b) Details of the pro forma adjustments to cost of sales and selling, general and administrative expenses reflect the following: (i) the elimination of compensation expense related to the corporate chief executive officer ("CEO") and the corporate chief financial officer ("CFO"), who were terminated upon consummation of the transactions, (ii) incremental depreciation and amortization of tangible and intangible assets recorded in conjunction with the acquisition, (iii) the annual management services fee payable to Harvest Partners for services including those historically provided by the CEO and corporate CFO, (iv) increase in pension expense based on actuarial valuations and (v) elimination of historical amortization of deferred financing costs.
FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------ Cost of sales: Net decrease in depreciation and amortization............... $ (504) ======= Selling, general and administrative expenses: CEO and CFO compensation.................................... $(1,473) Decrease in depreciation and amortization................... (282) Management services fee..................................... 750 Increase in pension expense................................. 209 Amortization of historical deferred financing costs......... (274) ------- $(1,070) =======
The acquisition will be accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" and the resulting goodwill and other intangible assets will be accounted for under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." The estimated increase in fair value of property, plant and equipment is approximately $24.9 million, with estimated useful lives ranging between 5 and 25 years. In addition, we believe we have intangible assets related to patents and trademarks that will ultimately be assigned fair market values in the final purchase price allocation. Based on the preliminary purchase price allocation, the value assigned to patents is approximately $8.6 million with estimated useful lives of 10 years, and the value assigned to trademarks with indefinite lives is $86.5 million. The purchase price in excess of fair value of net assets acquired, including identifiable intangibles, will be recorded as goodwill. Based on the preliminary purchase price allocation, the value assigned to goodwill is approximately $198.6 million. The purchase price allocation and the lives assigned to the assets are preliminary and have been made solely for the purpose of developing the pro forma financial information. Accordingly, the allocation of the purchase price, the related assignment of asset lives, and resulting depreciation and amortization expense are based on preliminary estimates, which may differ from the final purchase price allocation and the final lives assigned to the assets. Any change in the fair value or lives assigned to amortizable or depreciable assets may impact future operating results. 33 NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED) (c) The pro forma adjustments to interest expense reflect the following:
FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------ Commitment fee on revolving credit facility................. $ 200 Term loan................................................... 6,967 9 3/4% Senior Subordinated Notes............................ 16,088 Existing 9 1/4% Senior Subordinated Notes not tendered...... 91 Amortization of debt issuance costs......................... 1,454 ------- Pro forma interest expense.................................. 24,800 Less: historical interest expense, net...................... (6,795) ------- Total adjustment............................................ $18,005 =======
Interest expense was calculated as follows: (i) commitment fee on unused portion of the revolving credit facility of 1/2%; (ii) a rate of 7 1/10% (average London Interbank Offered Rate ("LIBOR") for the year ended December 31, 2001 of 3 6/10% + 3 1/2%) on the new credit facility net of repayment using the proceeds from the AmerCable sale; (iii) administration fee of $75,000 on the new credit facility; and (iv) an interest rate of 9 3/4% on the notes. The effect of a 1/8% increase or decrease in interest rates would increase or decrease total pro forma interest expense by $0.1 million for the year ended December 31, 2001. (d) Represents the estimated tax effect of the pro forma adjustments at an effective rate of 38.5%. (e) The pro forma statement of operations does not include pro forma adjustments for the increase in cost of sales due to the adjustment of inventory to fair value recorded as part of the purchase price allocation, the write-off of debt issuance costs in connection with the unsecured interim credit facility, the accelerated amortization of the debt issuance costs related to the repayment of a portion of the new credit facility with the proceeds from the sale of AmerCable or the portion of the tender offer premium in excess of market value of the existing 9 1/4% senior subordinated notes. These costs represent non-recurring expenses which we anticipate will be recorded in the statement of operations in the twelve months subsequent to the date of the transactions. 34 SELECTED HISTORICAL FINANCIAL DATA The following table sets forth our selected historical financial data for the first quarter of 2001 and the first quarter of 2002 and for each of the five years in the period ended December 31, 2001. The statement of operations data for each of the three years in the period ended December 31, 2001 and the balance sheet data as of December 31, 2000 and 2001 were derived from our audited financial statements included elsewhere in this prospectus. The statement of operations data for the two years ended December 31, 1997 and 1998 and the balance sheet data as of December 31, 1997, 1998 and 1999 were derived from our audited financial statements that are not included in this prospectus. The selected financial data presented below for the quarter ended March 31, 2001 and 2002 have been derived from our unaudited interim financial information, which, in the opinion of our management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The operating results for the first quarter of 2002 are not necessarily indicative of the operating results for the full fiscal year. No separate financial information for Simon Acquisition Corp. has been provided in this prospectus because (1) Simon Acquisition Corp. was formed for the purposes of the transactions and did not conduct any operations and (2) Simon Acquisition Corp. had no material assets. This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of our future results.
QUARTER ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT FOR RATIOS) INCOME STATEMENT DATA: Net sales(1).............................. $399,974 $410,111 $455,268 $499,393 $595,819 $108,611 $123,198 Cost of sales(1).......................... 285,798 285,822 317,596 353,994 425,366 81,414 90,778 -------- -------- -------- -------- -------- -------- -------- Gross profit.............................. 114,176 124,289 137,672 145,399 170,453 27,197 32,420 Selling, general and administrative expenses................................ 81,142 88,727 96,028 107,255 119,945 28,127 31,219 Other income, net......................... -- 2,673 -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Income (loss) from operations............. 33,034 38,235 41,644 38,144 50,508 (930) 1,201 Interest expense.......................... 9,795 7,565 6,779 6,046 6,795 1,579 1,669 Gain on the sale of UltraCraft............ -- -- -- 8,012 -- -- -- Merger transaction costs.................. -- -- -- -- -- -- 2,002 Equity in loss of Amercord Inc............ 626 1,881 1,337 -- -- -- -- Write-down of Amercord Inc................ -- 4,351 -- -- 2,393 2,393 -- -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes......... 22,613 24,438 33,528 40,110 41,320 (4,902) (2,470) Income tax expense (benefit).............. 9,524 11,382 13,038 16,555 15,908 (1,887) (951) -------- -------- -------- -------- -------- -------- -------- Income (loss) before extraordinary item... 13,089 13,056 20,490 23,555 25,412 (3,015) (1,519) Extraordinary item........................ -- 4,107 -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Net income (loss)......................... $ 13,089 $ 8,949 $ 20,490 $ 23,555 $ 25,412 $ (3,015) $ (1,519) ======== ======== ======== ======== ======== ======== ======== OTHER DATA: EBITDA(2)................................. $ 39,555 $ 45,452 $ 50,163 $ 47,694 $ 61,427 $ 1,731 $ 4,180 Capital expenditures...................... 8,758 14,261 18,915 11,925 15,022 6,765 3,118 Cash provided by (used in) operating activities.............................. 22,496 26,799 15,244 22,968 43,989 (10,127) (12,001) Cash used in investing activities......... (7,941) (14,712) (17,619) (5,538) (9,861) (1,726) (3,110) Cash provided by (used in) financing activities.............................. (15,004) 942 (9,157) (4,983) (21,138) (1,980) (245) Ratio of earnings to fixed charges(3)..... 2.6x 3.0x 3.9x 4.3x 4.1x -- --
35
AS OF DECEMBER 31, AS OF MARCH 31, ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA (AT END OF PERIOD): Working capital........................... $ 61,191 $ 79,225 $ 85,878 $102,064 $106,188 $ 95,334 $105,069 Total assets.............................. 178,504 189,319 206,296 231,141 254,307 223,631 241,169 Total debt................................ 80,914 78,600 75,000 75,000 75,000 75,000 75,000 Stockholders' equity...................... 44,734 64,378 79,326 97,990 102,675 92,995 101,024
- --------------- (1) Certain prior period amounts have been reclassified to conform with the current period presentation. (2) EBITDA is calculated as income from operations plus depreciation and amortization. We have included information concerning EBITDA because we believe that EBITDA is used by certain investors as one measure of a company's historical ability to service its debt. EBITDA should not be considered as an alternative to, or more meaningful than, net income as an indicator of a company's operating performance or to cash flows as a measure of liquidity. EBITDA has not been prepared in accordance with generally accepted accounting principles. EBITDA, as presented for our company, may not be comparable to similarly titled measures reported by other companies. (3) For purposes of computing the ratio of earnings to fixed charges, earnings are defined as income before income taxes, income or loss from discontinued operations and extraordinary gains or losses, plus fixed charges. Fixed charges consist of interest expense, including amortization of debt issuance costs and the interest component of rent expense. The deficiency in the ratio of earnings to fixed charges is approximately $4.9 million and $2.5 million for the quarters ended March 31, 2001 and 2002, respectively. 36 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the risks described in "Risk Factors" and elsewhere in this prospectus. You should read the following discussion with the sections of this prospectus titled "Unaudited Pro Forma Financial Information," "Selected Historical Financial Data" and our financial statements and related notes included elsewhere in this prospectus. OVERVIEW GENERAL Prior to the merger and the sale of AmerCable, we consisted of two operating divisions, Alside and AmerCable. In addition, we own an interest in Amercord Inc., which was accounted for using the equity method until November 1999 when it was recapitalized, reducing our interest in Amercord Inc. from 50% to 9.9%. Since the recapitalization, we have accounted for Amercord Inc. under the cost method. On March 16, 2002, Associated Materials Incorporated, Associated Materials Holdings Inc. and its wholly owned subsidiary, Simon Acquisition Corp. entered into a merger agreement pursuant to which, among other things, each stockholder of Associated Materials Incorporated received $50.00 in cash for each share of Associated Materials Incorporated stock. The equity tender offer expired on April 18, 2002. Over 90% of the outstanding shares of common stock of Associated Materials Incorporated were tendered and Simon Acquisition Corp. merged into Associated Materials Incorporated on April 19, 2002. Associated Materials Incorporated is now a wholly owned subsidiary of Associated Materials Holdings Inc., which is controlled by affiliates of Harvest Partners, Inc. Subsequent to the merger, our business and operations continued as they were being conducted prior to the merger. On June 24, 2002, we completed the sale of our AmerCable division to AmerCable Incorporated, a newly-formed entity controlled by members of AmerCable management and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. We used the net proceeds to repay a portion of our new credit facility in accordance with certain terms thereof. AmerCable is a leading manufacturer of specialty electrical cable products primarily used in the mining, marine and offshore drilling industries. In 2001, AmerCable accounted for approximately 12% of our total net sales. Our results of operations are primarily affected by the operating results of Alside, which accounted for more than 87% of our net sales in each of the last three years. Because our residential building products are consumer durable goods, our sales are impacted by a number of factors, including the availability of consumer credit, consumer interest rates, employment trends, changes in levels of consumer confidence, national and regional trends in new housing starts and general economic conditions. Our sales are also affected by changes in consumer preferences with respect to types of building products. Our products are used in the repair and remodeling, as well as the new construction, sectors of the building industry. We believe that approximately two thirds of Alside's sales were made to the repair and remodeling sector in 2001, 2000 and 1999. We believe that vinyl building products continue to gain market share from metal and wood products due to vinyl's favorable attributes, which include its durability, lower maintenance cost and lower cost compared to wood and metal. Although we cannot give any assurances, we further believe that these increases in market share, together with our increased marketing efforts, will increase our sales of vinyl siding, vinyl windows and other complementary building products. We operate with significant operating and financial leverage, which increased substantially following the completion of the transactions contemplated by the merger agreement. Significant portions of our selling, general and administrative expenses are fixed costs that neither increase nor decrease 37 proportionately with sales. As a result, a percentage change in our net sales will have a greater percentage effect on our income from operations. In addition, interest expense related to our long-term debt is fixed. SEGMENT DATA Alside accounted for more than 87% of our net sales and income from operations in each of the last three years. In 2001, Alside accounted for approximately 88% of our income from operations exclusive of corporate selling, general and administrative expenses. Management believes that a discussion of our results and financial position for these periods is enhanced by presenting segment information for Alside and AmerCable. The tables below set forth for the periods indicated certain items from our financial statements:
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 2001 2000 1999 -------------------- -------------------- -------------------- % OF % OF % OF TOTAL NET TOTAL NET TOTAL NET AMOUNT SALES AMOUNT SALES AMOUNT SALES -------- --------- -------- --------- -------- --------- (IN THOUSANDS) CONSOLIDATED: Net sales(1)......................... $595,819 100.0% $499,393 100.0% $455,268 100.0% Gross profit......................... 170,453 28.6 145,399 29.1 137,672 30.2 Selling, general and administrative expenses(2)......................... 119,945 20.1 107,255 21.5 96,028 21.1 -------- ----- -------- ----- -------- ----- Income (loss) from operations........ 50,508 8.5 38,144 7.6 41,644 9.1 Interest expense..................... 6,795 1.1 6,046 1.2 6,779 1.5 Gain on the sale of UltraCraft....... -- -- 8,012 1.6 -- -- Equity in loss of Amercord Inc....... -- -- -- -- 1,337 0.3 Write-down of Amercord Inc........... 2,393 0.4 -- -- -- -- Merger transaction costs............. -- -- -- -- -- -- -------- ----- -------- ----- -------- ----- Income (loss) before income taxes.... 41,320 7.0 40,110 8.0 33,528 7.3 Income tax expense (benefit)......... 15,908 2.7 16,555 3.3 13,038 2.8 -------- ----- -------- ----- -------- ----- Net income (loss).................... $ 25,412 4.3% $ 23,555 4.7% $ 20,490 4.5% ======== ===== ======== ===== ======== ===== QUARTER ENDED MARCH 31, ------------------------------------------- 2002 2001 -------------------- -------------------- % OF % OF TOTAL NET TOTAL NET AMOUNT SALES AMOUNT SALES -------- --------- -------- --------- (IN THOUSANDS) CONSOLIDATED: Net sales(1)......................... $123,198 100.0% 108,611 100.0% Gross profit......................... 32,420 26.3 27,197 25.0 Selling, general and administrative expenses(2)......................... 31,219 25.3 28,127 25.9 -------- ----- -------- ----- Income (loss) from operations........ 1,201 1.0 (930) (0.9) Interest expense..................... 1,669 1.4 1,579 1.5 Gain on the sale of UltraCraft....... -- -- -- -- Equity in loss of Amercord Inc....... -- -- -- -- Write-down of Amercord Inc........... -- -- 2,393 2.2 Merger transaction costs............. 2,002 1.6 -- -- -------- ----- -------- ----- Income (loss) before income taxes.... (2,470) (2.0) (4,902) (4.5) Income tax expense (benefit)......... (951) (0.8) (1,887) (1.7) -------- ----- -------- ----- Net income (loss).................... $ (1,519) (1.2)% $ (3,015) (2.8)% ======== ===== ======== =====
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 2001 2000 1999 -------------------- -------------------- -------------------- % OF % OF % OF TOTAL NET TOTAL NET TOTAL NET AMOUNT SALES AMOUNT SALES AMOUNT SALES -------- --------- -------- --------- -------- --------- (IN THOUSANDS) ALSIDE: Net sales(1)......................... $524,528 100.0% $434,845 100.0% $410,107 100.0% Gross profit......................... 156,626 29.8 131,704 30.3 129,996 31.7 Selling, general and administrative expenses............................ 107,737 20.5 95,404 22.0 87,588 21.4 -------- ----- -------- ----- -------- ----- Income (loss) from operations........ $ 48,889 9.3% $ 36,300 8.3% $ 42,408 10.3% ======== ===== ======== ===== ======== ===== Total Assets......................... $189,142 $165,990 $167,024 AMERCABLE: Net sales(1)......................... $ 71,291 100.0% $ 64,548 100.0% $ 45,161 100.0% Gross profit......................... 13,827 19.4 13,695 21.2 7,676 17.0 Selling, general and administrative expenses............................ 7,174 10.1 7,880 12.2 4,801 10.6 -------- ----- -------- ----- -------- ----- Income from operations............... $ 6,653 9.3% $ 5,815 9.0% $ 2,875 6.4% ======== ===== ======== ===== ======== ===== Total Assets......................... $ 34,054 $ 34,255 $ 26,673 QUARTER ENDED MARCH 31, ------------------------------------------- 2002 2001 -------------------- -------------------- % OF % OF TOTAL NET TOTAL NET AMOUNT SALES AMOUNT SALES -------- --------- -------- --------- (IN THOUSANDS) ALSIDE: Net sales(1)......................... $111,062 100.0% $ 89,939 100.0% Gross profit......................... 30,691 27.6 23,718 26.4 Selling, general and administrative expenses............................ 28,508 25.7 24,875 27.7 -------- ----- -------- ----- Income (loss) from operations........ $ 2,183 2.0% $ (1,157) (1.3)% ======== ===== ======== ===== Total Assets......................... $188,759 $176,413 AMERCABLE: Net sales(1)......................... $ 12,136 100.0% $ 18,672 100.0% Gross profit......................... 1,729 14.2 3,479 18.7 Selling, general and administrative expenses............................ 1,647 13.6 1,876 10.1 -------- ----- -------- ----- Income from operations............... $ 82 0.7% $ 1,603 8.6% ======== ===== ======== ===== Total Assets......................... $ 36,283 $ 40,128
- --------------- (1) Certain prior period amounts have been reclassified to conform with the current period presentation. (2) Consolidated selling, general and administrative expenses include corporate expenses of $5.0 million, $4.0 million and $3.6 million for the years 2001, 2000 and 1999, respectively, and $1.1 million and $1.4 million for the quarters ended March 31, 2002 and 2001, respectively. 38 RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2002 COMPARED TO THE QUARTER ENDED MARCH 31, 2001 Our net sales increased 13.4% to $123.2 million for the quarter ended March 31, 2002 compared to $108.6 million for the same period in 2001 as higher sales at our Alside division were partially offset by lower sales at our AmerCable division. Income from operations increased to $1.2 million for the first quarter of 2002 compared to an operating loss of $930,000 for the same period in 2001 as higher operating profits at Alside were offset by lower operating profits at AmerCable. Our net loss was $1.5 million or $0.22 per share in 2002 compared to a net loss of $3.0 million or $0.39 per share in 2001. The 2002 results include $2.0 million in transaction costs associated with our strategic review process and our merger with Simon Acquisition Corp. The 2001 results include the write-off of our Amercord investment. Exclusive of these items, our first quarter net loss was $0.04 per share and $0.20 per share for 2002 and 2001, respectively. Our results of operations are primarily affected by our Alside division, which accounted for more than 87% of our annual net sales in each of the last three years. Because most of Alside's building products are intended for exterior use, Alside's sales and operating profits tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year historically result in that quarter producing significantly less sales revenue and profits than in any other period of the year. Alside Alside's net sales increased $21.1 million or 23.5% to $111.1 million for the first quarter of 2002 compared to $89.9 million for the same period in 2001 due to higher sales of vinyl windows and vinyl siding. Unit sales of vinyl siding and vinyl windows increased 16.0% and 71.7%, respectively, for the first quarter of 2002 compared to the same period in 2001. Gross profit increased 29.4% to $30.7 million in 2002 compared to $23.7 million in 2001 due to the increased sales volume and significant improvements at Alside's Northwest window fabrication facility which was profitable in the first quarter of 2002 but incurred losses during the first quarter of 2001. Selling, general and administrative expense increased 14.6% to $28.5 million due to higher personnel costs in supply centers, higher incentive compensation due to increased sales, and additional marketing expense to support sales growth. Selling, general and administrative expense as a percent of sales was 25.7% for the first quarter of 2002 compared to 27.7% for the same period of 2001. Income from operations was $2.2 million for the first quarter of 2002 compared to an operating loss of $1.2 million for the same period in 2001 as increased gross profits were partially offset by higher selling, general and administrative expense. AmerCable Net sales at AmerCable decreased 35.0% to $12.1 million for the first quarter of 2002 compared to $18.7 million for the same period in 2001 due primarily to lower industrial cable sales to the telecommunications industry. Selling, general and administrative expense decreased 12.2% to $1.6 million for the first quarter of 2002 compared to $1.9 million for the 2001 period due to lower compensation costs. Income from operations decreased to $82,000 in the first quarter of 2002 compared to $1.6 million for the 2001 period as lower gross profits due to decreased sales were slightly offset by lower selling, general and administrative expense. Other Net interest expense increased 5.7% to $1.7 million for the first quarter of 2002 compared to $1.6 million for the same period in 2001 due to lower investment income resulting from the decline in interest rates during the first quarter of 2002 compared to 2001. We recorded interest income of $87,000 for the first quarter of 2002 compared to $176,000 for the same period in 2001. In connection with the merger, we incurred one-time merger related costs, including legal, accounting and investment banking fees of approximately $2.0 million during the first quarter of 2002. These costs have been classified in merger transaction costs in the statement of operations included elsewhere in this prospectus. 39 YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000 General Our net sales increased $96.4 million or 19.3% to a record high of $595.8 million for the year ended 2001 as compared to the 2000 period due primarily to strong sales at our Alside division. Income from operations increased $12.4 million or 32.4% to $50.5 million for the 2001 period compared to $38.1 million for the 2000 period due primarily to higher operating profits at Alside. Net income increased 7.9% to $25.4 million or $3.46 per share in 2001 compared to $23.6 million or $2.85 per share in 2000. The 2001 results include the $2.4 million write-down of our Amercord Inc. investment while the 2000 period results included the $8.0 million pre-tax gain on the sale of our UltraCraft cabinet operations and an additional $1.1 million in income tax expense recorded due to an adjustment to a deferred tax asset. Excluding these items, our net income and earnings per share were $26.9 million or $3.67 per share in 2001 and $19.7 million or $2.39 per share in 2000. In April 2001, we repurchased 1.0 million shares of our outstanding Class B common stock. Our weighted average shares outstanding were 7.3 million in 2001 and 8.3 million in 2000. Exclusive of the repurchase of the shares of Class B common stock, our weighted average shares outstanding and earnings per share for 2001 were 8.0 million and $3.20, respectively. Alside Alside's net sales increased 20.6% to $524.5 million in 2001 compared to $434.8 million in the 2000 period due to higher sales volume of vinyl windows, vinyl siding and complementary building products, such as roofing, foam insulation, tools and other materials manufactured by third parties and sold through Alside's supply centers. Unit sales of vinyl windows increased 48.1% for the 2001 period compared to the 2000 period, exclusive of the operations of Alpine, which were acquired in October 2000. Vinyl window unit sales increased 83.5% including the Alpine operations. Unit sales of vinyl siding increased 11.1% for the 2001 period while we believe that the vinyl siding industry as a whole decreased slightly. Gross profit increased 18.9% to $156.6 million for the 2001 period compared to $131.7 million for the same period in 2000, but decreased as a percentage of sales to 29.8% in 2001 from 30.3% in 2000 due to changes in product mix to lower margin vinyl windows. Gross profit margins on vinyl siding and windows each increased over 2000 due to lower raw material costs and improved manufacturing efficiencies. Selling, general and administrative expense increased to $107.7 million in 2001 compared to $95.4 million in 2000, but decreased as a percentage of sales. The increase was due to higher personnel costs and higher supply center expenditures. The increase in personnel costs was due to normal salary increases, an increase in the number of salaried personnel due to the Alpine acquisition in 2000, higher incentive compensation due to increased profitability at Alside and higher severance expense. Supply center costs increased due to higher personnel costs due to an increase in number of supply center personnel, higher incentive compensation and increased lease expense due to the opening of additional locations and increased lease expense at existing locations. Income from operations increased 34.7% to $48.9 million as higher gross profits were partially offset by higher selling, general and administrative expense. AmerCable Net sales increased 10.4% to $71.3 million for the 2001 period compared to $64.5 million for the same period in 2000 due to higher sales of marine and mining cable products which were partially offset by lower sales of industrial cable products, including telecommunications cable products. Gross profit increased to $13.8 million in 2001 compared to $13.7 million in 2000 but decreased as a percentage of sales due to higher labor and overhead costs and unfavorable fixed cost absorption. Selling, general and administrative expense was $7.2 million for the period ended 2001 compared to $7.9 million for the same period in 2000 as lower bad debt expense was partially offset by higher personnel costs. In 2000, AmerCable recorded $1.4 million in additional bad debt expense as the result of a customer bankruptcy. Income from operations increased 14.4% to $6.7 million in 2001 compared to $5.8 million for the same period in 2000 due to slightly higher gross profit and lower selling, general and administrative expense due to the additional $1.4 million in bad debt expense recorded in 2000. 40 Other Net interest expense increased $749,000 or 12.4% in 2001 compared to 2000 due primarily to a decrease in our investment income. Our average investment balance decreased during 2001 as compared to 2000 due to our repurchase of 1.0 million shares of our Class B common stock at an aggregate cost of $19.5 million in April 2001. The overall decrease in interest rates during 2001 also contributed to lower investment income. We recorded interest income of $377,000 in 2001 as compared to $1.1 million in 2000. Corporate selling, general and administrative expense increased to $5.0 million for 2001 compared to $4.0 million for the 2000 period due to the cost associated with obtaining a fairness opinion in connection with the repurchase of our Class B common stock and additional compensation expense recorded due to a modification of certain outstanding stock options. YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999 General Our net sales increased 9.7% to $499.4 million in 2000 as compared to $455.3 million in 1999 due to higher sales at our Alside and AmerCable divisions. Income from operations decreased 8.4% to $38.1 million in 2000 as compared to $41.6 million in 1999 as higher operating profits from our AmerCable division were offset by lower operating profits at Alside. Net income increased to $23.6 million in 2000 as compared to $20.5 million in 1999. The increase in net income was due to the sale of our UltraCraft cabinet operations in June 2000, which resulted in a pre-tax gain of $8.0 million. Alside Net sales at Alside increased to $434.8 million in 2000 as compared to $410.1 million in 1999 due to higher sales prices in vinyl siding and higher sales volume in vinyl windows and vinyl fencing. Vinyl siding sales increased in 2000 as compared to 1999 as higher sales prices which were implemented to offset higher vinyl resin costs were partially offset by a slight decrease in siding unit volume. Vinyl window sales increased 9.7% in 2000 due primarily to a 6.5% increase in unit sales volume while sales of vinyl fencing, decking and railing increased 28.5% due to higher sales volume. Gross profit increased to $131.7 million in 2000 but decreased as a percentage of sales as Alside was unable to recover any incremental margin on the selling price increases that resulted due to higher vinyl resin prices. Selling, general and administrative expense increased to $95.4 million in 2000 as compared to $87.6 million in 1999 due to the opening of eight additional supply centers as well as higher personnel costs and higher legal expense. Income from operations decreased to $36.3 million in 2000 from $42.4 million in 1999 as higher gross profits were more than offset by higher selling, general and administrative expense. AmerCable AmerCable's net sales increased 42.9% to $64.5 million in 2000 as compared to $45.2 million in 1999 due to higher volume across all product lines. Sales increased by 86% in the industrial segment as sales of power cable to the telecommunications industry were very strong. Gross profit increased to $13.7 million in 2000 up from $7.7 million in 1999 due to higher sales and improved fixed cost absorption. Gross profit as a percentage of sales increased to 21.2% as compared to 17.0% in 1999. Selling, general and administrative expense increased to $7.9 million in 2000 as compared to $4.8 million in 1999. The increase was due to a $1.4 million increase in bad debt expense as well as higher personnel costs and higher incentive compensation. Bad debt expense increased by $1.4 million in 2000 as a result of a large customer that filed for bankruptcy. Income from operations increased to $5.8 million in 2000 as compared to $2.9 million in 1999 due to higher gross profits, which were offset in part by higher selling, general and administrative expense. Other Net interest expense decreased $733,000 or 10.8% in 2000 as compared to 1999 primarily due to an increase in our investment income. We recorded interest income of $1.1 million in 2000 as compared to 41 $329,000 in 1999. We recorded $1.1 million in additional income tax expense due to an adjustment to a 1986 deferred tax asset recorded pursuant to the spin-off of the tire cord division into Amercord Inc. This adjustment increased the effective tax rate from 38.5% to 41.3%. Amercord Inc. In November 1999, Amercord Inc. was recapitalized, and in that transaction our interest in Amercord Inc. was reduced from 50% to 9.9%. As a result of the recapitalization, we received $1.2 million in cash (net of related expenses) and a subordinated note for $1.5 million due November 2004. We have the right to require Amercord Inc. to purchase our remaining 9.9% interest for $2.0 million in November 2003. For the reasons described in the following paragraph, we do not presently expect Amercord Inc. will have the financial ability to meet these obligations. Amercord Inc.'s operating results and financial position deteriorated during the first quarter 2001. We believed we would not recover our investment in Amercord Inc. and wrote off our $2.4 million investment in Amercord Inc. during the first quarter of 2001. Amercord Inc. ceased operations during the second quarter of 2001. QUARTERLY FINANCIAL DATA GENERAL Because most of Alside's building products are intended for exterior use, our sales and operating profits tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year historically result in that quarter producing significantly less sales revenue than in any other period of the year. As a result, we have historically had small profits or losses in the first quarter, and reduced profits in the fourth quarter of each calendar year due to the significant impact of Alside on our performance. Our quarterly sales and operating profit data for the three months ended March 31, 2002 and quarterly results for years 2001 and 2000 are shown in the table below:
THREE MONTHS ENDED ------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2002 Net sales -- Alside...................... $111,062 Net sales -- AmerCable................... 12,136 -------- Total net sales.......................... 123,198 Gross profit............................. 32,420 Income from operations................... 1,201 Net loss................................. (1,519) Basic and fully diluted loss per common share.................................. (0.22)
42
THREE MONTHS ENDED ------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 Net sales -- Alside...................... $ 89,939 $139,206 $150,942 $144,441 Net sales -- AmerCable................... 18,672 19,539 17,722 15,358 -------- -------- -------- -------- Total net sales.......................... 108,611 158,745 168,664 159,799 Gross profit............................. 27,197 47,266 49,592 46,398 Income (loss) from operations............ (930) 16,994 19,142 15,302 Net income (loss)........................ (3,015) 9,311 10,714 8,402 Basic earnings (loss) per common share... (0.39) 1.34 1.59 1.25 Diluted earnings (loss) per common share.................................. (0.39) 1.28 1.52 1.18 2000 Net sales -- Alside...................... $ 87,141 $119,135 $118,715 $109,854 Net sales -- AmerCable................... 16,278 15,246 16,096 16,928 -------- -------- -------- -------- Total net sales.......................... 103,419 134,381 134,811 126,782 Gross profit............................. 28,593 39,733 40,277 36,796 Income from operations................... 4,310 12,715 13,155 7,964 Net income............................... 1,591 11,894 5,967 4,103 Basic earnings per common share.......... 0.20 1.48 0.74 0.52 Diluted earnings per common share........ 0.19 1.43 0.71 0.50
LIQUIDITY AND CAPITAL RESOURCES HISTORICAL At March 31, 2002 the Company had cash and cash equivalents of $13.5 million and available borrowing capacity of approximately $48.1 million under our existing credit facility. Outstanding letters of credit as of March 31, 2002, totaled $1.9 million securing various insurance letters of credit. Net cash used by operations was $12.0 million in the quarter ended March 31, 2002 compared with $10.1 million in the same period in 2001. The increase in cash used by operations for the 2002 period was due primarily to increased inventory at Alside due to seasonal requirements and at AmerCable due to lower than anticipated sales volume. Net cash provided by operating activities was $44.0 million, $23.0 million and $15.2 million in 2001, 2000 and 1999, respectively. Cash flows from operations increased $21.0 million in 2001 compared to 2000 due to higher operating profits and higher accounts payable and accrued liabilities which were partially offset by higher accounts receivable. The increase in accounts payable was due to higher fourth quarter sales and the timing of vendor payments while the increase in accrued liabilities was due to higher commission and profit sharing accruals in our Alside division. Sales for the fourth quarter of 2001 were 26% higher than the same period in 2000 resulting in an increase in accounts receivable for 2001 compared to the 2000 period. Inventory levels have not increased proportionately with sales due to improved inventory management and the significant increase in vinyl window sales, which have relatively small amounts of finished goods inventory due to the fact that our window products are custom fabricated to the customer's specifications. Cash flows from operations increased in 2000 as compared to 1999 due primarily to lower working capital requirements. In May 1999, we amended our existing $50 million bank credit facility to extend the term of the facility through May 2002. Available borrowings under this credit agreement are limited to the lesser of the total facility less unused letters of credit or availability based on percentages of eligible accounts receivable and inventories. The credit agreement is secured by substantially all of our assets other than our 43 owned real property, equipment and our interest in Amercord Inc. At December 31, 2001, $1.9 million of this facility had been used to secure various insurance letters of credit. At December 31, 2001, we had an available borrowing capacity under the credit agreement of approximately $48.1 million. Capital expenditures totaled $3.1 million for the quarter ended March 31, 2002, compared with $6.8 million during the same period in 2001. Alside's expenditures in the 2002 period were primarily for the production of new casement window tooling and related production line expenditures. AmerCable's expenditures were incurred primarily to increase line capacity. Capital expenditures totaled $15.0 million, $11.9 million and $18.9 million in 2001, 2000 and 1999, respectively. Alside's 2001 expenditures were used primarily to increase window and fencing capacity and for the new ERP system, which will be implemented over the next two years at a total cost of approximately $12.0 million. Capital expenditures associated with the ERP implementation totaled $3.1 million in 2001 and 2000. Expenditures at AmerCable were used to expand manufacturing capacity. Capital expenditures in 2000 were used primarily to increase extrusion capacity for window profiles, fencing and siding products, improve window efficiency and upgrade window information systems at Alside and increase capacity and processing efficiency at AmerCable. Expenditures in 1999 were primarily used to complete the new vinyl siding manufacturing facility in Freeport, Texas, expand extrusion capacity for window profiles and vinyl fencing, expand capacity and increase manufacturing efficiency for semi-custom cabinets and increase production flexibility and capacity at AmerCable. Capital expenditures for the new vinyl siding manufacturing plant were $9.8 million in 1999. We have historically funded these capital expenditure requirements out of cash generated from operating activities or borrowings under our bank credit facility. We believe that capital expenditures ranging from $8.0 million to $10.0 million represent a base level of spending needed to maintain our manufacturing facilities as well as provide for modest increases in capacity and further automation. 2002 estimated capital expenditures are $13.3 million of which $10.3 million are budgeted for Alside. Alside's 2002 budget includes expenditures to replace existing window tooling to facilitate the manufacture of new products, increase window and siding capacity to meet anticipated sales growth, expand our existing supply center network and approximately $400,000 for the ERP system implementation. Approximately $3.0 million of the 2002 capital budget has been allocated to AmerCable, primarily to add extrusion capacity. We have commitments for future minimum lease payments under noncancelable operating leases, principally for manufacturing and distribution facilities and certain equipment. The minimum commitments under these leases for 2002, 2003, 2004, 2005, 2006 and thereafter are $14.0 million, $11.6 million, $8.9 million, $6.2 million, $3.4 million and $5.4 million, respectively. In connection with the recapitalization of Amercord Inc. in November 1999, we guaranteed a $3.0 million note secured by Amercord Inc.'s real property. Amercord Inc. ceased operations in the second quarter of 2001. As of the date of this prospectus, the lender has not requested us to make payment under the guaranty. Should the guaranty be exercised by Amercord Inc.'s lender, we and Ivaco Inc., another stockholder of Amercord Inc., have the option to assume the loan. Ivaco Inc. has indemnified us for 50% of any loss under the guaranty up to $1.5 million. Based on a third party appraisal of Amercord Inc.'s real property, we believe that we are adequately secured under our guaranty of the $3.0 million Amercord Inc. note such that no loss is anticipated with respect to this guaranty. Effective October 1, 1998, we established an Employee Stock Purchase Plan, or "ESPP". Employees participating in the ESPP can purchase shares of our common stock at a 15% discount to fair market value through payroll deductions of up to 25% of their eligible compensation. We initially registered 250,000 shares of common stock with the Commission for issuance pursuant to the ESPP and registered an additional 250,000 shares during 2001. During 2001, 2000 and 1999, we issued 60,679, 65,873 and 80,919 shares of common stock pursuant to the ESPP, resulting in net proceeds of approximately $875,000, $848,000 and $851,000, respectively. Our Board of Directors approved the suspension of the ESPP effective December 31, 2001. 44 On October 27, 1998 our Board of Directors approved a program to repurchase up to 800,000 shares of common stock in open market transactions depending on market, economic and other factors. On November 28, 2000 our Board of Directors authorized the repurchase of an additional 800,000 shares under the program for a total of 1.6 million shares. At December 31, 2001, we had repurchased 1.0 million shares of common stock under this program at a cost of $13.9 million. The Class B common stock repurchase described below was not part of this stock repurchase program. On April 29, 2001, we repurchased 1,000,000 shares of our Class B common stock from The Prudential Insurance Company of America, or Prudential, and its wholly owned subsidiary, PCG Finance Company II, LLC, or "PCG", at $19.50 per share, or $19.5 million in the aggregate, which has been reflected primarily as a reduction to retained earnings. The share purchase was financed through available cash and borrowings under our existing credit facility. Following the purchase, Prudential and PCG converted the remaining 550,000 shares of Class B common stock held by these entities into 550,000 shares of common stock pursuant to the terms of our certificate of incorporation. We have retired all 1,550,000 previously authorized shares of Class B common stock. LIQUIDITY AND CAPITAL RESOURCES AFTER THE MERGER The merger and related refinancing transactions required total cash of approximately $466.8 million, which was used to purchase our common stock in the equity tender offer, to consummate our debt tender offer for our then existing 9 1/4% notes and to pay fees and expenses related to the transactions. The transactions were financed through an equity contribution of approximately $172 million by Associated Materials Holdings Inc. (who received cash from the equity investors and $7.2 million of rollover equity from certain members of management), cash on hand of approximately $4.8 million, new term loan of $125 million from the new credit facility and proceeds from the offering of the outstanding notes. The equity tender offer closed on April 19, 2002, prior to the closing of the offering of the outstanding notes on April 23, 2002. We borrowed under a $215 million unsecured interim credit facility to complete the equity tender offer. The proceeds from the offering of the outstanding notes along with proceeds from the term loan under the new credit facility were used to repay such interim credit facility. On June 24, 2002, we completed the sale of our AmerCable division to AmerCable Incorporated, a newly-formed entity controlled by members of AmerCable management and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. We used the net proceeds to repay a portion of our new credit facility in accordance with certain terms thereof. We believe that available cash and cash flow from operations, together with borrowings under the new credit facility, will be sufficient to cover our working capital, capital expenditures and debt service needs for the foreseeable future. Our ability to make scheduled payments of principal or interest on, or to refinance, our indebtedness, or to fund planned capital expenditures, will depend on our future performance, which is subject to general economic conditions, competition in the building product environment and other factors. We may not generate sufficient cash flow from operations, realize anticipated revenue growth and operating improvements or obtain future capital in a sufficient amount or on acceptable terms, to enable us to service our indebtedness or to fund our other liquidity needs. The new credit facility and the indenture governing the notes will contain restrictive covenants that, among other things, limit our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell our assets or declare dividends. In addition, under the new credit facility we will be required to achieve certain financial ratios relating to leverage, interest expense coverage and fixed charge coverage. EFFECTS OF INFLATION We believe that the effects of inflation have not been material to our operating results for each of the three past years. 45 FINANCIAL ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" which has eliminated the pooling of interests method for mergers and acquisitions. The purchase method of accounting is required for all business combinations initiated after June 30, 2001. SFAS No. 141 supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." As discussed in the "Unaudited Pro Forma Financial Information" section of this prospectus, the merger will be accounted for under the purchase method of accounting proscribed under this Statement. In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets" which addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized but instead be reviewed annually for impairment using a fair-value based approach. Intangible assets that have a finite life will continue to be amortized over their respective estimated useful lives. The Statement is effective for fiscal years beginning after December 15, 2001. As discussed in the "Unaudited Pro Forma Financial Information" section of this prospectus, the merger will result in a purchase price allocation to tangible and intangible assets with both finite and indefinite lives. We will then be subject to testing for impairment on an annual basis those intangible assets with indefinite lives. In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs and establishes consistent accounting treatment for these items. This Statement is effective for fiscal years beginning after June 15, 2002. We believe the adoption of this Statement will not have a material effect on our financial position, results of operations or cash flows. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the financial reporting and accounting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51, "Consolidated Financial Statements" to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This Statement is effective for fiscal years beginning after December 15, 2001. We intend to account for the sale of our AmerCable division under the provisions of this Statement and as such AmerCable's results will be presented as "Discontinued Operations" subsequent to the merger. CRITICAL ACCOUNTING POLICIES AND ESTIMATES GENERAL Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to customer programs and incentives, bad debts, inventories, income taxes and pensions and benefits. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 46 We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. REVENUE RECOGNITION Revenues are recorded net of estimated customer programs and incentive offerings including special pricing agreements, promotions and other volume-based incentives. Revisions to these estimates are charged to income in the period in which the facts that give rise to the revision become known. BAD DEBT We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of our ability to make payments, additional allowances may be required. INVENTORY We value our inventories at the lower of cost (first-in, first-out) or market. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. INCOME TAXES We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. We review the recoverability of any tax assets recorded on the balance sheet and provide any necessary allowances as required. PENSION Our pension costs are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates and expected return on plan assets. In selecting these assumptions, management considers current market conditions, including changes in interest rates. Changes in the related pension benefit costs may occur in the future due to changes in assumptions. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FOREIGN CURRENCY EXCHANGE RATE RISK Our revenues are primarily from domestic customers and are realized in U.S. dollars. Accordingly, we believe our direct foreign currency exchange rate risk is not material. In the past, we have hedged against foreign currency exchange rate fluctuations on specific sales or equipment purchasing contracts. At March 31, 2002 we had no currency hedges in place. COMMODITY PRICE RISK Our principal raw material, vinyl resin, has been subject to rapid price changes, particularly in 1999 and 2000. We expect the price of vinyl resin to increase significantly in 2002. Through price increases to our customers, we have historically been able to pass on significant resin cost increases. The results of operations for individual quarters can and have been negatively impacted by a delay between the time of vinyl resin cost increases and price increases in our products. However, over longer periods of time, the 47 impact of the cost increases in vinyl resin has historically not been material. While we expect that any significant resin cost increases in 2002 will be offset by price increases to our customers, there can be no assurances that we will be able to pass on any future price increases. INTEREST RATE RISK At March 31, 2002, on a pro forma basis, we would have had $96.7 million of borrowings under our new credit facility that will be subject to variable interest rates based on the London Interbank Offered Rate. The effect of a 1/8% increase or decrease in interest rates would increase or decrease total interest expense for the quarter ended March 31, 2002 by approximately $30,000. 48 BUSINESS COMPANY OVERVIEW We are a leading, vertically integrated manufacturer and nationwide distributor of exterior residential building products. These products are marketed through our Alside division on a wholesale basis to more than 35,000 professional contractors engaged in home repair and remodeling and new home construction. We distribute our products primarily through our nationwide network of over 80 supply centers operating under the Alside(R)brand name. In 2001, Alside accounted for more than 88% of our total net sales. The core products we manufacture and distribute are vinyl siding and vinyl windows which together comprised approximately 71% of Alside's 2001 net sales. We also manufacture and distribute vinyl fencing, decking and railing, and vinyl garage doors and distribute other complementary products which are manufactured by third parties. Approximately two thirds of Alside's products are sold to contractors engaged in the home repair and remodeling market with one third sold to the new construction market. Our supply centers provide "one stop" shopping to our contractor customers, carrying products, accessories and tools necessary to complete a vinyl siding or window project. In addition, our supply centers provide high quality product literature, product samples and installation training to these customers. We believe that the strength of our products and distribution network has developed strong brand loyalty and long-standing relationships with local contractors and has enabled us to consistently gain market share over the last five years. Approximately 80% of Alside's 2001 net sales were generated through our network of supply centers with the remainder sold through independent distributors primarily in markets where we currently do not have supply centers. Due to our vertically integrated distribution strategy, innovative new product development and operational excellence, we have consistently generated sales growth in excess of industry averages. From 1996 to 2001, we generated a compounded annual growth rate in our net sales and EBITDA of 10.7% and 16.2%, respectively. In 2001, our net sales and EBITDA grew by 19.3% and 28.8%, respectively, over the prior year. We believe that our historical investment in manufacturing and distribution capabilities and our initiatives to reduce costs and enhance operating efficiencies throughout our production, distribution and supply chain provide us with a strong platform for future growth and profitability. INDUSTRY OVERVIEW Demand for residential building products is driven by a number of factors, including consumer confidence, availability of credit, new housing starts and general economic cycles. Historically, the demand for repair and remodeling products, where we are primarily focused, has been less cyclical than demand for new home construction and is less sensitive to these factors. Drivers of repair and remodeling demand include: - Favorable demographics. The segment of the population age 55 years and above, which favors professionally installed, low maintenance home improvements, is estimated to grow by 25% over the next five years and 50% over the next ten years. - Aging of the housing stock. The average home age increased from 23 years in 1985 to 29 years in 2000, and over 70% of the current housing stock was built prior to 1980. - Increase in average home size. The average home size increased over 25% from 1,785 square feet in 1985 to 2,306 square feet in 2000. In addition, repair and remodeling projects tend to utilize a greater mix of premium products with higher margins than those used in new construction projects. We estimate that the residential vinyl siding and vinyl window markets are approximately $1.7 billion and $3.4 million in size, respectively. Over the last 15 years, vinyl has commanded an increasing share of the total residential siding and window markets. Vinyl has greater durability, requires less maintenance and provides greater energy efficiency than many competing siding and window products. According to industry reports, based on unit sales, vinyl accounted for approximately 50% of the exterior siding market and 49 approximately 51% of the residential window market in 1998. More recently, vinyl siding has achieved increasing acceptance in the new construction market, as builders and home buyers have recognized vinyl's low maintenance, durability and price advantages. Vinyl windows also have achieved increased acceptance in the new construction market, as a result of builders and home buyers recognizing vinyl's favorable attributes, the enactment of local legal or building code requirements that mandate more energy efficient windows and the increased development and promotion of vinyl window products by national window manufacturers. We believe that vinyl siding and vinyl windows will continue to gain market share in the new residential construction market while remaining the preferred product of the remodeling marketplace. Vinyl competes with wood, masonry, fiber cement and metal in the siding market and wood and aluminum in the window market. OUR COMPETITIVE STRENGTHS The following competitive strengths have contributed to our growth and have enabled us to gain market share over the last five years within the U.S. siding and window markets. Nationwide Distribution Network of Company-Owned Supply Centers. We are one of only two major vinyl siding manufacturers in the United States that markets our products primarily through a company-owned distribution network. Our national distribution network offers us a dedicated channel compared to most of our competitors who rely on local third party distributors who generally carry an assortment of brands and may not focus on any particular brand. We believe that distributing our vinyl siding and window products through our nationwide network of over 80 Alside supply centers helps us to: (1) build long-standing customer relationships and Alside brand loyalty, (2) develop comprehensive, customized marketing programs to assist our contractor customers, (3) closely monitor developments in local customer preferences, and (4) ensure product availability through integrated logistics between our manufacturing and distribution. Our supply center network has enabled us to grow substantially faster than the industry. Our vinyl siding unit sales grew at a five year compounded annual growth rate of 9.2% as compared to an industry average of 2.0% over the same period and our vinyl window unit sales grew at a five year compounded annual growth rate of 12.7% as compared to an industry average of 5.8%. Broad Product Offering. We offer a diverse mix of vinyl siding and vinyl window products to both the repair and remodeling and new construction markets across all price points: premium, standard and economy. Including our manufactured products and products manufactured by third parties, our supply centers sell more than 2,000 building and remodeling products. Our broad product offering enables us to meet the specialized needs of our customers and diversify our sales across all segments of the market. Most of these products are sold under the Alside brand and are recognized for their quality and durability. Our product offering includes the well-known Charter Oak, Preservation, Seneca, Conquest and Landscape vinyl siding products, and the UltraMaxx, Excalibur, Centurion and Alpine vinyl window products. Low-Cost and Vertically Integrated Operations. We believe that we are a low-cost manufacturer as a result of our manufacturing expertise, state-of-the-art technology and economies of scale. Our Alside division has seven manufacturing facilities that produce vinyl siding and windows and other vinyl products. During the last three years, we invested approximately $35 million of capital in Alside, most of which was used in upgrading our manufacturing facilities. This has resulted in significant operating efficiency and increased capacity for meeting future growth needs. Within our window operations, our ability to produce vinyl extrusions, coupled with our high-speed welding and cleaning equipment, provides us with cost and quality advantages over other vinyl window manufacturers. 50 BUSINESS STRATEGY We seek to distinguish ourselves from other suppliers of residential building products and to sustain our profitability momentum through a business strategy focused on the following: Increase Sales at Existing Supply Centers. We plan to increase sales at each of our supply centers by continuing to: (1) enhance the vinyl siding and window product offering and expand third party products to offer a comprehensive package to appeal to a broad range of market segments; (2) utilize our highly trained sales force to maximize opportunities with existing customers and identify and capture new customers; and (3) allow supply centers to quickly respond to local market dynamics and take advantage of local market opportunities. Expand Supply Center Network. We intend to selectively expand our distribution network. We will continue to open additional supply centers in markets where we already have a presence, allowing us to gain additional market share in these attractive markets. Increase Focus on other Distributed Products. We will continue to focus on maximizing incremental revenue and margin opportunities from products which Alside does not manufacture. As part of this strategy we plan to identify additional products to sell through our supply centers to better serve our contractor customers. In addition, we intend to leverage our purchasing power by centralizing the purchasing decisions for high-volume distributed products. Develop Innovative Products. We plan to capitalize on our vinyl manufacturing expertise by continuing to develop and introduce innovative new products that offer performance, cost and other advantages. These efforts have led to several new product introductions in recent years including Preservation, the first bundled vinyl siding and vinyl window program in the industry; CenterLock, a vinyl siding product with a unique locking mechanism; Eclipse, the industry's only flat-seam vinyl siding; and Landscape, an economy vinyl siding product with enhanced rigidity providing the appearance of a higher end product. Our strong customer relationships provide valuable insight into the latest consumer preferences and product attributes that appeal to contractors. Drive Operational Excellence. We will continue to capitalize on opportunities to reduce costs, increase customer service levels and reduce lead times. We have historically identified similar opportunities and have subsequently executed strategic initiatives that resulted in increased profitability and revenue growth. For example, in 2000 and 2001 we targeted process efficiency opportunities in our window operations through system upgrades, flow realignment, and personnel-related initiatives. The successful implementation of this strategy raised our on-time deliveries to over 98% while increasing unit volume by over 48% (excluding our acquisition of Alpine) in 2001. PRODUCTS Our principal product offerings are vinyl siding and vinyl windows, which together accounted for approximately 71% of Alside's 2001 net sales. We also manufacture a variety of other products including vinyl fencing, decking and railing, as well as vinyl garage doors. The vinyl siding market consists of three segments: economy, standard and premium. Vinyl siding quality is determined by its rigidity, resistance to fading, thickness and ease of installation as well as other factors. Beginning with our introduction of Charter Oak in 1995, we have established ourselves as a leader in product innovation within all segments of the vinyl siding industry, most recently in the premium and economy segments. We believe that our innovation in product development was key to establishing us as a leader in the industry and will continue to be a principal factor in our sales growth in future years. For example, in late 1995, we introduced our Charter Oak siding, which enabled us to penetrate the premium segment of the vinyl siding market. We believe that Charter Oak continues to set the standard for premium vinyl siding products today. We introduced our Conquest siding product in 1997, which has enabled us to achieve additional market penetration in the economy segment of the siding industry. During 1998, we introduced 51 CenterLock, a patented product positioned in the premium market segment. In 1999, we introduced Odyssey Plus, an improved and updated version of our popular Odyssey siding product. We introduced our Seneca and Landscape products in order to broaden our offerings for the standard and economy segments in 2000. During 2001, we introduced three new premium siding products: Preservation, Eclipse and Board and Batten. In addition to these products, we have increased the number of colors and profiles offered within our existing siding products and continue to increase and improve upon the breadth of our vinyl siding product lines. We offer limited warranties ranging from 50-year warranties to lifetime warranties with our siding products. We divide our window products into the economy, standard and premium categories. Product quality within the vinyl window industry is determined by a number of competitive features including method of construction and materials used. We custom manufacture substantially all of our windows to fit existing window openings. Custom fabrication provides our customers with a product that is less expensive to install and more attractive after installation. Our custom windows are used primarily in the repair and remodeling market. In October 2000, we strengthened our position in the new construction segment of the window market through the purchase of substantially all the assets of Alpine Industries, Inc., who primarily manufactures new construction windows. New construction is one of the fastest growing segments of the vinyl window market and the acquisition of Alpine has positioned us to take advantage of this high growth market segment. This acquisition also gives us a presence in the western United States. Substantially all of our window products are accompanied by a limited lifetime warranty. A summary of our vinyl siding and window product offerings is presented in the table below according to our product line classification:
PRODUCT LINE SIDING PRODUCTS WINDOW PRODUCTS - ------------ --------------- --------------- Premium Preservation Preservation Charter Oak UltraMaxx CenterLock Alpine 9000 Series Eclipse Board and Batten Williamsport Standard Odyssey Plus Geneva Seneca Excalibur Alpine 8000 Series Economy Conquest Performance Series Landscape Centurion Alpine 7000 Series
In addition to vinyl siding and windows, we produce vinyl fencing, decking and railing under the brand name UltraGuard and vinyl garage doors under the brand name Premium Garage Doors. We primarily market our fencing, decking and railing and garage doors through independent dealers. To complete our line of vinyl siding and window products in our supply centers, we also distribute building products manufactured by other companies. These products include metal siding, roofing materials, insulation, cabinets and installation equipment and tools. MARKETING AND DISTRIBUTION Traditionally, most vinyl siding has been sold to the home remodeling marketplace through independent distributors. We are one of only two major vinyl siding manufacturers that markets products primarily through company-owned distribution centers. We have a nationwide distribution network of over 80 Alside supply centers through which we market Alside manufactured products and other complementary building products to over 35,000 professional home improvement and new construction contractors. The supply centers range in size from 6,000 square feet to 50,000 square feet depending on sales volume and the breadth and type of products offered at each location. We believe that our supply centers provide "one stop" shopping to meet the specialized needs of our contractor customers by distributing over 52 2,000 building and remodeling products, including a broad range of our manufactured vinyl siding and vinyl windows as well as products manufactured by others. In 2001, approximately 80% of Alside's sales were made through its supply centers. In addition to sales and promotional support, contractors look to their local supply centers to provide a broad range of specialty product offerings in order to maximize their ability to attract remodeling and homebuilding customers. We believe that distributing products through our supply centers provides us with certain competitive advantages such as (1) build long-standing customer relationships, (2) develop comprehensive, customized marketing programs to assist our contractor customers, (3) closely monitor developments in local customer preferences, and (4) ensure product availability through integrated logistics between our manufacturing and distribution. Many of our contractor customers have established long-standing relationships with their local supply centers based on individualized service, quality products, timely delivery, breadth of product offerings, strong sales and promotional programs and competitive prices. We support our contractor customer base with marketing and promotional programs that include product sample cases, sales literature, product videos and other sales and promotional materials. Professional contractors use these materials to sell remodeling construction services to their prospective customers. The customer generally relies on the professional contractor to specify the brand of siding or window to be purchased, subject to the customer's price, color and quality requirements. Our daily contact with our contractor customers also enables us to closely monitor activity in each of the remodeling and new construction markets in which we compete. This direct presence in the marketplace permits us to obtain current local market information, providing us with the ability to recognize trends in the marketplace earlier and adapt our product offerings on a location-by-location basis. Many of our contractor customers install both vinyl siding and vinyl windows. Because we manufacture and distribute both vinyl siding and vinyl windows, our contractor customers can acquire both products from a single source, which we believe provides us with a competitive advantage in marketing these products to our target customer base. Furthermore, we have the ability to achieve economies of scale in sales and marketing by developing integrated programs on either a national or local basis for our vinyl siding and vinyl window products. In 2000, we introduced Preservation as the industry's first bundled premium siding and window marketing program. Our unique position as a manufacturer and distributor of both vinyl siding and windows has enabled us to offer Preservation to select dealers. Each of our supply centers is evaluated as a separate profit center, and compensation of supply center personnel is based in part on the supply center's operating results. Decisions to open new supply centers, and to close or relocate existing supply centers, are based on our continuing assessment of market conditions and individual location profitability. During 2001, we added five supply centers to our distribution network. We have also opened seven new supply centers in 2002. We have developed formal training and recruiting programs for supply center personnel which we expect to improve our ability to staff new locations. Through certain of our supply centers, our Alside Installed Services Division provides full-service product installation of our vinyl siding products, principally to new homebuilders who value the importance of installation services. We also provide installation services for vinyl replacement windows through certain of our supply centers. We sell our manufactured products to large direct dealers and distributors, generally in those areas where no supply center currently exists. These sales accounted for approximately 20% of Alside's 2001 net sales. Despite their aggregate lower percentage of total sales, our largest individual customers are our large direct dealers and independent distributors. We continue to expand our network of independent distributors in strategic areas to improve our penetration into certain markets. MANUFACTURING We manufacture our vinyl siding products at our Ennis and Freeport, Texas facilities. We added the Freeport facility, which was completed in 1999, in order to provide the necessary capacity to meet our sales expectations for our siding products. We are able to add incremental extrusion capacity sufficient to 53 increase our capacity by approximately 50% over 2001 levels without the need for an additional facility or the expansion of the Freeport facility. We operate a vinyl extrusion facility in West Salem, Ohio to produce vinyl window extrusions as well as vinyl fencing, decking and railing and garage door panels. The Ennis, Texas plant also produces vinyl fencing. We operate three window fabrication plants which each use vinyl extrusions manufactured by us for the majority of their production requirements and utilize high speed welding and cleaning equipment for their welded window products. By producing our own vinyl extrusions, we believe we achieve significant cost savings and higher product quality compared to purchasing these materials from third-party suppliers. In October 2000, we purchased substantially all of the assets of Alpine, including its leased window fabrication facility located in Bothell, Washington. The Bothell facility produces its glass inserts, but has a long-term contract to purchase its vinyl extrusions from a third-party supplier. Our vinyl extrusion plants generally operate on a three-shift basis to optimize equipment productivity and utilize additional equipment to increase capacity to meet higher seasonal needs. Our window plants generally operate on a single shift basis utilizing both a second shift and increased numbers of leased production personnel to meet higher seasonal needs. RAW MATERIALS The principal raw materials used by us are vinyl resins, resin stabilizers and pigments, packaging materials, window hardware and glass, all of which are available from a number of suppliers. We have a contract with our resin supplier to supply substantially all of our vinyl resin requirements, which expires on December 31, 2002. We believe that we will be able to extend this contract. If we are not able to extend this contract, we believe that our requirements could also be met by other suppliers. The price of vinyl resin has been, and may continue to be, volatile. We expect the price of vinyl resin to increase significantly in 2002. We generally have been able to pass through price increases in raw materials to our customers. While we expect that any significant resin cost increases in 2002 will be offset by price increases to our customers, there can be no assurances that we will be able to pass on any future price increases. COMPETITION We believe that no company within the residential siding industry competes with us on both the manufacturing and distribution levels except for Owens Corning. There are, however, numerous small and large manufacturers of vinyl siding products, some of whom are larger in size and have greater financial resources than us. We compete with numerous large and small distributors of building products in our capacity as a distributor of these products. We believe that Alside is the fifth largest manufacturer of vinyl siding with approximately 8% of the U.S. market. The market for vinyl replacement windows is highly fragmented. We believe that the window fabrication industry will continue to experience consolidation due to the increased capital requirements for manufacturing welded vinyl windows. The trend towards welded windows, which require more expensive production equipment as well as more sophisticated information systems, has driven these increased capital requirements. We generally compete on price, product performance, and sales and service support to professional contractors. Competition varies by region. We also face competition from alternative materials: wood, masonry, fiber cement and metal in the siding market and wood and aluminum in the window market. ACQUISITIONS AND DIVESTITURES On June 24, 2002, we completed the sale of our AmerCable division to AmerCable Incorporated, a newly-formed entity controlled by members of management of the AmerCable division and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. Following the completion of the sale, we no longer own the assets of, or operate, the AmerCable division. 54 The asset purchase agreement in connection with the sale contained customary representations and warranties by AmerCable Incorporated to us, as well as certain limited representations and warranties by us to AmerCable Incorporated. The asset purchase agreement provides that following the asset sale, Associated Materials Incorporated and AmerCable Incorporated each will indemnify and hold harmless the other party and certain related parties and advisors for the inaccuracy of any representation or warranty, the failure to perform any covenant or comply with applicable bulk transfer or bulk sale laws and the incurrence of losses in connection with liabilities allocated to each party pursuant to the asset purchase agreement. Our obligation to indemnify AmerCable Incorporated is subject to various timing and monetary limitations and can in no event exceed the purchase price. In October 2000, we acquired substantially all of the assets of Alpine for $7.6 million in cash and the assumption of certain payroll related and property tax liabilities. Included in the acquired assets is Alpine's leased window fabrication facility located in Bothell, Washington. This facility manufactures vinyl windows primarily for the new construction market. In addition to new construction windows, Alpine manufactures premium sound control windows. This acquisition significantly increased our presence on the West Coast. The acquisition was accounted for using the purchase method of accounting. We completed the sale of our UltraCraft operation, a manufacturer of semi-custom frameless cabinets, in June 2000. Pre-tax net proceeds from the sale were $18.9 million after working capital adjustments and transaction costs. We recorded a pre-tax gain of $8.0 million on the sale. UltraCraft represented approximately 5% of our 1999 net sales. TRADEMARKS AND PATENTS We have registered and nonregistered trade names and trademarks covering the principal brand names and product lines under which our products are marketed. Although we consider each of these items to be valuable, we do not currently believe this property, other than the Alside(R) trademark, to be material. We have obtained patents on certain claims associated with our siding, fencing, decking and railing, and garage door products, which we believe distinguish our products from those of our competitors. GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS Our operations are subject to various environmental statutes and regulations, including laws and regulations addressing materials used in the manufacturing of our products. In addition, certain of our operations are subject to federal, state and local environmental laws and regulations that impose limitations or other requirements on the discharge of pollutants into the air, water and soil, establish standards for the treatment, transport, storage and disposal of solid and hazardous wastes, and remediation of soil and groundwater contamination. Such laws and regulations may also impact the availability of materials used in manufacturing our products. We believe we are in material compliance with applicable environmental requirements, and do not expect these requirements to result in material expenditures in the foreseeable future. However, additional future expenditures may be necessary as compliance standards and technology change, and unforeseen significant expenditures required to maintain compliance, including unforeseen liabilities, could have an adverse effect on our business and financial condition. We entered into a consent order dated August 25, 1992 with the United States Environmental Protection Agency pertaining to corrective action requirements associated with the use of hazardous waste storage facilities at our Akron, Ohio location. With the exception of a small container storage area, the use of these facilities was terminated prior to our acquisition of the Alside assets from USX in 1984. The effects of the past practices at this facility are continuing to be investigated (through continued groundwater monitoring) pursuant to the terms of the consent order. We believe that USX bears responsibility for substantially all of the direct costs of corrective action at these facilities under the relevant contract terms and under statutory and common law. To date, USX has reimbursed us for substantially all of the direct costs of corrective action at these facilities. We expect that USX will 55 continue to reimburse us. However, there can be no assurance that payments will continue to be made by USX or that it will have adequate financial resources to fully reimburse us for these costs. Certain environmental laws, including CERCLA and comparable state laws, impose strict, and in certain circumstances joint and several, liability upon specified responsible parties which include certain former owners and operators of waste sites designated for clean up by environmental regulators. A facility formerly owned by our company in Lumber City, Georgia, which is now owned by Amercord Inc., a company in which we currently hold a minority interest, is currently undergoing soil and groundwater investigation pursuant to a Consent Order entered into by Amercord Inc. with the Georgia Department of Natural Resources in 1994. We are not a party to these activities. We also understand that soil and groundwater in certain areas of the site (including in the areas of two industrial waste landfills) are being investigated under CERCLA by the United States Environmental Protection Agency to determine whether remediation of those areas may be required and whether the site should be listed on the state or federal list of priority sites requiring remediation. There can be no assurance that Amercord Inc., the current site owner, would have adequate financial resources to carry out additional remediation that may be required, or that if substantial remediation is required, claims will not be made against us which could result in material expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Amercord Inc." Also, we cannot be certain that we have identified all environmental matters giving rise to potential liability. More stringent future environmental requirements or stricter enforcement of existing requirements, the discovery of unknown conditions, or our past use of hazardous materials could result in increased expenditures or liabilities which could have an adverse effect on you. PROPERTIES Our operations include both owned and leased facilities as described below:
LOCATION PRINCIPAL USE SQUARE FEET - -------- ------------- ----------- Akron, Ohio Associated Materials Incorporated and Alside 70,000 Headquarters Vinyl Windows, Vinyl Fencing, Decking and Railing 577,000 and Vinyl Garage Doors Ennis, Texas Vinyl Siding Products, Vinyl Fencing, Decking and 301,000 Railing Freeport, Texas Vinyl Siding Products 120,000 West Salem, Ohio Vinyl Window Extrusions, Fencing and Garage Door 173,000 Panels Kinston, North Carolina Vinyl Windows 319,000(1) Cedar Rapids, Iowa Vinyl Windows 128,000(1) Bothell, Washington Vinyl Windows 159,000(1)
- --------------- (1) Leased facilities. Our management believes that our facilities are generally in good operating condition and are adequate to meet anticipated requirements in the near future. Except for one owned location in Akron, Ohio, we lease our supply centers for terms generally ranging from five to seven years with renewal options. The leases for Alside's window plants extend through 2011 for the Bothell location and 2005 for the Cedar Rapids and Kinston locations. Each lease is renewable at our option for an additional five-year period. Following the merger, we moved our corporate headquarters to our location in Akron, Ohio. 56 EMPLOYEES As of March 31, 2002, we had 2,457 employees. We believe that our employee relations are good. Alside's employment needs vary seasonally with sales and production. As of March 31, 2002, Alside had approximately 2,240 full-time employees, including approximately 1,120 hourly workers. The West Salem, Ohio plant is Alside's only unionized manufacturing facility, employing approximately 85 covered workers as of March 31, 2002. The collective bargaining agreement for the West Salem facility was successfully renegotiated in November 2001 for a three-year term. Additionally, approximately 90 hourly workers in certain supply center locations are covered by collective bargaining agreements. We consider Alside's labor relations to be good. Alside utilizes leased employees to supplement its own workforce at its vinyl window fabrication plants located in Akron, Ohio; Kinston, North Carolina; and Cedar Rapids, Iowa. We believe that the employee leasing program provides us with scheduling flexibility for seasonal production requirements. The aggregate number of leased employees in the window plants ranges from approximately 300 to 650 people based on seasonality. As of March 31, 2002, our AmerCable division had approximately 212 employees and our corporate office in Dallas, Texas had 5 employees. LEGAL PROCEEDINGS We are involved from time to time in litigation arising in the ordinary course of our business, none of which, after giving effect to our existing insurance coverage, is expected to have a material adverse effect on us. From time to time, we are involved in a number of proceedings and potential proceedings relating to environmental and product liability matters. We handle these claims in the ordinary course of our business and maintain product liability insurance covering certain types of claims. Although it is difficult to estimate our potential exposure to these matters, we believe that the resolution of these matters will not have a material adverse effect on our financial position, results of operations or liquidity. 57 THE EXCHANGE OFFER BACKGROUND AND PURPOSE OF THE EXCHANGE OFFER We issued the outstanding notes on April 23, 2002, in a private placement to a limited number of qualified institutional buyers and to persons in offshore transactions in reliance on Regulation S. In connection with this issuance, we entered into the indenture and the registration rights agreement, pursuant to which we agreed to, subject to certain exceptions: - within 90 days after the issue date of the outstanding notes, file an exchange offer registration statement with the Commission with respect to a registered offer to exchange the outstanding notes for exchange notes of our company having terms substantially identical in all material respects of the outstanding notes (except that the exchange notes will not contain terms with respect to transfer restrictions); - use our reasonable best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act within 180 days after the issue date of the outstanding notes; - as soon as practicable after the effectiveness of the exchange offer registration statement, offer the exchange notes in exchange for surrender of the outstanding notes; and - keep the exchange offer open for not less than 40 days (or longer if required by applicable law) after the date of notice of the exchange offer is mailed to holders of the outstanding notes. Except as discussed below, upon the consummation of the exchange offer, we will have no further obligations to register your outstanding notes. As soon as practicable after 5:00 p.m., New York City time on , 2002, unless we decide to extend this expiration date, the exchange offer will be consummated when we: - accept for exchange your outstanding notes tendered and not validly withdrawn pursuant to the exchange offer; and - deliver to the trustee for cancellation all your outstanding notes accepted for exchange and issue to you exchange notes equal in principal amount to the principal amount of the outstanding notes surrendered by you. Each broker dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of Distribution." REPRESENTATIONS We need representations from you before you can participate in the exchange offer. To participate in the exchange offer, we require that you represent to us that: - you are acquiring the exchange notes in the ordinary course of your business; - neither you nor any other person acting on your behalf is engaging in or intends to engage in a distribution of your exchange notes; - neither you nor any other person acting on your behalf has an arrangement or understanding with any person to participate in the distribution of the exchange notes; - neither you nor any other person acting on your behalf is an "affiliate" of us or any of our subsidiaries, as defined under Rule 405 of the Securities Act; and - if you or any other person acting on your behalf is a broker-dealer, you will receive exchange notes for your own account in exchange for your outstanding notes that were acquired as a result of 58 market-making activities or other trading activities, and you acknowledge that you will deliver a prospectus in connection with any resale of your exchange notes. RESALE OF THE EXCHANGE NOTES Based on interpretations by the Commission's staff, as set forth in no-action letters issued to third parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter (available May 13, 1988), Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), we believe that the exchange notes issued under the exchange offer in exchange for the outstanding notes may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act, if: - you are not an "affiliate," as defined in Rule 405 of the Securities Act, of our company; - the exchange notes are acquired in the ordinary course of your business; and - you are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in any manner, in the distribution of the exchange notes. If you are engaged in or intend to engage in, or have any arrangement or understanding with any person to participate in any manner, in a distribution of the exchange notes or if you are an affiliate of our company: - you cannot rely on the position of the Commission's staff mentioned above; and - you must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale of the exchange notes. TERMS OF THE EXCHANGE OFFER We will accept any validly tendered outstanding notes which are not withdrawn before 5:00 p.m., New York City time, on the expiration date. Exchange notes will be issued in denominations of $1,000 principal amount and integral multiples of $1,000 in exchange for each $1,000 principal amount of outstanding notes. You may tender some or all of your outstanding notes in the exchange offer. The form and terms of the exchange notes will be the same as the form and terms of your outstanding notes except that: - interest on the exchange notes will accrue from the last interest payment date on which interest was paid on your outstanding notes; and - the exchange notes have been registered under the Securities Act and will not bear a legend restricting their transfer. The exchange notes will evidence the same indebtedness as the outstanding notes, which they replace. The exchange notes will be issued under, and be entitled to the benefits of, the same indenture that authorized the issuance of the outstanding notes. As a result, both the exchange notes and the outstanding notes will be treated as a single class of debt securities under the indenture. The exchange offer does not depend upon any minimum aggregate principal amount of outstanding notes being surrendered for exchange. This prospectus, together with the letter of transmittal you received with this prospectus, is being sent to you and to others believed to have beneficial interests in the outstanding notes. You do not have any appraisal or dissenters' rights under the General Corporation Law of the State of Delaware or under the indenture governing your outstanding notes. We intend to conduct the exchange offer in compliance with the requirements of the Exchange Act and the rules and regulations of the Commission. We will have accepted your validly tendered outstanding notes when we have given oral or written notice to the exchange agent, which will occur as soon as practicable after the expiration date. The 59 exchange agent will act as agent for you for the purpose of receiving the exchange notes from us. If we do not accept your tendered outstanding notes for exchange because of an invalid tender or other valid reason, we will return the certificates, if any, without expense, to you as promptly as practicable after the expiration date. Certificates, if any, for exchange notes will likewise be sent to you as promptly as practicable following our acceptance of the tendered outstanding notes following the expiration date. You will not be required to pay brokerage commissions, fees or transfer taxes in the exchange of your outstanding notes. We will pay all charges and expenses other than any taxes you may incur in connection with the exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange the outstanding notes in like principal amount. The outstanding notes surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we extend the expiration date. In any event, we will hold the exchange offer open for at least forty days. In order to extend the exchange offer, we will issue a notice by press release or other public announcement before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: - to delay accepting your outstanding notes; - to extend the exchange offer; - to terminate the exchange offer if any of the conditions have not been satisfied by giving oral or written notice of any delay, extension or termination to the exchange agent; or - to amend the terms of the exchange offer in any manner. CONDITIONS TO THE EXCHANGE OFFER We will decide all questions as to the validity, form, eligibility, acceptance and withdrawal of tendered outstanding notes, and our determination will be final and binding on you. We reserve the absolute right to reject any and all outstanding notes not properly tendered or reject any outstanding notes which would be unlawful in the opinion of our counsel. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of outstanding notes as we determine. Although we intend to notify you of defects or irregularities with respect to tenders of your outstanding notes, we, the exchange agent or any other person will not incur any liability for failure to give any notification. Your tender of outstanding notes will not be deemed to have been made until any defects or irregularities have been cured or waived. Any of your outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to you, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. We reserve the right to purchase or make offers for any outstanding notes that remain outstanding after the expiration date or to terminate the exchange offer and, to the extent permitted by applicable law, purchase outstanding notes in the open market, in privately negotiated transactions or otherwise. The terms of any of these purchases or offers could differ from the terms of the exchange offer. These conditions are for our sole benefit, and we may assert or waive them at any time or for any reason. Our failure to exercise any of our rights will not be a waiver of our rights. 60 We will not accept for exchange any outstanding notes you tender, and no exchange notes will be issued to you in exchange for your outstanding notes, if at that time any stop order is threatened or in effect with respect to the registration statement or the qualification of the indenture relating to the exchange notes under the Trust Indenture Act of 1939. We are required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. In all cases, issuance of exchange notes to you will be made only after timely receipt by the exchange agent of: - a book entry confirmation of your outstanding notes into the exchange agent's account at the book-entry transfer facility or certificates for your outstanding notes; - with respect to DTC and its participants, electronic instructions of the holder agreeing to be bound by the letter of transmittal or a properly completed and duly executed letter of transmittal; and - all other required documents. In the case of outstanding notes tendered by book-entry transfer into the exchange agent's account at the book-entry transfer facility under the book-entry transfer procedures described below, your non-exchanged outstanding notes will be credited to an account maintained with the book-entry transfer facility. If we do not accept any of your tendered outstanding notes for a valid reason or if you submit your outstanding notes for a greater principal amount than you desire to exchange, we will return any unaccepted or non-exchanged outstanding notes to you at our expense. This will occur as promptly as practicable after the expiration or termination of the exchange offer for your outstanding notes. Notwithstanding any other provision of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes to you in exchange for, any of your outstanding notes and may terminate or amend the exchange offer if at any time before the acceptance of your outstanding notes for exchange or the exchange of the exchange notes for your outstanding notes, we determine that the exchange offer violates applicable law, any applicable interpretation of the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. PROCEDURES FOR TENDERING Only you may tender your outstanding notes in the exchange offer. Except as stated under "-- Book-Entry Transfer," to tender your outstanding notes in the exchange offer, you must: - complete, sign and date the enclosed letter of transmittal, or a copy of it; - have the signature on the letter of transmittal guaranteed if required by the letter of transmittal; and - mail, fax or otherwise deliver the letter of transmittal or copy to the exchange agent before the expiration date. In addition, either: - the exchange agent must receive a timely confirmation of a book-entry transfer of your outstanding notes, if that procedure is available, into the account of the exchange agent at DTC (the "Book-Entry Transfer Facility") under the procedure for book-entry transfer described below before the expiration date; - the exchange agent must receive certificates for your outstanding notes and the letter of transmittal before the expiration date; or - you must comply with the guaranteed delivery procedures described below. For your outstanding notes to be tendered effectively, the exchange agent must receive a valid agent's message through DTC's Automatic Tender Offer Program, or ATOP system, or a letter of transmittal and other required documents before the expiration date. 61 If you do not withdraw your tender before the expiration date, it will constitute an agreement between you and us in compliance with the terms and conditions in this prospectus and in the letter of transmittal. THE METHOD OF DELIVERY OF YOUR OUTSTANDING NOTES, A LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND A LETTER OF TRANSMITTAL OR OUTSTANDING NOTES DIRECTLY TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO MAKE THE EXCHANGE ON YOUR BEHALF. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See "Plan of Distribution." PROCEDURE IF THE OUTSTANDING NOTES ARE NOT REGISTERED IN YOUR NAME If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you want to tender your outstanding notes, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you want to tender on your own behalf, you must, before completing and executing a letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power or other proper endorsement from the registered holder. We urge you to act immediately since the transfer of registered ownership may take considerable time. BOOK-ENTRY TENDER The exchange agent will make requests to establish accounts at the book-entry transfer facility for purposes of the exchange offer within two business days after the date of this prospectus. If you are a financial institution that is a participant in the book-entry transfer facility's systems, you may make book-entry delivery of your outstanding notes being tendered by causing the book-entry transfer facility to transfer your outstanding notes into the exchange agent's account at the book-entry transfer facility in compliance with the appropriate procedures for transfer. However, although you may deliver your outstanding notes through book-entry transfer at the book-entry transfer facility, you must transmit, and the exchange agent must receive, a letter of transmittal or copy of the letter of transmittal, with any required signature guarantees and any other required documents, except as discussed in the following paragraph, on or before the expiration date or the guaranteed delivery below must be complied with. DTC's ATOP is the only method of processing the exchange offer through DTC. To accept the exchange offer through ATOP, participants in DTC must send electronic instructions to DTC through DTC's communication system instead of sending a signed, hard copy letter of transmittal. DTC is obligated to communicate those electronic instructions to the exchange agent. To tender your outstanding notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the exchange agent must contain the participant's acknowledgment of its receipt of and agreement to be bound by the letter of transmittal for your outstanding notes. SIGNATURE REQUIREMENTS AND SIGNATURE GUARANTEES Unless you are a registered holder who requests that your exchange notes be mailed to you and issued in your name or unless you are a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program, the Stock Exchange Medallion Program or an "Eligible Guarantor Institution" within the meaning of Rule 17Ad-15 under the Exchange 62 Act, each an "Eligible Institution," you must guarantee your signature on a letter of transmittal or a notice of withdrawal by an Eligible Institution. If a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity signs the letter of transmittal or any notes or bond powers on your behalf, that person must indicate their capacity when signing and submit satisfactory evidence to us with the letter of transmittal demonstrating their authority to act on your behalf. GUARANTEED DELIVERY PROCEDURES If you are a registered holder of outstanding notes and desire to tender your outstanding notes, and the procedure for book-entry transfer cannot be completed on a timely basis, your outstanding notes are not immediately available or time will not permit your outstanding notes or other required documents to reach the exchange agent before the expiration date, you may tender your outstanding notes if: - the tender is made through an Eligible Institution; - before the expiration date, the exchange agent receives from an eligible institution a properly completed and duly executed letter of transmittal and notice of guaranteed delivery, in the form provided by us; - a book-entry confirmation or the certificates for all physically tendered outstanding notes, in proper form for transfer, and all other documents required by the applicable letter of transmittal are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery; and - the notice of guaranteed delivery states your name and address and the amount of outstanding notes you are tendering, that your tender is being made thereby and you guarantee that within three NYSE trading days after the date of execution of the notice of guaranteed delivery, a book-entry confirmation or the certificates for all physically tendered outstanding notes, in proper form for transfer, and any other documents required by the applicable letter of transmittal will be deposited by the Eligible Institution with the exchange agent. BENEFICIAL OWNER INSTRUCTIONS TO HOLDERS OF OUTSTANDING NOTES Only a holder whose name appears on a DTC security position listing as a holder of outstanding notes, or the legal representative or attorney-in-fact of this holder, may execute and deliver the letter of transmittal. Holders of outstanding notes who are not registered holders of, and who seek to tender, outstanding notes should (1) obtain a properly completed letter of transmittal for such outstanding notes from the registered holder with signatures guaranteed by an Eligible Institution and obtain and include with such letter of transmittal outstanding notes properly endorsed for transfer by the registered holder thereof or accompanied by a written instrument or instruments of transfer or exchange from the registered holder with signatures on the endorsement or written instrument or instruments of transfer or exchange guaranteed by an Eligible Institution or (2) effect a record transfer of such outstanding notes and comply with the requirements applicable to registered holders for tendering outstanding notes before 5:00 p.m., New York City time, on the expiration date. Any outstanding notes properly tendered before 5:00 p.m., New York City time, on the expiration date accompanied by a properly completed letter of transmittal will be transferred of record by the registrar either prior to or as of the expiration date at our discretion. We have no obligation to transfer any outstanding notes from the name of the registered holder of the note if we do not accept these outstanding notes for exchange. Tendering holders should indicate in the applicable box in the letter of transmittal the name and address to which payment of accrued and unpaid interest in cash on the outstanding notes, certificates evidencing exchange notes and/or certificates evidencing outstanding notes for amounts not accepted for tender, each as appropriate, are to be issued or sent, if different from the name and address of the person 63 signing the letter of transmittal. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated and a substitute Form W-9 for this recipient must be completed. If these instructions are not given, the payments, including accrued and unpaid interest in cash on the outstanding notes, exchange notes or outstanding notes not accepted for tender, as the case may be, will be made or returned, as the case may be, to the registered holder of the outstanding notes tendered. Issuance of exchange notes in exchange for outstanding notes will be made only against deposit of the tendered outstanding notes. We will decide all questions as to the validity, form, eligibility, acceptance and withdrawal of tendered outstanding notes, and our determination will be final and binding on you. We reserve the absolute right to reject any and all outstanding notes not properly tendered or reject any outstanding notes which would be unlawful in the opinion of our counsel. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in a letter of transmittal, will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of outstanding notes as we determine. Although we intend to notify you of defects or irregularities with respect to tenders of your outstanding notes, we, the exchange agent or any other person will not incur any liability for failure to give any notification. Your tender of outstanding notes will not be deemed to have been made until any defects or irregularities have been cured or waived. Any of your outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to you, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES As further described in and otherwise qualified by this prospectus, we will accept all outstanding notes validly tendered before 5:00 p.m., New York City time, on the expiration date and not validly withdrawn. The acceptance for exchange of outstanding notes validly tendered and not validly withdrawn and the delivery of exchange notes and the payment of any accrued and unpaid interest on the outstanding notes will be made as promptly as practicable after the expiration date. Subject to rules promulgated pursuant to the Exchange Act, we expressly reserve the right to delay acceptance of any of the outstanding notes or to terminate the exchange offer and not accept for exchange any outstanding notes not theretofore accepted if any of the conditions set forth under the heading "-- Conditions to the Exchange Offer" shall not have been satisfied or waived by us. We will deliver exchange notes and make payments in cash of accrued and unpaid interest on the outstanding notes in exchange for outstanding notes pursuant to the exchange offer promptly following acceptance of the outstanding notes. In all cases, exchange for outstanding notes accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of outstanding notes (or confirmation of book-entry transfer thereof) and a properly completed and validly executed letter of transmittal (or a manually signed facsimile thereof) or, in the case of book-entry transfer, an agent's message and any other documents required thereby. For purposes of the exchange offer, we shall be deemed to have accepted validly tendered and not properly withdrawn outstanding notes when, as and if we give oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders of outstanding notes for the purposes of receiving the exchange notes from us and transmitting new notes to the tendering holders. Under no circumstances will any additional amount be paid by us or the exchange agent by reason of any delay in making such payment or delivery. If, for any reason whatsoever, acceptance for exchange of any outstanding notes tendered pursuant to the exchange offer is delayed, or we are unable to accept for exchange outstanding notes tendered pursuant to the exchange offer, then, without prejudice to our rights set forth herein, the exchange agent may nevertheless, on behalf of us and subject to rules promulgated pursuant to the Exchange Act, retain tendered outstanding notes, and such outstanding notes may not be withdrawn except to the extent that 64 the tendering holder of such outstanding notes is entitled to withdrawal rights as described herein. See "-- Withdrawal Rights." If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence or non-occurrence of certain other events set forth herein or otherwise, then such unaccepted outstanding notes will be returned, at our expense, to the tendering holder thereof as promptly as practicable after the expiration date or the termination of the applicable exchange offer therefor. No alternative, conditional or contingent tenders will be accepted. A tendering holder, by execution of a letter of transmittal, or facsimile thereof, waives all rights to receive notice of acceptance of such holder's outstanding notes for exchange. WITHDRAWAL RIGHTS You may withdraw your tender of your outstanding notes at any time before 5:00 p.m., New York City time, on the expiration date. For your withdrawal to be effective, an electronic ATOP transmission or, for non-DTC participants, written notice of withdrawal must be received by the exchange agent at its address found in this prospectus before 5:00 p.m., New York City time, on the expiration date. Your notice of withdrawal must: - specify your name; - identify your outstanding notes to be withdrawn, including the certificate number or numbers, if any, and principal amount of your outstanding notes; - be signed by you in the same manner as the original signature on the letter of transmittal by which your outstanding notes were tendered or be accompanied by documents of transfer sufficient to have the trustee of your outstanding notes register the transfer of your outstanding notes into your name; and - specify the name in which your outstanding notes are to be registered, if you do not want your outstanding notes registered in your name. We will determine all questions as to the validity, form and eligibility, including time of receipt, of your notice, and our determination will be final and binding on all parties. Any outstanding notes you withdraw will not be considered to have been validly tendered. We will return your outstanding notes which have been tendered but not exchanged for any reason without cost to you as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender your properly withdrawn outstanding notes by following one of the above procedures before the expiration date. CONSEQUENCES OF FAILURE TO EXCHANGE Any outstanding notes not tendered under the exchange offer will remain outstanding and continue to accrue interest. The outstanding notes will remain "restricted securities" within the meaning of the Securities Act and will remain subject to existing transfer restrictions. Accordingly, before the date that is one year after the later of the issue date and the last date on which we or any of our affiliates was the owner of the outstanding notes, the outstanding notes may be resold only (1) to us or our affiliates; (2) to a person whom you reasonably believe is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, (3) inside the United States to an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to such transfer, furnishes to the trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the outstanding notes, the form of which you can obtain from the trustee and, if such 65 transfer is in respect of an aggregate principal amount of outstanding notes at the time of transfer of less than $250,000, an opinion of counsel acceptable to us; (4) outside the United States in a transaction complying with the provisions of Rule 903 or Rule 904 under the Securities Act; (5) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if available); or (6) pursuant to an effective registration statement under the Securities Act. In each of cases (1) through (6) above, such sale shall be in accordance with any applicable securities laws of any state of the United States. As a result, the liquidity of the market for non-tendered outstanding notes could be adversely affected upon completion of the exchange offer. ADDITIONAL REGISTRATION RIGHTS Under some circumstances, we may be required to file a shelf registration statement covering resales of the outstanding notes. This requirement will be triggered if: - applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer; - for any other reason we do not consummate the exchange offer within 220 days of April 23, 2002; - an initial purchaser of the outstanding notes notifies us following consummation of the exchange offer that the outstanding notes held by it are not eligible to be exchanged for exchange notes in the exchange offer; or - certain holders are prohibited by law or Commission policy from participating in the exchange offer or may not resell the exchange notes acquired by them in the exchange offer to the public without delivering a prospectus, then, we will, subject to certain exceptions, - promptly file a shelf registration statement with the Commission covering resales of the outstanding notes or the exchange notes, as the case may be; - use our reasonable best efforts to cause the shelf registration statement to be declared effective under the Securities Act on or prior to the 180th day after the date on which the shelf registrations statement is required to be filed; and - keep the shelf registration statement effective until the earliest of (1) the time when the outstanding notes covered by the shelf registration statement can be sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h) of Rule 144, (2) two years from the effective date of the shelf registration statement and (3) the day on which all outstanding notes registered thereunder are disposed of in accordance therewith. We will, in the event a shelf registration statement is filed, among other things, - provide to each holder for whom such shelf registration statement was filed copies of the prospectus which is a part of the shelf registration statement, - notify each such holder when the shelf registration statement has become effective, and - take certain other actions as are required to permit unrestricted resales of the outstanding notes or the exchange notes, as the case may be. 66 A holder selling such outstanding notes or exchange notes pursuant to the shelf registration statement generally - would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, - will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales, and - will be bound by the provisions of the registration rights agreement that are applicable to such holder (including certain indemnification obligations). We will pay additional cash interest on the applicable outstanding notes and exchange notes, subject to certain exceptions, - if we fail to file an exchange offer registration statement with the Commission on or prior to the 90th day after the issue date of the outstanding notes, - if the exchange offer registration statement is not declared effective by the Commission on or prior to the 180th day after the issue date of the outstanding notes, - if the exchange offer is not consummated on or before the 40th day after the exchange offer registration statement is declared effective, - if obligated to file the shelf registration statement, we fail to file the shelf registration statement with the Commission on or prior to the 60th day after the date on which the obligation to file a shelf registration statement arises, - if obligated to file a shelf registration statement, the shelf registration statement is not declared effective on or prior to the 180th day after the date on which the obligation to file a shelf registration statement arises, or - after the exchange offer registration statement or the shelf registration statement, as the case may be, is declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) (each such event a registration default); from and including the date on which any such registration default shall occur to but excluding the date on which all registration defaults have been cured. The rate of the additional interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a registration default, and such rate will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all registration defaults have been cured at which point it will reset the coupon rate, up to a maximum additional interest rate of 1.0% per annum. We will pay such additional interest on regular interest payment dates. Such additional interest will be in addition to any other interest payable from time to time with respect to the outstanding notes and the exchange notes. 67 EXCHANGE AGENT You should direct all executed letters of transmittal to the exchange agent. Wilmington Trust Company is the exchange agent for the exchange offer. Questions, requests for assistance and requests for additional copies of the prospectus or a letter of transmittal should be directed to the exchange agent addressed as follows: By Registered or Certified By Hand/Overnight Delivery: By Facsimile Transmission: Mail: Wilmington Trust Company Wilmington Trust Company (For Eligible Institutions only) DC-1615 Reorganization Corporate Trust Reorganization (302) 636-4145 Services PO Box 8861 Services Confirm by telephone: Wilmington, DE 19899-8861 Rodney Square North (302) 636-6472 1100 North Market Street Wilmington, DE 19890-1615
FEES AND EXPENSES We currently do not intend to make any payments to brokers, dealers or others to solicit acceptances of the exchange offer. The principal solicitation is being made by mail. However, additional solicitations may be made in person or by telephone by our officers and employees. Our estimated cash expenses incurred in connection with the exchange offer will be paid by us and are estimated to be $0.1 million in the aggregate. This amount includes fees and expenses of the trustees for the exchange and outstanding notes, accounting, legal, printing and related fees and expenses. TRANSFER TAXES If you tender outstanding notes for exchange, you will not be obligated to pay any transfer taxes. However, if you instruct us to register exchange notes in the name of or request that your outstanding notes not tendered or not accepted in the exchange offer be returned to a person other than you, you will be responsible for the payment of any transfer tax owed. LOST OR MISSING CERTIFICATES If a holder of outstanding notes desires to tender a outstanding note pursuant to the exchange offer, but the outstanding note has been mutilated, lost, stolen or destroyed, such holder should write to or telephone the trustee under the indenture at the address listed below, concerning the procedures for obtaining replacement certificates for such outstanding note, arranging for indemnification or any other matter that requires handling by such trustee. Trustee: Wilmington Trust Company Corporate Trust Administration 1100 N. Market Street Wilmington, DE 19890 Telecopier: (302) 636-4145 Telephone: (302) 636-6453 68 MANAGEMENT EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES The following table sets forth information about our directors, executive officers and key employees.
NAME AGE POSITION(S) - ---- --- ----------- Ira D. Kleinman................. 45 Chairman of the Board Michael J. Caporale, Jr......... 50 President, Chief Executive Officer and Director D. Keith LaVanway............... 37 Vice President, Chief Financial Officer, Treasurer and Secretary Kenneth L. Bloom................ 38 President of Alside Window Company Benjamin L. McGarry............. 54 Alside Group Vice President -- Vinyl Manufacturing Thomas W. Arenz................. 44 Director Jonathan C. Angrist............. 31 Director
Set forth below is a brief description of the business experience of each of our directors, executive officers and key employees. Ira D. Kleinman, Age 45. Mr. Kleinman has been the Chairman of the Board since the merger. Mr. Kleinman is President of Associated Materials Holdings Inc. Mr. Kleinman has been a General Partner of Harvest Partners for more than five years and is currently a member of Harvest Associates III, LLC and Harvest Associates IV, LLC. Mr. Kleinman is also as a director for Global Power Equipment Group Inc. Michael J. Caporale, Jr., Age 50. Mr. Caporale has been the President and Chief Executive Officer of our company and a director since the merger. Mr. Caporale was named Chief Executive Officer of the Alside division and became a director in February 2001. Mr. Caporale joined our company in January 2000 as President of the Alside Window Company, became President and Chief Operating Officer of our Alside division in April 2000 and was named a Vice President of our company in August 2000. Prior to joining our company, Mr. Caporale was the President of Great Lakes Window, Inc., a subsidiary of Nortek, Inc., where he had been employed since 1995. D. Keith LaVanway, Age 37. Mr. LaVanway has been Vice President, Chief Financial Officer, Treasurer and Secretary of our company since the merger. Mr. LaVanway joined our company in February 2001 as Vice President -- Chief Financial Officer of Alside and was also named a Vice President of our company. Prior to joining us, Mr. LaVanway was employed by Nortek, Inc. from 1995 to 2001, most recently as Vice President -- Chief Financial Officer of Peachtree Doors and Windows Company. Kenneth L. Bloom, Age 38. Mr. Bloom joined our company in July 2000 as Alside's Vice President of Window Manufacturing. Mr. Bloom was named President of Alside Window Company in March 2001. Prior to joining us, Mr. Bloom was Corporate Vice President of Field Container Co., L.P., where he had been employed since 1996. Benjamin L. McGarry, Age 54. Mr. McGarry was named Group Vice President -- Vinyl Manufacturing of Alside in 1997. From 1984 to 1996, Mr. McGarry was Senior Vice President -- Manufacturing of Alside. Mr. McGarry joined Alside in 1980. Thomas W. Arenz, Age 44. Mr. Arenz has been a director since shortly after the merger. Mr. Arenz joined Harvest Partners, Inc. in November 1996 and became a Principal in October 1997. Mr. Arenz has over 16 years of private equity investment and corporate finance experience. From 1995 to 1996, Mr. Arenz was with the North American subsidiary of Preussag AG, a German multinational corporation, most recently as President. From 1991 to 1995, Mr. Arenz was a Principal at Joseph Littlejohn & Levy, a management buyout firm. Mr. Arenz was also in the corporate finance departments at Kidder, Peabody & Co. from 1990 to 1991 and Drexel Burnham Lambert from 1986 to 1990. 69 Jonathan C. Angrist, Age 31. Mr. Angrist has been a director since the merger. Mr. Angrist is Secretary and Assistant Treasurer of Associated Materials Holdings Inc. Mr. Angrist is also currently Vice President of Harvest Partners. From 1993 to 1997, Mr. Angrist was a consultant of Sibson & Company. Mr. Angrist is also a director for IRMC Holdings, Inc. All of our directors will be elected annually with terms expiring as of the next annual meeting of stockholders. All of our officers serve at the discretion of the Board of Directors. Messrs. Bloom and McGarry are considered our key employees because of their responsibilities as divisional officers in the respective capacities indicated. We, however, do not consider these employees to be our executive officers. EXECUTIVE COMPENSATION AND COMPENSATION AND INCENTIVE PROGRAMS EXECUTIVE COMPENSATION The following table sets forth the annual compensation paid by us for services rendered in 2001, 2000 and 1999 by our chief executive officer and each of our other executive officers during such time. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------------------- ANNUAL COMPENSATION SHARES ------------------------------------- UNDERLYING FISCAL OTHER ANNUAL OPTIONS/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) SARS(2) COMPENSATION - --------------------------- ------ -------- -------- --------------- ---------- ------------ William W. Winspear(4)............ 2001 $530,833 $667,185 -- 0 $ 44,800(3) Chairman of the Board, President 2000 $507,500 $612,870 -- 0 $ 39,450 and Chief Executive Officer 1999 $492,917 $512,500 -- 0 $ 36,000 Michael J. Caporale, Jr.(5)....... 2001 $412,504 $354,409 $66,271 0 $ 214,731(6) President and Chief Executive 2000 $335,417 $140,000 $53,157 100,000 $ 74,282 Officer of our Alside division Robert F. Hogan, Jr.(7)........... 2001 $262,500 $177,930 -- 0 $ 6,800(8) President and Chief Executive 2000 $249,167 $158,435 -- 0 $ 5,950 Officer of our AmerCable division 1999 $238,750 $ 42,985 -- 0 $ 5,600 Robert L. Winspear(9)............. 2001 $208,333 $ 66,719 -- 0 $ 6,800(8) Vice President and Chief Financial 2000 $197,500 $ 61,287 -- 0 $ 5,950 Officer 1999 $181,667 $ 51,251 -- 0 $ 5,600
- --------------- (1) Includes amounts for the payment of income taxes relating to relocation expenses paid by us in 2001 and 2000 and taxable to Mr. Caporale. Perquisites and other personal benefits received by our other executive officers are not included in the Summary Compensation Table because the aggregate amount of this compensation, if any, did not meet disclosure thresholds established under current SEC regulations. (2) In January 2000, Mr. Caporale was granted an option to purchase 50,000 shares of common stock at $14.4375 per share, the fair market value on the grant date. In March 2000, Mr. Caporale was granted an option to purchase an additional 50,000 shares of common stock at $13.875 per share, the fair market value on the grant date. These options vested 50% on the date of grant and the balance vests on the second anniversary of the grant date. (3) Includes directors fees of $38,000 and amounts accrued or allocated under a defined contribution plan of $6,800. (4) Mr. W. Winspear retired from our company upon completion of the equity tender offer. (5) Mr. Caporale joined us in January 2000. (6) Includes directors fees of $25,500, amounts accrued or allocated under a defined contribution plan of $6,800, a cash payment of $100,002 made under the terms of Mr. Caporale's employment agreement 70 in consideration of the cancellation of stock options granted by his previous employer and moving expenses of $82,429 incurred by Mr. Caporale and paid by us under the terms of his employment agreement. (7) Following the sale of AmerCable in June 2002, Mr. Hogan ceased to be an officer our Company and became the president, chief executive officer and chairman of the board of the newly-formed entity that acquired our AmerCable division. (8) Represents amounts accrued or allocated under a defined contribution plan. (9) Mr. R. Winspear ceased to be the vice president and chief financial officer of our company following the merger. COMPENSATION AND INCENTIVE PROGRAMS Incentive Bonus Plan We maintain an Incentive Bonus Plan providing for annual bonus awards to certain key employees, including each of our executive officers. Bonus amounts are based on our pre-tax profits or, in the case of Alside personnel, the pre-tax profits or return on invested capital of these divisions. This Plan is administered by the Compensation Committee, none of the members of which are eligible for a bonus award under this plan. Bonus payments under the Incentive Bonus Plan are not guaranteed. Cash bonuses accrued in 2001, 2000 and 1999 to each of our executive officers are set forth in the Summary Compensation Table. Employment Agreement It is expected that Mr. Caporale will enter into a new employment agreement with us effective as of the equity tender offer completion date. Under the expected terms of his new employment agreement, Mr. Caporale will serve as our President, Chief Executive Officer and a member of our board of directors. Mr. Caporale's new employment agreement is expected to provide for an initial base salary of $500,000, an annual incentive bonus based on growth in the equity value of Associated Materials Holdings Inc., certain perquisites and participation in employee benefit programs made available to other senior executives. The initial term of the new employment agreement is expected to be three years. It is expected that the terms of the new employment agreement will provide that on the first anniversary of the equity tender offer completion date and each successive anniversary thereof, the term of the new employment agreement will automatically extend by one year unless we deliver to Mr. Caporale a notice not to extend the employment term. It is expected that the terms of the new employment agreement will provide that if Mr. Caporale's employment is involuntarily terminated by us without cause or if Mr. Caporale resigns for good reason, he will be entitled to severance equal to $1,000,000 per year, together with continued health and dental benefits, for two years, plus a pro rata incentive bonus for the year of termination. It is expected that Mr. LaVanway will enter into an employment agreement with us effective as of the equity tender offer completion date and agree to terminate his existing severance agreement, as described below. Under the terms of his employment agreement, Mr. LaVanway will serve as our Vice President and Chief Financial Officer. Mr. LaVanway's employment agreement will provide for an initial base salary of $275,000 and an annual incentive bonus based on growth in the equity value of Associated Materials Holdings Inc. The initial term of the employment agreement is expected to be two years. At the end of the initial two-year term, and at the end of each two-year period thereafter, the term of the employment agreement is expected to automatically renew for successive two-year periods unless we provide Mr. LaVanway with a notice to terminate the employment term. The employment agreement is expected to provide the same severance terms as those provided by Mr. LaVanway's severance agreement with us for two years following the equity tender offer completion date. Thereafter, if Mr. LaVanway's employment is involuntarily terminated by us without cause, it is expected that he will be entitled to severance equal to his annual base salary for two years, plus a pro rata bonus for the year of termination. 71 Each of the executive officer's employment agreements described that we expect to enter into effective as of the equity tender offer completion date will include non-competition, non-solicitation, confidentiality and other restrictive covenants. Each of these employment agreements is also expected to provide that if any amount to be paid to the executive officer under the employment agreement is determined to be non-deductible by reason of Section 280G of the Internal Revenue Code, subject to certain limitations, the severance payments and benefits will be reduced to the extent necessary so that Section 280G does not cause any amount to be non-deductible by us. Severance Agreement We have entered into a severance agreement with Mr. LaVanway. This severance agreement will only become operative upon a "change in control" of our company. The severance agreement generally provides that if, within a two-year period following a change in control, we terminate the employment of Mr. LaVanway other than as a result of his death or disability, or for cause, or if Mr. LaVanway terminates employment with us under certain circumstances, he is entitled to receive severance compensation. This severance compensation would be: (1) two times Mr. LaVanway's base pay at the highest rate in effect for any period prior to his termination, (2) two times his cash bonus (equal to the highest applicable cash bonus earned during the three years immediately preceding the year in which the change in control occurred) and (3) if the termination of employment occurs after June 30 in any year, a prorated bonus for that calendar year. In addition, health and life insurance benefits substantially similar to those provided prior to termination would continue for a two-year period, subject to reduction to the extent comparable benefits are actually received by Mr. LaVanway from another employer during this period. The severance agreement also provides that if any amount to be paid to Mr. LaVanway under the severance agreement is determined to be non-deductible by reason of Section 280G of the Internal Revenue Code, the severance benefits will be reduced to the extent necessary so that Section 280G does not cause any amount to be non-deductible by us. The completion of the equity tender offer qualified as a "change of control" under this severance agreement. Committees of the Board of Directors Our Board of Directors does not currently have any standing committees. Director Compensation Prior to the merger, directors, including directors who were employees of Associated Materials Incorporated, received an annual retainer of $16,000 plus $3,500 for each Board meeting and $1,000 for each committee meeting attended in person or $1,000 for each such meeting in which participation was by telephone. Directors were reimbursed for reasonable travel expenses incurred in attending Board and committee meetings. Following the merger, we will reimburse our non-employee directors for all out-of-pocket expenses incurred in the performance of their duties as directors. We do not intend to pay fees to the current directors for attendance at meetings or for their services as members of the board of directors. Option/SAR Grants in 2001 No stock options or stock appreciation rights were granted to our executive officers in 2001. 72 Aggregated Option/SAR Exercises in 2001 and December 31, 2001 Option/SAR Values The following table provides information regarding the exercise of options during 2001 and unexercised options held as of December 31, 2001 for our executive officers.
NUMBER OF SHARES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT OPTIONS/SARS AT DECEMBER 31, 2001(1) DECEMBER 31, 2001(2) SHARES VALUE --------------------------- --------------------------- NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- -------- -------- ----------- ------------- ----------- ------------- William W. Winspear..... 0 $ 0 0 0 $ 0 $ 0 Michael J. Caporale, Jr.................... 0 $ 0 50,000 50,000 $1,169,688 $1,169,688 Robert F. Hogan, Jr..... 0 $ 0 24,000 6,000 $ 685,200 $ 171,300 Robert L. Winspear...... 0 $ 0 36,000 4,000 $1,149,300 $ 114,200
- --------------- (1) We have not granted stock appreciation rights. (2) Based on a price of $37.55 per share of common stock, the closing sale price on December 31, 2001, multiplied by the number of shares of common stock issuable upon exercise of these options. New Stock Option Plan Associated Materials Holdings Inc. adopted a new stock option plan shortly after the closing of the merger. Associated Materials Holdings Inc. may issue additional shares of common stock and preferred stock, subject to adjustment if particular capital changes affect the common stock and preferred stock, upon the exercise of options granted under the new option plan. The exercise price of an option granted under the new option plan will be determined by the Compensation Committee of the Board of Directors of Associated Materials Holdings Inc. An option holder may pay the exercise price of an option by any legal manner that the Compensation Committee permits. The Compensation Committee, or the Board of Directors, will administer the new option plan. The Compensation Committee will select eligible executives, employees and consultants of Associated Materials Holdings Inc. and its affiliates, including our company, to receive options and will determine the number and type of shares of stock covered by options granted under the new option plan, the terms under which options may be exercised, and other terms and conditions of options in accordance with the provisions of the new option plan. Option holders generally may not transfer their options except in the event of death. If Associated Materials Holdings Inc. undergoes a change in control, as defined in the new option plan, all outstanding options may immediately become fully exercisable, and the Compensation Committee may adjust outstanding options by substituting stock or other securities of any successor or another party to the change in control transaction, or cash out such outstanding options, in any such case, generally based on the consideration received by its stockholders in the transaction. Subject to particular limitations specified in the new option plan, the Board of Directors may amend or terminate the new option plan, and the Compensation Committee may amend options outstanding under the new option plan. The new option plan will terminate no later than 10 years following its effective date; however, any options outstanding under the new option plan will remain outstanding in accordance with their terms. Selected employees of Associated Materials Incorporated who held options immediately prior to the merger to purchase shares of Associated Materials Incorporated common stock have been, or will be, offered the opportunity to convert such options into options to purchase shares of Associated Materials Holdings Inc. common stock, preferred stock or both. Selected employees of Associated Materials Incorporated may also receive new options to purchase shares of common stock of Associated Materials Holdings Inc. It is also expected that certain employees of Associated Materials Incorporated will have the right to require Associated Materials Holdings Inc. to repurchase their options and shares of stock of Associated Materials Holdings Inc. that have been purchased through the exercise of options upon the occurrence of specified events. 73 DESCRIPTION OF CAPITAL STOCK We amended our certificate of incorporation and bylaws following the consummation of the merger. The following is a summary description of our capital stock. The information contained herein is subject to the detailed provisions of our amended certificate of incorporation and bylaws. Under our amended certificate of incorporation, we will have the authority to issue 1,000 shares of common stock, par value $.01 per share. Holders of shares of common stock are entitled to one vote per share in the election of directors and all other matters submitted to a vote of stockholders. Holders of common stock have no redemption or conversion rights and no preemptive or other rights to subscribe for our securities. The outstanding shares of common stock are fully paid and non-assessable. All shares of common stock are entitled (1) to share equally in dividends from sources legally available therefor when, as and if declared by the Board of Directors, and (2) upon our dissolution, to receive pro rata any of our assets after the satisfaction of corporate liabilities. Payment of cash dividends is restricted by covenants in our new credit agreement and the indenture governing the notes. 74 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE MERGER THE MERGER AGREEMENT. On March 16, 2002, we, Simon Acquisition Corp. and Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings Inc.) entered into an agreement and plan of merger pursuant to which Simon Acquisition Corp. commenced a tender offer to purchase all of the issued and outstanding shares of common stock of Associated Materials Incorporated, at a price of $50.00 per share, net to the seller in cash. Following the completion of the merger, Simon Acquisition Corp. merged into our company and we continued as the surviving corporation. The merger agreement contained customary representations and warranties by us to Simon Acquisition Corp. and Associated Materials Holdings Inc., as well as customary representations and warranties by Simon Acquisition Corp. and Associated Materials Holdings Inc. to us. The merger agreement provides that from and after the effective time of the merger, as the surviving corporation, we will indemnify and hold harmless each person who is now, at any time has been or becomes prior to the effective time of the merger, a director or officer of our company, and their heirs and personal representatives, against liabilities and expenses incurred in connection with any proceeding arising out of or pertaining to any action or omission occurring prior to the effective time of the merger (including, without limitation, any proceeding which arises out of or relates to the transactions contemplated by the merger agreement). Pursuant to the merger agreement, promptly following the commencement of the equity tender offer, we commenced a tender offer for our 9 1/4% senior subordinated notes and a solicitation of consents from holders of the existing notes to amend certain terms of the related indenture to facilitate the financings contemplated by the merger agreement, including the offering of the outstanding notes. On April 19, 2002, following our merger with Simon Acquisition Corp., we became a wholly owned subsidiary of Associated Materials Holdings Inc. As a result, Associated Materials Holdings Inc. has the right to appoint all of our directors. NON-COMPETITION AGREEMENT. In connection with the execution of the merger agreement, Mr. William W. Winspear, who was our Chairman, President and Chief Executive Officer prior to the completion of the equity tender offer, entered into a non-competition agreement with us. Mr. Winspear has agreed that he will not directly or indirectly own, operate, manage, control, consult with, provide services for, or in any manner engage in the building products/siding and windows business or the electrical cable manufacturing business in competition with us within the United States for a period of three years beginning on the offer completion date, which we will refer to as the "restricted period." Mr. Winspear has also agreed that during the restricted period he will not directly or indirectly (1) induce any of our employees to leave our employ, (2) hire any person who is our employee, or (3) induce any customer, supplier, distributor or other person having a significant business relationship with us to cease doing business with us, or otherwise intentionally adversely interfere with such a relationship. Mr. Winspear retired from our company upon completion of the equity tender offer. NON-SOLICITATION AGREEMENT. In connection with the execution of the merger agreement, Mr. Robert L. Winspear, who was our Vice President and Chief Financial Officer prior to the merger, entered into a non-solicitation agreement with us. Mr. Robert Winspear has agreed that he will not, directly or indirectly, for a period of two years following the completion of the equity tender offer: (1) induce any of our employees that was party to an employment or severance agreement with us on March 16, 2002 to leave our employ, (2) hire any such person, or (3) induce any customer, supplier, distributor or other person having a significant business relationship with us to cease doing business with us or otherwise intentionally adversely interfere with such a relationship. TENDER AND VOTING AGREEMENT. In connection with the execution of the merger agreement, Mr. William W. Winspear, who, at the time, was the Chairman of the Board, President and Chief Executive Officer of Associated Materials Incorporated and who beneficially owned at the time of the 75 merger agreement 3,097,242 shares of common stock of Associated Materials Incorporated, representing approximately 42% of the outstanding shares of common stock of Associated Materials Incorporated on a fully diluted basis, entered into a tender and voting agreement with Simon Acquisition Corp. and Associated Materials Holdings Inc. Mr. Winspear agreed to validly tender all of his shares and, until the termination of the tender and voting agreement, to vote or cause to be voted all of the shares which Mr. Winspear has the right to vote in favor of the merger and the approval of the terms of the merger agreement and in favor of each of the other transactions contemplated by the merger agreement, and against any other action that could adversely affect the transactions contemplated by the merger agreement. Mr. Winspear made customary representations and warranties relating to ownership of shares of Associated Materials Incorporated, power and authority, execution and delivery, no conflicts, no finder's fees, and reliance by Associated Materials Holdings Inc. THE STOCKHOLDERS AGREEMENT The stockholders of Associated Materials Holdings Inc. have entered into a stockholders agreement which governs certain relationships among, and contains certain rights and obligations of, such stockholders. The stockholders agreement, among other things, (1) limits the ability of the stockholders to transfer their shares in Associated Materials Holdings Inc. except in certain permitted transfers as defined therein; (2) provides for certain tag-along obligations and certain bring-along rights; (3) provides for certain registration rights; and (4) provides for certain preemptive rights. The stockholders agreement provides that the parties thereto must vote their shares to elect a board of directors consisting of four persons designated by the stockholders who are affiliates of Harvest Partners, Inc., our chief executive officer, a person designated by PPM America Private Equity Fund, LP and a person designated by Weston Presidio Service Company, LLC. Pursuant to the stockholders agreement, Harvest Partners, Inc. will have the power to control the amendment of the certificate of incorporation of Associated Materials Holdings Inc., excluding changes that would disproportionately and adversely affect the rights of any stockholder (other than stockholders who are affiliates of Harvest Partners, Inc.). In addition, all stockholders of Associated Materials Holdings Inc. have granted the Harvest funds the right, in certain circumstances, to require such stockholders to sell their shares in Associated Materials Holdings Inc. in a sale of substantially all of the assets of Associated Materials Holdings Inc. or a majority of the common stock of Associated Materials Holdings Inc. or our company, to any party other than an affiliate of Harvest Partners, Inc. Pursuant to the stockholders agreement, the stockholders (other than stockholders that are affiliates of Harvest Partners, Inc.) are granted "tag-along" rights under which such stockholders have the option of participating in certain sales of capital stock of Associated Materials Holdings Inc. by the stockholders who are affiliates of Harvest Partners, Inc. at the same price and other terms as such affiliates. Pursuant to the stockholders agreement, the stockholders are entitled to certain rights with respect to registration under the Securities Act of certain shares held by them including, in the case of affiliates of Harvest Partners, Inc., certain demand registration rights. The stockholders agreement also provides for certain preemptive rights. Subject to certain conditions, the preemptive rights grant the right to purchase shares in a share issuance of Associated Materials Holdings Inc. The stockholders agreement provides that it shall terminate, except with respect to the registration rights of the stockholders, upon the closing of an underwritten registered public offering of common stock of Associated Materials Holdings Inc. MANAGEMENT AGREEMENT We entered into a management agreement with Harvest Partners, Inc. Under the management agreement, Harvest Partners, Inc. will receive a one time fee of $5.0 million in connection with structuring and implementing the acquisition of our company. In addition, Harvest Partners, Inc. will provide us with financial advisory and strategic planning services. For these services, Harvest Partners, Inc. will receive an annual fee of $750,000, payable on a quarterly basis in advance, beginning on the date of execution of this 76 agreement. The fee will be adjusted on a yearly basis in accordance with the U.S. Consumer Price Index. The agreement also provides that Harvest Partners, Inc. will receive transaction fees in connection with financings, acquisitions and divestitures of our company. Such fees will be a percentage of the applicable transaction. Harvest Partners, Inc. will be reimbursed by us for all out-of-pocket expenses. The management agreement has a term of five years from its date of execution and will automatically be renewed on a yearly basis, beginning in 2004, unless otherwise specified by Harvest Partners, Inc. STOCK OPTIONS AND INVESTMENT OPPORTUNITY Mr. Caporale will be entering into an agreement with Associated Materials Holdings Inc. to convert his prior options to purchase shares of our common stock held immediately prior to the merger into options to purchase shares of preferred and common stock of Associated Materials Holdings Inc. with approximately the same aggregate exercise price and aggregate value, and on the same general terms and conditions, as his prior options. Mr. Caporale will receive new options to purchase shares of common stock of Associated Materials Holdings Inc. shortly after the consummation of the merger at a per share exercise price equal to the price per share paid by other equity investors of Associated Materials Holdings Inc. In addition, Mr. Caporale is offered the opportunity following the consummation of the merger and within three months thereafter to purchase shares of common and preferred stock of Associated Materials Holdings Inc. with an aggregate value of not more than one times his annual base salary at the same price per share paid by, and on substantially the same terms as, other equity investors of Associated Materials Holdings Inc. REPURCHASE OF CLASS B COMMON STOCK On April 29, 2001, we repurchased 1,000,000 shares of our Class B common stock from the Prudential Insurance Company of America and its wholly owned subsidiary, PCG Finance Company II, LLC. The purchase price was $19.50 per share of Class B common stock, or $19,500,000 in the aggregate. We financed this stock repurchase through available cash and borrowings under our existing bank credit facility. Following the purchase, Prudential and PCG converted their remaining 550,000 shares of Class B common stock into 550,000 shares of common stock. We retired all 1,550,000 previously authorized shares of Class B common stock. RELOCATION LOAN In connection with his joining us, Mr. Caporale moved to the Akron, Ohio area, where our Alside division is located. As part of his relocation benefits, on November 16, 2000, we made a non-interest bearing loan to Mr. Caporale in the amount of $270,407 for the purchase of a new home. Mr. Caporale repaid this loan in full on February 16, 2001. AMERCABLE On June 24, 2002, we completed the sale of our AmerCable division to AmerCable Incorporated, a newly-formed entity controlled by members of AmerCable management and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. Robert F. Hogan, Jr., president and chief executive officer of our AmerCable division and vice president of our company prior to the sale, will be the president, chief executive officer and chairman of the board of AmerCable Incorporated. 77 PRINCIPAL STOCKHOLDERS We are a wholly owned subsidiary of Associated Materials Holdings Inc. The capital stock of Associated Materials Holdings Inc. consists of preferred stock, par value $0.01 per share (the "preferred stock"), class A common stock, par value $0.01 per share (the "class A common stock") and class B non-voting common stock, par value $0.01 per share ("class B common stock" and collectively with the class A common stock, the "common stock"). The preferred stock is senior in right of payment to the common stock. Holders of preferred stock have no voting rights except as required by law. Harvest Funds (as defined in footnote 3 below) owns approximately 30.7% of the voting stock of Associated Materials Holdings Inc. and is party to a stockholders agreement dated as of March 22, 2002, regarding the ownership and voting of the common stock of Associated Materials Holdings Inc. By virtue of such stock ownership and stockholders agreement, Harvest Funds will have the ability to control the Board of Directors of Associated Materials Holdings Inc. The following table sets forth certain information as of June 28, 2002 regarding the beneficial ownership of: - Harvest Funds in Associated Materials Holdings Inc.; - the directors and named executive officers of our company; and - all executive officers and directors of our company as a group. We determined beneficial ownership in accordance with the rules of the Commission, which generally require inclusion of shares over which a person has voting or investment power. Share ownership in each case includes shares that may be acquired within sixty days through the exercise of any options. Except as otherwise indicated, the address for each of the named individuals is c/o Associated Materials Incorporated, 280 Park Avenue, New York, New York 10017.
CLASS A COMMON STOCK PREFERRED STOCK VOTING SECURITIES ---------------------- ---------------------- ---------------------- NUMBER OF NUMBER OF NUMBER OF SHARES PERCENTAGE SHARES PERCENTAGE SHARES PERCENTAGE --------- ---------- --------- ---------- --------- ---------- Harvest Funds(1)(2)(3)........ 500,000 30.7% 450,000 30.3% 500,000 30.7% Ira D. Kleinman(4)............ 500,000 30.7% 450,000 30.3% 500,000 30.7% Michael J. Caporale, Jr. (5)......................... 51,255 3.1% 46,415 3.0% 51,255 3.1% D. Keith LaVanway(6).......... 8,992 * 4,678 * 8,992 * Thomas W. Arenz(7)............ 500,000 30.7% 450,000 30.3% 500,000 30.7% Jonathan C. Angrist(8)........ -- -- -- -- -- -- All directors and executive officers as a group (5 persons).................... 560,247 33.2% 501,093 32.7% 560,247 33.2%
- --------------- * Less than 1%. (1) Associated Materials Holdings Inc. is controlled by Harvest Funds, by reason of their collective right to designate a majority of the members of the board of directors of Associated Materials Holdings Inc. Harvest Funds are Harvest Partners III, L.P., Harvest Partners III Beteilingungsgesellschaft Burgerlichen Rechts (mit Haftungsbeschrankung) ("Harvest Partners III, GbR"), Harvest Partners IV, L.P. and Harvest Partners IV GmbH & Co. KG ("Harvest Partners IV KG"). Harvest Associates III, L.L.C., which has six members, is the general partner of Harvest Partners III, L.P. and Harvest Partners III, GbR. Harvest Associates IV, L.L.C., which has six members, is the general partner of Harvest Partners IV, L.P. and Harvest Partners IV KG. Harvest Partners, Inc. provides management services for Harvest Associates III, L.L.C. in connection with Harvest Partners III, L.P. and Harvest Partners III, GbR and for Harvest Associates IV, L.L.C. in connection with Harvest Partners IV, L.P. and Harvest Partners IV KG. (2) Includes 131,978 shares of common stock and 118,780 shares of preferred stock owned by Harvest Partners III, L.P. and 18,022 shares of common stock and 16,220 shares of preferred stock owned by 78 Harvest Partners III, GbR for each of which Harvest Associates III, L.L.C. is the general partner. Harvest Funds may hold two classes of preferred stock or notes convertible into preferred stock. Harvest Associates III, L.L.C. has six members, each of whom has equal voting rights and who may be deemed to share beneficial ownership of the shares of common stock of Associated Materials Incorporated. The six members are Ira Kleinman, Harvey Mallement, Stephen Eisenstein, Harvey Wertheim, William Kane and Thomas Arenz. Mr. Kleinman and Mr. Mallement are on our board of directors. Each of Messrs. Kleinman, Mallement, Eisenstein, Wertheim, Kane and Arenz disclaims beneficial ownership of the shares of common stock owned by Harvest Partners III, L.P. and Harvest Partners III GbR. (3) Includes 273,000 shares of common stock and 245,700 shares of common stock owned by Harvest Partners IV, L.P. and 77,000 shares of common stock and 69,300 shares of preferred stock owned by Harvest Partners IV GmbH & Co. KG or Harvest Partners IV KG, for each of which Harvest Associates IV, L.L.C. is the general partner. Harvest Associates IV, L.L.C. has six members, each of whom has equal voting rights and who may be deemed to share beneficial ownership of the shares of common stock of Associated Materials Incorporated beneficially owned by it. The six members are Ira Kleinman, Harvey Mallement, Stephen Eisenstein, Harvey Wertheim, William Kane and Thomas Arenz. Mr. Kleinman and Mr. Mallement are on our board of directors. Each of Messrs. Kleinman, Mallement, Eisenstein, Wertheim, Kane and Arenz disclaims beneficial ownership of the shares of common stock owned by Harvest Partners IV, L.P., Harvest Partners IV KG. Harvest Partners III, L.P., Harvest Partners III GbR, Harvest Partners IV, L.P. and Harvest Partners IV KG are collectively referred to as the "Harvest Funds." The address of the named entities is 280 Park Avenue, 33rd Floor, New York, New York 10017. (4) Includes shares of class A common stock and preferred stock owned by Harvest Partners III, L.P. and shares of class A common stock and preferred stock owned by Harvest Partners III GbR, for each of which Harvest Associates III, L.L.C. is the general partner. Also includes shares of class A common stock and preferred stock owned by Harvest Partners IV, L.P. and Harvest Partners IV KG, for each of which Harvest Partners IV, L.L.C. is the general partner. Mr. Kleinman is a member of Harvest Associates, III, L.L.C. and Harvest Partners IV, L.L.C. and may be deemed to share beneficial ownership of the shares of common stock of Associated Materials Incorporated beneficially owned by them. Mr. Kleinman disclaims beneficial ownership of common shares owned by Harvest Partners III, L.P., Harvest Partners III GbR, Harvest Partners IV, L.P. and Harvest Partners IV KG. (5) Includes options to purchase 51,255 shares of class A common stock and 46,415 shares of preferred stock. This reflects the intended conversion of options held by Mr. Caporale to purchase shares of common stock of Associated Materials Incorporated prior to the merger into options to purchase shares of common and preferred stock of Associated Materials Holdings Inc. (6) Includes options to purchase 8,992 shares of class A common stock and 4,678 shares of preferred stock. This reflects the intended conversion of options held by Mr. LaVanway to purchase shares of common stock of Associated Materials Incorporated prior to the merger into options to purchase shares of common and preferred stock of Associated Materials Holdings Inc. (7) Includes shares of class A common stock and preferred stock owned by Harvest Partners III, L.P. and shares of class A common stock and preferred stock owned by Harvest Partners III GbR, for each of which Harvest Associates III, L.L.C. is the general partner. Also includes shares of class A common stock and preferred stock owned by Harvest Partners IV, L.P. and Harvest Partners IV KG, for each of which Harvest Partners IV, L.L.C. is the general partner. Mr. Arenz is a member of Harvest Associates, III, L.L.C. and Harvest Partners IV, L.L.C. and may be deemed to share beneficial ownership of the shares of common stock of Associated Materials Incorporated beneficially owned by them. Mr. Arenz disclaims beneficial ownership of common shares owned by Harvest Partners III, L.P., Harvest Partners III GbR, Harvest Partners IV, L.P. and Harvest Partners IV KG. (8) Mr. Angrist is a director of our company. None of Harvest Funds, the directors or the executive officers owns shares of class B common stock. 79 DESCRIPTION OF CERTAIN INDEBTEDNESS NEW CREDIT FACILITY The new credit facility provides for the following: (1) a seven year $125 million term loan which was drawn at closing to finance the transactions, and (2) a five year $40 million revolving credit facility, which includes letters of credit (subject to a $10 million sublimit), which may be used for, among other things, general corporate purposes including working capital. The term loan will amortize beginning six months after closing in quarterly installments over the six and one-half year amortization period in an aggregate amount equal to 1% annually for the first five and one-half years of such amortization period with the balance to be paid in the final year in four equal installments. UBS Warburg LLC and Credit Suisse First Boston act as joint-lead arrangers, UBS AG, Stamford Bank acts as administrative agent, Credit Suisse First Boston acts as syndication agent and CIBC World Markets Corp. acts as documentation agent for the syndicate of lenders providing the new credit facility. Subject to certain exceptions, the new credit facility requires mandatory repayments and mandatory reductions thereunder with the proceeds from (1) asset sales, (2) the issuance of debt and equity securities, (3) insurance and condemnation awards and (4) annual excess cash flow. Voluntary prepayments of the new credit facility will be permitted at any time, subject to certain notice requirements and to the payment of certain losses and expenses suffered by the lenders as a result of the prepayment of "Eurodollar Loans" (as defined in the new credit facility) prior to the end of the applicable interest period. The new credit facility bears interest at the sum of the (1) applicable margin and (2) at our option, either the "Alternate Base Rate" (as defined in the new credit facility) or the "Eurodollar Rate" (as defined in the new credit facility). The Alternate Base Rate will be the higher of (1) the rate that UBS AG, Stamford Branch announces from time to time as its prime commercial lending rate, as in effect from time to time and (2) one-half of 1% in excess of the federal funds rate, as published by the Federal Reserve Bank of New York. The applicable interest margin is initially a percentage per annum equal to (1) in the case of the term loans maintained as (a) Alternate Base Rate Loans (as defined in the new credit facility), 2.50%, and (b) Eurodollar Loans (as defined in the new credit facility), 3.50% and (2) in the case of revolving loans maintained as (a) Base Rate Loans, 2.00%, and (b) Eurodollar Loans, 3.00%, in each case with respect to revolving loans subject to adjustments based on certain levels of financial performance. With respect to Eurodollar Loans, (1) we may elect interest periods of 1, 2, 3, 6 or, if available, 9 or 12 months and (2) interest will be payable in arrears at the earlier of (a) the end of an applicable interest period and (b) quarterly. With respect to Alternate Base Rate Loans, interest will be payable quarterly on the last business day of each fiscal quarter. Additionally, we will pay a commitment fee in an amount equal to 0.50% per annum on the daily average unused portion of the new credit facility, subject to adjustments based on certain levels of financial performance. The new credit facility contains certain covenants, including, without limitation, restrictions on: - debt and liens; - the sale of assets; - mergers, acquisitions and other business combinations; - voluntary prepayment of certain debt (including the notes); - transactions with affiliates; 80 - capital expenditures; - leases; - loans and investments, as well as prohibitions on the payment of cash dividends to, or the repurchase on redemption of stock from, stockholders; and - various financial covenants. The new credit facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-default and cross-acceleration to certain other debt, certain events of bankruptcy and insolvency, certain events under the Employee Retirement Income Security Act of 1974, as amended, material judgments, actual or asserted failure of any guaranty or security document supporting the new credit facility to be in full force and effect and change of control. If such a default occurs, the lenders under the new credit facility would be entitled to take various actions, including all actions permitted to be taken by a secured creditor, the acceleration of amounts due under the new credit facility and requiring that all such amounts be immediately paid in full. All obligations under the new credit facility are jointly and severally guaranteed by Associated Materials Holdings Inc. and all of our direct and indirect wholly owned domestic subsidiaries. The debt under the new credit facility is secured by a pledge of our capital stock and the capital stock of our subsidiaries (but not to exceed 66 2/3 of the voting stock of foreign subsidiaries), and a perfected lien and security interest in substantially all of our owned real and personal assets (tangible and intangible) and the owned real and personal assets (tangible and intangible) of Associated Materials Holdings Inc. and each of our direct and indirect wholly owned domestic subsidiaries. Our future wholly owned domestic subsidiaries will be required to guarantee the new credit facility and to secure such guarantee with substantially all of their owned real and personal assets (tangible and intangible). The new credit facility, including the terms and conditions described above, is subject to modification, amendment and waiver by the parties thereto. OUR 9 1/4% SENIOR SUBORDINATED NOTES We currently have outstanding senior subordinated notes due March 1, 2008. The principal amount of these senior subordinated notes bears annual interest at 9 1/4%. These existing notes are governed by an indenture between us and Bank of New York Trust Company of Florida, N.A. (formerly U.S. Trust Company of Texas, N.A.). We commenced a tender offer and consent solicitation to purchase all of our $75 million outstanding 9 1/4% notes and to receive consents from holders of such notes to amend the terms of the indenture governing such notes. The debt tender offer expired on April 18, 2002. Approximately $74 million aggregate principal amount of the 9 1/4% notes were tendered. We amended the indenture governing the 9 1/4% notes to remove substantially all the restrictive covenants pursuant to a supplemental indenture dated as of April 4, 2002. Subsequent to the merger, we commenced a change of control offer pursuant to the indenture governing the 9 1/4% notes to purchase the 9 1/4% notes not tendered in the debt tender offer. The change of control offer expired on June 21, 2002 and approximately $0.1 million aggregate principal amount of such notes was tendered and accepted. We intend to discharge the remaining approximately $0.9 million outstanding 9 1/4% notes pursuant to the indenture governing such notes. We may also, from time to time, purchase such notes through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine. We expect that all discharged notes will be redeemed on or after March 1, 2003 at 104.625% of the principal amount of such notes ($1,046.25 per $1,000 principal amount of such notes), plus accrued and unpaid interest, if any, to the date of purchase. 81 AMERCORD INC. GUARANTEE In connection with the recapitalization of Amercord Inc. in November 1999, we guaranteed a $3.0 million note secured by Amercord Inc.'s real property. To date, the lender has not requested us to make payment under the guaranty. Should the guaranty be exercised by Amercord Inc.'s lender, we and Ivaco Inc., another stockholder of Amercord Inc., have the option to assume the loan. Ivaco Inc. has indemnified us for 50% of any loss under the guaranty up to $1.5 million. Based on a third party appraisal of Amercord Inc.'s real property, we believe that we are adequately secured under our guaranty of the $3.0 million Amercord Inc. note such that no losses are anticipated with respect to this guaranty. 82 DESCRIPTION OF THE NOTES We issued the outstanding notes under an indenture (the "Indenture") among us and Wilmington Trust Company, as trustee, in a private transaction that was exempt from the registration requirements of the Securities Act. We will issue the exchange notes under the same indenture. The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. A copy of the Indenture has been filed as an exhibit to this exchange offer registration statement. As used in this section, the term "Notes" refers collectively to the outstanding notes and the exchange notes, and the term "Company" refers only to Associated Materials Incorporated ("Associated Materials"), and does not refer to any of our subsidiaries. Certain terms used in this description are defined under the subheading "-- Certain Definitions." The terms of the outstanding notes and the exchange notes are identical, both of which are governed by the Indenture described herein. The following description is only a summary of the material provisions of the Indenture. We urge you to read the Indenture, because it, not this description, defines your rights as holders of these Notes. You may request copies of this agreement at our address set forth under the heading "Available Information." BRIEF DESCRIPTION OF THE NOTES THE NOTES - are unsecured senior subordinated obligations of the Company; - are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; - are senior in right of payment to any future Subordinated Obligations of the Company; and - are subject to registration with the SEC pursuant to the Registration Rights Agreement. EACH SUBSIDIARY GUARANTY - unconditionally guarantees the obligations of the Company under the Notes; and - is a senior subordinated obligation of the relevant Subsidiary Guarantor. PRINCIPAL, MATURITY AND INTEREST The Company issued the Notes initially with a maximum aggregate principal amount of $165.0 million. The Company issued the Notes in denominations of $1,000 and any integral multiple of $1,000. The Notes will mature on April 15, 2012. Subject to our compliance with the covenant described under the subheading "-- Certain Covenants -- Limitation on Indebtedness," we are permitted to issue more Notes under the Indenture in an unlimited aggregate principal amount (the "Additional Notes"). The Notes and the Additional Notes, if any, will be treated as a single class for all purposes of the Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context otherwise requires, for all purposes of the Indenture and this "Description of the Notes," references to the Notes include any Additional Notes actually issued. Interest on these Notes will accrue at the rate of 9 3/4% per annum and will be payable semiannually in arrears on April 15 and October 15, commencing on October 15, 2002. We will make each interest payment to the holders of record of these Notes on the immediately preceding April 1 and October 1. Interest on these Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Additional interest may accrue on the Notes in certain circumstances pursuant to the Registration Rights Agreement. 83 OPTIONAL REDEMPTION Except as set forth below, we will not be entitled to redeem the Notes at our option prior to April 15, 2007. On and after April 15, 2007, we will be entitled at our option to redeem all or a portion of these Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date (subject to the right of Holders of record on the related record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on April 15 of the years set forth below:
PERIOD REDEMPTION PRICE - ------ ---------------- 2007........................................................ 104.875% 2008........................................................ 103.250 2009........................................................ 101.625 2010 and thereafter......................................... 100.000%
In addition, before April 15, 2005, we may at our option on one or more occasions redeem Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) at a redemption price (expressed as a percentage of principal amount) of 109.75%, plus accrued and unpaid interest to the redemption date with the net cash proceeds from one or more Equity Offerings (provided that if the Equity Offering is an offering by Associated Materials Holdings, Inc. ("Parent"), a portion of the net cash proceeds thereof equal to the amount required to redeem any such Notes is contributed to the equity capital of the Company); provided that (1) at least 65% of such aggregate principal amount of Notes (which includes Additional Notes, if any) remains outstanding immediately after the occurrence of each such redemption (other than Notes held, directly or indirectly, by the Company or its Affiliates); and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. REDEMPTION UPON A CHANGE OF CONTROL At any time on or prior to April 15, 2007, the Notes may also be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, notice of which is sent no later than 30 days after the occurrence of such Change of Control by notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (the "Change of Control Redemption Date"). "Applicable Premium" means, with respect to a Note at any Change of Control Redemption Date, the greater of: (1) 1.0% of the principal amount of such Note; or (2) the excess of (a) the present value at such time of: (x) the redemption price of such Note at April 15, 2007 (such redemption price being described under "-- Optional Redemption"), plus (y) all required interest payments (excluding accrued but unpaid interest) due on such Note through April 15, 2007 computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Note. 84 "Treasury Rate" means the yield to maturity at the Change of Control Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the Change of Control Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the Change of Control Redemption Date to April 15, 2007, provided, however, that if the period from the Change of Control Redemption Date to April 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Change of Control Redemption Date to April 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. SELECTION AND NOTICE OF REDEMPTION If we are redeeming less than all the Notes at any time, the Trustee will select Notes to be redeemed on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate. We will redeem Notes of $1,000 or less in whole and not in part. Except as required under "-- Escrow of Proceeds; Mandatory Redemption," we will cause notices of redemption to be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES Except as set forth above under "-- Change of Control" and "Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock," we are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. We may at any time and from time to time purchase Notes in the open market or otherwise. SUBSIDIARY GUARANTIES Each Subsidiary Guarantor will jointly and severally guarantee, on an unsecured senior subordinated basis, our obligations under these Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guaranty will be limited as necessary to prevent the guarantee of that Subsidiary Guaranty from constituting a fraudulent conveyance under applicable law. See "Risk Factors -- The guarantees may be voided under specific legal circumstances." Each Subsidiary Guarantor that makes a payment under its Subsidiary Guaranty will be entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's pro rata portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. If a Subsidiary Guaranty were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor's liability on its Subsidiary 85 Guaranty could be reduced to zero. See "Risk Factors -- The guarantees may be voided under specific legal circumstances." Pursuant to the Indenture, a Subsidiary Guarantor may consolidate with, merge with or into or transfer all or substantially all its assets to any other Person to the extent described below under "-- Certain Covenants -- Merger and Consolidation"; provided, however, that if such other Person is not the Company, such Subsidiary Guarantor's obligations under its Subsidiary Guaranty must be expressly assumed by such other Person, unless such merger or transfer occurs as part of an Asset Disposition of such Subsidiary Guarantor in accordance with the applicable provisions of the Indenture. The Subsidiary Guaranty of a Subsidiary Guarantor will be released (1) upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor; (2) upon the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor; (3) if the Company properly designates any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of the Indenture; or (4) at such time as such Subsidiary Guarantor no longer Guarantees or otherwise has outstanding any other Indebtedness of the Company or another Subsidiary Guarantor; in the case of paragraphs (1) and (2), other than to the Company or an Affiliate of the Company and as permitted by the Indenture. RANKING SENIOR INDEBTEDNESS VERSUS NOTES The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Guaranty and all other Subordinated Note Obligations will be subordinate in right of payment to the prior payment in full in cash or cash equivalents of all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor, including all Bank Indebtedness of the Company and such Subsidiary Guarantor under the Credit Agreement. As of March 31, 2002, after giving effect to the Transactions and the sale of the Company's AmerCable division, the Company and its Subsidiary would have had $98.7 million of Senior Indebtedness all of which is secured. In addition, the Company would have had additional availability of $37.4 million for borrowing of Senior Indebtedness under the Credit Agreement after completion of the Transactions and the sale of the Company's AmerCable division. Although the Indenture contains limitations on the amount of additional Indebtedness that the Company and the Subsidiary Guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness." OTHER SENIOR SUBORDINATED INDEBTEDNESS VERSUS NOTES Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the Notes and the relevant Guaranty in accordance with the provisions of the Indenture. The Notes and each Subsidiary Guaranty will in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor, respectively. We and the Subsidiary Guarantors have agreed in the Indenture that we and they will not Incur, any Indebtedness that is contractually subordinate or junior in right of payment to our Senior Indebtedness or the Senior Indebtedness of such Subsidiary Guarantors, unless such Indebtedness is Senior Subordinated Indebtedness of the applicable Person or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such person. The Indenture does not treat unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured. 86 PAYMENT OF NOTES We are not permitted to pay principal of, premium, if any, or interest on the Notes or pay any other Subordinated Note Obligation or make any deposit pursuant to the provisions described under "-- Defeasance" below and may not purchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if either of the following occurs (a "Payment Default") (1) any Designated Senior Indebtedness of the Company is not paid in full in cash when due; or (2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms; unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full according to its terms. Regardless of the foregoing, we are permitted to pay the Notes if we and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing. During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we will not be permitted to pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to us) of written notice (a "Blockage Notice") of such default from the Representative of the Bank Indebtedness or, if no Bank Indebtedness is outstanding, the Representative of such other Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if such Payment Blockage Period is terminated (1) by written notice to the Trustee and us from the Person or Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior Indebtedness has been discharged or repaid in full according to its terms. Notwithstanding the provisions described above, unless a Payment Default exists, we are permitted to resume paying the Notes after the end of such Payment Blockage Period. The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period irrespective of the number of defaults with respect to our Designated Senior Indebtedness during such period. Upon any payment or distribution upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property, (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full in cash or cash equivalents of such Senior Indebtedness before the holders of the Notes are entitled to receive any payment; (2) until the Senior Indebtedness of the Company is paid in full in cash or cash equivalents, any payment or distribution to which holders of the Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear, except that holders of Notes may receive certain Capital Stock and subordinated debt obligations; and (3) if a distribution is made to holders of the Notes that, due to the subordination provisions, should not have been made to them, such holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. 87 If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee must promptly notify the holders of Designated Senior Indebtedness of the Company or the Representative of such Designated Senior Indebtedness of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, neither the Company nor any Subsidiary Guarantor may pay the Notes until five Business Days after the Representatives of all the issues of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the Indenture otherwise permits payment at that time. The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are senior subordinated obligations. As such, the rights of holders of the Notes to receive payment by a Subsidiary Guarantor pursuant to a Subsidiary Guaranty will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Subsidiary Guarantor and the obligations of such Subsidiary Guarantor under the Subsidiary Guaranty. By reason of the subordination provisions contained in the Indenture, in the event of a liquidation or insolvency proceeding, creditors of the Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, may recover more, ratably, than the holders of the Notes, and creditors of ours who are not holders of Senior Indebtedness may recover less, ratably, than holders of our Senior Indebtedness and may recover more, ratably, than the holders of the Notes. The terms of the subordination provisions described above will not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to the provisions described under "-- Defeasance." CHANGE OF CONTROL Upon the occurrence of any of the following events (each, a "Change of Control"), each Holder shall have the right to require that the Company purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date): (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (directly or indirectly) one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), except that such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, and except that any Person that is deemed to have beneficial ownership of shares solely as the result of being part of a group pursuant to Rule 13d-5(b)(1) of the Exchange Act shall be deemed not to have beneficial ownership of any shares held by a Permitted Holder forming a part of such group), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 the Exchange Act), directly or indirectly, in the aggregate, a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company (for the purposes of this clause (1), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person is the beneficial owner (as defined in this provision), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in this provision), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); 88 (2) individuals who after the first board meeting after the consummation of the Merger constituted the Board of Directors of Parent or the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Parent or the Company was approved by a vote of a majority of the directors of the Parent or the Company then still in office who were either directors after the first board meeting after the consummation of the Merger or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Parent or the Company then in office; (3) the adoption of a plan relating to the liquidation or dissolution of the Company; or (4) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation. Within 30 days following any Change of Control, unless we have exercised our option to redeem all the Notes as described under "Redemption Upon a Change of Control", we will mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating (1) that a Change of Control has occurred and that such Holder has the right to require us to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control; (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased. If the terms of the Credit Agreement or any other Senior Indebtedness prohibit the Company from making a Change of Control Offer or from purchasing the Notes pursuant thereto, prior to the mailing of the notice to noteholders described in the preceding paragraph, but in any event within 30 days following any Change of Control, the Company covenants to: (1) repay in full all Indebtedness outstanding under the Credit Agreement and such other Senior Indebtedness or offer to repay in full all such Indebtedness and repay the Indebtedness of each lender who has accepted such offer; or (2) obtain the requisite consent under the Credit Agreement and such other Senior Indebtedness to permit the purchase of the Notes as described above. The Company must first comply with the covenant described above before it will be required to purchase Notes in the event of a Change of Control; provided, however, that the Company's failure to comply with the covenant described in the preceding sentence or to make a Change of Control Offer because of any such failure shall constitute a Default described in clause (4) under "-- Defaults" below (and not under clause (2) thereof). As a result of the foregoing, a holder of the Notes may not be able to compel the Company to purchase the Notes unless the Company is able at the time to refinance all 89 Indebtedness outstanding under the Credit Agreement or obtain requisite consents under the Credit Agreement. We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations. The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchasers. The Company does not have the present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are contained in the covenant described under "-- Certain Covenants -- Limitation on Indebtedness." Such restrictions can only be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction. The Credit Agreement will prohibit us from purchasing any Note and will also provide that the occurrence of certain change of control events with respect to the Company would constitute a default thereunder. In the event a Change of Control occurs at a time when we are prohibited from purchasing Notes, we may seek the consent of our lenders to the purchase of Notes or may attempt to refinance the borrowings that contain such prohibition. If we do not obtain such a consent or repay such borrowings, we will remain prohibited from purchasing Notes. In such case, our failure to offer to purchase Notes would constitute a Default under the Indenture, which would, in turn, constitute a default under the Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payment to holders of notes. Future Indebtedness that we may incur may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require the repurchase of such Indebtedness upon a Change of Control. Moreover, the exercise by the Holders of their right to require us to repurchase the Notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the holders of Notes following the occurrence of a Change of Control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. The definition of "Change of Control" includes a disposition of all or substantially all of the assets of the Company to any Person. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of "all or substantially all" of the assets of the Company. As a 90 result, it may be unclear as to whether a Change of Control has occurred and whether a holder of Notes may require the Company to make an offer to repurchase the Notes as described above. The provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the Notes. CERTAIN COVENANTS The Indenture contains covenants including, among others, the following: LIMITATION ON INDEBTEDNESS (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and its Restricted Subsidiaries will be entitled to Incur Indebtedness (including Additional Notes issued after the Issue Date) if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, no Default has occurred and is continuing and the Consolidated Coverage Ratio exceeds 2 to 1. (b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries will be entitled to Incur any or all of the following Indebtedness ("Permitted Indebtedness"): (1) Indebtedness Incurred by the Company and its Restricted Subsidiaries pursuant to the Credit Agreement; provided, however, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1) and then outstanding does not exceed the greater of (A) $165.0 million less the sum of all mandatory principal payments with respect to such Indebtedness pursuant to paragraph (a)(3)(A) of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock" (which principal payments in the case of revolving loans are accompanied by a corresponding permanent commitment reduction) and (B) the sum of (x) 65% of the book value of the inventory of the Company and its Restricted Subsidiaries and (y) 85% of the book value of the accounts receivable of the Company and its Restricted Subsidiaries; (2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary or to the holder of a Lien permitted under the Indenture) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such Indebtedness and the holders of Bank Indebtedness do not have a security interest therein or the obligee is a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes; (3) the Notes, the Exchange Notes and related Guarantees (other than any Additional Notes); (4) Indebtedness outstanding on the Issue Date and/or the Merger Date (other than Indebtedness described in clause (1) or (3) of this covenant); (5) Refinancing Indebtedness; (6) Hedging Obligations of the Company or any Restricted Subsidiary not for the purpose of speculation; (7) obligations in respect of letters of credit, performance, bid, surety, appeal and other similar bonds and completion guarantees, payment obligations in connection with self-insurance or similar requirements provided by the Company or any Restricted Subsidiary in the ordinary course of business; 91 (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, however,that such Indebtedness is extinguished within five Business Days of its Incurrence; (9) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease, construction or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) within 180 days after such purchase, lease or improvement in an aggregate principal amount which, when added together with the amount of Indebtedness Incurred pursuant to this clause (9) and then outstanding, does not exceed $5.0 million (including any Refinancing Indebtedness with respect thereto); (10) Indebtedness Incurred and outstanding on or prior to the date on which such Person was acquired by the Company or any Restricted Subsidiary or assumed by the Company or a Restricted Subsidiary at the time of acquisition of all or any portion of the assets (or any business or product line of another Person) (other than Indebtedness Incurred in connection with or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Restricted Subsidiary or was acquired by the Company); provided, however, at the time of such acquisition and after giving effect thereto, the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (10) and then outstanding does not exceed $5.0 million; (11) any Guarantee (including the Subsidiary Guaranties) by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Company or such Restricted Subsidiary is permitted under the terms of the Indenture; (12) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company; and (13) Indebtedness of the Company or of any of its Restricted Subsidiaries in an aggregate principal amount which, when taken together with all other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (13) above or paragraph (a)), does not exceed $12.5 million (which amount may, but need not be, incurred in whole or in part under clause (b)(1) above). (c) Notwithstanding the foregoing, neither the Company nor any Subsidiary Guarantor will Incur any Indebtedness pursuant to the foregoing paragraph (b) (other than (b)(1) above or under the Credit Agreement pursuant to (b)(13) above) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Notes or the applicable Subsidiary Guaranty to at least the same extent as such Subordinated Obligations. (d) Notwithstanding paragraphs (a) and (b) above, neither the Company nor any Subsidiary Guarantor will Incur (1) any Indebtedness if such Indebtedness is subordinate in right of payment to any Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of the Company or such Subsidiary Guarantor, as applicable, or (2) any Secured Indebtedness (for borrowed money including Capital Lease Obligations) that is not Senior Indebtedness of such Person (other than Indebtedness solely between or among the Company and a Subsidiary Guarantor or between or among the Subsidiary Guarantors) unless contemporaneously therewith such Person makes effective provision to secure the Notes or the relevant Subsidiary Guaranty, as applicable, equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. 92 (e) For purposes of determining compliance with this covenant, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses and (2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above and (3) the Company will be entitled from time to time to reclassify any Indebtedness Incurred pursuant to any clause in paragraph (b) above such that it will be deemed as having been Incurred under another clause in paragraph (b). Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock and change in the amount outstanding due solely to the result of fluctuations in the exchange rates of currencies will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant. (f) For purposes of determining compliance with any U.S. dollar restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness, provided, however, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be as provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess will be determined on the date such Refinancing Indebtedness is Incurred. LIMITATION ON RESTRICTED PAYMENTS (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if, at the time the Company or such Restricted Subsidiary makes such Restricted Payment, (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date (the amount expended for such purpose if other than in cash, having the fair market value of such property as determined in good faith by the Company) would exceed the sum of (without duplication) (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the first fiscal quarter ending after the Issue Date occurs to the end of the most recent fiscal quarter for which internal financial statements are available on or prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus (B) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company) and 100% of any cash capital contribution received by the Company from its shareholders subsequent to the Issue Date; plus (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) 93 subsequent to the Issue Date of any Indebtedness of the Company for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); plus (D) an amount equal to the sum of (x) the net reduction in the Investments made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment and proceeds representing the return of capital, in each case received by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any such Person, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person. (b) The preceding provisions will not prohibit (1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Restricted Subsidiary or Indebtedness Guaranteed by the Company or a Restricted Subsidiary) or a substantially concurrent cash capital contribution received by the Company from its shareholders; provided, however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness which is permitted to be Incurred pursuant to the covenant described under "-- Limitation on Indebtedness"; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided however that such dividend shall be included in the calculation of the amount of Restricted Payments; (4) so long as no Default has occurred and is continuing, the repurchase or other acquisition of, shares of, or options to purchase shares of, common stock or preferred stock of the Parent or the Company or any of its Subsidiaries by the Company or any of its Subsidiaries (or payments paid to the Parent to consummate such repurchases or other acquisitions in accordance with the provisions of this clause (4)) from employees, former employees, directors, consultants, former consultants or former directors of the Company or any of its Subsidiaries upon the death, disability or termination of employment of such employees, directors or consultants, pursuant to the terms of the agreements (including employment and consulting agreement or amendments thereto) or plans approved by the Board of Directors; provided, however, that the aggregate amount of such repurchases and other acquisitions shall not exceed the sum of (A) $2.5 million in any fiscal year and (B) the cash proceeds of any "key man" life insurance policies that are used to make such repurchases; provided, however, that amounts not used pursuant to this clause (4) in a year may be carried forward for use in future years; provided further, however, that such repurchases and other acquisitions shall be included in the calculation of the amount of Restricted Payments; 94 (5) the Transactions; provided, however, that Restricted Payments used to effect the Transactions will be excluded in the calculation of the amount of Restricted Payments; (6) dividends, loans, advances or other distributions to Parent to be used by Parent solely (a) to pay its franchise taxes and other fees required to maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries and other compensation of the employees, directors fees, indemnification obligations, professional fees and expenses) incurred by Parent in the ordinary course of its business; provided, however, that such dividends shall not exceed $750,000 in any calendar year; provided, further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments; (7) payments to Parent in respect of Federal, state, foreign and local taxes attributable to (or arising as a result of) the operations of the Company and its Subsidiaries; provided, however, that the amount of such payments in any fiscal year do not exceed the amount that the Company and its Subsidiaries would be required to pay in respect of Federal, state, foreign and local taxes for such fiscal year were the Company to pay such taxes as a stand-alone taxpayer (whether or not all such amounts are actually used by Parent for such purposes); provided, further, however,that such payments shall be excluded in the calculation of the amount of Restricted Payments; (8) repurchase of Capital Stock deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a portion of the exercise price thereof and repurchases of Capital Stock deemed to occur upon the withholding of a portion of the Capital Stock granted or awarded to an employee to pay for the statutory minimum taxes payable by such employee upon such grant or award; provided, however, that such amount shall be excluded in the calculation of the amount of Restricted Payments; or (9) Restricted Payments not exceeding $7.5 million in the aggregate; provided, however, that (A) at the time of such Restricted Payments, no Default shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be included in the calculation of the amount of Restricted Payments. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date (including the Indenture and the Credit Agreement); (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings of the Indebtedness referred to in any of the foregoing clauses and restrictions contained in Indebtedness incurred after the date hereof in accordance with the terms of the Indenture; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings are not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the applicable instrument governing such indebtedness as in effect on the date 95 of the Indenture; provided that, with respect to any agreement governing such other Indebtedness, the provisions relating to such encumbrance or restriction are no less favorable to the Company in any material respect as determined by the Company in its reasonable and good faith judgment than the provisions contained in the Credit Agreement as in effect on the Issue Date; (iv) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (v) any such encumbrance or restriction consisting of customary non-assignment provisions in contracts or in leases governing leasehold interest and in intellectual property contracts and licenses; (vi) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of assets (including Capital Stock) of such Restricted Subsidiary permitted by the Indenture pending the closing of such sale or disposition; (vii) any restriction arising under applicable law, regulation or order; (viii) restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (ix) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless (1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Company, or in the case of an Asset Disposition in excess of $10 million, by the Board of Directors of the Company, of the shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) pursuant to one or more of the following: (A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the Company (including cash collateralization of letters of credit and similar credit transactions constituting Senior Indebtedness) or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (or, in the case of a revolving credit facility, effect a permanent reduction in availability thereunder regardless of the fact that no prepayment may be required) (in each case other than Indebtedness owed to the Company or a Subsidiary of the Company) or repay Indebtedness secured by such asset within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) to the extent of the balance of such Net Available Cash after application (if any) in accordance with clause (A), to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; and (C) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an offer to the holders of the Notes (and to holders of other 96 Senior Subordinated Indebtedness of the Company designated by the Company) to purchase Notes at 100% of their principal amount thereof (and such other Senior Subordinated Indebtedness of the Company) pursuant to and subject to the conditions set forth in paragraph (b) below; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $10.0 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash may be invested in a manner not prohibited by the Indenture and/or applied to temporarily reduce revolving credit indebtedness. For the purposes of clause (a)(2) above of this covenant, any of the following are deemed to be cash or cash equivalents: (1) the assumption of Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; (2) securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash within 90 days after the date of such Asset Disposition (to the extent of the cash received); and (3) any Additional Assets (so long as such Additional Assets are acquired for fair market value in connection with the transaction giving rise to such Asset Disposition, as determined in good faith by the Board of Directors of the Company or such Restricted Subsidiary, as applicable). (b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior Subordinated Indebtedness of the Company) pursuant to clause (a)(3)(C) above, the Company will purchase Notes tendered pursuant to an offer by the Company for the Notes (and such other Senior Subordinated Indebtedness) at a purchase price of 100% of their principal amount (or, in the event such other Senior Subordinated Indebtedness of the Company was issued with significant original issue discount, 100% of the accreted value thereof) without premium, plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness of the Company, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture. If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the securities to be purchased on a pro ratabasis but in round denominations, which in the case of the Notes will be denominations of $1,000 principal amount or multiples thereof. The Company shall not be required to make such an offer to purchase Notes (and other Senior Subordinated Indebtedness of the Company) pursuant to this covenant if the Net Available Cash available therefor is less than $10.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of each offer to purchase Notes pursuant to this covenant, the amount of Net Available Cash will be reset to zero. (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue of its compliance with such securities laws or regulations. 97 LIMITATION ON AFFILIATE TRANSACTIONS (a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm's-length dealings with a Person who is not an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $2.0 million, a majority of the Board of Directors of the Company have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors; and (3) if such Affiliate Transaction involves an amount in excess of $10.0 million, the Board of Directors of the Company shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries or is not materially less favorable to the Company and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arm's-length transaction with a Person who was not an Affiliate. (b) The provisions of the preceding paragraph (a) will not apply to (1) any Investment (including a Permitted Investment) or other Restricted Payment, in each case permitted to be made pursuant to the covenant described under "-- Limitation on Restricted Payments"; (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company; (3) loans or advances to employees or consultants in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time; (4) the payment of reasonable fees and compensation to, the provision of employee benefit arrangements and indemnity for the benefit of, directors, officers, employees and consultants of the Company and its Restricted Subsidiaries; (5) any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries; (6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company and loans or advances to employees to purchase Capital Stock; (7) any agreement with the Company or any Restricted Subsidiary as in effect as of the Issue Date or any amendment or replacement thereto or any transaction contemplated thereby (including pursuant to any amendment or replacement thereto) so long as any such amendment or replacement agreement is not more disadvantageous to the Company or such Restricted Subsidiary in any material respect than the original agreement as in effect on the Issue Date; (8) the payment of management, consulting and advisory fees and related expenses made pursuant to the Harvest Management Services Agreement as in effect on the Issue Date or any amendment or replacement thereto or any transaction contemplated thereby (including pursuant to any amendment or replacement thereto) so long as any such amendment or replacement agreement is not more disadvantageous to the Company or such Restricted Subsidiary in any material respect than the original agreement as in effect on the Issue Date; 98 (9) any consulting or employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business consistent with the past practice of the Company or such Restricted Subsidiary; and (10) any tax sharing agreement or arrangement and payments pursuant thereto among the Company and its Subsidiaries and other Person (including Parent) with which the Company or its Subsidiaries is required or permitted to file a consolidated tax return or with which the Company or any of its Restricted Subsidiaries is or could be part of a consolidated group for tax purposes in amounts not otherwise prohibited by the Indenture. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES The Company (1) will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any Capital Stock of a Restricted Subsidiary to any Person (other than the Company or a Restricted Subsidiary), and (2) will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' or other legally required qualifying shares) to any Person (other than to the Company or a Restricted Subsidiary), unless (A) immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary; or (B) immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described under "-- Limitation on Restricted Payments" if made on the date of such issuance, sale or other disposition; or (C) the sale or issuance of Capital Stock if the proceeds therefrom are applied in accordance with "-- Limitation on Sales of Assets and Subsidiary Stock". MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; and 99 (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture; provided, however, that (i) the Company may effect the Transactions, and (ii) clause (3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction. The Successor Company will be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, and the predecessor Company, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Notes. The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person (other than the Company or the Subsidiary Guarantor) unless (1) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to another Person (other than to the Company or a Subsidiary of the Company), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Company provides an Officers' Certificate to the Trustee to the effect that the Company will comply with its obligations under the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock" in respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary under its Subsidiary Guaranty; (2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with the Indenture. FUTURE SUBSIDIARY GUARANTORS The Company will cause each domestic Restricted Subsidiary that guarantees or incurs any Indebtedness under the Credit Agreement to, at the same time, execute and deliver to the Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture. SEC REPORTS Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (unless the SEC will not accept such a filing and commencing with the effectiveness of the Exchange Offer or Shelf Registration Statement) and will in any event provide the Trustee and Noteholders within 15 days after it files with the SEC with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filings of such information, documents and reports under such Sections; provided, however, that the Company shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in 100 which event the Company will make available such information to the Trustee and Holders of Notes within 15 days after the time the Company would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act. In addition, the Company will furnish to the Holders of the Notes and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act. DEFAULTS Each of the following is an Event of Default: (1) a default in the payment of interest on the Notes when due, continued for 30 days; (2) a default in the payment of principal of any Note when due at its Stated Maturity, upon redemption, upon required purchase, upon declaration of acceleration or otherwise; (3) the failure by the Company or any Subsidiary Guarantor to comply with its obligations under "-- Certain Covenants -- Merger and Consolidation" above; (4) the failure by the Company or any Subsidiary Guarantor to comply for 30 days after notice with any of its obligations in the covenants described above under "Change of Control" (other than a failure to purchase Notes) or under "-- Certain Covenants" under "-- Limitation on Indebtedness," "-- Limitation on Restricted Payments," "-- Limitation on Restrictions on Distributions from Restricted Subsidiaries," "-- Limitation on Sales of Assets and Subsidiary Stock" (other than a failure to purchase Notes), "-- Limitation on Affiliate Transactions," or "-- Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries"; (5) the failure by the Company or any Subsidiary Guarantor to comply for 60 days after notice with its other agreements contained in the Indenture; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million (the "cross acceleration provision"); (7) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary (the "bankruptcy provisions"); (8) any judgment or decree for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $10.0 million is entered against the Company or any Significant Subsidiary, and is not discharged, paid, waived or stayed within 60 days after same becomes final and non-appealable (the "judgment default provision"); or (9) any Subsidiary Guaranty of a Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Guaranty) for 30 days after notice or any Subsidiary Guarantor that is a Significant Subsidiary denies or disaffirms its obligations under its Guaranty. However, a default under clauses (4), (5) and (8) will not constitute an Event of Default until the Trustee or the holders of 25% in principal amount of the outstanding Notes notify the Company of the default (and demand that same be remedied) and the Company does not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will 101 ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the Notes. Under certain circumstances, the holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Notwithstanding the foregoing, in the event of a declaration of acceleration in respect of the Notes because an Event of Default specified in clause (6) above shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or paid or such Event of Default shall have been cured or waived by the holders of such Indebtedness and written notice of such discharge, cure or waiver, as the case may be, shall have been given to the Trustee by the Company or by the requisite holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Notes and (a) no Person shall have commenced judicial proceedings to foreclose upon assets of the Company or any of its Restricted Subsidiaries or shall have exercised any right under applicable law or applicable security documents to take ownership of any of such assets in lieu of foreclosure and (b) no other Event of Default with respect to the Notes shall have occurred which has not been cured or waived during such 30-day period. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the Notes unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless (1) such holder has previously given the Trustee notice that an Event of Default is continuing; (2) holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy; (3) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and (5) holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder of a Note or that would involve the Trustee in personal liability. If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each holder of the Notes notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers determines that withholding notice is not opposed to the interest of the holders of the Notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. We are required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are taking or propose to take in respect thereof. 102 AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the holders of a majority in principal amount of the Notes then outstanding (voting as a single class) (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes) and any past default or compliance with any provisions may also be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each holder of an outstanding Note affected thereby, an amendment or waiver may not, among other things, (1) reduce the amount of Notes whose holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "-- Optional Redemption" or shall be redeemed as described under "-- Escrow of Proceeds; Special Mandatory Redemption" above; (5) make any Note payable in money other than that stated in the Note; (6) impair the right of any holder of the Notes to receive payment of principal of and interest on such holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Notes; (7) make any change in the amendment provisions which require each holder's consent or in the waiver provisions; (8) make any change in the ranking or priority of any Note that would adversely affect the Noteholders; or (9) make any change in any Guaranty that would adversely affect the Noteholders in any material respect. Notwithstanding the preceding, without the consent of any holder of the Notes, the Company, the Subsidiary Guarantors and Trustee may amend the Indenture (1) to cure any ambiguity, omission, mistake, defect or inconsistency; (2) to provide for the assumption by a successor corporation of the obligations of the Company or any Subsidiary Guarantor under the Indenture; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code); (4) to add guarantees with respect to the Notes, including any Subsidiary Guaranties, or to secure the Notes; (5) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the holders of the Notes or to surrender any right or power conferred upon the Company or a Subsidiary Guarantor; (6) to make any change that does not adversely affect the rights of any holder of the Notes; or (7) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness of the Company or a Subsidiary Guarantor then 103 outstanding unless the holders of such Senior Indebtedness (or their Representative) consent to such change. The consent of the holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, we are required to mail to holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER The Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for registration of transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges. DEFEASANCE At any time, we may terminate all our obligations under the Notes, the Guaranties and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. In addition, at any time we may terminate our obligations under "-- Change of Control" and under the covenants described under "-- Certain Covenants," the operation of clauses (3) and (4) of the first paragraph under "-- Defaults," the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "-- Defaults" above and the limitations contained in clause (3) of the first paragraph under "-- Certain Covenants -- Merger and Consolidation" above ("covenant defeasance"). We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option, payment of the Notes and the guarantees may not be accelerated because of an Event of Default with respect thereto. If we exercise our covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (6), or (7) (with respect only to Significant Subsidiaries) above or because of the failure of the Company to comply with clause (3) of the first paragraph under "-- Certain Covenants -- Merger and Consolidation" above. If we exercise our legal defeasance option or our covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Guaranty. In order to exercise either of our defeasance options, we must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). In addition, in order to exercise our defeasance option, the defeasance shall not result in a breach or violation of, or constitute a default under the Indenture (other than a breach or violation of the Indenture resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing), the Credit Agreement or any other material agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or is bound. 104 CONCERNING THE TRUSTEE Wilmington Trust Company is to be the Trustee under the Indenture. We have appointed the Trustee as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, if it acquires any conflicting interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign. The Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, member, incorporator or stockholder of the Company, Parent or any Subsidiary Guarantor will have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, any Subsidiary Guaranty or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability and such waiver and release are part of the consideration for issuance of the Notes. The waiver and release are part of the consideration for issuance of the Notes. Such waiver and release may not be effective to waive liabilities under the U.S. Federal securities laws, and it is the view of the SEC that such a waiver is against public policy. GOVERNING LAW The Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS "Additional Assets" means (1) any property, plant, equipment or other assets used or usable in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the covenants described under "-- Certain Covenants -- Limitation on 105 Restricted Payments," and "-- Certain Covenants -- Limitation on Affiliate Transactions" only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease (other than operating leases entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of clauses (1), (2) and (3) above, (A) a disposition or transfer by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (B) for purposes of the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, (x) a disposition that constitutes a Restricted Payment permitted by the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments" or a Permitted Investment or (y) a disposition of all or substantially all the assets of the Company in accordance with the covenant described under "-- Certain Covenants -- Merger and Consolidation"; (C) sales or other dispositions of obsolete, uneconomical, negligible, damaged, worn-out or surplus assets in the ordinary course of business (including but not limited to equipment, inventory and intellectual property); (D) a disposition of assets with a fair market value of less than or equal to $1.0 million, not to exceed $5.0 million in the aggregate in any 12 month period; (E) sale or discount of accounts receivable in connection with the compromise or collection thereof; (F) sale or exchange of equipment in connection with the purchase or other acquisition of equipment; and (G) sales or grants of licenses to use intellectual property. provided, however, that a disposition of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "-- Change of Control" and/or the provisions described above under the caption "-- Merger and Consolidation" and not by the provisions described above under the caption "-- Limitation on Sales of Assets and Subsidiary Stock" covenant. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease 106 Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of "Capital Lease Obligation." "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Facilities" means the bank facilities under to the Credit Agreement. "Bank Indebtedness" means all Obligations pursuant to the Credit Agreement. "Board of Directors" with respect to a Person means the Board of Directors of such Person or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which internal financial statements are available on or prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (and, if such Indebtedness is revolving Indebtedness, the amount of Indebtedness deemed to be outstanding for such period shall be the average outstanding amount of such Indebtedness during such period); (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; 107 (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, EBITDA for such period shall be reduced by an amount equal to EBITDA (if positive) attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to EBITDA (if negative), attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets (including Capital Stock), the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in accordance with Regulation S-X under the Exchange Act or as otherwise acceptable to the SEC. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication, (1) interest expense attributable to Capital Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) amortization of debt discount and debt issuance cost; (3) capitalized interest; (4) non-cash interest expense; (5) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (6) net payments or receipts pursuant to Hedging Obligations; 108 (7) dividends declared and paid in cash or Disqualified Stock in respect of (A) all Preferred Stock of Restricted Subsidiaries and (B) all Disqualified Stock of the Company, in each case held by Persons other than the Company or a Wholly Owned Subsidiary in each case other than dividends payable in Qualified Stock; (8) interest incurred in connection with Investments in discontinued operations; and (9) interest accruing on any Indebtedness of any other Person (other than a Subsidiary) to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary and such Indebtedness is accelerated or any payment is actually made in respect of such Guarantee; and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or a Restricted Subsidiary thereof) in connection with Indebtedness Incurred by such plan or trust, and less, to the extent included in such interest expense the amortization during such period of capitalized financing costs; provided, however, that the aggregate amount of amortization relating to any such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5.0% of the aggregate amount of the financing giving rise to such capitalized financing costs. "Consolidated Net Income" means, for any period, the sum of (1) net income of the Company and its Subsidiaries and (2) to the extent deducted in calculating net income of the Company and its Subsidiaries, any non-recurring fees, expenses or charges related to the Transactions; provided, however, that there shall not be included in such Consolidated Net Income (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (A) subject to the exclusion contained in clause (3) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (2) below); and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (2) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (3) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (3) any gain or loss (and the related tax effects) realized upon the sale or other disposition of any assets of the Company, its consolidated Restricted Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person; 109 (4) extraordinary, non-cash or non-recurring gains, losses or charges, including (i) those related to impairment of goodwill and other intangible assets and (ii) the write-off of deferred financing costs and related premiums paid in connection with any early extinguishment of Indebtedness and the related tax effects; (5) the cumulative effect of a change in accounting principles; and (6) any net income or loss attributable to discontinued operations. Notwithstanding the foregoing, for the purposes of the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "Credit Agreement" means the Credit Agreement dated as of April 19, 2002, by and among the Company, the lenders referred to therein, UBS AG, Stamford Branch, as Administrative Agent, Credit Suisse First Boston, as Syndication Agent and CIBC World Markets Corp., as Documentation Agent, together with the related documents thereto (including any guarantees and security documents, whether in effect on the Issue Date or entered into thereafter), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" with respect to a Person means (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such Person which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated by such Person in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, that portion of any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event (1) matures (excluding any maturity as a result of an optional redemption by the issuer thereof) or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the date that is 91 days after the Stated Maturity of the Notes; provided, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees 110 of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy obligations as a result of such employee's death or disability; and provided further, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the date that is 91 days after the Stated Maturity of the Notes shall not constitute Disqualified Stock if (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes as described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and "-- Certain Covenants -- Change of Control." The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture; provided, however, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person. "EBITDA" for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: (1) all income tax expense of the Company and its consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid operating activity item that was paid in cash in a prior period); and (4) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period); in each case for such period determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion, including by reason of minority interest) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Financing" means the financing by Parent of at least $172.0 million of equity capital to provide a portion of the funds for the Equity Tender Offer and the Merger. "Equity Offering" means a primary offering of common stock or common equity of Parent or the Company. "Equity Tender Offer" means the cash tender offer for 100% of the shares of common stock of the Company at a price of $50.00 per share. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in 111 (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entity as approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranty" means each Subsidiary Guaranty, as applicable. "Guaranty Agreement" means a supplemental indenture, in a form satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the Company's obligations with respect to the Notes on the terms provided for in the Indenture. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement or similar Agreement. "Holder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (1) the principal in respect of (A) indebtedness of such Person for borrowed money and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/ Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Per son under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); 112 (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bankers' acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided, however, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time. "Independent Qualified Party" means an investment banking firm, accounting firm or appraisal firm of national standing; provided, however, that such firm is not an Affiliate of the Company. "Interest Rate Agreement" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements to protect such Person against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. Except as otherwise provided for herein, the amount of an Investment shall be its fair value at the time the Investment is made and without giving effect to subsequent changes in value. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments", (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors of the Company. 113 "Issue Date" means April 23, 2002. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. "Lenders" means the lenders from time to time party to the Credit Agreement. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Merger" means the merger of Simon Acquisition Corp. with and into the Company pursuant to the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger dated as of March 16, 2002 by and among Simon Acquisition Corp., Parent and the Company. "Merger Date" means April 19, 2002. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form), in each case net of (1) all legal, title and recording tax expenses, underwriting discounts, commissions and other fees and expenses incurred (including, without limitation, fees and expenses of counsel, accountants and investment bankers), and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any current or contingent liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Tender Offer" means the tender offer by the Company of all of our existing 9 1/4% senior subordinated notes due 2008 of the Company, including the change of control offer required pursuant to the indenture governing the existing notes and the defeasance of any remaining existing notes after such change of control offer. "Obligations" means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness. "Officer" means the Chairman of the Board, the President, Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company. 114 "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Parent" means Associated Materials Holdings, Inc., a Delaware corporation, and its successors. "Permitted Holders" means Harvest Partners, Inc., and its affiliates and funds managed by Harvest Partners, Inc. and/or its affiliates. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however,that the primary business of such Restricted Subsidiary is a Related Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (3) cash and Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however,that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, moving, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees, directors or consultants made in the ordinary course of business in an aggregate amount not to exceed $2.0 million at any time outstanding; (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"; (9) any Person where such Investment was acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (10) Hedging Obligations of the Company's or any Restricted Subsidiary's business and not for the purpose of speculation; (11) Investments existing on the Issue Date and any such Investment that replaces or refinances such Investment in such Person existing on the Issue Date in an amount not exceeding the amount of the Investment being replaced or refinanced; provided, however, the new Investment is on terms and conditions no less favorable than the Investment being renewed or replaced; (12) Guarantees of Indebtedness otherwise permitted under the Indenture; (13) Investments the payment of which consists of Qualified Stock of Parent or the Company; (14) Investments in the Notes; 115 (15) Investments consisting of obligations of one or more consultants, officers, directors or other employees of the Company or any of its Subsidiaries in connection with such consultants, officers', directors' or employees' acquisition of shares of capital stock of Parent or the Company so long as no cash is paid by the Company or any of its Subsidiaries to such consultants, officers, directors or employees in connection with the acquisition of any such obligations; and (16) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding, not to exceed $2.5 million. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Qualified Stock" means any Capital Stock that is not Disqualified Stock. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary incurred pursuant to paragraph (a) of the covenant "Limitation on Indebtedness" or subclause (3), (4), (5), (7), (8) or (10) of paragraph (b) of the covenant "Limitation on Indebtedness"; provided, however, that (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; and (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided, further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. "Registration Rights Agreement" means the Registration Rights Agreement among the Company, Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp. entered into in connection with the issuance of the Notes. "Related Business" means any business in which the Company or any of its Restricted Subsidiaries was engaged on the Issue Date and any business reasonably related, ancillary or complementary to any business of the Company or any of its Restricted Subsidiaries in which the Company was engaged on the Issue Date or a reasonable expansion thereof. 116 "Representative" means with respect to a Person any trustee, agent or representative (if any) for an issue of Senior Indebtedness of such Person. "Restricted Payment" with respect to any Person means (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person (other than the purchase, re purchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition); or (4) the making of any Investment (other than a Permitted Investment) in any Person. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the U.S. Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company or a Subsidiary Guarantor for borrowed money that is secured by a Lien on an asset of the Company or a Subsidiary Guarantor. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Senior Indebtedness" means with respect to any Person (1) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred, including, and together with, all Obligations under the Credit Agreement; and (2) accrued and unpaid interest (including interest accruing on or after the filing of, or which would have accrued but for the filing of, any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of such Person for borrowed money, including, and together with, all Obligations under the Credit Agreement, (B) Hedging Obligations and (C) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that such obligations are subordinate or pari passu in right of payment to the Notes or the Guaranty of such Person, as the case may be; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary; (2) any liability for Federal, state, local or other taxes owed or owing by such Person; 117 (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person; or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture, except to the extent that the Indebtedness so incurred was extended by the lenders thereof in reliance on a certificate executed and delivered by the president, chief executive officer or chief financial or accounting officer of the Company in which certificate such officer certified that the incurrence of such Indebtedness was permitted under the proviso in paragraph (a) or clause (1) or (13) in paragraph (b) under the caption "Certain Covenants -- Limitation on Indebtedness." "Senior Subordinated Indebtedness" means, with respect to a Person, the Notes (in the case of the Company), the Guaranty (in the case of a Subsidiary Guarantor) and any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank pari passu with the Notes or such Guaranty, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Note Obligations" means all Obligations with respect to the Notes, including, without limitation, principal, premium (if any), interest payable pursuant to the terms of the Notes (including upon the acceleration or redemption thereof), together with and including any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise. "Subordinated Obligation" means, with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Guaranty of such Person, as the case may be, pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock or is at the time owned or controlled, directly or indirectly, by (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Subsidiary Guarantor" means each domestic Subsidiary of the Company that executes the Indenture as a guarantor on the Issue Date and each other domestic Subsidiary of the Company that thereafter guarantees the Notes pursuant to the terms of the Indenture. "Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Notes. 118 "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than 365 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard & Poor's Ratings Group; (5) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.; and (6) money market funds at least 95% of the assets of which constitute Temporary Cash Investments of the kind described in clauses (1) through (5) of this definition. "Transactions" means, collectively, the Merger, the Equity Tender Offer, the Note Tender Offer, the Equity Financing, the Bank Facilities and this Offering. "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the Issue Date. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means Wilmington Trust Company until a successor replaces it and, thereafter, means the successor. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. Except as described under "-- Certain Covenants -- Limitation on Indebtedness", whenever it is necessary to determine whether the Company has complied with any covenant in the Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency. 119 "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Unrestricted Subsidiary" means (1) any Subsidiary of an Unrestricted Subsidiary; and (2) any Subsidiary of the Company which is designated after the Issue Date as an Unrestricted Subsidiary by a board resolution of the Board of Directors of the Company; provided that a Subsidiary may be so designated as an Unrestricted Subsidiary only if (A) such designation is in compliance with "-- Certain Covenants -- Limitation on Restricted Payments" above; (B) immediately after giving effect to such designation, the Company could have incurred at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to "Certain Covenants -- Limitation on Indebtedness" above; (C) no Default or Event of Default has occurred and is continuing or results therefrom; and (D) neither the Company nor any Restricted Subsidiary will at any time (i) provide a guarantee of, or similar credit support to, any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (ii) be directly or indirectly liable for any Indebtedness of such Subsidiary or (iii) be directly or indirectly liable for any other Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon (or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity) upon the occurrence of a default with respect to any other Indebtedness that is Indebtedness of such Subsidiary (including any corresponding right to take enforcement action against such Subsidiary), except in the case of clause (i) or (ii) to the extent (i) that the Company or such Restricted Subsidiary could otherwise provide such a guarantee or incur such Indebtedness (other than as Permitted Indebtedness) pursuant to "-- Certain Covenants -- Limitation on Indebtedness" above and (ii) the provision of such guarantee and the incurrence of such Indebtedness otherwise would be permitted under "-- Certain Covenants -- Limitation on Restricted Payments" above. The Trustee will be provided with an officers' certificate stating that such designation is permitted and setting forth the basis upon which the calculations required by this definition were computed, together with a copy of the board resolution adopted by the Board of Directors of the Company making such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "-- Certain Covenants -- Limitation on Indebtedness" and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. 120 "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and other legally required qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries. 121 BOOK-ENTRY, DELIVERY AND FORM The outstanding notes were offered and sold to qualified institutional buyers in reliance on Rule 144A and in offshore transactions in reliance on Regulation S. Except as set forth below, exchange notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. THE GLOBAL NOTES Except as described below, we initially issued the outstanding notes and we will initially issue the exchange notes in the form of one or more notes in registered, global form without interest coupons. These global notes will be deposited upon issuance with, or on behalf of, DTC and registered in the name of DTC, or its nominee, or will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee. All interests in global notes, including those held through Euroclear Bank SA/N.V., as operator of the Euroclear System, or Clearstream Banking, societe anonyme may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of these systems. Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances described below. You may hold your beneficial interests in the global notes directly through DTC if you have an account with DTC or directly through organizations that have an account with DTC. Any beneficial interest in one of the global notes that is transferred to a person who takes delivery in the form of an interest in another global note will, upon transfer, cease to be an interest in this global note and become an interest in the other global note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other global note for as long as it remains such an interest. DEPOSITARY PROCEDURES The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. We take no responsibility for these operations and procedures and urge investors to contact the system or its participants directly to discuss these matters. DTC has advised us that it is - a limited purpose trust company organized under the laws of the State of New York, - a "banking organization" within the meaning of the New York Banking Law, - a member of the Federal Reserve System, - a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and - a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers, including the initial purchasers of the outstanding notes; banks and trust companies; clearing corporations and some other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. The ownership interests in, and transfers of ownership 122 interests in, each security held by or on behalf of DTC are recorded on the records of the participants and indirect participants. DTC has also advised us that, pursuant to procedures established by it, (1) upon deposit of the global notes, DTC will credit the accounts of participants with an interest in the global notes; and (2) ownership of these interests in the global notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the participants) or by the participants and the indirect participants (with respect to other owners of beneficial interest in the global notes). The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to such persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants, the ability of a person having beneficial interests in a global note to pledge such interests to persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE GLOBAL NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF GLOBAL NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if the holder is not a participant or an indirect participant in DTC, on the procedures of the participant through which the holder owns its interest, to exercise any rights of a holder of Notes under the indenture or the global note. We understand that under existing industry practice, if we request any action of holders of notes, or a holder that is an owner of a beneficial interest in a global note desires to take any action that DTC, as the holder of the global note, is entitled to take, then DTC would authorize its participants to take the action and the participants would authorize holders owning through participants to take the action or would otherwise act upon the instruction of these holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to the notes. Payments in respect of the principal of, and interest and premium and additional interest, if any, on a global note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, we and the trustee will treat the persons in whose names the notes, including the global notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither we, the trustee nor any agent of us or the trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any participant's or indirect participant's records relating to or payments made on account of beneficial ownership interest in the global notes or for maintaining, supervising or reviewing any of DTC's records or any participant's or indirect participant's records relating to the beneficial ownership interests in the global notes; or (2) any other matter relating to the actions and practices of DTC or any of its participants or indirect participants. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the global notes (including principal and interest), is to credit the accounts of the relevant participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the participants and the indirect participants to the beneficial owners of the global notes will be governed by standing instructions and customary practices and will be the responsibility of the participants or the indirect participants and will not be the responsibility of DTC, the trustee or us. 123 Neither we nor the trustee will be liable for any delay by DTC or any of its participants in identifying the beneficial owners of the global notes, and we and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants, in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the notes, cross-market transfers between the participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf of delivering or receiving interests in the relevant global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. DTC has advised us that it will take any action permitted to be taken by a holder of notes only at the direction of one or more participants to whose account DTC has credited the interests in the global notes and only in respect of such portion of the aggregate principal amount of the notes as to which such participant or participants has or have given such direction. However, if there is an event of default under the notes, DTC reserves the right to exchange the global notes for notes in certificated form, and to distribute such notes to its participants. Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither we nor the trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES A global note is exchangeable for definitive notes in registered certificated form if: (1) DTC (a) notifies us that it is unwilling or unable to continue as depositary for the global notes and DTC fails to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act; (2) we, at our option, notify the trustee in writing that we elect to cause the issuance of certificated notes; or (3) there has occurred and is continuing a default or event of default with respect to the notes. In addition, beneficial interests in a global note may be exchanged for certificated notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, certificated notes delivered in exchange for any global note or beneficial interests in global notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend, unless that legend is not required by applicable law. 124 EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES Certificated notes may not be exchanged for beneficial interests in any global note unless the transferor first delivers to the trustee a written certificate (in the form provided in the indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes. SAME DAY SETTLEMENT AND PAYMENT We will make payments in respect of the notes represented by the global notes (including principal, premium, if any, interest and liquidated damages, if any) by wire transfer of immediately available funds to the accounts specified by the global note holder. We will make all payments of principal, interest and premium and additional interest, if any, with respect to certificated notes by wire transfer of immediately available funds to the accounts specified by the holders of the certificated notes or, if no such account is specified, by mailing a check to each such holder's registered address. Transfers between participants in DTC will be effected in accordance with DTC's procedures and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a global note from a participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised us that cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date. 125 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following section describes certain anticipated U.S. federal income tax consequences relating to the exchange of outstanding notes for exchange notes pursuant to the exchange offer. This description is based upon the Internal Revenue Code of 1986, as amended, existing and proposed Treasury regulations, existing administrative pronouncements and judicial decisions, each as available and in effect as of the date hereof. All of the foregoing are subject to change, and any such change could be retroactive and could affect the continuing validity of this description. This description deals only with exchange notes held as capital assets by initial holders that acquire the exchange notes pursuant to the exchange offer. This description does not discuss all of the tax consequences that may be relevant to holders that are subject to special tax rules, such as (1) certain financial institutions, (2) real estate investment trusts, (3) regulated investment companies, (4) grantor trusts, (5) insurance companies, (6) dealers or traders in securities or currencies, (7) persons holding notes in connection with a hedging transaction, straddle, conversion transaction or other integrated transaction, or (8) persons who have ceased to be United States citizens or to be taxed as resident aliens. This description also does not address the U.S. federal estate and gift tax consequences or any applicable foreign, state or local tax laws. Holders should consult their tax advisors with regard to the application of U.S. federal income and estate tax laws to their particular situation, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. EXCHANGE OFFER The exchange of outstanding notes by a holder for exchange notes pursuant to the exchange offer will not constitute a taxable exchange for U.S. federal income tax purposes. A holder will not recognize gain or loss upon the receipt of exchange notes pursuant to the exchange offer and will be required to treat the exchange notes and any payments thereon for U.S. federal income tax purposes as if the exchange offer had not occurred. A holder's holding period for exchange notes will include the holding period for the outstanding notes exchanged pursuant to the exchange offer and a holder's adjusted basis in exchange notes will be the same as such holder's adjusted basis in such outstanding notes. THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE EXCHANGE OF OUTSTANDING NOTES FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER OR THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF THE EXCHANGE NOTES. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, LOCAL, OR OTHER TAXING JURISDICTION. 126 PLAN OF DISTRIBUTION We are not using any underwriters for this exchange offer. We are also bearing the expenses of the exchange. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2002, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of outstanding notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concession received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer, (including the expenses of one counsel for the holders of the outstanding notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the outstanding notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the notes offered hereby will be passed upon for us by White & Case LLP, New York, New York. EXPERTS The financial statements of Associated Materials Incorporated at December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, appearing in this prospectus forming part of a registration statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 127 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Audited Financial Statements: Report of Independent Auditors............................ F-2 Balance Sheets at December 31, 2001 and 2000.............. F-3 Statements of Operations for the years ended December 31, 2001, 2000 and 1999.................................... F-4 Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999....................... F-5 Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.................................... F-6 Notes to Financial Statements............................. F-7 Unaudited Financial Statements: Balance Sheets at March 31, 2002 and December 31, 2001.... F-20 Statements of Operations for the quarters ended March 31, 2002 and 2001.......................................... F-21 Statements of Cash Flows for the quarters ended March 31, 2002 and 2001.......................................... F-22 Notes to Financial Statements for the quarter ended March 31, 2002............................................... F-23
F-1 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Associated Materials Incorporated We have audited the accompanying balance sheets of Associated Materials Incorporated as of December 31, 2001 and 2000 and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Associated Materials Incorporated at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Dallas, Texas February 8, 2002 F-2 ASSOCIATED MATERIALS INCORPORATED BALANCE SHEETS
DECEMBER 31, --------------------- 2001 2000 --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 28,869 $ 15,879 Short term investment..................................... -- 5,019 Accounts receivable, net of allowance for doubtful accounts of $5,117 and $6,168 at December 31, 2001 and 2000, respectively..................................... 65,784 50,853 Inventories............................................... 74,574 74,429 Income taxes receivable................................... -- 453 Other current assets...................................... 3,394 4,213 -------- -------- Total current assets........................................ 172,621 150,846 Property, plant and equipment, net.......................... 77,733 73,917 Investment in Amercord Inc.................................. -- 2,393 Other assets................................................ 3,953 3,985 -------- -------- Total assets...................................... $254,307 $231,141 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 29,579 $ 19,273 Accrued liabilities....................................... 35,356 29,509 Income taxes payable...................................... 1,498 -- -------- -------- Total current liabilities................................... 66,433 48,782 Deferred income taxes....................................... 5,091 3,927 Other liabilities........................................... 5,108 5,442 Long-term debt.............................................. 75,000 75,000 Commitments and Contingencies Stockholders' equity: Preferred stock, $.01 par value: Authorized shares -- 100,000 shares at December 31, 2001 and 2000 Issued shares -- 0 at December 31, 2001 and 2000....... -- -- Common stock, $.0025 par value: Authorized shares -- 15,000,000 at December 31, 2001 and 2000 Issued shares -- 7,842,003 at December 31, 2001 and 7,164,024 at December 31, 2000........................ 19 18 Common stock Class B, $.0025 par value: Authorized and issued shares -- 0 at December 31, 2001 and 1,550,000 at December 31, 2000.................... -- 4 Less: Treasury stock, at cost -- 1,078,476 shares at December 31, 2001 and 955,170 at December 31, 2000..... (14,476) (12,425) Capital in excess of par.................................. 17,124 14,862 Retained earnings......................................... 100,008 95,531 -------- -------- Total stockholders' equity.................................. 102,675 97,990 -------- -------- Total liabilities and stockholders' equity.................. $254,307 $231,141 ======== ========
See accompanying notes. F-3 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, -------------------------------------- 2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales.................................................. $595,819 $499,393 $455,268 Cost of sales.............................................. 425,366 353,994 317,596 -------- -------- -------- Gross profit............................................... 170,453 145,399 137,672 Selling, general and administrative expenses............... 119,945 107,255 96,028 -------- -------- -------- Income from operations..................................... 50,508 38,144 41,644 Interest expense, net...................................... 6,795 6,046 6,779 -------- -------- -------- 43,713 32,098 34,865 Gain on the sale of UltraCraft............................. -- 8,012 -- Equity in loss of Amercord Inc............................. -- -- 1,337 Write-down of investment in Amercord Inc................... 2,393 -- -- -------- -------- -------- Income before income taxes................................. 41,320 40,110 33,528 Income tax expense......................................... 15,908 16,555 13,038 -------- -------- -------- Net income................................................. $ 25,412 $ 23,555 $ 20,490 ======== ======== ======== Earnings Per Common Share -- Basic: Net income............................................... $ 3.62 $ 2.94 $ 2.52 ======== ======== ======== Earnings Per Common Share -- Assuming Dilution: Net income............................................... $ 3.46 $ 2.85 $ 2.46 ======== ======== ========
See accompanying notes. F-4 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF STOCKHOLDERS' EQUITY
CLASS B CAPITAL COMMON STOCK COMMON STOCK TREASURY STOCK IN TOTAL --------------- --------------- ----------------- EXCESS RETAINED STOCKHOLDERS' SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT OF PAR EARNINGS EQUITY ------ ------ ------ ------ ------ -------- ------- -------- ------------- (IN THOUSANDS) Balance at December 31, 1998....................... 6,939 $17 1,550 $ 4 88 $ (1,048) $12,273 $ 53,132 $ 64,378 Net income and total comprehensive income..... -- -- -- -- -- -- -- 20,490 20,490 Cash dividends ($0.10 per share)................... -- -- -- -- -- -- -- (845) (845) Exercise of common stock options and related tax benefits................. 5 -- -- -- -- -- 30 -- 30 Purchase of treasury shares................... -- -- -- -- 467 (5,578) -- -- (5,578) Common stock issued under Employee Stock Purchase Plan..................... 81 -- -- -- -- -- 851 -- 851 ----- --- ------ ---- ----- -------- ------- -------- -------- Balance at December 31, 1999....................... 7,025 17 1,550 4 555 (6,626) 13,154 72,777 79,326 Net income and total comprehensive income..... -- -- -- -- -- -- -- 23,555 23,555 Cash dividends ($0.10 per share)................... -- -- -- -- -- -- -- (801) (801) Exercise of common stock options and related tax benefits................. 73 -- -- -- -- -- 860 -- 860 Purchase of treasury shares................... -- -- -- -- 400 (5,799) -- -- (5,799) Common stock issued under Employee Stock Purchase Plan..................... 66 1 -- -- -- -- 848 -- 849 ----- --- ------ ---- ----- -------- ------- -------- -------- Balance at December 31, 2000....................... 7,164 18 1,550 4 955 (12,425) 14,862 95,531 97,990 Net income and total comprehensive income..... -- -- -- -- -- -- -- 25,412 25,412 Cash dividends ($0.20 per share)................... -- -- -- -- -- -- -- (1,438) (1,438) Exercise of common stock options and related tax benefits................. 67 -- -- -- -- -- 1,387 -- 1,387 Purchase of treasury shares................... -- -- -- -- 123 (2,051) -- -- (2,051) Common stock issued under Employee Stock Purchase Plan..................... 61 -- -- -- -- -- 875 -- 875 Retirement of Class B common stock............. -- -- (1,000) (3) -- -- -- (19,497) (19,500) Conversion of Class B common stock to common stock.................... 550 1 (550) (1) -- -- -- -- -- ----- --- ------ ---- ----- -------- ------- -------- -------- Balance at December 31, 2001....................... 7,842 $19 -- $ -- 1,078 $(14,476) $17,124 $100,008 $102,675 ===== === ====== ==== ===== ======== ======= ======== ========
See accompanying notes. F-5 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- (IN THOUSANDS) OPERATING ACTIVITIES Net income.................................................. $25,412 $23,555 $20,490 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. 10,919 9,550 8,519 Deferred income taxes..................................... 1,164 1,691 (380) Provision for losses on accounts receivable............... 1,468 2,884 2,323 Equity in loss of Amercord Inc............................ -- -- Write-down of investment in Amercord Inc.................. 2,393 -- -- Loss on sale of assets.................................... 43 558 51 Gain on the sale of UltraCraft............................ -- (8,012) Tax benefit from stock option exercises................... 411 92 15 Changes in operating assets and liabilities: Accounts receivable..................................... (16,022) (3,492) (9,150) Inventories............................................. (145) (5,180) (13,406) Other current assets.................................... 818 (677) (300) Accounts payable........................................ 10,306 1,882 5,220 Accrued liabilities..................................... 5,847 2,556 1,536 Income taxes receivable/payable......................... 1,951 (227) (808) Other assets............................................ (242) (1,804) (38) Other liabilities....................................... (334) (408) (165) ------- ------- ------- Net cash provided by operating activities................... 43,989 22,968 15,244 INVESTING ACTIVITIES Additions to property, plant and equipment.................. (15,022) (11,925) (18,915) Proceeds from sale of assets................................ 142 86 65 Purchase of Alpine Industries, Inc. assets.................. -- (7,565) -- Proceeds from the sale of UltraCraft........................ -- 18,885 -- (Purchase)/sale of short-term investment.................... 5,019 (5,019) -- Proceeds from sale of Amercord interest..................... -- -- 1,231 ------- ------- ------- Net cash used in investing activities....................... (9,861) (5,538) (17,619) FINANCING ACTIVITIES Net proceeds from issuance of common stock.................. 875 849 851 Principal payments of long-term debt........................ -- -- (3,600) Repurchase of Class B common stock.......................... (19,500) -- -- Options exercised........................................... 976 768 15 Dividends paid.............................................. (1,438) (801) (845) Treasury stock acquired..................................... (2,051) (5,799) (5,578) ------- ------- ------- Net cash used in financing activities....................... (21,138) (4,983) (9,157) ------- ------- ------- Net increase (decrease) in cash............................. 12,990 12,447 (11,532) Cash at beginning of period................................. 15,879 3,432 14,964 ------- ------- ------- Cash at end of period....................................... $28,869 $15,879 $ 3,432 ======= ======= ======= Supplemental Information: Cash paid for interest.................................... $ 7,176 $ 7,177 $ 7,108 ======= ======= ======= Cash paid for income taxes................................ $12,633 $15,292 $14,313 ======= ======= =======
See accompanying notes. F-6 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES LINE OF BUSINESS Associated Materials Incorporated (the "Company") consists of two operating divisions, Alside and AmerCable. Alside is engaged principally in the manufacture and distribution of exterior residential building products to professional contractors throughout the United States. AmerCable manufactures jacketed electrical cable utilized in a variety of industrial applications. The Company also owns an interest in Amercord Inc. ("Amercord"), which was accounted for using the equity method until November 1999 when Amercord was recapitalized, reducing the Company's interest in Amercord from 50% to 9.9%. Since the recapitalization, the Company has accounted for Amercord under the cost method. See Note 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions regarding the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION Product sales are recognized at the time of shipment and when payment is reasonably certain. Revenues are recorded net of estimated customer programs and incentive offerings including special pricing agreements, promotions and other volume-based incentives. Revisions to these estimates are charged to income in the period in which the facts that give rise to the revision become known. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is provided by the straight-line method over the estimated useful lives of the assets which are as follows: Building and improvements................................... 7 to 30 years Computer equipment.......................................... 3 years Machinery and equipment..................................... 3 to 15 years
INCOME TAX Income taxes have been provided using the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. F-7 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) SHORT-TERM INVESTMENT At December 31, 2000 the Company had a $5.0 million commercial paper investment, with an original maturity of six months, reported as a short-term investment on the balance sheet. The Company classified the investment as held-to-maturity as the Company had the intent and held the investment to maturity. The investment was carried at amortized cost. DERIVATIVES From time to time the Company hedges its position with respect to raw material or currency fluctuations on specific contracts by entering into forward contracts or purchase options, the cost of which are realized upon the completion of the contract as cost of sales. The contracts effectively meet risk reduction and correlation criteria and are recorded using hedge accounting. No such contracts were in place at December 31, 2001 or 2000. INTEREST INCOME Interest income was $377,000, $1.1 million and $329,000 in 2001, 2000 and 1999, respectively, and is included in interest expense, net. MARKETING AND ADVERTISING The Company expenses marketing and advertising costs as incurred. Marketing and advertising expense was $9.9 million, $9.2 million and $8.5 million in 2001, 2000 and 1999, respectively. RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform with the current period presentation. LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to sell. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" which has eliminated the pooling of interests method for mergers and acquisitions. All business combinations initiated after June 30, 2001 are required to be accounted for using the purchase method of accounting. SFAS No. 141 supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." The Company has not made any acquisitions that were accounted for by the pooling of interests method. The Company believes the adoption of this Statement will not have a material effect on the Company's financial position, results of operations or cash flows. In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets" which addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 requires F-8 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) goodwill and intangible assets with indefinite useful lives no longer be amortized but instead be reviewed annually for impairment using a fair-value based approach. Intangible assets that have a finite life will continue to be amortized over their respective estimated useful lives. The Statement is effective for fiscal years beginning after December 15, 2001. The Company has not recorded goodwill or other intangible assets with respect to any acquisition. The Company believes the adoption of this Statement will not have a material effect on the Company's financial position, results of operations or cash flows. In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs and establishes consistent accounting treatment for these items. This Statement is effective for fiscal years beginning after June 15, 2002. The Company believes the adoption of this Statement will not have a material effect on the Company's financial position, results of operations or cash flows. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the financial reporting and accounting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51, "Consolidated Financial Statements" to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This Statement is effective for fiscal years beginning after December 15, 2001. The Company believes the adoption of this Statement will not have a material effect on the Company's financial position, results of operations or cash flows. In September 2000, the Emerging Issues Task Force issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs" which was effective for the fourth quarter of 2000. The EITF concluded that amounts billed to a customer in a sale transaction related to shipping and handling should be classified as revenue. The EITF also concluded that if costs incurred related to shipping and handling are significant and not included in cost of sales, an entity should disclose both the amount of such costs and the line item on the income statement that includes such costs. Prior to implementing EITF 00-10, the Company classified shipping and handling amounts billed to a customer as revenue. Costs incurred related to shipping and handling were classified as a reduction of revenue. The Company has reclassified prior period information to conform with the provisions of EITF 00-10. 2. INVESTMENT IN AMERCORD The Company owns a 9.9% interest in Amercord, a manufacturer of steel tire cord and tire bead wire used in the tire manufacturing industry. During the fourth quarter of 1999, Amercord was recapitalized, reducing the Company's interest in Amercord from 50% to 9.9%. As a result of the recapitalization, the Company received cash of $1.2 million (net of related expenses) and a subordinated note for $1.5 million due November 2004. In addition, the Company has the right to require Amercord to purchase the Company's remaining 9.9% interest for $2.0 million in November 2003. After Amercord's recapitalization, the Company accounted for Amercord using the cost method of accounting. Prior to Amercord's recapitalization, the Company accounted for Amercord using the equity method of accounting. The Company recorded equity in the losses of Amercord of $1.3 million in 1999. F-9 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Amercord's operating results and financial position deteriorated during the first quarter 2001. The Company believed it would not recover its investment in Amercord and wrote off its $2.4 million investment in Amercord during the first quarter of 2001. Amercord ceased operations during the second quarter of 2001. In connection with the recapitalization of Amercord in November 1999, the Company guaranteed a $3.0 million note secured by Amercord's real property. To date, the lender has not requested the Company to make payment under the guaranty. Should the guaranty be exercised by Amercord's lender, the Company and Ivaco Inc., another stockholder of Amercord, have the option to assume the loan. Ivaco Inc. has indemnified the Company for 50% of any loss under the guaranty up to $1.5 million. Based on a third party appraisal of Amercord's real property, the Company believes that it is adequately secured under its guaranty of the $3.0 million Amercord note such that no losses are anticipated with respect to this guaranty. 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS Changes in the allowance for doubtful accounts on accounts receivable for the years ended December 31 consist of (in thousands):
2001 2000 1999 ------ ------ ------ Balance at beginning of period............................. $6,168 $4,864 $4,159 Provision for losses....................................... 1,468 2,884 2,323 Losses sustained (net of recoveries)....................... 2,519 1,358 1,618 Allowance for UltraCraft receivables sold.................. -- 222 -- ------ ------ ------ Balance at end of period................................... $5,117 $6,168 $4,864 ====== ====== ======
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is based on review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. 4. INVENTORIES Inventories at December 31 consist of (in thousands):
2001 2000 ------- ------- Raw materials............................................... $21,102 $23,229 Work-in-progress............................................ 4,597 5,101 Finished goods and purchased stock.......................... 48,875 46,099 ------- ------- $74,574 $74,429 ======= =======
F-10 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31 consist of (in thousands):
2001 2000 -------- -------- Land........................................................ $ 1,878 $ 1,878 Buildings................................................... 30,231 29,601 Construction in process..................................... 2,970 1,985 Machinery and equipment..................................... 119,151 106,596 -------- -------- 154,230 140,060 Less accumulated depreciation............................... 76,497 66,143 -------- -------- $ 77,733 $ 73,917 ======== ========
6. ACCRUED LIABILITIES AND OTHER LIABILITIES Accrued liabilities at December 31 consist of (in thousands):
2001 2000 ------- ------- Employee compensation....................................... $15,648 $12,450 Sales promotions and incentives............................. 8,929 6,813 Employee benefits........................................... 3,747 3,450 Interest.................................................... 2,322 2,313 Other....................................................... 4,710 4,483 ------- ------- $35,356 $29,509 ======= =======
Other liabilities of $5,108,000 and $5,442,000 at December 31, 2001 and 2000, respectively, consist primarily of accruals for retiree medical benefits related to the 1989 closure of the Company's metal plant. 7. DEBT In May 1999, the Company amended its $50 million credit agreement with KeyBank, N.A. ("Credit Agreement") to extend the term to May 31, 2002. Available borrowings under the Credit Agreement are limited to the lesser of the total facility less unused letters of credit or availability based on percentages of eligible accounts receivable and inventories. Unused letters of credit totaled $1,898,000 at December 31, 2001, primarily related to insurance coverage. The Company's available borrowing capacity at December 31, 2001 was approximately $48,102,000. The Credit Agreement includes covenants that require the maintenance of certain financial ratios and net worth and that place restrictions on the repurchase of common stock and the payment of dividends. One covenant in the Credit Agreement requires the Company to maintain a minimum ratio of cash inflows to cash outflows determined for the preceding twelve-month period at the end of each calendar quarter. During 2001, the Company repurchased 1.0 million shares of its Class B common stock at an aggregate cost of $19.5 million. In order to complete the Class B common stock repurchase, the Company obtained a waiver under the Credit Agreement to exclude the Class B common stock repurchase from the covenant calculation of cash inflows to cash outflows. The Company was in compliance with all Credit Agreement covenants at December 31, 2001. Outstanding borrowings under the Credit Agreement are secured by substantially all of the assets of the Company other than the Company's real property, equipment and its interest in Amercord. F-11 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Interest is payable on borrowings under the revolving credit facility at either the prime commercial rate (4.75% at December 31, 2001) or LIBOR plus 1.00% at the option of the Company and on the unused credit facility at a rate of .20%. Letter of credit fees of 1.125% are paid at origination. The weighted average interest rate for borrowings under the revolving credit facility was 5.9% and 8.4% for the years ended December 31, 2001 and 2000, respectively. Long-term debt at December 31, 2001 and 2000 consists of $75 million of 9 1/4% Senior Subordinated Notes due 2008. The fair value of the 9 1/4% Notes at December 31, 2001 was $76.6 million based upon quoted market price. The Company's ability to make restricted payments, such as the repurchase of stock and the payment of dividends, is restricted by covenants in its Credit Agreement and the Indenture pursuant to which the Company's 9 1/4% Senior Subordinated Notes were issued. At December 31, 2001, the Company had the ability to make restricted payments of up to $15.7 million under the terms of the Indenture, the more restrictive of the two agreements. 8. ACQUISITIONS AND DIVESTITURES On October 6, 2000, the Company acquired substantially all of the assets of Alpine Industries, Inc. for $7.6 million in cash and the assumption of certain payroll related and property tax liabilities. Included in the acquired assets is Alpine's leased window fabrication facility located in Bothell, Washington. This facility manufactures vinyl windows for the new construction and remodeling markets. The Company accounted for the acquisition using the purchase method of accounting and the results of operations have been included in the Company's income statement from the date of acquisition. The Company completed the sale of its UltraCraft operation, a manufacturer of semi-custom frameless cabinets, in June 2000. Pre-tax net proceeds from the sale were $18.9 million after working capital adjustments and transaction costs. The Company recorded a pre-tax gain on the sale of $8.0 million. UltraCraft represented approximately 5% of the Company's 1999 net sales. Under the terms of the 9 1/4% Note Indenture, the Company was obligated to make an offer to repurchase the 9 1/4% Notes using the after-tax net proceeds from the UltraCraft sale, to the extent the Company did not use these net proceeds within one year of the sale to repay senior indebtedness or to acquire assets used in, or other businesses similar to, the business currently conducted by the Company. As a result of the Company's acquisition of the Alpine assets together with other capital expenditures, the Company believes that it was not obligated to make an offer to repurchase the 9 1/4% Notes. 9. COMMITMENTS Commitments for future minimum lease payments under noncancelable operating leases, principally for manufacturing and distribution facilities and certain equipment, are as follows (in thousands): 2002........................................................ $13,961 2003........................................................ 11,624 2004........................................................ 8,933 2005........................................................ 6,168 2006........................................................ 3,423 Thereafter.................................................. 5,410
Lease expense was approximately $17,859,000, $14,673,000 and $13,141,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The Company's lease agreements typically contain renewal options. F-12 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 10. INCOME TAXES Income tax expense for the years ended December 31 consists of (in thousands):
2001 2000 1999 ------------------ ------------------ ------------------ CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- Federal income taxes......... $13,835 $ 948 $13,800 $1,510 $11,776 $(364) State income taxes........... 909 216 1,064 181 1,642 (16) ------- ------ ------- ------ ------- ----- $14,744 $1,164 $14,864 $1,691 $13,418 $(380) ======= ====== ======= ====== ======= =====
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income taxes as of December 31 are as follows (in thousands):
2001 2000 ------- ------- Deferred tax assets: Medical benefits.......................................... $ 1,966 $ 2,095 Bad debt expense.......................................... 1,914 1,979 Inventory costs........................................... 763 1,108 Capital loss on Amercord Inc.............................. 472 472 Other..................................................... 1,222 616 ------- ------- Total deferred tax assets................................... 6,337 6,270 Deferred tax liabilities: Depreciation.............................................. 9,889 8,975 Pension expense........................................... 779 302 Other..................................................... 760 920 ------- ------- Total deferred tax liabilities.............................. 11,428 10,197 ------- ------- Net deferred tax liabilities................................ $(5,091) $(3,927) ======= =======
The reconciliation of the statutory rate to the Company's effective income tax rate for the years ended December 31 follows:
2001 2000 1999 ---- ---- ---- Statutory rate.............................................. 35.0% 35.0% 35.0% State income tax, net of federal income tax benefit......... 1.8 2.0 3.2 Other....................................................... 1.7 4.3 0.7 ---- ---- ---- Effective rate.............................................. 38.5% 41.3% 38.9% ==== ==== ====
During the third quarter 2000, the Company recorded $1.1 million in additional income tax expense due to an adjustment to a deferred tax asset, which was recorded in 1986 pursuant to the spin-off of the Company's tire cord operation into Amercord. The effect of this adjustment is included in the other category in the rate reconciliation. Exclusive of this adjustment, the Company's effective tax rate would have been 38.5%. F-13 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 11. STOCKHOLDERS' EQUITY In October 1998 the Company's Board of Directors approved a stock repurchase program that authorized the Company to purchase up to 800,000 shares of common stock in open market transactions depending on market, economic and other factors. In November 2000, the Board authorized the repurchase of an additional 800,000 shares of common stock under the Company's stock repurchase program, bringing the total number of shares under the plan to 1,600,000 shares. During 2001, 2000 and 1999, the Company repurchased 123,306, 399,774 and 467,000 shares of its common stock under the stock repurchase program at a cost of $2,051,000, $5,799,000 and $5,578,000. The repurchase of the Company's Class B common stock described below was not part of this stock repurchase program. On April 29, 2001, the Company repurchased 1,000,000 shares of its Class B common stock from The Prudential Insurance Company of America ("Prudential") and its wholly owned subsidiary, PCG Finance Company II, LLC ("PCG") at $19.50 per share, or $19.5 million in the aggregate, which has been reflected primarily as a reduction to retained earnings. The share purchase was financed through available cash and borrowings under the Company's $50,000,000 credit facility. Following the purchase, Prudential and PCG converted the remaining 550,000 shares of Class B common stock held by these entities into 550,000 shares of common stock pursuant to the terms of the Company's Certificate of Incorporation. The Company has retired all 1,550,000 previously authorized shares of Class B common stock. 12. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Numerator: Numerator for basic and diluted earnings per common share -- Net income................................ $25,412 $23,555 $20,490 Denominator: Denominator for basic earnings per common share -- weighted-average shares............................ 7,023 8,007 8,126 Effect of dilutive securities: Employee stock options............................. 311 251 218 ------- ------- ------- Denominator for diluted earnings per common share -- adjusted weighted-average shares................... 7,334 8,258 8,344 ======= ======= ======= Basic earnings per common share......................... $ 3.62 $ 2.94 $ 2.52 ======= ======= ======= Diluted earnings per common share....................... $ 3.46 $ 2.85 $ 2.46 ======= ======= =======
Options to purchase 50,000 and 40,000 shares of common stock with a weighted average exercise price of $16.11 and $16.00 per share were outstanding for the years ended December 31, 2000 and December 31, 1999, respectively, but were excluded from the diluted earnings per share calculation because the option exercise price was greater than the average market price of the common stock during the period. F-14 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 13. STOCK PLANS The Company has a stock option plan, whereby it grants stock options to certain directors, officers and key employees. The Company has authorized 1,200,000 shares of common stock to be issued under the plan. Options were granted at fair market value on the grant date and are exercisable for ten years. Options vest by either of the following methods: 50% vests upon the grant date with the other 50% vesting after two years or 20% vests upon the grant date with an additional 20% vesting each year commencing on the first anniversary of the grant date. All outstanding options granted under the stock option plan are non-statutory stock options. Transactions during 1999, 2000 and 2001 under this plan are summarized below:
WEIGHTED AVERAGE SHARES PRICE EXERCISE PRICE ------- ------------------ ---------------- Options outstanding at December 31, 1998................................... 572,300 $2.925 to $16.00 $ 8.45 Exercised................................ (5,000) $2.925 $ 2.925 ------- ------------------ ------- Options outstanding at December 31, 1999................................... 567,300 $2.925 to $16.00 $ 8.50 Exercised................................ (73,486) $5.00 to $11.875 $ 9.57 Granted.................................. 167,500 $11.875 to $16.563 $ 13.50 Expired or canceled...................... (26,514) $9.00 to $11.875 $ 9.72 ------- ------------------ ------- Options outstanding at December 31, 2000................................... 634,800 $2.925 to $16.563 $ 9.65 Exercised................................ (67,300) $2.925 to $11.875 $ 5.76 Granted.................................. 20,000 $17.875 $17.875 Expired or canceled...................... (19,000) $9.00 to $11.875 $ 9.45 ------- ------------------ ------- Options outstanding at December 31, 2001................................... 568,500 $2.925 to $17.875 $ 10.41 =======
Options to purchase 456,000, 476,800 and 407,800 shares were exercisable at December 31, 2001, 2000 and 1999, respectively. The weighted average exercise price of options outstanding was $10.41, $9.65 and $8.50 at December 31, 2001, 2000 and 1999, respectively. The following table summarizes significant ranges of outstanding and exercisable options at December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE REMAINING EXERCISE EXERCISE RANGE SHARES LIFE IN YEARS PRICE SHARES PRICE - ----- ------- ------------- -------- -------- --------- $2.925 to $5.00.................... 105,500 2.21 $ 3.328 105,500 $ 3.328 $9.00 to $12.00.................... 293,000 6.20 $10.196 252,500 $10.268 $13.875 to $17.875................. 170,000 7.61 $15.169 98,000 $15.159
The Company has adopted the disclosure provisions of SFAS No. 123 but continues to measure stock-based compensation in accordance with APB No. 25. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its stock options under the fair value method of that statement. The weighted average fair value at date of grant for options granted during 2001 and 2000 using the Black-Scholes method was $8.39 and $12.58 per option, respectively. No options were granted in 1999. The fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model with the following assumptions for 2001 and 2000, respectively: dividend yield of .95% and .67%, volatility factor of the F-15 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) expected market price of the stock of .330 and .307, a weighted-average risk free interest rate of 5.10% and 6.38% and an expected life of the option of 10 years. Stock based compensation costs would have reduced net income by $344,000, $977,000 and $475,000 or $0.05, $0.12 and $0.06 per basic and diluted share in 2001, 2000 and 1999, respectively, if the fair values of the options granted in that year had been recognized as compensation expense on a straight-line basis over the vesting period of the grant. The pro forma effect on net income for 2001, 2000 and 1999 may not be representative of the pro forma effect on net income in future years. Effective October 1, 1998 the Company established an Employee Stock Purchase Plan ("ESPP"). The ESPP allows employees to purchase the Company's common stock at 85% of the lower of the fair market value on the first day of the purchase period or the last day of the purchase period. The Company has registered 500,000 shares of common stock for issuance under the ESPP. Employees purchased 60,679, 65,873, and 80,919 shares under the ESPP at average prices of $14.42, $12.87 and $10.52 per share during 2001, 2000 and 1999, respectively. The Company's Board of Directors approved the suspension of the ESPP effective December 31, 2001. 14. BUSINESS SEGMENTS The Company has two reportable segments: building products and electrical cable products. The principal business activities of the building products segment are the manufacture of vinyl siding, vinyl windows and the wholesale distribution of these and other complementary building products principally to professional home remodeling and new construction contractors. The principal business activity of the electrical cable segment is the manufacture and sale of jacketed electrical cable. The Company evaluates performance and allocates resources based on operating profit, which is net sales less operating costs and expenses. Comparative financial data by reportable segment for the years ended December 31 are as follows (in thousands):
2001 2000 1999 -------- -------- -------- Net sales: Building products.................................. $524,528 $434,845 $410,107 Electrical cable products.......................... 71,291 64,548 45,161 -------- -------- -------- $595,819 $499,393 $455,268 ======== ======== ======== Operating profits (losses): Building products.................................. $ 48,889 $ 36,300 $ 42,408 Electrical cable products.......................... 6,653 5,815 2,875 Corporate expense.................................. (5,034) (3,971) (3,639) -------- -------- -------- $ 50,508 $ 38,144 $ 41,644 ======== ======== ======== Identifiable assets: Building products.................................. $189,142 $165,990 $167,024 Electrical cable products.......................... 34,054 34,255 26,673 Corporate.......................................... 31,111 30,896 12,599 -------- -------- -------- $254,307 $231,141 $206,296 ======== ======== ========
F-16 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 -------- -------- -------- Depreciation and amortization: Building products.................................. $ 8,901 $ 7,767 $ 6,900 Electrical cable products.......................... 1,708 1,493 1,347 Corporate.......................................... 310 290 272 -------- -------- -------- $ 10,919 $ 9,550 $ 8,519 ======== ======== ======== Additions to property, plant and equipment: Building products.................................. $ 11,652 $ 7,936 $ 16,018 Electrical cable products.......................... 3,359 3,708 2,897 Corporate.......................................... 11 281 -- -------- -------- -------- $ 15,022 $ 11,925 $ 18,915 ======== ======== ========
Identifiable assets by segment are those used in the Company's operations in each segment. Corporate assets are principally the Company's cash and cash equivalents and short-term investments. The Company operates principally in the United States. Neither aggregate export sales nor sales to a single customer have accounted for 10% or more of consolidated net sales in any of the years presented. 15. RETIREMENT PLANS The Company sponsors a defined benefit pension plan, The Premium Building Products Company Hourly Employees Pension Plan ("Premium Plan"), which covers approximately 250 participants. The Company froze the Alside defined benefit retirement plan ("Alside Plan") effective December 31, 1998 and replaced it with a defined contribution plan effective January 1, 1999. As a result of the plan freeze, the Company recorded a $5,951,000 curtailment gain in 1998. Prepaid pension and accrued pension liabilities are included in other assets and accrued liabilities in the accompanying balance sheets. Information regarding the Company's defined benefit plans is as follows:
2001 2000 -------------------------- -------------------------- ALSIDE PLAN PREMIUM PLAN ALSIDE PLAN PREMIUM PLAN ----------- ------------ ----------- ------------ CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation at beginning of year.............. $25,733,225 $1,099,907 $26,322,987 $ 990,155 Service cost..................... 209,068 37,396 221,534 41,091 Interest cost.................... 1,887,103 77,462 1,814,543 74,301 Plan amendments.................. -- 42,605 -- -- Actuarial (gain) loss............ 1,101,555 (1,618) (1,608,232) 7,202 Benefits paid.................... (1,307,134) (21,265) (1,017,607) (12,842) ----------- ---------- ----------- ---------- Projected benefit obligation at end of year.................... $27,623,817 $1,234,487 $25,733,225 $1,099,907 =========== ========== =========== ==========
F-17 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 -------------------------- -------------------------- ALSIDE PLAN PREMIUM PLAN ALSIDE PLAN PREMIUM PLAN ----------- ------------ ----------- ------------ CHANGE IN PLAN ASSETS Fair value of assets at beginning of year........................ $32,413,729 $ 880,459 $34,346,364 $ 918,140 Actual return on plan assets..... (2,374,681) (57,095) (915,028) (24,839) Employer contributions........... -- 205,000 -- -- Benefits paid.................... (1,307,134) (21,265) (1,017,607) (12,842) ----------- ---------- ----------- ---------- Fair value of assets at end of year........................... 28,731,914 1,007,099 32,413,729 880,459 Funded status.................... 1,108,097 (227,388) 6,680,504 (219,448) Unrecognized: Transition obligation.......... -- 14,200 -- 21,301 Prior service costs............ -- 80,488 -- 44,125 Cumulative net (gain) loss..... 875,940 42,592 (5,681,834) (102,245) ----------- ---------- ----------- ---------- Accrued pension asset (liability)................. $ 1,984,037 $ (90,108) $ 998,670 $ (256,267) =========== ========== =========== ========== KEY ASSUMPTIONS AS OF DECEMBER 31 Discount rate.................... 7.25% 7.25% 7.50% 7.50% Long-term rate of return on assets......................... 9.00% 9.00% 9.00% 9.00% Salary increases................. N/A N/A N/A N/A NET PERIODIC PENSION (BENEFIT) COST Service cost..................... $ 209,068 $ 37,396 $ 221,534 $ 41,091 Interest cost.................... 1,887,103 77,462 1,814,543 74,301 Expected return on assets........ (2,863,811) (84,314) (3,040,376) (82,002) Amortization of unrecognized: Transition obligation.......... -- 7,101 -- 7,101 Prior service costs............ -- 6,242 -- 6,242 Cumulative net gain............ (217,727) (5,046) (609,625) (10,239) ----------- ---------- ----------- ---------- Net periodic pension (benefit) cost........................... $ (985,367) $ 38,841 $(1,613,924) $ 36,494 =========== ========== =========== ==========
The Company sponsors two defined contribution plans (the "401(k) Plans") intended to provide assistance in accumulating personal savings for retirement. The 401(k) Plans are qualified as a tax-exempt plan under Sections 401(a) and 401(k) of the Internal Revenue Code. The Alside 401(k) Plan covers all full-time, non-union employees of Alside and matches up to 4.0% of eligible compensation. For the years ended December 31, 2001, 2000 and 1999, the Company's pre-tax contribution to the Alside 401(k) Plan was $2.1 million, $2.0 million and $2.1 million, respectively. The AmerCable 401(k) Plan covers all full-time employees of AmerCable and matches up to 4.0% of eligible compensation (3.5% of eligible compensation prior to 2001). For the years ended December 31, 2001, 2000 and 1999, the Company's pre-tax contributions to the AmerCable 401(k) Plan were $281,000, $238,000 and $215,000, respectively. 16. CONTINGENCIES The Company entered into a consent order dated August 25, 1992 with the United States Environmental Protection Agency pertaining to corrective action requirements associated with the use of hazardous waste storage facilities at its Akron, Ohio location. With the exception of a small container storage area, the use of these facilities was terminated prior to the acquisition of the facilities by the F-18 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Company from USX Corporation ("USX") in 1984. The Company believes that USX bears financial responsibility for substantially all of the direct costs of corrective action at these facilities under relevant contract terms and under statutory and common law. The effects of the past practices of these facilities are continuing to be investigated pursuant to the terms of the consent order and as a result the Company is unable to reasonably estimate a reliable range of the aggregate cost of corrective action at this time. To date, USX has reimbursed the Company for substantially all of the direct costs of corrective action at these facilities. The Company expects that USX will continue to reimburse the Company for substantially all of the direct costs of corrective action at these facilities. As a result, the Company believes that any material claims resulting from this proceeding will not have a material adverse effect on the Company. F-19 ASSOCIATED MATERIALS INCORPORATED BALANCE SHEETS
(UNAUDITED) MARCH 31, DECEMBER 31, 2002 2001 ----------- ------------ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 13,513 $ 28,869 Accounts receivable, net.................................. 61,658 65,784 Inventories............................................... 79,412 74,574 Income taxes receivable................................... 940 -- Other current assets...................................... 3,637 3,394 -------- -------- Total current assets........................................ 159,160 172,621 Property, plant and equipment, net.......................... 77,897 77,733 Other assets................................................ 4,112 3,953 -------- -------- Total assets................................................ $241,169 $254,307 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 33,187 $ 29,579 Accrued liabilities....................................... 20,904 35,356 Income taxes payable...................................... -- 1,498 -------- -------- Total current liabilities................................... 54,091 66,433 Deferred income taxes....................................... 4,996 5,091 Other liabilities........................................... 6,058 5,108 Long-term debt.............................................. 75,000 75,000 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value: Authorized shares -- 100,000 at March 31, 2002 and December 31, 2001 Issued shares -- 0 at March 31, 2002 and December 31, 2001.................................................. -- -- Common stock, $.0025 par value: Authorized shares -- 15,000,000 Issued shares -- 7,852,503 at March 31, 2002 and 7,842,003 at December 31, 2001...................... 20 19 Common stock, Class B, $.0025 par value: Authorized and issued shares -- 0 at March 31, 2002 and December 31, 2001............................... -- -- Less: Treasury stock, at cost -- 1,078,476 shares at March 31, 2002 and December 31, 2001......................... (14,476) (14,476) Capital in excess of par.................................. 17,330 17,124 Retained earnings......................................... 98,150 100,008 -------- -------- Total stockholders' equity.................................. 101,024 102,675 -------- -------- Total liabilities and stockholders' equity.................. $241,169 $254,307 ======== ========
See accompanying notes. F-20 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTER ENDED MARCH 31, ------------------------- 2002 2001 ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales................................................... $123,198 $108,611 Cost of sales............................................... 90,778 81,414 -------- -------- Gross margin................................................ 32,420 27,197 Selling, general and administrative expense................. 31,219 28,127 -------- -------- Income (loss) from operations............................... 1,201 (930) Interest expense............................................ 1,669 1,579 -------- -------- Loss before other non-operating expenses and income taxes... (468) (2,509) Merger transaction costs.................................... (2,002) -- Loss on the writedown of Amercord Inc....................... -- (2,393) -------- -------- Loss before income taxes.................................... (2,470) (4,902) Income tax benefit.......................................... (951) (1,887) -------- -------- Net loss.................................................... $ (1,519) $ (3,015) ======== ======== Net loss per common share -- Basic and fully diluted........ $ (0.22) $ (0.39) ======== ======== Dividends per common share.................................. $ 0.05 $ 0.10 ======== ========
See accompanying notes. F-21 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF CASH FLOWS (UNAUDITED)
QUARTER ENDED MARCH 31, ----------------- 2002 2001 ------- ------- (IN THOUSANDS) OPERATING ACTIVITIES Net loss.................................................... $(1,519) $(3,015) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization.......................... 2,979 2,661 Deferred income taxes.................................. (95) (189) Loss on the writedown of Amercord Inc.................. -- 2,393 Loss on sale of assets................................. 36 50 Tax benefit from stock option exercise................. 113 -- Changes in operating assets and liabilities: Accounts receivable, net............................. 4,126 (5,366) Inventories.......................................... (4,838) (2,717) Income taxes receivable/payable...................... (2,438) (1,698) Accounts payable and accrued liabilities............. (10,844) (2,229) Other assets and liabilities......................... 479 (17) ------- ------- Net cash used by operating activities....................... (12,001) (10,127) INVESTING ACTIVITIES Proceeds from sale of short-term investment................. -- 5,019 Proceeds from sale of assets................................ 8 20 Additions to property, plant and equipment.................. (3,118) (6,765) ------- ------- Net cash used by investing activities....................... (3,110) (1,726) FINANCING ACTIVITIES Dividends paid.............................................. (339) (765) Treasury stock acquired..................................... -- (1,803) Proceeds from exercise of stock options..................... 94 588 ------- ------- Net cash used by financing activities....................... (245) (1,980) ------- ------- Net decrease in cash........................................ (15,356) (13,833) Cash at beginning of period................................. 28,869 15,879 ------- ------- Cash at end of period....................................... $13,513 $ 2,046 ======= ======= Supplemental information: Cash paid for interest...................................... $ 3,493 $ 3,502 ======= ======= Net cash paid for income taxes.............................. $ 2,254 $ 257 ======= =======
See accompanying notes. F-22 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2002 (UNAUDITED) 1. BASIS OF PRESENTATION The unaudited financial statements of Associated Materials Incorporated (the "Company") for the quarter ended March 31, 2002 have been prepared in accordance with generally accepted accounting principles for interim financial reporting, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year. The Company's Alside division manufactures and distributes building products. Because most of Alside's building products are intended for exterior use, Alside's sales and operating profits tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year historically result in that quarter producing significantly less sales revenue and profits than in any other period of the year. 2. MERGER TRANSACTION On March 16, 2002, the Company entered into a merger agreement (the "Merger Agreement") with Associated Materials Holdings Inc. ("Holdings") and its wholly owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the acquisition of all shares of the Company's common stock through a cash tender offer for $50.00 per share. The Merger Agreement also required that the Company commence a tender offer to purchase all of its outstanding 9 1/4% Senior Subordinated Notes due March 1, 2008. On April 19, 2002, the cash tender offers for the Company's common stock and 9 1/4% Senior Subordinated Notes were completed. Approximately 95.9% of the outstanding shares of common stock were validly tendered and approximately 98.7% of the outstanding 9 1/4% notes were validly tendered. The Company also executed a supplemental indenture removing substantially all of the restrictive covenants in the indenture governing such notes. The Company is obligated to make a change of control offer for the approximately $1 million of remaining 9 1/4% notes at a price of 101% of the principal amount thereof, plus accrued and unpaid interest. Subsequent to the completion of the tender offers, Simon Acquisition Corp. was merged with and into the Company, with the Company continuing as the surviving corporation and a privately held, wholly owned subsidiary of Holdings (which is controlled by affiliates of Harvest Partners, Inc.). Following the completion of the merger, the Company's shares were delisted from NASDAQ. The merger has been accounted for using the purchase method of accounting. The total purchase consideration of $378.1 million has been allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values at the date of acquisition based on preliminary valuation estimates and certain assumptions. The preliminary allocation of purchase price has resulted in $286.2 million in goodwill and other intangibles, including $8.6 million of preliminary purchase price allocated to patents with estimated useful lives of 10 years and $86.5 million assigned to trademarks with indefinite lives. The allocation of purchase price is being finalized by management and is not reflected in the March 31, 2002 financial statements. The merger was financed through the issuance of $165 million of 9 3/4% senior F-23 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) subordinated notes due 2012, a $125 million new credit facility (see Note 5), a $172 million equity contribution by Associated Materials Holdings Inc. (which received an equity contribution of approximately $172 million consisting of cash from the equity investors of $164.8 million and rollover equity by certain members of management of $7.2 million) and cash on hand of approximately $2.5 million. In connection with the merger, the Company incurred merger related costs, including legal, accounting and investment banking fees. These costs are required to be expensed in accordance with generally accepted accounting principles. These costs have been classified in merger transaction costs in the accompanying statement of operations. 3. INVENTORIES Inventories are valued at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):
MARCH 31, DECEMBER 31, 2002 2001 --------- ------------ Raw materials............................................... $23,263 $21,102 Work-in-process............................................. 5,421 4,597 Finished goods and purchased stock.......................... 50,728 48,875 ------- ------- $79,412 $74,574 ======= =======
4. EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
QUARTER ENDED MARCH 31, ----------------- 2002 2001 ------- ------- Numerator: Numerator for basic and diluted earnings per common share -- net loss...................................... $(1,519) $(3,015) Denominator: Denominator for basic and diluted earnings per common share -- weighted-average shares....................... 6,770 7,677 Basic and diluted loss per common share..................... $ (0.22) $ (0.39) ======= =======
In accordance with Statement of Financial Accounting Standard No. 128, approximately 436,000 and 268,000 potential common shares were excluded from the calculation of weighted average shares outstanding for the quarter ended March 31, 2002 and 2001, respectively. Due to the losses incurred during the quarters ended March 31, 2002 and 2001, inclusion of these shares would have been antidilutive. 5. SUBSEQUENT EVENTS On April 19 and April 24, 2002, the Company filed a Form 15 with the SEC suspending its obligations to file reports under Sections 12(g) and 15(d) of the Securities Exchange Act of 1934. On April 19, 2002, the Company relocated its principal executive offices to 3773 State Rd., Cuyahoga Falls, Ohio. F-24 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) On June 24, 2002, the Company completed the sale of its AmerCable division to AmerCable Incorporated, a newly formed entity controlled by members of AmerCable management and Wingate Partners III, L.P., for net proceeds of approximately $28.3 million of cash and the assumption of certain liabilities pursuant to an asset purchase agreement dated as of the same date. The Company used the net cash proceeds to repay a portion of the new credit facility in accordance with certain terms thereof. F-25 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (ASSOCIATED LOGO) ASSOCIATED MATERIALS INCORPORATED OFFER TO EXCHANGE ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 FOR REGISTERED 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 ------------------------ PROSPECTUS ------------------------ , 2002 We have not authorized any dealer, salesperson, or other person to give any information or represent anything not contained in this prospectus or the accompanying letter of transmittal. You must not rely on any unauthorized information. This prospectus and the accompanying letter of transmittal do not offer to sell or ask you to buy any securities in any jurisdiction where it is unlawful. The information contained in this prospectus is current as of , 2002. Until , 200 , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Reference is made to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which permits a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director's fiduciary duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions), or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Amended and Restated Certificate of Incorporation contains the provisions permitted by Section 102(b)(7) of the DGCL. Reference is made to Section 145 of the DGCL which provides that a corporation may indemnify any persons, including directors and officers, who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such director, officer, employee or agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interest and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify directors and/or officers in an action or suit by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the director or officer is adjudged to be liable to the corporation. Where a director or officer is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such director or officer actually and reasonably incurred. The above provisions of the DGCL are nonexclusive. The Registrant's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") and the Amended and Restated By-laws (the "By-laws") provides that each person who is or was a director or officer of the Registrant, or each such person who is or was serving at the request of the Board of Directors or an officer of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Registrant to the full extent permitted from time to time by the DGCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Registrant to provide broader indemnification rights than said law permitted the Registrant to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect. The indemnification provided for under Article IV of the By-laws shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled, under the Certificate of Incorporation or under any other bylaw, agreement, insurance policy, vote of stockholders or disinterested directors, applicable law or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The Registrant's Certificate of Incorporation provides that to the full extent permitted by the DGCL or any other applicable laws presently or hereafter in effect, no director of the Registrant shall be personally liable to the Registrant or its stockholders for or with respect to any acts or omissions in the performance of his or her duties as a director of the Registrant. II-1 The Registrant provides insurance for each director and officer for certain losses arising from claims or charges made against them while acting in their capacities as directors or officers of the Registrant. Article IV, Section 6 of the By-laws provides that, by action of the Board of Directors, notwithstanding any interest of the directors in the action, the Registrant shall have the power to purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director or officer of the Registrant, or is or was serving at the request of the Registrant as director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not he is indemnified against such liability or expense under the provisions of Article IV of the Bylaws and whether or not the Registrant would have the power or would be required to indemnify him against such liability under the provisions of Article IV of the Bylaws or of the DGCL or by any other applicable law. ITEM 21. EXHIBIT AND FINANCIAL STATEMENTS INDEX (a) Exhibits:
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Merger, dated as of March 16, 2002, by and among Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings Inc.), Simon Acquisition Corp. and the Registrant (incorporated by reference to Exhibit 99(d)(1) of Schedule TO filed by Associated Materials Holdings, Inc. and certain affiliates, File No. 005-53705, filed on March 22, 2002). 3.1 Amended and Restated Certificate of Incorporation of the Registrant. 3.2 Amended and Restated By-Laws of the Registrant. 4.1 Registration Rights Agreement, dated as of April 23, 2002, by and among the Registrant, AMI Management Company, Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp. 4.2 Indenture governing the Registrant's 9 3/4% Senior Subordinated Notes Due 2012, dated as of April 23, 2002, by and among the Registrant, AMI Management Company and Wilmington Trust Company. 4.3 Supplemental Indenture governing the Registrant's 9 3/4% Senior Subordinated Notes Due 2012, dated as of May 10, 2002 by and among the Registrant, AMI Management Company, Alside, Inc. and Wilmington Trust Company. 4.4 Form of the Registrant's 9 3/4% Senior Subordinated Note due 2012. 4.5 Form of Indenture governing the Registrant's 9 1/4% Senior Subordinated Notes due 2008, between the Company and The Bank of New York Trust Company of Florida, N.A. (as successor to U.S. Trust Company of Texas, N.A.) (incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form S-1/A, File No. 3333-42067, filed on January 30, 1998). 4.6 First Supplemental Indenture governing the Registrant's 9 1/4% Senior Subordinated Notes due 2008, dated as of April 4, 2002, by and among the Registrant and The Bank of New York Trust Company of Florida, N.A (as successor to U.S. Trust Company of Texas, N.A.). 4.7 Form of 9 1/4% Senior Subordinated Note due 2008 (incorporated by reference to Exhibit A of Exhibit 4.1 of the Registrant's Registration Statement on Form S-1/A, File No. 333-42067, filed on January 30, 1998). 5.1* Legal Opinion of White & Case LLP as to the legality of the securities being issued. 10.1 Credit Agreement, dated as of April 19, 2002, by and among the Registrant, Associated Materials Holdings Inc., the various financial institutions and other Persons from time to time parties thereto, UBS AG, Stamford Branch, as administrative agent, Credit Suisse First Boston, Cayman Islands Branch, as syndication agent, CIBC World Markets Corp., as documentation agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as joint lead arrangers (the "Credit Agreement").
II-2
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.2 Borrower Security and Pledge Agreement of the Registrant, dated as of April 19, 2002, by the Company, in favor of UBS AG, Stamford Branch, as administrative agent. 10.3 Form of Subsidiary Security and Pledge Agreement, by each subsidiary of the Registrant from time to time party thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf of the Secured Parties (as defined in the Credit Agreement). 10.4 Form of Subsidiary Guaranty, by each subsidiary of the Registrant from time to time party thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf of the Secured Parties (as defined in the Credit Agreement). 10.5 Assumption Agreement, dated as of April 19, 2002, by and among the Registrant and AMI Management Company, as guarantors. 10.6 Agreement of Sale, dated as of January 30, 1984, between USX Corporation (formerly United States Steel Corporation) ("USX") and the Registrant (incorporated by reference to Ex- hibit 10.1 of the Registrant's Registration Statement on Form S-1, File No. 33-64788). 10.7 Amendment Agreement, dated as of February 29, 1984, between USX and the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant's Registration Statement on Form S-1, File No. 33-64788). 10.8 Form of Indemnification Agreement between the Registrant and each of the directors and executive officers of the Registrant (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1, File No. 33-84110). 10.9 Incentive Bonus Plan of the Registrant (incorporated by reference to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K filed for December 31, 2000). 10.10 Severance Agreement, dated December 27, 2001, between the Registrant and Robert F. Hogan, Jr. (incorporated by reference to Exhibit 10.13 of the Registrant's Annual Report on Form 10-K filed for December 31, 2001). 10.11 Management Agreement, dated as of April 19, 2002, by and between Harvest Partners, Inc. and the Registrant. 10.12 Asset Purchase Agreement, dated as of June 24, 2002, between the Registrant and AmerCable Incorporated. 10.13 Associated Materials Holdings Inc. 2002 Stock Option Plan. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2* Consent of White & Case LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included on signature page to Registration Statement). 25.1* Statement of Eligibility of Trustee. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.
- --------------- * To be filed by amendment. ITEM 22. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-3 (b) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (c) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunder duly authorized, in the City of Cuyahoga Falls, State of Ohio on July 3, 2002. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. KEITH LAVANWAY ------------------------------------ Name: D. Keith LaVanway Title: Vice President, Chief Financial Officer, Treasurer and Secretary KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Caporale, Jr. and D. Keith LaVanway, and each of them severally, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, supplements, subsequent registration statements relating to the offering to which this Registration Statement relates, or other instruments he deems necessary or appropriate, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons, in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ IRA D. KLEINMAN Chairman of the Board July 3, 2002 ------------------------------------------------ Ira D. Kleinman /s/ MICHAEL J. CAPORALE, JR. President, Chief Executive July 3, 2002 ------------------------------------------------ Officer and Director Michael J. Caporale, Jr. (Principal Executive Officer) /s/ D. KEITH LAVANWAY Vice President, Chief Financial July 3, 2002 ------------------------------------------------ Officer, Treasurer and D. Keith LaVanway Secretary (Principal Financial Officer and Principal Accounting Officer) /s/ THOMAS ARENZ Director July 3, 2002 ------------------------------------------------ Thomas Arenz /s/ JONATHAN ANGRIST Director July 3, 2002 ------------------------------------------------ Jonathan Angrist
II-5 EXHIBITS INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Merger, dated as of March 16, 2002, by and among Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings Inc.), Simon Acquisition Corp. and the Registrant (incorporated by reference to Exhibit 99(d)(1) of Schedule TO filed by Associated Materials Holdings, Inc. and certain affiliates, File No. 005-53705, filed on March 22, 2002). 3.1 Amended and Restated Certificate of Incorporation of the Registrant. 3.2 Amended and Restated By-Laws of the Registrant. 4.1 Registration Rights Agreement, dated as of April 23, 2002, by and among the Registrant, AMI Management Company, Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp. 4.2 Indenture governing the Registrant's 9 3/4% Senior Subordinated Notes Due 2012, dated as of April 23, 2002, by and among the Registrant, AMI Management Company and Wilmington Trust Company. 4.3 Supplemental Indenture governing the Registrant's 9 3/4% Senior Subordinated Notes Due 2012, dated as of May 10, 2002 by and among the Registrant, AMI Management Company, Alside, Inc. and Wilmington Trust Company. 4.4 Form of the Registrant's 9 3/4% Senior Subordinated Note due 2012. 4.5 Form of Indenture governing the Registrant's 9 1/4% Senior Subordinated Notes due 2008, between the Company and The Bank of New York Trust Company of Florida, N.A. (as successor to U.S. Trust Company of Texas, N.A.) (incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form S-1/A, File No. 3333-42067, filed on January 30, 1998). 4.6 First Supplemental Indenture governing the Registrant's 9 1/4% Senior Subordinated Notes due 2008, dated as of April 4, 2002, by and among the Registrant and The Bank of New York Trust Company of Florida, N.A (as successor to U.S. Trust Company of Texas, N.A.). 4.7 Form of 9 1/4% Senior Subordinated Note due 2008 (incorporated by reference to Exhibit A of Exhibit 4.1 of the Registrant's Registration Statement on Form S-1/A, File No. 333-42067, filed on January 30, 1998). 5.1* Legal Opinion of White & Case LLP as to the legality of the securities being issued. 10.1 Credit Agreement, dated as of April 19, 2002, by and among the Registrant, Associated Materials Holdings Inc., the various financial institutions and other Persons from time to time parties thereto, UBS AG, Stamford Branch, as administrative agent, Credit Suisse First Boston, Cayman Islands Branch, as syndication agent, CIBC World Markets Corp., as documentation agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as joint lead arrangers (the "Credit Agreement"). 10.2 Borrower Security and Pledge Agreement of the Registrant, dated as of April 19, 2002, by the Company, in favor of UBS AG, Stamford Branch, as administrative agent. 10.3 Form of Subsidiary Security and Pledge Agreement, by each subsidiary of the Registrant from time to time party thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf of the Secured Parties (as defined in the Credit Agreement). 10.4 Form of Subsidiary Guaranty, by each subsidiary of the Registrant from time to time party thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf of the Secured Parties (as defined in the Credit Agreement). 10.5 Assumption Agreement, dated as of April 19, 2002, by and among the Registrant and AMI Management Company, as guarantors. 10.6 Agreement of Sale, dated as of January 30, 1984, between USX Corporation (formerly United States Steel Corporation) ("USX") and the Registrant (incorporated by reference to Ex- hibit 10.1of the Registrant's Registration Statement on Form S-1, File No. 33-64788). 10.7 Amendment Agreement, dated as of February 29, 1984, between USX and the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant's Registration Statement on Form S-1, File No. 33-64788).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.8 Form of Indemnification Agreement between the Registrant and each of the directors and executive officers of the Registrant (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1, File No. 33-84110). 10.9 Incentive Bonus Plan of the Registrant (incorporated by reference to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K filed for December 31, 2000). 10.10 Severance Agreement, dated December 27, 2001, between the Registrant and Robert F. Hogan, Jr. (incorporated by reference to Exhibit 10.13 of the Registrant's Annual Report on Form 10-K filed for December 31, 2001). 10.11 Management Agreement, dated as of April 19, 2002, by and between Harvest Partners, Inc. and the Registrant. 10.12 Asset Purchase Agreement, dated as of June 24, 2002, between the Registrant and AmerCable Incorporated. 10.13 Associated Materials Holdings Inc. 2002 Stock Option Plan. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2* Consent of White & Case LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included on signature page to Registration Statement). 25.1* Statement of Eligibility of Trustee. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.
- --------------- * To be filed by amendment. EX-3.1 3 y61690exv3w1.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 =========================================================== AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ASSOCIATED MATERIALS INCORPORATED (Originally Incorporated on April 4, 1983) -------------- ASSOCIATED MATERIALS INCORPORATED, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: FIRST. The name of the Corporation is Associated Materials Incorporated (the "Corporation"). The Corporation was originally incorporated as Associated Materials Incorporated on April 4, 1983. SECOND. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, the Amended and Restated Certificate of Incorporation has been duly adopted in accordance therewith, and restates and integrates and further amends the provisions of the Certificate of Incorporation of the Corporation. THIRD. The text of the Amended and Restated Certificate of Incorporation of the Corporation hereby reads in its entirety as follows: ARTICLE I: The name of the Corporation is Associated Materials Incorporated. ARTICLE II: The registered office of the Corporation in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801 in the County of New Castle. The name of its registered agent in the State of Delaware is The Corporation Trust Company, the address of which is Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801. ARTICLE III: The purpose of the Corporation is to engage, directly or indirectly, in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as from time to time in effect. ARTICLE IV: The total authorized capital stock of the Corporation shall be 1000 shares of Common Stock, par value $0.01 per share. ARTICLE V: The business of the Corporation shall be managed under the direction of the Board of Directors except as otherwise provided by law. The number of Directors of the Corporation shall be fixed from time to time by, or in the manner provided in, the By-Laws of the Corporation. Election of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide. ARTICLE VI: The Board of Directors may make, alter or repeal the By-Laws of the Corporation except as otherwise provided in the By-Laws adopted by the Corporation's stockholders. ARTICLE VII: Each person who is or was a Director or officer of the Corporation, or each such person who is or was serving at the request of the Board of Directors or an officer of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation to the full extent permitted from time to time by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law -2- permitted the Corporation to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this ARTICLE VII. Any amendment or repeal of this ARTICLE VII shall not adversely affect any right or protection existing hereunder immediately prior to such amendment or repeal. To the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws presently or hereafter in effect, no Director of the Corporation shall be personally liable to the Corporation or its stockholders for or with respect to any acts or omissions in the performance of his or her duties as a Director of the Corporation. Any repeal or modification of this ARTICLE VII shall not adversely affect any right or protection of a Director of the Corporation existing immediately prior to such repeal or modification. ARTICLE VIII: Except as provided in ARTICLE VII, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -3- IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by an authorized officer, this 24th day of April, 2002. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway ----------------------------------- Name: D. Keith LaVanway Title: Chief Financial Officer EX-3.2 4 y61690exv3w2.txt AMENDED AND RESTATED BY-LAWS EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF ASSOCIATED MATERIALS INCORPORATED Table of Contents Page ARTICLE I STOCKHOLDERS...................................... 1 Section 1. Annual Meeting.................................... 1 Section 2. Special Meetings.................................. 1 Section 3. Notice of Meetings................................ 1 Section 4. Quorum............................................ 1 Section 5. Organization of Meetings.......................... 1 Section 6. Voting............................................ 2 Section 7. Inspectors of Election............................ 2 Section 8. Action by Consent................................. 2 ARTICLE II DIRECTORS......................................... 3 Section 1. Number, Quorum, Term, Vacancies, Removal.......... 3 Section 2. Meetings, Notice.................................. 3 Section 3. Committees........................................ 4 Section 4. Action by Consent................................. 4 Section 5. Compensation...................................... 4 ARTICLE III OFFICERS.......................................... 4 Section 1. Titles and Election............................... 4 Section 2. Terms of Office................................... 4 Section 3. Removal........................................... 4 Section 4. Resignations...................................... 4 Section 5. Vacancies......................................... 5 Section 6. Chairman of the Board............................. 5 Section 7. President......................................... 5 Section 8. Vice Presidents................................... 5 Section 9. Secretary......................................... 5 Section 10. Treasurer......................................... 5 Section 11. Duties of Officers may be Delegated............... 6 ARTICLE IV INDEMNIFICATION................................... 6 Section 1. Suits By Third Parties............................ 6 Section 2. Suits in the Name of the Corporation.............. 6 Section 3. Successful Defense................................ 6 Section 4. Determination to Indemnify........................ 7 Section 5. Provisions Nonexclusive........................... 7 Section 6. Insurance......................................... 7 Section 7. Surviving Corporation............................. 7 Section 8. Continuing Indemnification........................ 7 ARTICLE V CAPITAL STOCK..................................... 8 Section 1. Certificates...................................... 8 Section 2. Transfer.......................................... 8 Section 3. Record Dates...................................... 8 Section 4. Lost Certificates................................. 8 ARTICLE VI CHECKS, NOTES, ETC................................ 9 Section 1. Checks, Notes, Etc................................ 9 ARTICLE VII MISCELLANEOUS PROVISIONS.......................... 9 Section 1. Offices........................................... 9 Section 2. Fiscal Year....................................... 9 Section 3. Corporate Seal.................................... 9 Section 4. Books............................................. 9 Section 5. Voting of Stock................................... 9 ARTICLE VIII AMENDMENTS........................................ 9 Section 1. Amendments........................................ 9 (i) AMENDED AND RESTATED BY-LAWS OF ASSOCIATED MATERIALS INCORPORATED ARTICLE I STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held either within or without the State of Delaware, at such place as the Board of Directors may designate in the call or in a waiver of notice thereof, on the first Monday in January of each year beginning with the year 2003 (or if such day be a legal holiday, then on the next succeeding day not a holiday) at 10 a.m., for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. Section 2. Special Meetings. Special Meetings of the stockholders may be called by the Board of Directors or by the President, and shall be called by the President or by the Secretary upon the written request of the holders of record of at least twenty-five per cent (25%) of the shares of stock of the Corporation, issued and outstanding and entitled to vote, at such times and at such place either within or without the State of Delaware as may be stated in the call or in a waiver of notice thereof. Section 3. Notice of Meetings. Notice of the time, place and purpose of every meeting of stockholders shall be delivered personally or mailed not less than ten days nor more than sixty days previous thereto to each stockholder of record entitled to vote, at his post office address appearing upon the records of the Corporation or at such other address as shall be furnished in writing by him to the Corporation for such purpose. Such further notice shall be given as may be required by law or by these By-Laws. Any meeting may be held without notice if all stockholders entitled to vote are present in person or by proxy, or if notice is waived in writing, either before or after the meeting, by those not present. Section 4. Quorum. The holders of record of at least a majority of the shares of the stock of the Corporation, issued and outstanding and entitled to vote, present in person or by proxy, shall, except as otherwise provided by law or by these By-Laws, constitute a quorum at all meetings of the stockholders; if there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time until a quorum shall have been obtained. Section 5. Organization of Meetings. Meetings of the stockholders shall be presided over by the Chairman of the Board, if there be one, or if he is not present by the President, or if he is not present, by a chairman to be chosen at the meeting. The Secretary of the Corporation, or in his absence an Assistant Secretary, shall act as Secretary of the meeting, if present. Section 6. Voting. At each meeting of stockholders, except as otherwise provided by statute or the Certificate of Incorporation, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his name on the records of the Corporation. Elections of directors shall be determined by a plurality of the votes cast thereat and, except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, all other action shall be determined by a majority of the votes cast at such meeting. Each proxy to vote shall be in writing and signed by the stockholder or by his duly authorized attorney. At all elections of directors, the voting shall be by ballot or in such other manner as may be determined by the stockholders present in person or by proxy entitled to vote at such election. With respect to any other matter presented to the stockholders for their consideration at a meeting, any stockholder entitled to vote may, on any question, demand a vote by ballot. A complete list of the stockholders entitled to vote at each such meeting, arranged in alphabetical order, with the address of each, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 7. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the chairman of the meeting may, and on the request of any stockholder entitled to vote, shall appoint one or more Inspectors of Election. Each Inspector of Election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector of Election at such meeting with strict impartiality and according to the best of his ability. If appointed, Inspectors of Election shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if, prior to such action, a written consent or consents thereto, setting forth such action, is signed by the holders of record of shares of the stock of the Corporation, issued and outstanding and entitled to vote thereon, having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. -2- ARTICLE II DIRECTORS Section 1. Number, Quorum, Term, Vacancies, Removal. The Board of Directors of the Corporation shall consist of at least three but no more than nine persons. The number of directors may be changed by a resolution passed by a majority of the whole Board or by a vote of the holders of record of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote. A majority of the members of the Board of Directors then holding office (but not less than one-third of the total number of directors nor less than two directors) shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. Directors shall hold office until the next annual election and until their successors shall have been elected and shall have qualified, unless sooner displaced. Whenever any vacancy shall have occurred in the Board of Directors, by reason of death, resignation, or otherwise, other than removal of a director with or without cause by a vote of the stockholders, it shall be filled by a majority of the remaining directors, though less than a quorum (except as otherwise provided by law), or by the stockholders, and the person so chosen shall hold office until the next annual election and until his successor is duly elected and has qualified. Any one or more of the directors of the Corporation may be removed either with or without cause at any time by a vote of the holders of record of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote, and thereupon the term of the director or directors who shall have been so removed shall forthwith terminate and there shall be a vacancy or vacancies in the Board of Directors, to be filled by a vote of the stockholders as provided in these By-Laws. Section 2. Meetings, Notice. Meetings of the Board of Directors shall be held at such place either within or without the State of Delaware, as may from time to time be fixed by resolution of the Board, or as may be specified in the call or in a waiver of notice thereof. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board, and special meetings may be held at any time upon the call of two directors, the Chairman of the Board, if one be elected, or the President, by oral, telegraphic or written notice, duly served on or sent or mailed to each director not less than two days before such meeting. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting was held. Notice need not be given of regular meetings of the Board. Any meeting may be held without notice, if all directors are present, or if notice is waived in writing, either before or after the meeting, by those not present. Any member of the Board of Directors, or any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment -3- by means of which all persons participating in the meeting can hear each other and participation in a meeting by such means shall constitute presence in person at such meeting. Section 3. Committees. The Board of Directors may, in its discretion, by resolution passed by a majority of the whole Board, designate from among its members one or more committees which shall consist of one or more directors. The Board may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of the committee. Such committees shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing them. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies in it, or to dissolve it. Section 4. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent or consents thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent or consents is filed with the minutes of proceedings of the Board or committee. Section 5. Compensation. The Board of Directors may determine, from time to time, the amount of compensation which shall be paid to its members. The Board of Directors shall also have power, in its discretion, to allow a fixed sum and expenses for attendance at each regular or special meeting of the Board, or of any committee of the Board; in addition the Board of Directors shall also have power, in its discretion, to provide for and pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. ARTICLE III OFFICERS Section 1. Titles and Election. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall be a President, a Treasurer and a Secretary. The Board of Directors from time to time may elect a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers and agents as it shall deem necessary, and may define their powers and duties. Any number of offices may be held by the same person. Section 2. Terms of Office. The officer shall hold office until their successors are chosen and qualify. Section 3. Removal. Any officer may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the Board of Directors. Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. -4- Section 5. Vacancies. If the office of any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. Section 6. Chairman of the Board. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders, and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 7. President. The President shall be the Chief Executive Officer of the Corporation and, in the absence of the Chairman, shall preside at all meetings of the Board of Directors, and of the stockholders. He shall exercise the powers and perform the duties usual to the chief executive officer and, subject to the control of the Board of Directors, shall have general management and control of the affairs and business of the Corporation; he shall appoint and discharge employees and agents of the Corporation (other than officers elected by the Board of Directors) and fix their compensation; and he shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall have the power to execute bonds, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 8. Vice Presidents. If chosen, the Vice Presidents, in the order of their seniority, shall, in the absence or disability of the President, exercise all of the powers and duties of the President. Such Vice Presidents shall have the power to execute bonds, notes, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties incident to the office of Vice President and as the Board of Directors, or the President shall direct. Section 9. Secretary. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall affix the corporate seal to any instrument requiring it, and when so affixed, it shall be attested by the signature of the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer who may affix the seal to any such instrument in the event of the absence or disability of the Secretary. The Secretary shall have and be the custodian of the stock records and all other books, records and papers of the Corporation (other than financial) and shall see that all books, reports, statements, certificates and other documents and records required by law are properly kept and filed. Section 10. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the directors whenever -5- they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 11. Duties of Officers may be Delegated. In case of the absence or disability of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director. ARTICLE IV INDEMNIFICATION Section 1. Suits By Third Parties. The Corporation shall indemnify any person who was or is in a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Section 2. Suits in the Name of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 3. Successful Defense. To the extent that any person referred to in Sections 1 and 2 of Article IV hereof has been successful on the merits or otherwise in defense of -6- any action, suit or proceeding referred to in such Sections, or in defense or any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 4. Determination to Indemnify. Any indemnification under Sections 1 and 2 of Article IV hereof (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth therein. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, (ii) if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. Section 5. Provisions Nonexclusive. The indemnification provided by, or granted pursuant to, this Article IV shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled, under the Certificate of Incorporation or under any other bylaw, agreement, insurance policy, vote of stockholders or disinterested directors, applicable law or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 6. Insurance. By action of the Board of Directors, notwithstanding any interest of the directors in the action, the Corporation shall have the power to purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent of another Corporation, partnership, joint venture, trust, association or other enterprise, against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not he is indemnified against such liability or expense under the provisions of this Article IV and whether or not the Corporation would have the power or would be required to indemnify him against such liability under the provisions of this Article IV or of the DGCL or by any other applicable law. Section 7. Surviving Corporation. The Board of Directors may provide by resolution that references to "the Corporation" in this Article IV shall include, in addition to this Corporation, all constituent corporations absorbed in a merger with the Corporation so that any person who was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, employee or agent of another corporation, partnership, joint venture, trust, association or other entity shall stand in the same position under the provisions of this Article IV with respect to this Corporation as he would if he had served this Corporation in the same capacity or is or was so serving such other entity at the request of this Corporation, as the case may be. Section 8. Continuing Indemnification. The indemnification provided by, or granted pursuant to, this Article IV shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, and administrators of such person. -7- ARTICLE V CAPITAL STOCK Section 1. Certificates. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the President or a Vice President and by the Secretary, or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, and countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or registered by a registrar other than the Corporation or its employee, the signature of any such officer may be a facsimile signature. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Section 2. Transfer. The shares of stock of the Corporation shall be transferred only upon the books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Section 3. Record Dates. The Board of Directors may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the distribution or allotment of any rights, or the date when any change, conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to receive any distribution or allotment of such rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such distribution or allotment or rights or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 4. Lost Certificates. In the event that any certificate of stock is lost, stolen, destroyed or mutilated, the Board of Directors may authorize the issuance of a new certificate of the same tenor and for the same number of shares in lieu thereof. The Board may in its discretion, before the issuance of such new certificate, require the owner of the lost, stolen, destroyed or mutilated certificate, or the legal representative of the owner to make an affidavit or affirmation setting forth such facts as to the loss, destruction or mutilation as it deems necessary, and to give the Corporation a bond in such reasonable sum as it directs to indemnify the Corporation. -8- ARTICLE VI CHECKS, NOTES, ETC. Section 1. Checks, Notes, Etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, may be signed by the President or any Vice President and may also be signed by such other officer or officers, agent or agents, as shall be thereunto authorized from time to time by the Board of Directors. ARTICLE VII MISCELLANEOUS PROVISIONS Section 1. Offices. The registered office of the Corporation shall be located at the office of The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, in the State of Delaware and said corporation shall be the registered agent of this Corporation in charge thereof. The Corporation may have other offices either within or without the State of Delaware at such places as shall be determined from time to time by the Board of Directors or the business of the Corporation may require. Section 2. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 3. Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation, and the year and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. Section 4. Books. There shall be kept at such office of the Corporation as the Board of Directors shall determine, within or without the State of Delaware, correct books and records of account of all its business and transactions, minutes of the proceedings of its stockholders, Board of Directors and committees, and the stock book, containing the names and addresses of the stockholders, the number of shares held by them, respectively, and the dates when they respectively became the owners of record thereof, and in which the transfer of stock shall be registered, and such other books and records as the Board of Directors may from time to time determine. Section 5. Voting of Stock. Unless otherwise specifically authorized by the Board of Directors, all stock owned by the Corporation, other than stock of the Corporation, shall be voted, in person or by proxy, by the President or any Vice President of the Corporation on behalf of the Corporation. ARTICLE VIII AMENDMENTS Section 1. Amendments. The vote of the holders of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote, shall be necessary -9- at any meeting of stockholders to amend or repeal these By-Laws or to adopt new by-laws. These By-Laws may also be amended or repealed, or new by-laws adopted, at any meeting of the Board of Directors by the vote of at least a majority of the entire Board; provided that any by-law adopted by the Board may be amended or repealed by the stockholders in the manner set forth above. Any proposal to amend or repeal these By-Laws or to adopt new by-laws shall be stated in the notice of the meeting of the Board of Directors or the stockholders, or in the waiver of notice thereof, as the case may be, unless all of the directors or the holders of record of all of the shares of stock of the Corporation, issued and outstanding and entitled to vote, are present at such meeting. -10- EX-4.1 5 y61690exv4w1.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.1 $165,000,000 ASSOCIATED MATERIALS INCORPORATED 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 REGISTRATION RIGHTS AGREEMENT April 23, 2002 Credit Suisse First Boston Corporation UBS Warburg LLC CIBC World Markets Corp. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: Simon Acquisition Corp., a Delaware corporation (the "ACQUISITION CORP."), proposes to issue and sell to Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp. (collectively, the "INITIAL PURCHASERS"), upon the terms set forth in a purchase agreement dated as of April 18, 2002 (the "PURCHASE AGREEMENT"), $165,000,000 aggregate principal amount of its 9 3/4% Senior Subordinated Notes Due 2012 (the "INITIAL SECURITIES") to be guaranteed (as described below). The Initial Securities will be issued pursuant to an Indenture, dated as of April 23, 2002 (the "INDENTURE"), between Associated Materials Incorporated ("AMI"), AMI Management Inc., as guarantor (the "Guarantor") and Wilmington Trust Company, as trustee (the "TRUSTEE"). The Initial Securities are being sold in connection with an agreement and plan of merger, dated as of March 16, 2002 (the "MERGER AGREEMENT"), among Harvest/AMI Holdings, Inc. (now known as Associated Materials Holdings Inc.), Acquisition Corp., and AMI. Pursuant to the Merger Agreement, Acquisition Corp. merged with and into AMI (the "MERGER") on April 19, 2002 (the "Merger Closing Date") with AMI surviving the Merger. Immediately after the Merger Closing Date, AMI and the Guarantor executed an assumption agreement (the "ASSUMPTION AGREEMENT"), substantially in the form attached as Exhibit I to the Purchase Agreement, pursuant to which AMI, as survivor of the Merger, assumed all of the obligations of Acquisition Corp. under the Purchase Agreement, and caused the Guarantor to become a party to such Agreement as Guarantor. Reference to this "AGREEMENT" as of and after the Merger Closing Date will refer to this Registration Rights Agreement together with the Assumption Agreement, references to the Purchase Agreement as of and after the Merger Closing Date will refer to the Purchase Agreement together with the Assumption Agreement, and references to the Indenture as of and after the Merger Closing Date will refer to the Indenture. As used herein, the "COMPANY" shall mean Acquisition Corp. prior to the Merger Closing Date and, at and as of the Merger Closing Date, AMI and the Guarantor. -2- As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of the Initial Purchasers and the subsequent holders of the Securities (as defined below) (collectively the "HOLDERS"), as follows: 1. Registered Exchange Offer. Unless not permitted by applicable law, the Company shall prepare and, not later than 90 days (such 90th day being a "FILING DEADLINE") after the Closing Date (as defined in the Purchase Agreement), file with the Securities and Exchange Commission (the "COMMISSION") a registration statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to a proposed offer (the "REGISTERED EXCHANGE OFFER") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities of the Company issued under the Indenture, identical in all material respects to the Initial Securities and registered under the Securities Act, except for provisions relating to transfer restrictions and Additional Interest (the "EXCHANGE SECURITIES"). The Company shall use its reasonable best efforts to (i) cause such Exchange Offer Registration Statement to become effective under the Securities Act within 180 days after the Closing Date (such 180th day being an "EFFECTIVENESS DEADLINE") and (ii) keep the Exchange Offer Registration Statement effective for not less than 40 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "EXCHANGE OFFER REGISTRATION PERIOD"). If the Company commences the Registered Exchange Offer, the Company will be required to consummate the Registered Exchange Offer no later than 40 days after the date on which the Exchange Offer Registration Statement is declared effective (such 40th day being the "CONSUMMATION DEADLINE"). Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly as practicable commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Securities and Private Exchange Securities (as defined below) acquired in exchange for Initial Securities constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. Clauses (i) and (ii) above shall also contain all other information with respect to such sales as the Commission may require in order to permit such sale pursuant thereto. -3- The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer, at such broker-dealer's request, for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "PRIVATE EXCHANGE") for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects to the Initial Securities except for provisions relating to transfer restrictions and Additional Interest (the "PRIVATE EXCHANGE SECURITIES"). The Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. The Private Exchange Securities, however, will carry a restrictive legend. The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the "SECURITIES". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply with all applicable laws. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and -4- (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange. The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture (although the Private Exchange Securities will bear a restrictive legend) and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company, in writing (which may be contained in the Letter of Transmittal contemplated by the Registered Exchange Offer), that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies as to form in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer. The Company will pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable actions to effect a change in Commission policy. In connection with the foregoing, the Company will take all such other commercially reasonable actions as may be reasonably requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon -5- which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff. 2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the 220th day after the Closing Date, (iii) any Initial Purchaser so requests in writing, within 20 days after the consummation of the Registered Exchange Offer, with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive registered Exchange Securities on the date of the exchange and any such Holder so requests in writing, within 20 days after the consummation of the Registered Exchange Offer, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv) the receipt of the required notice, being a "TRIGGER DATE"): (a) The Company shall promptly (but in no event more than 60 days after the Trigger Date (such 60th day being a "FILING DEADLINE")) file with the Commission and thereafter use its reasonable best efforts to cause to be declared effective no later than 180 days after the Trigger Date (such 180th day being an "EFFECTIVENESS DEADLINE") a registration statement (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, a "REGISTRATION STATEMENT") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "SHELF Registration"); provided,however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its best reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (i) such action is required by applicable law or (ii) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 3(j) hereof, if applicable. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply as to form in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material -6- fact or omit to state a 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. 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information substantially in the form set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders (provided all such requesting Holders have provided the Company with all required information). Such Holders must furnish to the Company in writing, within 10 days after receipt of a request therefor, such information and any other information the Company may reasonably request for use in connection with any Shelf Registration Statement or prospectus or preliminary prospectus included therein. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any post-effective amendment thereto has become effective; -7- (ii) of any request by the Commission for post-effective amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, upon request without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto (but in no event including supplements except as provided in paragraph (g) below), including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those if any, incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Exchange Securities and Private Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the pro- -8- spectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities pursuant to any Registration Statement the Company shall use its reasonable best efforts to register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject or (iii) make any change to the Company's charter documents, by-laws or similar organizational documents or any agreement between the Company and its stockholders. (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). Furthermore, the Company may allow the Shelf Registration Statement and the related prospectus to cease to become effective and usable if the Company is in possession of material non-public information relating to a proposed financial, recapitalization, acquisition, business combination or other material transaction involving the Company or its subsidiaries which the board of directors of the Company determines in good faith would require disclosure in the Shelf Registration Statement by the Company of such material non-public information for which the Company has a bona fide business purpose for not disclosing and disclosure of such information is not otherwise required by law; provided (i) that the Company notifies the holders within two business days after such board of directors makes such decision (a "Transaction-Related Suspension Notice") and (ii) that number of days during which such Registration Statement was not effective or usable pursuant to the foregoing provisions shall last no longer than 60 days in any 12-month period. The time period regarding the effectiveness of such Registration Statement set forth in Section 2 or 3 hereof, as applicable, shall be extended by a number of days -9- equal to the number of days in the period from and including the date of delivery of the Transaction Related Suspension to the date such Holder is advised in writing by the Company that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings that are incorporated by reference in the prospectus. During any such Transaction Related Suspension, no Additional Interest shall accrue or otherwise be payable to the Holders. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall use its reasonable best efforts to cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. Such Holders must furnish to the Company in writing, within 10 days after written receipt of a request therefor, such information and any other information the Company may reasonably request for use in connection with any Shelf Registration Statement or prospectus or preliminary prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Additional Interest pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate -10- documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof. Any such access granted to the inspectors under this Section 3(p) shall be subject to the prior receipt by the Company of written undertakings to preserve the confidentiality of any information deemed by the Company to be confidential, in form and substance reasonably satisfactory to the Company. Records that the Company determines, in good faith, to be confidential and any records that it notifies the inspectors are confidential shall not be disclosed by the inspectors unless (i) the Company in its sole discretion based on advice of counsel determines the disclosure of such records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such records in ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly involving such inspector and arising out of, based upon, relating to or involving this Agreement or any transactions contemplated hereby or arising hereunder or (iv) the information in such records has been made generally available to the public. Each selling Holder of such Transfer Restricted Security will be required to further agree that it will, upon learning that disclosure of such records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the records deemed confidential. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such information is generally available to the public. (q) In the case of any underwritten Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (which may be its internal counsel) (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, a statement that no facts have come to the attention of such counsel that would cause it to believe that such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and any documents incorporated by reference therein (except for the financial statements, financial schedules and notes thereto and any other financially derived statistics included therein or omitted therefrom, as to which such counsel need not -11- express a view) contained an untrue statement of a material fact or omitted to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act) (in each case subject to customary qualifications and exemptions); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the applicable Securities and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) of the Purchase Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied. (t) The Company will use its reasonable best efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "RULES") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 -12- hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. 4. Registration Expenses. (a) Except as set forth in Section 4(b) below, all expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation; (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing (including printing certificates for the Securities to be issued in the Registered Exchange Offer and the Private Exchange and printing of prospectuses contained in the Registration Statement), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Exchange Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. (b) Each Holder of Securities shall pay all underwriting discounts and commissions, if any, and the fees of any counsel retained by or on behalf of the underwriters, and transfer taxes, if any, related to the sale or disposition of such Holder's Securities pursuant to any Shelf Registration Statement. (c) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities (as defined below) who are tendering Initial Securities in the Registered Exchange Offer and/or selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cahill Gordon & Reindel unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "INDEMNIFIED Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement -13- or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus (as amended or supplemented at the time of sale) relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus (as amended or supplemented at the time of sale) if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders in connection with any Registration Statement involving an underwritten public offering. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending or appearing in any judicial or extra-judicial proceeding, in any capacity, including but not limited to, defendant, co-defendant, third-party defendant or witness in connection with any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if -14- a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above except to the extent that the indemnifying party has become materially prejudiced (through forfeiture of substantive rights or defenses) by such omission. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld or delayed), effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section (d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the -15- Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Additional Interest Under Certain Circumstances. (a) Additional interest (the "ADDITIONAL Interest") with respect to the Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "REGISTRATION DEFAULT"): (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline; (ii) any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline; (iii) the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or (iv) any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately. Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. Additional Interest shall accrue on the Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.25% per annum (the "ADDITIONAL INTEREST RATE") for the first 90-day period immediately following the occurrence of such Registration Default. The Additional Interest Rate shall increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional Interest Rate of 1.0% per annum. (b) A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such -16- post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured or until the Company is no longer required pursuant to this Agreement to keep such Registration Statement or related prospectus usable. When any Registration Default is cured, the Additional Interest on such Transfer Restricted Security shall reset to the Additional Interest, if any, incurred prior to such Registration Default. (c) Any amounts of Additional Interest due pursuant to Section 6(a) will be payable in cash on the regular interest payment dates with respect to the Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the principal amount of the Securities and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the date on which such Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A under the Securities Act. The Company covenants that it will take such further action as any Holder of Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("MANAGING UNDERWRITERS") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering and shall be reasonably acceptable to the Company. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes -17- all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 1 and 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 1 and 2 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Registered Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers; Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group -18- with a copy to: Cahill Gordon & Reindel Eighty Pine Street New York, NY 10005 Fax No.: (212) 269-5420 Attention: Luis R. Penalver, Esq. (3) if to the Issuer, at its address as follows: Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, NY 10172 Fax No.: Attention: Ira D. Kleinman with a copy to: White & Case LLP 1155 Avenue of the Americas New York, NY 10010 Fax No.: Attention: Jonathan Kahn, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (f) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. -19- (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (m) Submission to Jurisdiction. By the execution and delivery of this Agreement, AMI and each of the Guarantor submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. [the remainder of this page is intentionally left blank] If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers, the Company and Guarantor in accordance with its terms. Very truly yours, ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway --------------------------------- Name: D. Keith LaVanway Title: Vice President and Chief Financial Officer AMI MANAGEMENT COMPANY, as Guarantor By: /s/ D. Keith LaVanway --------------------------------- Name: D. Keith LaVanway Title: Vice President, Chief Financial Officer, Secretary and Treasurer The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION UBS WARBURG LLC CIBC WORLD MARKETS CORP. By: Credit Suisse First Boston Corporation By: /s/ Edward M. Yorke --------------------------- Name: Edward M. Yorke Title: Managing Director ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 200 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.(1) The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. - ---------- 1 In addition, the legend required by Item 502(e) of Regulation S-K will appear on the inside front cover page of the Exchange Offer prospectus. ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ____________________________ Address: _________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.2 6 y61690exv4w2.txt INDENTURE GOVERNING THE 9 3/4% SENIOR SUB. NOTES EXHIBIT 4.2 ASSOCIATED MATERIALS INCORPORATED as Issuer INDENTURE Dated as of April 23, 2002 WILMINGTON TRUST COMPANY Trustee CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- --------- 310(a)..................................................... 7.10 (a)(3).................................................. N.A. (a)(4).................................................. N.A. (b)..................................................... 7.03, 7.08, 7.10 (b)(1).................................................. 7.10 (c)..................................................... N.A. 311........................................................ 7.03 311(a)..................................................... 7.11 (b)..................................................... 7.11 (c)..................................................... N.A. 312(a)..................................................... 2.05 (b)..................................................... 13.03 (c)..................................................... 13.03 313(a)..................................................... 7.06 (b)(1).................................................. N.A. (b)..................................................... 7.06 (c)..................................................... N.A. (d)..................................................... N.A. 314(a)..................................................... 4.02 314(a)(4).................................................. 4.11 (b)..................................................... N.A. (c)(1).................................................. N.A. (c)(2).................................................. N.A. (c)(3).................................................. N.A. (d)..................................................... N.A. (e)..................................................... N.A. (f)..................................................... N.A. 315(a)..................................................... 7.01 (b)..................................................... N.A. (c)..................................................... N.A. (d)..................................................... N.A. (e)..................................................... N.A. 316(a)(last sentence)...................................... N.A. (a)(1)(A)............................................... N.A. (a)(1)(B)............................................... N.A. (a)(2).................................................. N.A. (b)..................................................... N.A. 317(a)(1).................................................. N.A. (a)(2).................................................. N.A. (b)..................................................... N.A. 318(a)..................................................... N.A.
TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions............................................. 1 SECTION 1.02. Other Definitions....................................... 30 SECTION 1.03. Incorporation by Reference of Trust Indenture Act....... 31 SECTION 1.04. Rules of Construction................................... 31 ARTICLE 2 The Securities SECTION 2.01. Form and Dating......................................... 32 SECTION 2.02. Execution and Authentication............................ 33 SECTION 2.03. Registrar and Paying Agent.............................. 33 SECTION 2.04. Paying Agent To Hold Money in Trust..................... 34 SECTION 2.05. Securityholder Lists.................................... 34 SECTION 2.06. Transfer and Exchange................................... 34 SECTION 2.07. Replacement Securities.................................. 35 SECTION 2.08. Outstanding Securities.................................. 35 SECTION 2.09. Temporary Securities.................................... 36 SECTION 2.10. Cancellation............................................ 36 SECTION 2.11. Defaulted Interest...................................... 36 SECTION 2.12. CUSIP Numbers........................................... 37 SECTION 2.13. Issuance of Additional Securities....................... 37 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee...................................... 38 SECTION 3.02. Selection of Securities To Be Redeemed.................. 38 SECTION 3.03. Notice of Redemption.................................... 38 SECTION 3.04. Effect of Notice of Redemption.......................... 39 SECTION 3.05. Deposit of Redemption Price............................. 39 SECTION 3.06. Securities Redeemed in Part............................. 40 ARTICLE 4 Covenants SECTION 4.01. Payment of Securities................................... 40 SECTION 4.02. SEC Reports............................................. 40
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Page ---- SECTION 4.03. Limitation on Indebtedness.............................. 41 SECTION 4.04. Limitation on Restricted Payments....................... 45 SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries............................... 49 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock...... 50 SECTION 4.07. Limitation on Affiliate Transactions.................... 53 SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries............................... 55 SECTION 4.09. Change of Control....................................... 56 SECTION 4.10. Future Guarantors....................................... 58 SECTION 4.11. Compliance Certificate.................................. 58 SECTION 4.12. Further Instruments and Acts............................ 58 ARTICLE 5 Successor Company SECTION 5.01. When Company May Merge or Transfer Assets............... 58 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default....................................... 60 SECTION 6.02. Acceleration............................................ 63 SECTION 6.03. Other Remedies.......................................... 63 SECTION 6.04. Waiver of Past Defaults................................. 63 SECTION 6.05. Control by Majority..................................... 64 SECTION 6.06. Limitation on Suits..................................... 64 SECTION 6.07. Rights of Holders To Receive Payment.................... 65 SECTION 6.08. Collection Suit by Trustee.............................. 65 SECTION 6.09. Trustee May File Proofs of Claim........................ 65 SECTION 6.10. Priorities.............................................. 66 SECTION 6.11. Undertaking for Costs................................... 66 SECTION 6.12. Waiver of Stay or Extension Laws........................ 66 ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee....................................... 67 SECTION 7.02. Rights of Trustee....................................... 68 SECTION 7.03. Individual Rights of Trustee............................ 70 SECTION 7.04. Trustee's Disclaimer.................................... 70 SECTION 7.05. Notice of Defaults...................................... 70
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Page ---- SECTION 7.06. Reports by Trustee to Holders........................... 70 SECTION 7.07. Compensation and Indemnity.............................. 71 SECTION 7.08. Replacement of Trustee.................................. 72 SECTION 7.09. Successor Trustee by Merger............................. 73 SECTION 7.10. Eligibility; Disqualification........................... 73 SECTION 7.11. Preferential Collection of Claims Against Company....... 73 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance........ 74 SECTION 8.02. Conditions to Defeasance................................ 75 SECTION 8.03. Application of Trust Money.............................. 77 SECTION 8.04. Repayment to Company.................................... 77 SECTION 8.05. Indemnity for Government Obligations.................... 77 SECTION 8.06. Reinstatement........................................... 77 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders.............................. 78 SECTION 9.02. With Consent of Holders................................. 79 SECTION 9.03. Compliance with Trust Indenture Act..................... 80 SECTION 9.04. Revocation and Effect of Consents and Waivers........... 80 SECTION 9.05. Notation on or Exchange of Securities................... 81 SECTION 9.06. Trustee To Sign Amendments.............................. 81 SECTION 9.07. Payment for Consent..................................... 81 ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate................................ 81 SECTION 10.02. Liquidation, Dissolution, Bankruptcy.................... 82 SECTION 10.03. Default on Senior Indebtedness of the Company........... 82 SECTION 10.04. Acceleration of Payment of Securities................... 84 SECTION 10.05. When Distribution Must Be Paid Over..................... 84 SECTION 10.06. Subrogation............................................. 84 SECTION 10.07. Relative Rights......................................... 85 SECTION 10.08. Subordination May Not Be Impaired by Company............ 85 SECTION 10.09. Rights of Trustee and Paying Agent...................... 85 SECTION 10.10. Distribution or Notice to Representative................ 86
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Page ---- SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate................................... 86 SECTION 10.12. Trust Moneys Not Subordinated........................... 86 SECTION 10.13. Trustee Entitled To Rely................................ 86 SECTION 10.14. Trustee To Effectuate Subordination..................... 87 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company........................................ 87 SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions................... 87 ARTICLE 11 Subsidiary Guaranties SECTION 11.01. Guaranties.............................................. 87 SECTION 11.02. Limitation on Liability................................. 90 SECTION 11.03. Successors and Assigns.................................. 90 SECTION 11.04. No Waiver............................................... 90 SECTION 11.05. Modification............................................ 91 SECTION 11.06. Release of Subsidiary Guarantor......................... 91 ARTICLE 12 Subordination of Subsidiary Guaranties SECTION 12.01. Agreement To Subordinate................................ 91 SECTION 12.02. Liquidation, Dissolution, Bankruptcy.................... 92 SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor.. 92 SECTION 12.04. Demand for Payment...................................... 94 SECTION 12.05. When Distribution Must Be Paid Over..................... 94 SECTION 12.06. Subrogation............................................. 94 SECTION 12.07. Relative Rights......................................... 94 SECTION 12.08. Subordination May Not Be Impaired by Company............ 95 SECTION 12.09. Rights of Trustee and Paying Agent...................... 95 SECTION 12.10. Distribution or Notice to Representative................ 95 SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment............................... 96 SECTION 12.12. Trustee Entitled To Rely................................ 96 SECTION 12.13. Trustee To Effectuate Subordination..................... 96 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor............................... 97 SECTION 12.15. Reliance by Holders of Senior Indebtedness of Subsidiary Guarantors on Subordination Provisions................ 97
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Page ---- ARTICLE 13 Miscellaneous SECTION 13.01. Trust Indenture Act Controls............................ 97 SECTION 13.02. Notices................................................. 97 SECTION 13.03. Communication by Holders with Other Holders............. 98 SECTION 13.04. Certificate and Opinion as to Conditions Precedent...... 99 SECTION 13.05. Statements Required in Certificate or Opinion........... 99 SECTION 13.06. When Securities Disregarded............................. 99 SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............ 100 SECTION 13.08. Legal Holidays.......................................... 100 SECTION 13.09. Governing Law........................................... 100 SECTION 13.10. No Recourse Against Others.............................. 100 SECTION 13.11. Successors.............................................. 100 SECTION 13.12. Multiple Originals...................................... 101 SECTION 13.13. Table of Contents; Headings............................. 101 SECTION 13.14. No Adverse Interpretation of Other Agreements........... 101
Rule 144A/Regulation S Appendix Exhibit 1 - Form of Initial Security Exhibit A - Form of Exchange Security or Private Exchange Security -v- INDENTURE dated as of April 23, 2002, among ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation (the "Company"), the Subsidiary Guarantor and WILMINGTON TRUST COMPANY, a Delaware corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's Initial Securities, Exchange Securities, Private Exchange Securities and Additional Securities (collectively, the "Securities"). ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Additional Assets" means: (1) any property, plant, equipment or other assets used or usable in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related Business. "Additional Securities" means, subject to the Company's compliance with Section 4.03, 9 3/4% Senior Subordinated Securities Due 2012 issued from time to time after the Issue Date under the terms of this Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other than Exchange Securities or Private Exchange Securities issued pursuant to an exchange offer for other Securities outstanding under this Indenture). "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of -2- such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.04 and 4.07 only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease (other than operating leases entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary, other than, in the case of clauses (1), (2) and (3) above, (A) a disposition or transfer by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (B) for purposes of Section 4.06 only, (x) a disposition that constitutes a Restricted Payment permitted by Section 4.04 or a Permitted Investment or (y) a disposition of all or substantially all the assets of the Company in accordance with Section 5.01; (C) sales or other dispositions of obsolete, uneconomical, negligible, damaged, worn-out or surplus assets in the -3- ordinary course of business (including but not limited to equipment, inventory and intellectual property); (D) a disposition of assets with a fair market value of less than or equal to $1.0 million, not to exceed $5.0 million in the aggregate in any 12 month period; (E) sale or discount of accounts receivable in connection with the compromise or collection thereof; (F) sale or exchange of equipment in connection with the purchase or other acquisition of equipment; and (G) sales or grants of licenses to use intellectual property; provided, however, that a disposition of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of this Indenture described under Section 4.09 and/or the provisions described under Section 5.01 and not by the provisions described under Section 4.06. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of "Capital Lease Obligation". "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Facilities" means the bank facilities under the Credit Agreement. -4- "Bank Indebtedness" means all Obligations pursuant to the Credit Agreement. "Board of Directors" with respect to a Person means the Board of Directors of such Person or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following events: (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (directly or indirectly) one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), except that such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, and except that any Person that is deemed to have beneficial ownership of shares solely as the result of being part of a group pursuant to Rules 13d-5(b)(1) of the Exchange Act shall be deemed not to have beneficial ownership of any shares held by a Permitted Holder forming a part of such group), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in Rule 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the -5- Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company (for the purposes of this clause (1), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person is the beneficial owner (as defined in this provision), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in this provision), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); (2) individuals who after the first board meeting after the consummation of the Merger constituted the Board of Directors of the Company or Parent (together with any new directors whose election by such Board of Directors of the Company of the Parent Board or whose nomination for election by the shareholders of the Company or the Parent, as the case may be, was approved by a vote of a majority of the directors of the Company or the Parent, as the case may be, then still in office who were either directors after the first board meeting after the consummation of the Merger or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company or the Parent then in office; (3) the adoption of a plan relating to the liquidation or dissolution of the Company; or (4) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, -6- at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Company Order" means a written order from the Company to the Trustee requesting the Trustee to authenticate the Securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which internal financial statements are available on or prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (and, if such Indebtedness is revolving Indebtedness, the amount of Indebtedness deemed to be outstanding for such period shall be the average outstanding amount of such Indebtedness during such period); (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to -7- repay, repurchase, defease or otherwise discharge such Indebtedness; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, EBITDA for such period shall be reduced by an amount equal to EBITDA (if positive) attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to EBITDA (if negative), attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. -8- For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets (including Capital Stock), the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in accordance with Regulation S-X under the Exchange Act or as otherwise acceptable to the SEC. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, without duplication, (1) interest expense attributable to Capital Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) amortization of debt discount and debt issuance cost; (3) capitalized interest; (4) non-cash interest expense; (5) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (6) net payments or receipts pursuant to Hedging Obligations; (7) dividends declared and paid in cash or Disqualified Stock in respect of (A) all Preferred Stock of Restricted Subsidiaries and (B) all Disqualified Stock of the Company, in each case held by Persons other than the Company or a Wholly Owned Subsidiary in each case other than dividends payable in Qualified Stock; (8) interest incurred in connection with Investments in discontinued operations; -9- (9) interest accruing on any Indebtedness of any other Person (other than a Subsidiary) to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary and such Indebtedness is accelerated or any payment is actually made in respect of such Guarantee; and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or a Restricted Subsidiary thereof) in connection with Indebtedness Incurred by such plan or trust, and less, to the extent included in such interest expense, the amortization during such period of capitalized financing costs; provided, however, that the aggregate amount of amortization relating to any such capitalized financing costs deducted in calculating Consolidated Interest Expense shall not exceed 5.0% of the aggregate amount of the financing giving rise to such capitalized financing costs. "Consolidated Net Income" means, for any period, the sum of (1) net income of the Company and its Subsidiaries and (2) to the extent deducted in calculating net income of the Company and its Subsidiaries, any non-recurring fees, expenses or charges related to the Transactions; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the exclusion contained in clause (3) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (2) below); and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; -10- (2) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the exclusion contained in clause (3) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (3) any gain or loss (and the related tax effects) realized upon the sale or other disposition of any assets of the Company, its consolidated Restricted Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person; (4) extraordinary, non-cash or non-recurring gains, losses or charges, including (i) those related to impairment of goodwill and other intangible assets and (ii) the write-off of deferred financing costs and related premiums paid in connection with any early extinguishment of Indebtedness and the related tax effects; (5) the cumulative effect of a change in accounting principles; and (6) any net income or loss attributable to discontinued operations. Notwithstanding the foregoing, for the purposes of Section 4.04 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repay- -11- ments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under Section 4.04(a)(3)(D). "Credit Agreement" means the Credit Agreement dated as of April 19, 2002, by and among the Company, the lenders referred to therein, UBS AG, Stamford Branch, as Administrative Agent, Credit Suisse First Boston, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, together with the related documents thereto (including any guarantees and security documents, whether in effect on the Issue Date or entered into thereafter), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness", with respect to a Person, means (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such Person which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated by such Person in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, that portion of any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: -12- (1) matures (excluding any maturity as a result of an optional redemption by the issuer thereof) or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the date that is 91 days after the Stated Maturity of the Securities; provided, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy obligations as a result of such employee's death or disability; and provided, further, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the date that is 91 days after the Stated Maturity of the Securities shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Securities in Section 4.06 and 4.09 of this Indenture. The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to this Indenture; provided, however, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price shall be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person. "EBITDA" for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: -13- (1) all income tax expense of the Company and its consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid operating activity item that was paid in cash in a prior period); and (4) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period); in each case for such period determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion, including by reason of minority interest) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Financing" means the financing by Parent of at least $172.0 million of equity capital to provide a portion of the funds for the Equity Tender Offer and the Merger. "Equity Offering" means a primary offering of common stock or common equity of Parent or the Company. "Equity Tender Offer" means the cash tender offer for 100% of the shares of common stock of the Company at a price of $50.00 per share. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "Exchange Securities" means the debt securities of the Company issued pursuant to this Indenture in exchange for, and in an -14- aggregate principal amount equal to, the Securities, in compliance with the terms of the Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entity as approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of busi- -15- ness. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranty" means each Subsidiary Guaranty, as applicable. "Guaranty Agreement" means a supplemental indenture, in a form satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the Company's obligations with respect to the Securities on the terms provided for in this Indenture. "Harvest Management Services Agreement" means the management agreement, dated as of April 19, 2002 between Harvest Partners, Inc. and the Company entered into in connection with the Transaction. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement or similar Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (1) the principal in respect of (A) indebtedness of such Person for borrowed money and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person -16- under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bankers' acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with this Indenture (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided, however, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time. "Indenture" means this Indenture as amended or supplemented from time to time. -17- "Independent Qualified Party" means an investment banking firm, accounting firm or appraisal firm of national standing; provided, however, that such firm is not an Affiliate of the Company. "Interest Rate Agreement" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements to protect such Person against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. Except as otherwise provided for herein, the amount of an Investment shall be its fair value at the time the Investment is made and without giving effect to subsequent changes in value. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and Section 4.04: (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors of the Company. "Issue Date" means the date on which the Securities are originally issued. -18- "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. "Lenders" means the lenders from time to time party to the Credit Agreement. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Merger" means the merger of Simon Acquisition Corp. with and into Associated Materials Incorporated pursuant to the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger dated as of March 16, 2002 by and among Simon Acquisition Corp., Parent and the Company. "Merger Date" means the day the Merger was consummated. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form), in each case net of: (1) all legal, title and recording tax expenses, underwriting discounts, commissions and other fees and expenses incurred (including, without limitation, fees and expenses of counsel, accountants and investment bankers), and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; -19- (3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition; and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any current or contingent liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually Incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Tender Offer" means the tender offer by the Company of all its existing 9 1/4% senior subordinated securities due 2008, including the change of control offer required pursuant to the indenture governing the existing 9 1/4% senior subordinated securities and the defeasance of any remaining existing 9 1/4% senior subordinated securities after such change of control offer. "Obligations" means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness. "Offerings" means the issue and sale of the Securities pursuant to the Purchase Agreement. "Offering Circular" means an offering circular, dated as of April 18, 2002, relating to the Securities offered by the Company. "Officer" means the Chairman of the Board, the President, Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers one of whom shall be the principal financial officer. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. -20- "Parent" means Associated Materials Holdings, Inc., a Delaware corporation, and its successors. "Parent Board" means the Board of Directors of the Parent or any committee thereof duly authorized to act on behalf of such Board. "Permitted Holders" means Harvest Partners, Inc. and its affiliates and funds managed by Harvest Partners, Inc. and/or its affiliates. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (3) cash and Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, moving, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees, directors or consultants made in the ordinary course of business in an aggregate amount not to exceed $2.0 million at any time outstanding; (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and -21- owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 4.06; (9) any Person where such Investment was acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (10) Hedging Obligations of the Company's or any Restricted Subsidiary's business and not for the purpose of speculation; (11) Investments existing on the Issue Date and any such Investment that replaces or refinances such Investment in such Person existing on the Issue Date in an amount not exceeding the amount of the Investment being replaced or refinanced; provided, however, the new Investment is on terms and conditions no less favorable than the Investment being renewed or replaced; (12) Guarantees of Indebtedness otherwise permitted under this Indenture; (13) Investments the payment of which consists of Qualified Stock of Parent or the Company; (14) Investments in the Securities; (15) Investments consisting of obligations of one or more consultants, officers, directors or other employees of the Company or any of its Subsidiaries in connection with such consultants, officers', directors' or employees' acquisition of shares of capital stock of Parent or the Company so long as no cash is paid by the Company or any of its Subsidiaries to such consultants, officers, directors or employees in connection with the acquisition of any such obligations; and -22- (16) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding, not to exceed $2.5 million. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Purchase Agreement" means a purchase agreement dated April 18, 2002 between Simon Acquisition Corp. and the Initial Purchasers (as defined therein) to effectuate the Offering. "Qualified Stock" means any Capital Stock that is not Disqualified Stock. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary incurred pursuant to Section 4.03(a) or Section 4.03(b)(3), (4), (5), (7), (8) or (10); provided, however, that: (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is -23- equal to or greater than the Average Life of the Indebtedness being Refinanced; and (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided, further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. "Registration Rights Agreement" means the Registration Rights Agreement among the Company, the Subsidiary Guarantor, and Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp. entered into in connection with the issuance of the Securities. "Related Business" means any business in which the Company or any of its Restricted was engaged on the Issue Date and any business reasonably related, ancillary or complementary to any business of the Company or any of its Restricted Subsidiaries in which the Company or any of its Restricted Subsidiaries was engaged on the Issue Date or a reasonable expansion thereof. "Representative" means with respect to a Person any trustee, agent or representative (if any) for an issue of Senior Indebtedness of such Person. "Restricted Payment" with respect to any Person means: (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by -24- any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition); or (4) the making of any Investment (other than a Permitted Investment) in any Person. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the U.S. Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company or a Subsidiary Guarantor for borrowed money that is secured by a Lien on assets of the Company or a Subsidiary Guarantor. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Senior Indebtedness" means with respect to any Person: (1) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred, including, and together with, all Obligations under the Credit Agreement; and (2) accrued and unpaid interest (including interest accruing on or after the filing of, or which would have accrued but for the filing of, any petition in bankruptcy or for reor- -25- ganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of such Person for borrowed money, including, and together with, all Obligations under the Credit Agreement, (B) Hedging Obligations and (C) indebtedness evidenced by Securities, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that such obligations are subordinate or pari passu in right of payment to the Securities or the Guaranty of such Person, as the case may be; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary; (2) any liability for Federal, state, local or other taxes owed or owing by such Person; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business including guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person; or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture, except to the extent that the Indebtedness so incurred was extended by the lenders thereof in reliance on a certificate executed and delivered by the president, chief executive officer or chief financial or accounting officer of the Company in which certificate such officer certified that the incurrence of such Indebtedness was permitted under the proviso in paragraph (a) or clause (1) or (13) in paragraph (b) of Section 4.03. "Senior Subordinated Indebtedness" means, with respect to a Person, the Securities (in the case of the Company), the Guaranty (in the case of a Subsidiary Guarantor) and any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank pari passu with the Securities or such Guaranty, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person. -26- "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Simon Acquisition Corp." means Simon Acquisition Corp., a Delaware corporation. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means, with respect to a Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities or a Guaranty of such Person, as the case may be, pursuant to a written agreement to that effect. "Subordinated Securities Obligations" means all Obligations with respect to the Securities, including, without limitation, principal, premium (if any), interest payable pursuant to the terms of the Securities (including upon the acceleration or redemption thereof), together with and including any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise. "Subsidiary" means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Subsidiary Guarantor" means AMI Management Company and each domestic Subsidiary of the Company that executes this Indenture as a guarantor on the Issue Date and each other domestic Subsidiary of the Company that thereafter guarantees the Securities pursuant to the terms of this Indenture. -27- "Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Securities. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than 365 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-l" (or higher) according to Moody's Investors Service, Inc. or "A-l" (or higher) according to Standard & Poor's Ratings Group; (5) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.; and -28- (6) money market funds at least 95% of the assets of which constitute Temporary Cash Investments of the kind described in clauses (1) through (5) of this definition. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in Section 9.03. "Transactions" means, collectively, the Merger, the Equity Tender Offer, the Note Tender Offer, the Equity Financing, the Bank Facilities and the Offering. "Trust Officer" means any officer of the Trustee having direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of their knowledge of and familiarity with the particular subject. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (1) any Subsidiary of an Unrestricted Subsidiary; and (2) any Subsidiary of the Company which is designated after the Issue Date as an Unrestricted Subsidiary by a board resolution of the Board of Directors of the Company; provided that a Subsidiary may be so designated as an Unrestricted Subsidiary only if: (A) such designation is in compliance with Section 4.04; (B) immediately after giving effect to such designation, the Company could have incurred at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03; (C) no Default or Event of Default has occurred and is continuing or results therefrom; and (D) neither the Company nor any Restricted Subsidiary will at any time -29- (i) provide a guarantee of, or similar credit support to, any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (ii) be directly or indirectly liable for any Indebtedness of such Subsidiary or (iii) be directly or indirectly liable for any other Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon (or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity) upon the occurrence of a default with respect to any other Indebtedness that is Indebtedness of such Subsidiary (including any corresponding right to take enforcement action against such Subsidiary), except in the case of clause (i) or (ii) to the extent (i) that the Company or such Restricted Subsidiary could otherwise provide such a guarantee or incur such Indebtedness (other than as Permitted Indebtedness) pursuant to Section 4.03 and (ii) the provision of such guarantee and the incurrence of such Indebtedness otherwise would be permitted under Section 4.04. The Trustee will be provided with an Officers' Certificate stating that such designation is permitted and setting forth the basis upon which the calculations required by this definition were computed, together with a copy of the board resolution adopted by the Board of Directors of the Company making such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (A) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. -30- "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. Except as described in Section 4.03, whenever it is necessary to determine whether the Company has complied with any covenant in this Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and other legally required qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction" 4.07 "Bankruptcy Law" 6.01 "Blockage Notice" 10.03 "covenant defeasance option" 8.01(b) "Custodian" 6.01 "Event of Default" 6.01 "legal defeasance option" 8.01(b) "Legal Holiday" 13.08
-31-
Defined in Term Section ---- ------- "pay its Subsidiary Guaranty" 12.03 "pay the Securities" 10.03 "Payment Blockage Period" 10.03 "Payment Default" 10.03, 12.03 "Permitted Indebtedness" 4.03(b) "Registrar" 2.03 "Subsidiary Guaranty Blockage Notice" 12.03 "Subsidiary Guaranty Payment Blockage Period" 12.03 "Successor Company" 5.01(a)(1)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on this Indenture securities means the Company and any other obligor on this Indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; -32- (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the Issue Date. ARTICLE 2 The Securities SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix") which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture ("Exhibit A"). The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its -33- authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been duly and validly authenticated and issued under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Upon receipt of a Company Order, the Trustee or authenticating agent shall authenticate the Securities for original issue up to the aggregate principal amount stated in the Securities. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Wholly Owned Subsidiary -34- incorporated or organized within The United States of America may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints The Depositary Trust Company ("DTC") to act as Depositary with respect to the Global Securities. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal or interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders that complies with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(1) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request -35- to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser. If the principal amount of and interest due on any Security is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. -36- SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for such definitive Securities upon surrender of such temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall be entitled to the same benefits under this Indenture as a Holder of definitive Securities. SECTION 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation. The Trustee shall dispose of such cancelled Securities in accordance with its customary procedures unless the Company directs the Trustee to deliver canceled Securities to the Company. Upon written request of the Company, certification of the destruction of all canceled Securities will be delivered to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. -37- SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. SECTION 2.13. Issuance of Additional Securities. The Company shall be entitled, subject to its compliance with Section 4.03, to issue Additional Securities under this Indenture which shall have identical terms as the Initial Securities issued on the Issue Date, other than with respect to the date of issuance and issue price. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor shall be treated as a single class for all purposes under this Indenture. With respect to any Additional Securities, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each which shall be delivered to the Trustee, the following information: (1) the aggregate principal amount of such Additional Securities to be authenticated and delivered pursuant to this Indenture; (2) the issue price, the issue date and the CUSIP number of such Additional Securities; provided, however, that no Additional Securities may be issued at a price that would cause such Additional Securities to have "original issue discount" within the meaning of Section 1273 of the Code; and (3) whether such Additional Securities shall be Transfer Restricted Securities and issued in the form of Initial Securities as set forth in the Appendix to this Indenture or shall be issued in the form of Exchange Securities as set forth in Exhibit A. -38- ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur. Except as required under Section 3.07, the Company shall give each notice to the Trustee provided for in this Section at least 30 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in principal amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly in writing of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; -39- (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Except for a redemption pursuant to paragraph 5(b) of the Securities, on or prior to 10:00 a.m., New York time, on the redemption date, the Company shall deposit with the Trustee or Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) an amount of money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on the redemption date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. The Trustee or the Paying Agent will promptly -40- return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest, if any, on all Securities to be redeemed. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof), the Company shall execute and the Trustee shall authenticate and deliver to the Holder of that Security (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the principal amount of the Security surrendered. ARTICLE 4 Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (unless the SEC will not accept such a filing and commencing with the effectiveness of the Exchange Offer or Shelf Registration Statement) and will in any event provide the Trustee and Securityholders within 15 days after it files with the SEC with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports -41- under such Sections; provided, however, that the Company shall not be so obligated to file such reports with the SEC, if the SEC does not permit such filing, in which event the Company will make available such information to the Trustee and Securityholders within 15 days after the time the Company would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act. In addition, the Company shall furnish to the Holder of the Securities and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities are not freely transferable under the Securities Act. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on an Officers' Certificate). SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and its Restricted Subsidiaries shall be entitled to Incur Indebtedness (including Additional Securities issued after the Issue Date) if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, no Default has occurred and is continuing and the Consolidated Coverage Ratio exceeds 2 to 1. (b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries shall be entitled to Incur any or all of the following Indebtedness ("Permitted Indebtedness"): (1) Indebtedness Incurred by the Company and its Restricted Subsidiaries pursuant to the Credit Agreement; provided, however, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1) and then outstanding does not exceed the greater of (A) $165.0 million less the sum of all mandatory principal payments with respect to such Indebtedness pursuant to Section 4.06(a)(3)(A) (which principal payments in the case of revolving loans are accompanied by a corresponding permanent commitment reduction) and (B) the sum of (x) 65% of the book value of the inventory of the Company and its Restricted Subsidiaries and (y) 85% of the book value of -42- the accounts receivable of the Company and its Restricted Subsidiaries; (2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary or to the holder of a Lien permitted under this Indenture) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such Indebtedness and the holders of Bank Indebtedness do not have a security interest therein or the obligee is a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities; (3) the Securities and the Exchange Securities and related Guarantees (other than any Additional Securities); (4) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1) or (3) of this Section 4.03(b)); (5) Refinancing Indebtedness; (6) Hedging Obligations of the Company or any Restricted Subsidiary not for the purpose of speculation; (7) obligations in respect of letters of credit, performance, bid, surety, appeal and other similar bonds and completion guarantees, payment obligations in connection with self-insurance or similar requirements provided by the Company or any Restricted Subsidiary in the ordinary course of business; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of its Incurrence; (9) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease, construction or improvement of property (real or personal) or equipment (whether through the -43- direct purchase of assets or the Capital Stock of any Person owning such assets) within 180 days after such purchase, lease or improvement in an aggregate principal amount which, when added together with the amount of Indebtedness Incurred pursuant to this clause (9) and then outstanding, does not exceed $5.0 million (including any Refinancing Indebtedness with respect thereto); (10) Indebtedness Incurred and outstanding on or prior to the date on which such Person was acquired by the Company or any Restricted Subsidiary or assumed by the Company or a Restricted Subsidiary at the time of acquisition of all or any portion of the assets (or any business or product line of another Person) (other than Indebtedness Incurred in connection with or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Restricted Subsidiary or was acquired by the Company); provided, however, at the time of such acquisition and after giving effect thereto, the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (10) and then outstanding does not exceed $5.0 million; (11) any Guarantee (including the Subsidiary Guaranties) by the Company or a Restricted Subsidiary of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture; (12) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, Incurred or assumed in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company; and (13) Indebtedness of the Company or of any of its Restricted Subsidiaries in an aggregate principal amount which, when taken together with all other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (12) above or paragraph (a)), does not exceed $12.5 million (which amount may, but need not be, Incurred in whole or in part under the Credit Agreement. -44- (c) Notwithstanding the foregoing, neither the Company nor any Subsidiary Guarantor shall Incur any Indebtedness pursuant to Section 4.03(b) (other than (b)(1) above or under the Credit Agreement pursuant to (b)(13) above) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Securities or the applicable Subsidiary Guaranty to at least the same extent as such Subordinated Obligations. (d) Notwithstanding Sections 4.03(a) and 4.03(b) above, neither the Company nor any Subsidiary Guarantor shall Incur (1) any Indebtedness if such Indebtedness is subordinate in right of payment to any Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of the Company or such Subsidiary Guarantor, as applicable, or (2) any Secured Indebtedness (for borrowed money including Capital Lease Obligations) that is not Senior Indebtedness of such Person (other than Indebtedness solely between or among the Company and a Subsidiary Guarantor or between or among the Subsidiary Guarantors) unless contemporaneously therewith such Person makes effective provision to secure the Securities or the relevant Subsidiary Guaranty, as applicable, equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (e) For purposes of determining compliance with this covenant, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses and (2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above and (3) the Company will be entitled from time to time to reclassify any Indebtedness Incurred pursuant to any clause in paragraph (b) above such that it will be deemed as having been Incurred under another clause in paragraph (b). Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock and change in the amount outstanding due solely to the result of fluctuations in the exchange rates of currencies will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.03. -45- (f) For purposes of determining compliance with any U.S. dollar restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness shall be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness, provided, however, that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars shall be as provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced shall be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness shall be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess shall be determined on the date such Refinancing Indebtedness is Incurred. SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to, make a Restricted Payment if, at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not entitled to Incur an additional $1.00 of Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date (the amount expended for such purpose if other than in cash, having the fair market value of such property as determined in good faith by the Company) would exceed the sum of (without duplication): (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the first fiscal quarter ending after the Issue Date occurs to the end of the most recent fiscal quarter for which internal financial statements are available on or prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus -46- (B) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company) and 100% of any cash capital contribution received by the Company from its shareholders subsequent to the Issue Date; plus (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); plus (D) an amount equal to the sum of (x) the net reduction in the Investments made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment and proceeds representing the return of capital, in each case received by the Company or any Restricted Subsidiary, and (y) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any such Person, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person. (b) The preceding provisions of Section 4.04(a) shall not prohibit: (1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Restricted Subsidiary -47- or Indebtedness Guaranteed by the Company or a Restricted Subsidiary) or a substantially concurrent cash capital contribution received by the Company from its shareholders; provided, however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under Section 4.04(a)(3)(B); (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness which is permitted to be Incurred pursuant to Section 4.03; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this Section 4.04; provided, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (4) so long as no Default has occurred and is continuing, the repurchase or other acquisition of, shares of, or options to purchase shares of, common stock or preferred stock of the Parent or the Company or any of its Subsidiaries by the Company or any of its Subsidiaries (or payments paid to the Parent to consummate such repurchases or other acquisitions in accordance with the provisions of this clause (4)) from employees, former employees, directors, consultants, former consultants or former directors of the Company or any of its Subsidiaries upon the death, disability or termination of employment of such employees, directors or consultants, pursuant to the terms of the agreements (including employment and consulting agreement or amendments thereto) or plans approved by the Board of Directors; provided, however, that the aggregate amount of such repurchases and other acquisitions shall not exceed the sum of (A) $2.5 million in any fiscal year and (B) the cash proceeds of any "key man" life insurance policies that are used to make such repurchases; provided, however, that amounts not used pursuant to this clause (4) in a year may be carried forward for use in future years; provided, further, however, that -48- such repurchases and other acquisitions shall be included in the calculation of the amount of Restricted Payments; (5) the Transactions; provided, however, that Restricted Payments used to effect the Transactions will be excluded in the calculation of the amount of Restricted Payments; (6) dividends, loans, advances or other distributions to Parent to be used by Parent solely (a) to pay its franchise taxes and other fees required to maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries and other compensation of the employees, directors fees, indemnification obligations, professional fees and expenses) Incurred by Parent in the ordinary course of its business; provided, however, that such dividends shall not exceed $750,000 in any calendar year; provided, further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments; (7) payments to Parent in respect of Federal, state, foreign and local taxes attributable to (or arising as a result of) the operations of the Company and its Subsidiaries; provided, however, that the amount of such payments in any fiscal year do not exceed the amount that the Company and its Subsidiaries would be required to pay in respect of Federal, state, foreign and local taxes for such fiscal year were the Company to pay such taxes as a stand-alone taxpayer (whether or not all such amounts are actually used by Parent for such purposes); provided, further, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; (8) repurchase of Capital Stock deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a portion of the exercise price thereof and repurchases of Capital Stock deemed to occur upon the withholding of a portion of the Capital Stock granted or awarded to an employee to pay for the statutory minimum taxes payable by such employee upon such grant or award; provided, however, that such amount shall be excluded in the calculation of the amount of Restricted Payments; or (9) Restricted Payments not exceeding $7.5 million in the aggregate; provided, however, that (A) at the time of such Restricted Payments, no Default shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be included in the calculation of the amount of Restricted Payments. -49- SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date (including this Indenture and the Credit Agreement); (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings of the Indebtedness referred to in any of the foregoing clauses and restrictions contained in Indebtedness incurred after the date hereof in accordance with the terms of this Indenture; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings are not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the applicable instrument governing such indebtedness as in effect on the date of this Indenture; provided that, with respect to any agreement governing such other Indebtedness, the provisions relating to such encumbrance or restriction are no less favorable to the Company in any material respect as determined by the Company in its reasonable and good faith judgment than the provisions contained in the Credit Agreement as in effect on the Issue Date; -50- (iv) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (v) any such encumbrance or restriction consisting of customary non-assignment provisions in contracts or in leases governing leasehold interest and in intellectual property contracts and licenses; (vi) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of assets (including Capital Stock) of such Restricted Subsidiary permitted by this Indenture pending the closing of such sale or disposition; (vii) any restriction arising under applicable law, regulation or order; (viii) restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (ix) restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien. SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) The Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Company, or in the case of an Asset Disposition in excess of $10 million, by the Board of Directors of the Company, of the shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such -51- Restricted Subsidiary, as the case may be) pursuant to one or more of the following: (A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the Company (including cash collateralization of letters of credit and similar credit transactions constituting Senior Indebtedness) or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (or, in the case of a revolving credit facility, effect a permanent reduction in availability thereunder regardless of the fact that no prepayment may be required) (in each case other than Indebtedness owed to the Company or a Subsidiary of the Company) or repay Indebtedness secured by such asset within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) to the extent of the balance of such Net Available Cash after application (if any) in accordance with clause (A), to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; and (C) to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an offer to the holders of the Securities (and to holders of other Senior Subordinated Indebtedness of the Company designated by the Company) to purchase Securities at 100% of their principal amount thereof (and such other Senior Subordinated Indebtedness of the Company) pursuant to and subject to the conditions of Section 4.06(b); provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this Section 4.06, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this Section 4.06 (a) except to the extent that the aggregate Net Available -52- Cash from all Asset Dispositions which is not applied in accordance with this Section 4.06 (a) exceeds $10.0 million. Pending application of Net Available Cash pursuant to this Section 4.06 (a), such Net Available Cash may be invested in a manner not prohibited by this Indenture and/or applied to temporarily reduce revolving credit indebtedness. For the purposes of this Section 4.06(a)(2), any of the following are deemed to be cash or cash equivalents: (1) the assumption of Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; (2) securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash within 90 days after the date of such Asset Disposition (to the extent of the cash received); and (3) any Additional Assets (so long as such Additional Assets are acquired for fair market value in connection with the transaction giving rise to such Asset Disposition, as determined in good faith by the Board of Directors of the Company or such Restricted Subsidiary, as applicable). (b) In the event of an Asset Disposition that requires the purchase of Securities (and other Senior Subordinated Indebtedness of the Company) pursuant to Section 4.06 (a)(3)(C), the Company shall purchase Securities tendered pursuant to an offer by the Company for the Securities (and such other Senior Subordinated Indebtedness) at a purchase price of 100% of their principal amount (or, in the event such other Senior Subordinated Indebtedness of the Company was issued with significant original issue discount, 100% of the accreted value thereof) without premium, plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness of the Company, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in this Indenture. If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company shall select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Securities shall be denominations of $1,000 principal amount or multiples thereof. The Company shall not be required to make such an offer to purchase Securities (and other -53- Senior Subordinated Indebtedness of the Company) pursuant to this Section 4.06 if the Net Available Cash available therefor is less than $10.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of each offer to purchase Securities pursuant to this Section 4.06, the amount of Net Available Cash will be reset to zero. (c) The Company will comply with the notice requirements of Section 3.03 and, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.06. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.06, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.06 by virtue of its compliance with such securities laws or regulations. SECTION 4.07. Limitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are not materially less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in arm's-length dealings with a Person who is not an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $2.0 million, a majority of the Board of Directors of the Company have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors; and (3) if such Affiliate Transaction involves an amount in excess of $10.0 million, the Board of Directors of the Company shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries or is not materially less favorable to -54- the Company and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arm's-length transaction with a Person who was not an Affiliate. (b) The provisions of Section 4.07 (a) shall not apply to: (1) any Investment (including a Permitted Investment) or other Restricted Payment, in each case permitted to be made pursuant to Section 4.04; (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company; (3) loans or advances to employees or consultants in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time; (4) the payment of reasonable fees and compensation to, the provision of employee benefit arrangements and indemnity for the benefit of, directors, officers, employees and consultants of the Company and its Restricted Subsidiaries; (5) any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries; (6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company and loans or advances to employees to purchase Capital Stock; (7) any agreement with the Company or any Restricted Subsidiary as in effect as of the Issue Date or any amendment or replacement thereto or any transaction contemplated thereby (including pursuant to any amendment or replacement thereto) so long as any such amendment or replacement agreement is not more disadvantageous to the Company or such Restricted Subsidiary in any material respect than the original agreement as in effect on the Issue Date; (8) the payment of management, consulting and advisory fees and related expenses made pursuant to the Harvest Management Services Agreement as in effect on the Issue Date or any amendment or replacement thereto or any transaction contemplated thereby (including pursuant to any amendment or replace- -55- ment thereto) so long as any such amendment or replacement agreement is not more disadvantageous to the Company or such Restricted Subsidiary in any material respect than the original agreement as in effect on the Issue Date; (9) any consulting or employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business consistent with the past practice of the Company or such Restricted Subsidiary, and (10) any tax sharing agreement or arrangement and payments pursuant thereto among the Company and its Subsidiaries and other Person (including Parent) with which the Company or its Subsidiaries is required or permitted to file a consolidated tax return or with which the Company or any of its Restricted Subsidiaries is or could be part of a consolidated group for tax purposes in amounts not otherwise prohibited by this Indenture. SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company (1) shall not, and shall not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of any Capital Stock of a Restricted Subsidiary to any Person (other than the Company or a Restricted Subsidiary), and (2) shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' or other legally required qualifying shares) to any Person (other than to the Company or a Restricted Subsidiary), unless (A) immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary; or (B) immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under Section 4.04 if made on the date of such issuance, sale or other disposition; or -56 (C) the sale or issuance of Capital Stock if the proceeds therefrom are applied in accordance with Section 4.06. SECTION 4.09. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), In the event that at the time of such Change of Control the terms of the Senior Indebtedness of the Company restrict or prohibit the repurchase of Securities pursuant to this Section, then prior to the mailing of the notice to Holders provided for in Section 4.09(b) below but in any event within 30 days following any Change of Control, the Company shall (1) repay in full all such Senior Indebtedness or offer to repay in full all such Indebtedness and repay the Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing such Senior Indebtedness to permit the repurchase of the Securities as provided for in Section 4.09(b). (b) Within 30 days following any Change of Control, unless the Company has exercised its option to redeem all the Securities as described in paragraph 5(b) of the Securities, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of such purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control; (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions, as determined by the Company, consistent with this Section 4.09, that a Holder must follow in order to have its Securities purchased. -57 (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, the Company will, to the extent lawful: (1) accept for payment all Securities or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the purchase price plus accrued and unpaid interest, if any, in respect of all Securities or portions of Securities properly tendered; and (3) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities or portions of Securities being purchase by the Company. The Paying Agent will promptly mail to each Holder of Securities properly tendered the purchase price plus accrued and unpaid interest, if any, for such Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder of a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the purchase date. (e) Notwithstanding the foregoing provisions of this Section, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.09 applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. -58- (f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue of its compliance with such securities laws or regulations. SECTION 4.10. Future Guarantors. The Company shall cause each domestic Restricted Subsidiary that guarantees or incurs any Indebtedness under the Credit Agreement to, at the same time, execute and deliver to the Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary shall Guarantee payment of the Securities on the same terms and conditions as those set forth in this Indenture. SECTION 4.11. Compliance Certificate. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officers' Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). SECTION 4.12. Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE 5 Successor Company SECTION 5.01. When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless -59- (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing (3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture; provided, however, that (i) the Company may effect the Transactions (and clause (4) will not be applicable), and (ii) clause (3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company or another Restricted Subsidiary or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction. The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and the predecessor Company, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Securities. The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person (other than the Company or the Subsidiary Guarantor) unless: -60- (1) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to another Person (other than to the Company or a Subsidiary of the Company), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Company provides an Officers' Certificate to the Trustee to the effect that the Company shall comply with its obligations under Section 4.06 in respect of such disposition, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary under its Subsidiary Guaranty; (2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with this Indenture. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon required purchase, upon declaration of acceleration or otherwise; -61- (3) the Company or any Subsidiary Guarantor fails to comply with Section 5.01; (4) the Company or any Subsidiary Guarantor fails to comply with Section 4.03, 4.04, 4.05, 4.06 (other than a failure to purchase Securities), 4.07, 4.08 or 4.09 and such failure continues for 30 days after the notice specified below; (5) the Company or any Subsidiary Guarantor fails to comply with any of its agreements in the Securities or this Indenture and such failure continues for 60 days after the notice specified below; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million, or its foreign currency equivalent at the time; (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or -62- (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $10.0 million is entered against the Company or any Significant Subsidiary, and remains undischarged, unpaid, unwaived or unstayed for a period of 60 consecutive days following the entry of such judgment or decree becomes final and non-appealable; or (10) any Subsidiary Guaranty of a Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Guaranty) for 30 days after notice or any Subsidiary Guarantor that is a Significant Subsidiary denies or disaffirms its obligations under its Guaranty. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clauses (4), (5) and (9) is not an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Securities notify the Company and the Trustee of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (6) (subject to Section 6.05(b)) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (9) or (10) its status and what action the Company is taking or proposes to take with respect thereto. -63- SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. Subject to Section 6.02, the Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security, (ii) a Default arising from the failure to redeem or purchase any Security when required pursuant to this Indenture or (iii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. -64- SECTION 6.05. Control by Majority. (a) The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. (b) Notwithstanding the foregoing, in the event of a declaration of acceleration in respect of the Securities because an Event of Default specified in Section 6.01(6) above shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or paid or such Event of Default shall have been cured or waived by the holders of such Indebtedness and written notice of such discharge, cure or waiver, as the case may be, shall have been given to the Trustee by the Company or by the requisite holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Securities and (i) no Person shall have commenced judicial proceedings to foreclose upon assets of the Company or any of its Restricted Subsidiaries or shall have exercised any right under applicable law or applicable security documents to take ownership of any of such assets in lieu of foreclosure and (ii) no other Event of Default with respect to the Securities shall have occurred which has not been cured or waived during such 30-day period. SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; -65- (3) such Holder or Holders offer to the Trustee reasonable security or indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. -66- SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order at the date or dates fixed by the Trustee and, in the case of distribution of such money on account of principal, premium, if any, or interest, if any, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company and, if such money or property has been collected from a Subsidiary Guarantor, to holders of Senior Indebtedness of such Subsidiary Guarantor, in each case to the extent required by Articles 10 and 12; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the -67- benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing (and is not cured), the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that (1) this paragraph does not limit the effect of paragraph (b) of this Section; -68- (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. -69- (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute willful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of the outstanding Securities. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the corporate trust office of the Trustee, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. (j) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions -70- pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. (k) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days and apply to the SEC for permission to continue as trustee or resign. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing with respect to the Securities and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA Section 313(a) if such report is required (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, -71- no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses Incurred or made by it, including costs of collection, in connection with the exercise or performance of any of its powers or duties hereunder, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees and expenses) Incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have one separate counsel (if the Trustee determines in its reasonable judgment that the need for separate counsel exists (due to a conflict of interest or otherwise)) and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The Company need not pay any settlement made without its consent, which consent shall not be unreasonably withheld. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the resignation and removal of the Trustee and the satisfaction and discharge of this Indenture. When the Trustee -72- incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the outstanding Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if (1) the Trustee fails to comply with Section 7.10; (2) the Trustee fails to comply with TIA Section 310(b) after written request therefor by the Company; (3) the Trustee is adjudged bankrupt or insolvent; (4) a receiver or other public officer takes charge of the Trustee or its property; or (5) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in aggregate principal amount of the outstanding Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee, without further act, deed or conveyance, shall have all the rights, powers and duties of the retiring Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under the TIA. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the -73- outstanding Securities may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any -74- creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (1) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (2) all outstanding Securities have become due and payable, whether at maturity or on a redemption date as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (1) all its obligations under the Securities, the Subsidiary Guaranties and this Indenture ("legal defeasance option") or (2) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.10 and the operation of Sections 5.01, 6.01(3), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the limitations contained in Section 5.01(3) ("covenant defeasance option"), and the Securities will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities will not be deemed outstanding for accounting purposes). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities and the Guarantees may not be accelerated because of an Event of Default with respect thereto. If the Company -75- exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of such sections, with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(a)(3). If the Company exercises its legal defeasance option or its covenant defeasance option, each Guarantor, if any, shall be released from all of its obligations with respect to its Guaranty. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Event of Defaults from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (4) defeasance does not result in a breach or violation of, or constitute a default under, this Indenture (other than a -76- breach or violation of the Indenture resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing), the Credit Agreement or any other material agreement or instrument binding on the Company or any of its Restricted Subsidiaries and is not prohibited by Article 10; (5) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, subject to customary circumstances and conditions, after the 91st day following the deposit, the trust fund will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. -77- SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations deposited pursuant to this Article 8 or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. -78- ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Company, the Subsidiary Guarantor and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder (1) to cure any ambiguity, omission, mistake, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add guarantees with respect to the Securities, including any Subsidiary Guaranties, or to secure the Securities; (5) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the Holders or to surrender any right or power herein conferred upon the Company or a Subsidiary Guarantor; (6) to make any change that does not adversely affect the rights of any Securityholder; or (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA. An amendment under this Section may not make any change that adversely affects the rights under Article 10 or 12 of any holder of Senior Indebtedness of the Company or of a Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securi- -79- tyholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, the Subsidiary Guarantor and the Trustee may amend this Indenture, the Securities or the Escrow Agreement without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (voting as a single class) (including consents obtained in connection with a tender offer for, exchange for or purchase of the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal amount of or extend the Stated Maturity of any Security; (4) reduce the amount payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; (6) impair the right of any Securityholder to receive payment of principal of and interest on such Securityholder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Securityholder's Securities; (7) make any changes in the ranking or priority of any Security that would adversely affect the Securityholders; (8) make any change in Section 6.04, 6.07 or 6.10 or the second sentence of this Section; (9) make any change in any Guaranty that would adversely affect the Securityholders in any material respect; or (10) reduce the percentage of the principal amount of outstanding securities necessary for amendment to or waiver of -80- compliance with any provision of this Indenture or the Securities or for waiver of any default. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 or 12 of any holder of Senior Indebtedness of the Company or of a Subsidiary Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. Section 2.08 hereof shall determine which Securities are considered to be "outstanding" for purposes of this Section 9.02. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preced- -81- ing paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, in addition to the documents required by Section 13.04, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Subsidiary of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid and is paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that -82- the Indebtedness evidenced by the Securities and all other Subordinated Securities Obligations are subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness of the Company which is Senior Indebtedness of the Company shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution upon a total or partial liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in cash or cash equivalents of such Senior Indebtedness before Securityholders shall be entitled to receive any payment on the Securities; (2) until such Senior Indebtedness of the Company is paid in full in cash or cash equivalents, any payment or distribution to which Securityholders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Securities; and (3) if a distribution is made to Securityholders that, due to the provisions of this Article 10, should not have been made to them, then the Securityholders shall hold such distribution in trust for holders of the Senior Indebtedness and pay such distribution to such holders as their interests may appear. For purposes of this Section only, "cash equivalents" shall mean Temporary Cash Investments. SECTION 10.03. Default on Senior Indebtedness of the Company. The Company shall not pay the principal of, premium, if any, or interest, if any, on the Securities or other Subordinated Securities Obligations or make any deposit pursuant to Section 8.01 -83- and may not purchase, redeem or otherwise retire any Securities or other Subordinated Securities Obligations (collectively, "pay the Securities") if either of the following (a "Payment Default") occurs: (1) any Designated Senior Indebtedness of the Company is not paid in full in cash when due; or (2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash; provided, however, that the Company shall be entitled to pay the Securities and any other Subordinated Securities Obligations without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing. During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company shall not pay the Securities or other Subordinated Securities Obligations for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the Bank Indebtedness or, if no Bank Indebtedness is outstanding, the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period shall end earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior Indebtedness has been discharged or repaid in full in cash. -84- Notwithstanding the provisions described in the immediately preceding two sentences (but subject to the provisions contained in the first sentence of this Section), unless a Payment Default exists, the Company shall be entitled to resume payments on the Securities and the other Subordinated Securities Obligations after termination of such Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of the Company during such period. For purposes of this Section, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness of the Company initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representatives) of the acceleration. SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If any Designated Senior Indebtedness of the Company is outstanding, neither the Company nor any Subsidiary Guarantor shall pay the Securities until five Business Days after the Representatives of all the issues of Designated Senior Indebtedness of the Company receive notice of such acceleration and, thereafter, shall be entitled to pay the Securities only if this Article 10 otherwise permits payment at that time. SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Securities are paid in full, Securityholders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Securities) to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which -85- otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent shall continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that under this Article 10 would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that such payments are prohibited by this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative shall be entitled to give the notice. The Trustee in its individual or any other capacity shall be entitled to hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent shall be entitled to do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such -86- holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever any Person is to make a distribution or give a notice to holders of Senior Indebtedness of the Company, such Person shall be entitled to make such distribution or give such notice to their Representative (if any). SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to rely (1) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (2) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (3) upon the Representatives of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of -87- such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 11 Subsidiary Guaranties SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby unconditionally and irrevocably guarantees, jointly and sev- -88- erally, to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities or other Subordinated Securities Obligations when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor shall remain bound under this Article 11 notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) except as set forth in Section 11.06, any change in the ownership of such Subsidiary Guarantor. Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Subsidiary Guaranty is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty and each Subsidiary Guaranty is made subject to such provisions of this Indenture. -89- Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (1) the unpaid amount of such Obligations, (2) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (3) all other monetary Obligations of the Company to the Holders and the Trustee. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 12. Each Subsidiary Guarantor further agrees that, as be- -90- tween it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor shall have the right to seek contribution from any non-paying Subsidiary Guarantor in an amount equal to such non-paying Subsidiary Guarantor's pro rata portion of such payment based on the respective net assets of all of the Subsidiary Guarantors at the time of such payment as determined in accordance with GAAP, so long as the exercise of such right does not impair the rights of the Holders under the Guaranty. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 11.02. Limitation on Liability. Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 11.03. Successors and Assigns. This Article 11 shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privi- -91- lege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this Article 11, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Release of Subsidiary Guarantor. Upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than a sale or disposition to the Company or another Subsidiary Guarantor or an Affiliate of the Company), or if the Company properly designates any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture, or at such time a Subsidiary Guarantor no longer has outstanding any other Indebtedness or Guarantees any Indebtedness of the Company or another Subsidiary Guarantor, such Subsidiary Guarantor shall be deemed released from all obligations under this Article 11 without any further action required on the part of the Trustee or any Holder. At the written request of the Company, upon receipt of an officers' certificate, the Trustee shall execute and deliver an appropriate instrument evidencing such release. ARTICLE 12 Subordination of Subsidiary Guaranties SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by such Subsidiary Guarantor's Subsidiary Guaranty and all other Subordinated Securities Obligations are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full in cash of all Senior Indebtedness of such Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of -92- a Subsidiary Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's Guaranty of Senior Indebtedness of the Company) shall rank senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution upon a total or partial liquidation or dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property, (1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full in cash of such Senior Indebtedness before Securityholders shall be entitled to receive any payment pursuant to the Subsidiary Guaranty of such Subsidiary Guarantor; (2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash, any payment or distribution to which Securityholders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities of such Subsidiary Guarantor that are subordinated to such Senior Indebtedness to at least the same extent as the Subsidiary Guaranty; (3) if a distribution is made to Securityholders that, due to the provisions of this Article 12, should not have been made to them, then the Securityholders shall hold such distribution in trust for holders of the Senior Indebtedness and pay such distribution to such holders as their interests may appear. SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor. No Subsidiary Guarantor shall make its Subsidiary Guaranty or purchase, redeem or otherwise retire or defease any Securities or other Subordinated Securities Obligations (collectively, "pay its Subsidiary Guaranty") if either of the following (a "Payment Default") occurs: (1) any Designated Senior Indebtedness of such Subsidiary Guarantor is not paid in full in cash when due; or -93- (2) any other default on Designated Senior Indebtedness of such Subsidiary Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash; provided, however, that any Subsidiary Guarantor shall be entitled to pay its Subsidiary Guaranty or any other Subordinated Securities Obligations without regard to the foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing. During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness of such Subsidiary Guarantor pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Subsidiary Guarantor shall not pay its Subsidiary Guaranty or other Subordinated Securities Obligations for a period (a "Subsidiary Guaranty Payment Blockage Period") commencing upon the receipt by the Trustee of (with a copy to such Subsidiary Guarantor) written notice (a "Subsidiary Guaranty Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Subsidiary Guaranty Payment Blockage Period and ending 179 days thereafter. The Subsidiary Guaranty Payment Blockage Period shall end earlier if such Subsidiary Guaranty Payment Blockage Period is terminated: (1) by written notice to the Trustee and such Subsidiary Guarantor from the Person or Persons who gave such Subsidiary Guaranty Blockage Notice; (2) because the default giving rise to such Subsidiary Guaranty Blockage Notice is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior Indebtedness has been discharged or repaid in full in cash. Notwithstanding the provisions described in the immediately preceding two sentences (but subject to the provisions contained in the first sentence of this Section), unless a Payment Default exists, any Subsidiary Guarantor shall be entitled to resume payments pursuant to its Subsidiary Guaranty and other Subordinated Securities Ob- -94- ligations after termination of such Subsidiary Guaranty Payment Blockage Period. No Subsidiary Guarantor shall be subject to more than one Subsidiary Guaranty Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of such Subsidiary Guarantor during such period. For purposes of this Section, no default or event of default which existed or was continuing on the date of the commencement of any Subsidiary Guaranty Payment Blockage Period with respect to the Designated Senior Indebtedness of such Subsidiary Guarantor initiating such Subsidiary Guaranty Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Subsidiary Guaranty Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 12.04. Demand for Payment. If a demand for payment is made on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of such Subsidiary Guarantor (or their Representatives) of such demand. SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 12 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the applicable Subsidiary Guarantor and pay it over to them or their Representatives as their interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of a Subsidiary Guarantor is paid in full and until the Securities are paid in full, Securityholders shall be subrogated (equally and ratably with all other Indebtedness pari passu with such Subsidiary Guaranties) to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness of such Subsidiary Guarantor. A distribution made under this Article 12 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior Indebtedness. SECTION 12.07. Relative Rights. This Article 12 defines the relative rights of Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Indenture shall -95- (1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of such Subsidiary Guarantor, which is absolute and unconditional, to pay its Subsidiary Guaranty to the extent set forth in Article 11; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by such Subsidiary Guarantor under its Subsidiary Guaranty, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive distributions otherwise payable to Securityholders. SECTION 12.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Subsidiary Guaranty of such Subsidiary Guarantor shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or Paying Agent shall continue to make payments on any Subsidiary Guaranty and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that such payments are prohibited by this Article 12. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the Representative shall be entitled to give the notice. The Trustee in its individual or any other capacity shall be entitled to hold Senior Indebtedness of any Subsidiary Guarantor with the same rights it would have if it were not the Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 12.10. Distribution or Notice to Representative. Whenever any Person is to make a distribution or give a notice to -96- holders of Senior Indebtedness of any Subsidiary Guarantor, such Person shall be entitled to make such distribution or give such notice to their Representative (if any). SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment. The failure to make a payment pursuant to a Subsidiary Guaranty by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 12 shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on any Subsidiary Guarantor pursuant to its Subsidiary Guaranty. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 12, the Trustee and the Securityholders shall be entitled to rely (1) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (2) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (3) upon the Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12. SECTION 12.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between -97- the Securityholders and the holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 12 or otherwise. SECTION 12.15. Reliance by Holders of Senior Indebtedness of Subsidiary Guarantors on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 13 Miscellaneous SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: -98- if to the Company or any Subsidiary Guarantor: Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, NY 10172 Attention: Ira D. Kleinman with copies to: White & Case 1155 Avenue of the Americas New York, NY 10010 Attention: Jonathan Kahn, Esq. if to the Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attention: Corporate Trust Administration The Company, any Subsidiary Guarantor or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, any Subsidiary Guarantor, the -99- Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, such action is authorized or permitted by this Indenture and that all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining -100- whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. SECTION 13.10. No Recourse Against Others. No past, present or future director, officer, employee, member, incorporator or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company under the Securities or this Indenture or of such Subsidiary Guarantor under its Subsidiary Guaranty or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issuance of the Securities. Such waiver and release may not be effective to waive liabilities under the U.S. Federal securities laws, and it is the view of the SEC that such a waiver is against public policy. SECTION 13.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. -101- SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 13.14. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such Indenture, loan or debt agreement may not be used to interpret this Indenture. -102- IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway ------------------------------------ Name: D. Keith LaVanway Title: Vice President and Chief Financial Officer AMI MANAGEMENT COMPANY, as Subsidiary Guarantor By: /s/ D. Keith LaVanway ------------------------------------ Name: D. Keith LaVanway Title: Vice President, Chief Financial Officer, Secretary and Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ James D. Nesci ------------------------------------ Name: James D. Nesci Title: Authorized Signer RULE 144A/REGULATION S APPENDIX PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions For the purposes of this Appendix the following terms shall have the meanings indicated below: "Applicable Procedures" means, with respect to any transfer or transaction involving a Temporary Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depository, Euroclear and Clearstream for such a Temporary Regulation S Global Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Clearstream" means Clearstream Banking, societe anonyme, or any successor securities clearing agency. "Definitive Security" means a certificated Initial Security, Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(e). "Depository" means The Depository Trust Company, its nominees and their respective successors. "Distribution Compliance Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to Persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Securities. "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear System or any successor securities clearing agency. "Exchange Securities" means (1) the 9 3/4% Senior Subordinated Securities Due 2012 issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2) Additional Securities, if any, issued -2- pursuant to a registration statement filed with the SEC under the Securities Act. "Initial Purchasers" means (1) with respect to the Initial Securities issued on the Issue Date, Credit Suisse First Boston Corporation, UBS Warburg LLC and CIBC World Markets Corp., and (2) with respect to each issuance of Additional Securities, the Persons purchasing such Additional Securities under the related Purchase Agreement. "Initial Securities" means (1) $165 million aggregate principal amount of 9 3/4% Senior Subordinated Securities Due 2012 issued on the Issue Date and (2) Additional Securities, if any, issued in a transaction exempt from the registration requirements of the Securities Act. "Institutional Accredited Investor" means an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Private Exchange" means the offer by the Company, pursuant to a Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means any 9 3/4% Senior Subordinated Securities Due 2012 issued in connection with a Private Exchange. "Purchase Agreement" means (1) with respect to the Initial Securities issued on the Issue Date, the Purchase Agreement dated April 18, 2002, between Simon Acquisition Corp. and the Initial Purchasers, and (2) with respect to each issuance of Additional Securities, the purchase agreement or underwriting agreement among the Company and the Persons purchasing such Additional Securities. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to a Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. -3- "Registration Rights Agreement" means (1) with respect to the Initial Securities issued on the Issue Date, the Registration Rights Agreement dated as of the Issue Date, among the Company, the Subsidiary Guarantor and the Initial Purchasers, and (2) with respect to each issuance of Additional Securities issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company, the Subsidiary Guarantor, if any, and the Persons purchasing such Additional Securities under the related Purchase Agreement. "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to a Registration Rights Agreement. "Transfer Restricted Securities" means Securities that bear or are required to bear the legend set forth in Section 2.3(e) hereto. 1.2 Other Definitions
Defined Term in Section ---- ---------- "Agent Members" 2.1(b) "Global Security" 2.1(a) "Permanent Regulation S Global Security" 2.1(a) "Regulation S" 2.1(a) "Rule 144A" 2.1(a) "Rule 144A Global Security" 2.1(a) "Temporary Regulation S Global Security" 2.1(a)
2. The Securities. 2.1 (a) Form and Dating. The Initial Securities will be offered and sold by the Company pursuant to a Purchase Agreement. The -4- Initial Securities will be resold initially only to (i) QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and (ii) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S under the Securities Act ("Regulation S"). Initial Securities may thereafter be transferred to, among others, QIBs, Institutional Accredited Investors and purchasers in reliance on Regulation S, subject to the restrictions on transfer set forth herein. Initial Securities initially resold pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security") and Initial Securities initially resold pursuant to Regulation S shall be issued initially in the form of one or more temporary global securities in definitive, fully registered form (collectively, the "Temporary Regulation S Global Security"), in each case without interest coupons and with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. Beneficial ownership interests in the Temporary Regulation S Global Security will not be exchangeable for interests in the Rule 144A Global Security, a permanent global security (the "Permanent Regulation S Global Security"), or any other Security without a legend containing restrictions on transfer of such Security prior to the expiration of the Distribution Compliance Period and then only upon certification in form reasonably satisfactory to the Trustee that beneficial ownership interests in such Temporary Regulation S Global Security are owned either by non-U.S. persons or U.S. persons who purchased such interests in a transaction that did not require registration under the Securities Act. The Rule 144A Global Security, the Temporary Regulation S Global Security and the Permanent Regulation S Global Security are collectively referred to herein as "Global Securities". The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered -5- by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under the Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of Definitive Securities. 2.2 Authentication. The Trustee shall authenticate and deliver (1) on the Issue Date, an aggregate principal amount of $165 million 9 3/4% Senior Subordinated Securities Due 2012, (2) any Additional Securities for an original issue in an aggregate principal amount specified in the written order of the Company pursuant to Section 2.02 of the Indenture and (3) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to a Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and, in the case of any issuance of Additional Securities pursuant to Section 2.13 of the Indenture, shall certify that such issuance is in compliance with Section 4.03 of the Indenture. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a co-registrar with a request (x) to register the transfer of such Definitive Securities; or -6- (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or its attorney duly authorized in writing; and (ii) if such Definitive Securities are required to bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred (x) pursuant to an exemption from registration in accordance with Rule 144A, Regulation S or Rule 144 under the Securities Act; or (y) in reliance upon another exemption from the requirements of the Securities Act, (i) a certification to that effect (in the form set forth on the reverse of the Security) and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i). (b) Restrictions on Transfer of a Definitive Security for a Beneficial Interest in a Global Security. A Definitive Security may not be exchanged for a beneficial interest in a Rule 144A Global Security or a Permanent Regulation S Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompa- -7- nied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with (i) certification, in the form set forth on the reverse of the Security, that such Definitive Security is either (A) being transferred to a QIB in accordance with Rule 144A or (B) is being transferred after expiration of the Distribution Compliance Period by a Person who initially purchased such Security in reliance on Regulation S to a buyer who elects to hold its interest in such Security in the form of a beneficial interest in the Permanent Regulation S Global Security; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Rule 144A Global Security (in the case of a transfer pursuant to clause (b)(i)(A)) or Permanent Regulation S Security (in the case of a transfer pursuant to clause (b)(i)(B)) to reflect an increase in the aggregate principal amount of the Securities represented by the Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, such instructions to contain information regarding the Depository account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, equal to the principal amount of the Definitive Security so canceled. If no Rule 144A Global Securities or Permanent Regulation S Global Securities, as applicable, are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Deposi- -8- tory, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions, instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Restrictions on Transfer of Temporary Regulation S Global Securities. During the Distribution Compliance Period, beneficial ownership interests in Temporary Regulation S Global Securities may only be sold, pledged or transferred through Euroclear -9- or Clearstream in accordance with the Applicable Procedures and only (i) to the Company, (ii) so long as such Security is eligible for resale pursuant to Rule 144A, to a Person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (iii) in an offshore transaction in accordance with Regulation S, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act or (v) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. (e) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Restricted Global Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY -10- RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security or an Initial Security or Private Exchange Security in global form, in each case without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. -11- (v) Upon the consummation of a Private Exchange with respect to the Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Securities that do not exchange their Initial Securities, and Private Exchange Securities in global form with the global securities legend and the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (f) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, purchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated Securities, redeemed, purchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (g) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 3.07, 4.06, 4.09 and 9.05 of the Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any Definitive Security selected for redemption in whole or in part pursuant to Article 3 of the Indenture, except the unredeemed portion of any Definitive Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an of- -12- fer to repurchase or redeem Securities or 15 Business Days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of the Indenture shall evidence the same debt and shall be entitled to the same benefits under the Indenture as the Securities surrendered upon such transfer or exchange. (h) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under the Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as -13- are expressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a) A Global Security deposited with the Depository or with the Trustee as Securities Custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 hereof and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and, in either case, a successor Depository is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Securities under the Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located at its principal corporate trust office in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Security delivered in exchange for an interest in the Transfer Restricted Security shall, except as otherwise provided by Section 2.3(e) hereof, bear the restricted securities legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b) hereof, the registered Holder of a Global Security shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Securities. (d) In the event of the occurrence of one of the events specified in Section 2.4(a) hereof, the Company shall promptly make -14- available to the Trustee a reasonable supply of Definitive Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 to RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [RESTRICTED SECURITIES LEGEND] THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO -2- SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. [Temporary Regulation S Global Security Legend] BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE RULE 144A GLOBAL SECURITY OR THE PERMANENT REGULATION S GLOBAL SECURITY OR ANY OTHER SECURITY REPRESENTING AN INTEREST IN THE SECURITIES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED THROUGH EUROCLEAR BANK S.A./N.A., AS OPERATOR OF THE EUROCLEAR SYSTEM OR CLEARSTREAM BANKING, SOCIETE ANONYME AND ONLY (I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES, (IV) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (VI) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL NOTIFY ANY -3- PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN APPLICABLE. -4- No. ________ CUSIP No. ________ $ ___________ 9 3/4% Senior Subordinated Note Due 2012 Simon Acquisition Corp., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of _______________ _____________________________ ________________________________ Dollars on April 15, 2012. Interest Payment Dates: April 15 and October 15, commencing October 15, 2002. Record Dates: April 1 and October 1. Additional provisions of this Security are set forth on the other side of this Security. ASSOCIATED MATERIALS INCORPORATED By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: Dated: -5- TRUSTEE'S CERTIFICATE OF AUTHENTICATION WILMINGTON TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by - --------------------------- Authorized Signatory -6- [FORM OF REVERSE SIDE OF INITIAL SECURITY] 9 3/4% Senior Subordinated Note Due 2012 1. Interest Simon Acquisition Corp., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest will accrue on this Security at a rate of 0.25% per annum (increasing by an additional 0.25% per annum after each subsequent 90-day period that occurs after the date on which such Registration Default occurs up to a maximum additional interest rate of 1.0% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually in arrears on April 15 and October 15 of each year, commencing October 15, 2002. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 23, 2002. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 1 or October 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to -7- the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, Wilmington Trust Company, a Delaware banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or coregistrar. 4. Indenture The Company issued the Securities under an Indenture dated as of April 23, 2002 ("Indenture"), among the Company, the Subsidiary Guarantor and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. This Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; issue or sell capital stock of subsidiaries; engage in transactions with affiliates; transfer or sell assets; guarantee indebtedness; restrict dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. These covenants are subject to important exceptions and qualifications. -8- 5. Optional Redemption; Redemption Upon a Change of Control (a) Except as set forth below, the Company shall not be entitled to redeem the Securities at its option prior to April 15, 2007. On and after April 15, 2007, the Company shall be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on April 15 of the years set forth below:
Redemption Period Price ------ ----- 2007................................................... 104.875% 2008................................................... 103.250% 2009................................................... 101.625% 2010 and thereafter.................................... 100.000%
Prior to April 15, 2005, the Company shall be entitled at its option on one or more occasions to redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) at a redemption price (expressed as a percentage of principal amount) of 109.75%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Equity Offerings (provided that if the Equity Offering is an offering by Parent, a portion of the net cash proceeds thereof equal to the amount required to redeem any such Securities is contributed to the equity capital of the Company); provided, however, that: (1) at least 65% of such aggregate principal amount of Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates) and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. -9- (b) At any time on or prior to April 15, 2007, the Securities may also be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, notice of which is sent no later than 30 days after the occurrence of such Change of Control by notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (the "Change of Control Redemption Date"). "Applicable Premium" means, with respect to a Security at any Change of Control Redemption Date, the greater of: (1) 1.0% of the principal amount of such Security; or (2) the excess of (a) the present value at such time of: (x) the redemption price of such Security at April 15, 2007 (such redemption price being described under paragraph 5(a) above, plus (y) all required interest payments (excluding accrued but unpaid interest) due on such Security through April 15, 2007 computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Security. "Treasury Rate" means the yield to maturity at the Change of Control Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the Change of Control Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the Change of Control Redemption Date to April 15, 2007; provided, however, that if the period from the Change of Control Redemption Date to April 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, -10- except that if the period from the Change of Control Redemption Date to April 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at its registered address. Securities in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has exercised its right to redeem the Securities as described under Section 5 hereof, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be purchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. Under certain circumstances as set forth in the Indenture, the Company will be required to offer to purchase Securities with the Net Available Cash from Asset Dispositions. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. -11- 9. Guaranty The payment by the Company of the principal of, and premium and interest on, the Securities is unconditionally guaranteed on a joint and several senior subordinated basis by each Subsidiary Guarantor. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 principal amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. -12- 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Securities may be amended with the written consent of the Holders of at least a majority in aggregate principal amount outstanding of the Securities (including consents obtained in connection with a tender offer for, exchange for or purchase of the Securities) and (ii) any past default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantor and the Trustee shall be entitled to amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities, including Subsidiary Guaranties, or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company or the Subsidiary Guarantor, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder. 15. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon required purchase, upon declaration of acceleration or otherwise; (iii) the failure by the Company or any Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $10 million; and (vii) certain defaults with respect to Subsidiary Guaranties. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare all the Securities to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. -13- Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is not opposed to the interest of the Holders. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others No past, present or future director, officer, employee, member, incorporator or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). -14- 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 21. Holders' Compliance with Registration Rights Agreement Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 22. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, NY 10172 Attention: Ira D. Kleinman -15- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: ------------------- ---------------------------------- - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms. CHECK ONE BOX BELOW (1) _ in the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (2) _ inside the United States to an Institutional Accredited Investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that, -16- prior to such transfer, furnished to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities; or (3) _ outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (4) _ pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933; or (5) _ pursuant to an effective registration statement under the Securities Act of 1933; or (6) _ to the Company. If such transfer is being made pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act, the undersigned further certifies that (i) the offer of the Securities was not made to a person in the United States; (ii) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (iii) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903 or Rule 904 of Regulation S, as applicable; (iv) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (v) we have advised the transferee of the transfer restrictions applicable to the Securities; and (vi) if the circumstances set forth in Rule 904(B) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending -17- a confirmation or other notice stating that the Securities may be offered and sold during the distribution compliance period specified in Rule 903 of Regulation S; pursuant to registration of the Securities under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (2) or (3) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ----------------------------------- Signature Signature Guarantee: - ----------------------------- ---------------------------- Signature must be guaranteed Signature Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. - -------------------------------------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the -18- undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: ----------------------------- --------------------------------- NOTICE: To be executed by an executive officer [TO BE ATTACHED TO GLOBAL SECURITIES] -19- SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Amount of Amount of Principal amount Signature of decrease in increase in of this Global authorized Principal Principal Security signatory of amount of amount of following such Trustee or Date of this Global this Global decrease or Securities Exchange Security Security increase Custodian -------- -------- -------- -------- ---------
-20- OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount: $ Date: Your Signature: ---------------------- -------------------------- (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: ----------------------------------------------------------- (Signature must be guaranteed) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY * **] - ---------- * If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". ** If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1. -2- No. CUSIP No. ------------- -------------- $ 9 3/4% Senior Subordinated Note Due 2012 Simon Acquisition Corp., a Delaware corporation, promises to pay to __________, or registered assigns, the principal sum of ____________________ Dollars on April 15, 2012. Interest Payment Dates: April 15 and October 15 commencing October 15, 2002. Record Dates: April 1 and October 1. Additional provisions of this Security are set forth on the other side of this Security. Dated: ASSOCIATED MATERIALS INCORPORATED By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION WILMINGTON TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ------------------------- Authorized Signatory -3- [FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] 9 3/4% Senior Subordinated Note Due 2012 1. Interest Associated Materials Incorporated, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest will accrue on this Security at a rate of 0.25% per annum (increasing by an additional 0.25% per annum after each subsequent 90-day period that occurs after the date on which such Registration Default occurs up to a maximum additional interest rate of 1.0% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured.2 The Company will pay interest semiannually in arrears on April 15 and October 15 of each year, commencing October 15, 2002. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 23, 2002. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the February 1 or August 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of - ---------- * Insert if at the date of issuance of the Exchange Security or Private Exchange Security (as the case may be) any Registration Default has occurred with respect to the related Initial Securities during the interest period in which such date of issuance occurs. -4- the Securities represented by a Global Security (including principal, premium, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, Wilmington Trust Company, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of April 23, 2002 (the "Indenture"), among the Company, the Subsidiary Guarantor and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; issue or sell capital stock of subsidiaries; -5- engage in transactions with affiliates; transfer or sell assets; guarantee indebtedness; restrict dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. These covenants are subject to important exceptions and qualifications. 5. Optional Redemption; Redemption Upon a Change of Control (a) Except as set forth below, the Company shall not be entitled to redeem the Securities at its option prior to April 15, 2007. On and after April 15, 2007, the Company shall be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on April 15 of the years set forth below:
Redemption Period Price ------ -------- 2007............................................................ 104.875% 2008............................................................ 103.250% 2009............................................................ 101.625% 2010 and thereafter............................................. 100.000%
Prior to April 15, 2005, the Company shall be entitled at its option on one or more occasions to redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) at a redemption price (expressed as a percentage of principal amount) of 109.75%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Equity Offerings (provided that if the Equity Offering is an offering by Parent, a portion of the Net Cash Proceeds thereof equal to the amount required to redeem any such Securities is contributed to the equity capital of the Company); provided, however, that: (1) at least 65% of such aggregate principal amount at maturity of Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of -6- each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates); and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (b) At any time on or prior to April 15, 2007, the Securities may also be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, notice of which is sent no later than 30 days after the occurrence of such Change of Control by notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (the "Change of Control Redemption Date"). "Applicable Premium" means, with respect to a Security at any Change of Control Redemption Date, the greater of: (1) 1.0% of the principal amount of such Security; or (2) the excess of (a) the present value at such time of: (x) the redemption price of such Security at April 15, 2007 (such redemption price being described under paragraph 5(a) above, plus (y) all required interest payments (excluding accrued but unpaid interest) due on such Security through April 15, 2007 computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Security. "Treasury Rate" means the yield to maturity at the Change of Control Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the Change of Control Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the Change of Control Redemption Date to April 15, 2007; provided, however, that if the -7- period from the Change of Control Redemption Date to April 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Change of Control Redemption Date to April 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at its registered address. Securities in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has exercised its right to redeem the Securities as described under Section 5 hereof, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be purchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. Under certain circumstances as set forth in the Indenture, the Company will be required to offer to purchase Securities with the Net Available Cash from Asset Dispositions. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before -8- the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Guaranty The payment by the Company of the principal of, and premium and interest on, the Securities is unconditionally guaranteed on a joint and several senior subordinated basis by each Subsidiary Guarantor. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 principal amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the -9- Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities (including consents obtained in connection with a tender offer for, exchange for or purchase of the Securities) and (ii) any past default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantor and the Trustee shall be entitled to amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities, including Subsidiary Guaranties, or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company or the Subsidiary Guarantor, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder. 15. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon required purchase, upon declaration of acceleration or otherwise; (iii) failure by the Company or any Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $10 million; and (vii) certain defaults with respect to Subsidiary Guaranties. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities -10- may declare all the Securities to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is not opposed to the interest of the Holders. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others No past, present or future director, officer, employee, member, incorporator or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), -11- TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 21. Holders' Compliance with Registration Rights Agreement Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.3 22. Governing Law. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. - ---------- * Delete if this Security is not being issued in exchange for an Initial Security. -12- The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, New York 10172 Attention: Ira D. Kleinman -13- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: ------------------------ ---------------------------- - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. -14- OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount: $ Date: Your Signature: ---------------------- -------------------------- (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: ----------------------------------------------------------- (Signature must be guaranteed) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EX-4.3 7 y61690exv4w3.txt SUPPLEMENTAL INDENTURE EXHIBIT 4.3 SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE, dated as of May 10, 2002, among Associated Materials Incorporated, a Delaware corporation (the "Company"), AMI Management Company, a Delaware business trust ("AMC"), Wilmington Trust Company, as trustee under the Indenture referred to below (the "Trustee"), and Alside, Inc., a Delaware corporation ("Alside"). W I T N E S S E T H : WHEREAS, the Company, AMC and the Trustee heretofore executed and delivered an Indenture, dated as of April 23, 2002 (as heretofore amended and supplemented, the "Indenture"), providing for the issuance of the 9 3/4% Senior Subordinated Notes due 2012 (the "Securities") (capitalized terms used herein but not otherwise defined have the meanings ascribed thereto in the Indenture); WHEREAS, Section 4.10 of the Indenture provides that each domestic Restricted Subsidiary of the Company that guarantees or incurs any Indebtedness under the Credit Agreement shall execute and deliver to the Trustee a Guaranty Agreement, pursuant to which such Restricted Subsidiary shall Guarantee payment of the Securities on the same terms and conditions as those set forth in the Indenture; WHEREAS, Section 9.01 of the Indenture provides that the Company may amend the Indenture without notice to or consent of any Securityholder to add guarantees with respect to the Securities, including any Subsidiary Guaranties, or to secure the Securities; WHEREAS, Alside is a domestic Restricted Subsidiary of the Company and has entered into the Supplement No. 1 to the Subsidiary Guaranty, dated as of May 10, 2002, by and between Alside and UBS AG, Stamford Branch, as administrative agent, to guarantee the Indebtedness under the Credit Agreement as provided therein; WHEREAS, this Supplemental Indenture has been duly authorized by all necessary corporate action on the part of each of the Company, AMC and Alside; and WHEREAS, all conditions precedent to supplement the Indenture have been met; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, AMC, Alside and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows: ARTICLE I Guaranties Section 1.1. Subsidiary Guarantor. The definition of "Subsidiary Guarantor" set forth in Section 1.01 of the Indenture is hereby amended to read in its entirety as follows: "Subsidiary Guarantor" means AMI Management Company, Alside, Inc. and each domestic Subsidiary of the Company that executes this Indenture as a guarantor on the Issue Date and each other domestic Subsidiary of the Company that thereafter guarantees the Securities pursuant to the terms of this Indenture." Section 1.2. Subsidiary Guaranty. Alside hereby agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee the Company's Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in Articles 11 and 12 of the Indenture and to be bound by all other applicable provisions of the Indenture. Section 1.3. Alside. Alside agrees to be bound by the Indenture and the Subsidiary Guaranties. Section 1.4. Trustee's Acceptance. The Trustee hereby accepts this Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture. ARTICLE II Miscellaneous Section 2.1. Effect of Supplemental Indenture. Upon the execution and delivery of this Supplemental Indenture by the Company, AMC, Alside and the Trustee, the Indenture shall be supplemented in accordance herewith, and this Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby. Section 2.2. Indenture Remains in Full Force and Effect. Except as supplemented hereby, all provisions in the Indenture shall remain in full force and effect. Section 2.3. Indenture and Supplemental Indenture Construed Together. This Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, the Indenture and this Supplemental Indenture shall henceforth be read and construed together. Section 2.4. Confirmation and Preservation of Indenture. The Indenture as supplemented by this Supplemental Indenture is in all respects confirmed and preserved. Section 2.5. Conflict with Trust Indenture Act. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the provision of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. Section 2.6. Severability. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. -2- Section 2.7. Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the Holders of the Securities, any benefit of any legal or equitable right, remedy or claim under the Indenture, this Supplemental Indenture or the Securities. Section 2.8. Successors. All agreements of the Company, AMC and Alside in this Supplemental Indenture shall bind its successors. All agreements of the Trustee in this Supplemental Indenture shall bind its successors. Section 2.9. Certain Duties and Responsibilities of the Trustee. In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture and the Securities relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided. Section 2.10. Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. Section 2.11. Multiple Originals. The parties may sign any number of copies of this Supplemental Indenture, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 2.12. Headings. The Article and Section headings herein are inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. Section 2.13. The Trustee. The Trustee shall not be responsible in any manner for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made by the Company, AMC and Alside. -3- IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first written above. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway ------------------------------------- Name: D. Keith LaVanway Title: Vice President and Chief Financial Officer AMI MANAGEMENT COMPANY By: /s/ D. Keith LaVanway ------------------------------------- Name: D. Keith LaVanway Title: Vice President, Chief Financial Officer, Secretary and Treasurer ALSIDE, INC. By: /s/ D. Keith LaVanway ------------------------------------- Name: D. Keith LaVanway Title: Vice President, Treasurer and Secretary WILMINGTON TRUST COMPANY, as Trustee By: /s/ Michael G. Oller, Jr. ------------------------------------- Name: Michael G. Oller, Jr. Title: Financial Services Officer -4- EX-4.4 8 y61690exv4w4.txt FORM THE 9 3/4% SENIOR SUBORDINATED NOTE DUE 2012 EXHIBIT 4.4 [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [RESTRICTED SECURITIES LEGEND] THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH -2- ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. [Temporary Regulation S Global Security Legend] BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE RULE 144A GLOBAL SECURITY OR THE PERMANENT REGULATION S GLOBAL SECURITY OR ANY OTHER SECURITY REPRESENTING AN INTEREST IN THE SECURITIES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED THROUGH EUROCLEAR BANK S.A./N.A., AS OPERATOR OF THE EUROCLEAR SYSTEM OR CLEARSTREAM BANKING, SOCIETE ANONYME AND ONLY (I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES, (IV) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (VI) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL NOTIFY ANY PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN APPLICABLE. -3- No. ________ CUSIP No. ________ $ _______ 9 3/4% Senior Subordinated Note Due 2012 Simon Acquisition Corp., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of _____________________________ ________________________________ Dollars on April 15, 2012. Interest Payment Dates: April 15 and October 15, commencing October 15, 2002. Record Dates: April 1 and October 1. Additional provisions of this Security are set forth on the other side of this Security. ASSOCIATED MATERIALS INCORPORATED By: ________________________________ Name: Title: By: ________________________________ Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION WILMINGTON TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by _____________________________ Authorized Signatory -4- [FORM OF REVERSE SIDE OF INITIAL SECURITY] 9 3/4% Senior Subordinated Note Due 2012 1. Interest Simon Acquisition Corp., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest will accrue on this Security at a rate of 0.25% per annum (increasing by an additional 0.25% per annum after each subsequent 90-day period that occurs after the date on which such Registration Default occurs up to a maximum additional interest rate of 1.0% per annum) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually in arrears on April 15 and October 15 of each year, commencing October 15, 2002. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 23, 2002. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 1 or October 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). -5- 3. Paying Agent and Registrar Initially, Wilmington Trust Company, a Delaware banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or coregistrar. 4. Indenture The Company issued the Securities under an Indenture dated as of April 23, 2002 ("Indenture"), among the Company, the Subsidiary Guarantor and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. This Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; issue or sell capital stock of subsidiaries; engage in transactions with affiliates; transfer or sell assets; guarantee indebtedness; restrict dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. These covenants are subject to important exceptions and qualifications. 5. Optional Redemption; Redemption Upon a Change of Control (a) Except as set forth below, the Company shall not be entitled to redeem the Securities at its option prior to April 15, 2007. On and after April 15, 2007, the Company shall be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due -6- on the relevant interest payment date), if redeemed during the 12-month period commencing on April 15 of the years set forth below:
Redemption Period Price ------ ----- 2007................................................... 104.875% 2008................................................... 103.250% 2009................................................... 101.625% 2010 and thereafter.................................... 100.000%
Prior to April 15, 2005, the Company shall be entitled at its option on one or more occasions to redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) at a redemption price (expressed as a percentage of principal amount) of 109.75%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Equity Offerings (provided that if the Equity Offering is an offering by Parent, a portion of the net cash proceeds thereof equal to the amount required to redeem any such Securities is contributed to the equity capital of the Company); provided, however, that: (1) at least 65% of such aggregate principal amount of Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates) and (2) each such redemption occurs within 90 days after the date of the related Equity Offering. (b) At any time on or prior to April 15, 2007, the Securities may also be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, notice of which is sent no later than 30 days after the occurrence of such Change of Control by notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (the "Change of Control Redemption Date"). "Applicable Premium" means, with respect to a Security at any Change of Control Redemption Date, the greater of: (1) 1.0% of the principal amount of such Security; or -7- (2) the excess of (a) the present value at such time of: (x) the redemption price of such Security at April 15, 2007 (such redemption price being described under paragraph 5(a) above, plus (y) all required interest payments (excluding accrued but unpaid interest) due on such Security through April 15, 2007 computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the principal amount of such Security. "Treasury Rate" means the yield to maturity at the Change of Control Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the Change of Control Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the Change of Control Redemption Date to April 15, 2007; provided, however, that if the period from the Change of Control Redemption Date to April 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Change of Control Redemption Date to April 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 6. Notice of Redemption Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at its registered address. Securities in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. -8- 7. Put Provisions Upon a Change of Control, unless the Company has exercised its right to redeem the Securities as described under Section 5 hereof, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be purchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. Under certain circumstances as set forth in the Indenture, the Company will be required to offer to purchase Securities with the Net Available Cash from Asset Dispositions. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Guaranty The payment by the Company of the principal of, and premium and interest on, the Securities is unconditionally guaranteed on a joint and several senior subordinated basis by each Subsidiary Guarantor. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 principal amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. -9- 11. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Securities may be amended with the written consent of the Holders of at least a majority in aggregate principal amount outstanding of the Securities (including consents obtained in connection with a tender offer for, exchange for or purchase of the Securities) and (ii) any past default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantor and the Trustee shall be entitled to amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities, including Subsidiary Guaranties, or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company or the Subsidiary Guarantor, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder. 15. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption -10- pursuant to paragraph 5 of the Securities, upon required purchase, upon declaration of acceleration or otherwise; (iii) the failure by the Company or any Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $10 million; and (vii) certain defaults with respect to Subsidiary Guaranties. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare all the Securities to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is not opposed to the interest of the Holders. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others No past, present or future director, officer, employee, member, incorporator or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. -11- 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 21. Holders' Compliance with Registration Rights Agreement Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 22. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: -12- Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, NY 10172 Attention: Ira D. Kleinman -13- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to ________________________________________________________________________________ (Print or type assignee's name, address and zip code) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ________________________ Your Signature: _________________________ ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms. CHECK ONE BOX BELOW (1) _ in the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (2) _ inside the United States to an Institutional Accredited Investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that, prior to such transfer, furnished to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities; or -14- (3) _ outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (4) _ pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933; or (5) _ pursuant to an effective registration statement under the Securities Act of 1933; or (6) _ to the Company. If such transfer is being made pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act, the undersigned further certifies that (i) the offer of the Securities was not made to a person in the United States; (ii) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (iii) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903 or Rule 904 of Regulation S, as applicable; (iv) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (v) we have advised the transferee of the transfer restrictions applicable to the Securities; and (vi) if the circumstances set forth in Rule 904(B) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Securities may be offered and sold during the distribution compliance period specified in Rule 903 of Regulation S; pursuant to registration of the Securities under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act. -15- Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (2) or (3) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. _________________________________ Signature Signature Guarantee: ____________________________ ________________________________ Signature must be guaranteed Signature Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ________________________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: _________________________ _____________________________________ NOTICE: To be executed by an executive officer [TO BE ATTACHED TO GLOBAL SECURITIES] -16- SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Amount of decrease Amount of increase Principal amount of this Signature of in Principal in Principal Global Security authorized signatory Date of amount of this amount of this following such decrease of Trustee or Exchange Global Security Global Security or increase Securities Custodian -------- --------------- --------------- ----------- --------------------
-17- OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount: $ Date: ____________________________ Your Signature: _________________________ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: __________________________________________________________ (Signature must be guaranteed) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EX-4.6 9 y61690exv4w6.txt FIRST SUPPLEMENTAL INDENTURE EXHIBIT 4.6 FIRST SUPPLEMENTAL INDENTURE DATED AS OF APRIL 4, 2002 TO THE INDENTURE DATED AS OF MARCH 1, 1998 BETWEEN ASSOCIATED MATERIALS INCORPORATED AND THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A. (AS SUCCESSOR TO U.S. TRUST COMPANY OF TEXAS, N.A.) FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 4, 2002, by and between ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation (the "Company"), and THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., as successor to U.S. Trust Company of Texas, N.A. (the "Trustee"), to the Indenture, dated as of March 1, 1998, by and between the Company and the Trustee (the "Indenture"). All terms used herein and not otherwise defined herein shall have the same respective meanings as in the Indenture. RECITALS: The Company has $75,000,000 aggregate principal amount of 9 1/4% Senior Subordinated Notes due March 1, 2008 (the "Securities") issued and outstanding pursuant to the Indenture. The Company desires and has requested the Trustee to join with the Company in the execution and delivery of this Supplemental Indenture for the purpose of amending the Indenture in order to eliminate certain covenants and Events of Default. Section 9.02 of the Indenture provides that a supplemental indenture may be entered into by the Company and the Trustee to change certain provisions of the Indenture or modify certain rights of the Holders of the Securities with the consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Securities not owned by the Company, any subsidiary of the Company or any affiliate thereof and the authorization by a resolution of the Board of Directors of the Company. Pursuant to a solicitation by the Company, consents to the amendments to the Indenture pursuant to this Supplemental Indenture of Holders of at least a majority in aggregate principal amount of the then outstanding Securities have been received and a resolution duly adopted by the Board of Directors of the Company has authorized the Company to enter into this Supplemental Indenture with the Trustee. All things necessary to make this Supplemental Indenture the valid agreement of the Company and the Trustee and a valid amendment to the Indenture have been done. NOW THEREFORE, the Company and the Trustee hereby agree as set forth below. 1. Amendment. The Indenture is amended as follows: 1.1. Section 1.01 is hereby amended by deleting each of the following defined terms in its entirety: "Acquired Indebtedness," "Average Life," "Borrowing Base," "Consolidated Interest Coverage Ratio," "Consolidated Interest Expense," "Consolidated Net Income," "Consolidated Net Worth," "Consolidated Tax Expense," "guarantee," "Investment," "Permitted Indebtedness," "Permitted Investment," "Permitted Liens," "Purchase Money Obligation" and "Taxable Notes." 1.2. Section 1.02 is hereby amended by deleting the following defined terms and the reference to the Section of the Indenture in which each such defined term is defined: "Affiliate Transaction," "incurrence" and "Required Filing Date." 1.3. Sections 4.02, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.18, 4.19, 4.22, 4.23 and 4.24 are hereby amended by deleting such Sections in their entirety. 1.4. ARTICLE V, consisting of Sections 5.01 and 5.02, is hereby amended by deleting such Sections in their entirety. 1.5. Section 6.01(a)(ii) is hereby amended and restated in its entirety to read as follows: "(ii) the Company defaults in the payment of interest on any Security or in the payment of any other amount owing under this Indenture or the Securities when the same becomes due and payable, whether or not such payment shall be prohibited by this Indenture;" 1.6. Section 6.01(a) is hereby amended by deleting clauses (iii), (v), (vi), (vii), (viii) and (ix) thereof in their entirety. 1.7. Section 11.04 is hereby amended by deleting clauses (b), (c) and (f) thereof in their entirety. 2. Corresponding Amendments to the Securities. Each Security is hereby amended to make the terms of such Security consistent with the terms of the Indenture, as amended by this Supplemental Indenture. To the extent of any conflict between the terms of the Securities and the terms of the Indenture, as amended by this Supplemental Indenture, the terms of the Indenture, as amended by this Supplemental Indenture, shall govern and be controlling. 3. Effectiveness. Pursuant to Section 9.07 of the Indenture, this Supplemental Indenture will become effective upon execution, but the amendments set forth in Section 1 of this Supplemental Indenture (the "Amendments") will not become operative unless and until the Company accepts for payment all Securities validly tendered and not withdrawn pursuant to the Company's Offer to Purchase and Consent Solicitation Statement, dated March 22, 2002, and the related Letter of Transmittal and Consent, as the same may be amended from time to time, and the funds necessary for the payment of all such tendered Securities have been irrevocably delivered to the Trustee for payment to the Holders thereof. If and when the Amendments become operative, the Indenture shall be deemed to be modified and amended in accordance with this Supplemental Indenture and the respective rights, limitations of rights, duties and immunities under the Indenture of the Trustee, the Company and the Holders of Securities shall thereafter be determined, exercised and enforced under the Indenture subject in all respects to such modifications and amendments contained in this Supplemental Indenture, and all the terms and conditions of this Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. 2 4. Miscellaneous. 4.1. This Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and the Indenture and this Supplemental Indenture shall henceforth be read and construed together as one instrument. 4.2. The Indenture, as supplemented by this Supplemental Indenture, is in all respects confirmed and preserved. 4.3. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the provisions of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 4.4. In case any provision of this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 4.5. The Section headings herein are for convenience only and shall not affect the construction hereof. 4.6. Nothing in the Indenture, the Supplemental Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder, and the Holders of the Securities, any benefit of any legal or equitable right, remedy or claim under the Indenture, the Supplemental Indenture or the Securities. 4.7. All covenants and agreements in this Supplemental Indenture by the Company shall be binding on its successors and assigns, whether so expressed or not. 4.8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE OR ENTERED INTO AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 4.9. This Supplemental Indenture may be executed in one or more counterparts, each of which shall be an original, but such counterparts shall together constitute one and the same instrument. Delivery by facsimile of a signature on this Supplemental Indenture shall have the same effect as delivery of an original of such signature. 4.10. The Trustee assumes no responsibility for the correctness of the recitals herein contained, which shall be taken as the statements of the Company. The Trustee makes no representations as to, and, subject to the provisions of Section 7.01 of the Indenture, shall have no responsibility for, the validity or sufficiency of this Supplemental Indenture or the due authorization and execution hereof by the Company. 3 IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, as of the day and year first written above. ASSOCIATED MATERIALS INCORPORATED By: /s/ Robert L. Winspear --------------------------------- Name: Robert L. Winspear Title: Vice President and Chief Financial Officer THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., as successor to U.S. Trust Company of Texas, N.A. By: /s/ John C. Stohlmann --------------------------------- Name: John C. Stohlmann Title: Vice President EX-10.1 10 y61690exv10w1.txt CREDIT AGREEMENT EXHIBIT 10.1 [EXECUTION COPY] U.S.$165,000,000 CREDIT AGREEMENT, dated as of April 19, 2002, among ASSOCIATED MATERIALS INCORPORATED, as the Borrower, ASSOCIATED MATERIALS HOLDINGS INC., as a Guarantor, VARIOUS FINANCIAL INSTITUTIONS AND OTHER PERSONS FROM TIME TO TIME PARTIES HERETO, as the Lenders, UBS AG, STAMFORD BRANCH, as the Administrative Agent, CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as the Syndication Agent, and CIBC WORLD MARKETS CORP., as the Documentation Agent. --------------------- UBS WARBURG LLC and CREDIT SUISSE FIRST BOSTON CORPORATION, as the Joint Lead Arrangers Table of Contents
Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms............................................... 4 SECTION 1.2. Use of Defined Terms........................................ 39 SECTION 1.3. Cross-References............................................ 39 SECTION 1.4. Accounting and Financial Determinations..................... 39 ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, Notes AND LETTERS OF CREDIT SECTION 2.1. Commitments................................................. 39 SECTION 2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment....................................... 39 SECTION 2.1.2. Letter of Credit Commitment........................... 40 SECTION 2.1.3. Term Loan Commitment.................................. 40 SECTION 2.2. Reduction of the Commitment Amounts......................... 40 SECTION 2.3. Borrowing Procedures........................................ 41 SECTION 2.3.1. Borrowing Procedures.................................. 41 SECTION 2.3.2. Swing Line Loan Borrowing Procedures.................. 41 SECTION 2.4. Continuation and Conversion Elections....................... 42 SECTION 2.5. Funding..................................................... 43 SECTION 2.6. Letter of Credit Issuance Procedures........................ 43 SECTION 2.6.1. Other Lenders' Participation.......................... 44 SECTION 2.6.2. Disbursements......................................... 44 SECTION 2.6.3. Reimbursement......................................... 44 SECTION 2.6.4. Deemed Disbursements.................................. 45 SECTION 2.6.5. Nature of Reimbursement Obligations................... 45 SECTION 2.7. Register; Notes............................................. 46 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments; Application..................... 47 SECTION 3.1.1. Repayments and Prepayments............................ 47 SECTION 3.1.2. Application........................................... 50
-i- Table of Contents (continued)
Page SECTION 3.2. Interest Provisions......................................... 50 SECTION 3.2.1. Rates................................................. 50 SECTION 3.2.2. Post-Maturity Rates................................... 51 SECTION 3.2.3. Payment Dates......................................... 51 SECTION 3.3. Fees........................................................ 51 SECTION 3.3.1. Commitment Fee........................................ 51 SECTION 3.3.2. Agents' Fee........................................... 52 SECTION 3.3.3. Letter of Credit Fees................................. 52 ARTICLE IV CERTAIN EURODOLLAR AND OTHER PROVISIONS SECTION 4.1. Eurodollar Lending Unlawful................................. 52 SECTION 4.2. Deposits Unavailable........................................ 53 SECTION 4.3. Increased Eurodollar Loan Costs, etc........................ 53 SECTION 4.4. Funding Losses.............................................. 53 SECTION 4.5. Increased Capital Costs..................................... 54 SECTION 4.6. Taxes....................................................... 54 SECTION 4.7. Payments, Computations, etc................................. 57 SECTION 4.8. Sharing of Payments......................................... 57 SECTION 4.9. Setoff...................................................... 58 SECTION 4.10. Replacement of Lenders...................................... 58 SECTION 4.11. Change of Lending Office.................................... 59 ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extension.................................... 59 SECTION 5.1.1. Resolutions, etc...................................... 60 SECTION 5.1.2. Material Transaction Documents........................ 60 SECTION 5.1.3. Tender Offer Completed................................ 60 SECTION 5.1.4. Debt Tender Offer..................................... 60 SECTION 5.1.5. Supplemental Indenture................................ 61 SECTION 5.1.6. Antitakeover Statutes................................. 61 SECTION 5.1.7. No Impediments to the Merger.......................... 61
-ii- Table of Contents (continued)
Page SECTION 5.1.8. Mergerco Debt Financing............................... 61 SECTION 5.1.9. Equity Investment..................................... 61 SECTION 5.1.10. Payment of Outstanding Indebtedness, etc.............. 61 SECTION 5.1.11. Closing Date Certificate.............................. 62 SECTION 5.1.12. Delivery of Notes..................................... 62 SECTION 5.1.13. Closing Fees, Expenses, etc........................... 62 SECTION 5.1.14. No Material Adverse Effect............................ 62 SECTION 5.1.15. Term Loan Escrow Account.............................. 62 SECTION 5.1.16. Mergerco Guaranty..................................... 62 SECTION 5.1.17. Subsidiary Guaranty................................... 62 SECTION 5.1.18. Solvency Certificate.................................. 63 SECTION 5.1.19. Security and Pledge Agreements........................ 63 SECTION 5.1.20. Patent Security Agreement, Copyright Security Agreement and Trademark Security Agreement............ 64 SECTION 5.1.21. Mortgages............................................. 64 SECTION 5.1.22. Perfection Certificate, Filing Agent, etc............. 64 SECTION 5.1.23. Insurance............................................. 65 SECTION 5.1.24. Approvals............................................. 65 SECTION 5.1.25. Opinions of Counsel................................... 65 SECTION 5.2. All Credit Extensions....................................... 65 SECTION 5.2.1. Compliance with Warranties, No Default, etc........... 65 SECTION 5.2.2. Credit Extension Request, etc......................... 65 ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1. Organization, etc........................................... 66 SECTION 6.2. Due Authorization, Non-Contravention, etc................... 66 SECTION 6.3. Government Approval, Regulation, etc........................ 67 SECTION 6.4. Validity, etc............................................... 67 SECTION 6.5. Financial Information....................................... 67 SECTION 6.6. No Material Adverse Effect.................................. 67 SECTION 6.7. Litigation.................................................. 67
-iii- Table of Contents (continued)
Page SECTION 6.8. Labor Matters............................................... 67 SECTION 6.9. Subsidiaries................................................ 68 SECTION 6.10. Ownership of Properties..................................... 68 SECTION 6.11. Taxes....................................................... 68 SECTION 6.13. Environmental Warranties.................................... 69 SECTION 6.14. Accuracy of Information..................................... 70 SECTION 6.15. Regulations U and X......................................... 71 SECTION 6.16. Issuance of Subordinated Debt, Status of Obligations as Senior Indebtedness, etc..................... 71 SECTION 6.17. Solvency.................................................... 71 ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants....................................... 71 SECTION 7.1.1. Financial Information, Reports, Notices, etc.......... 71 SECTION 7.1.2. Maintenance of Existence; Compliance with Laws, etc............................................. 74 SECTION 7.1.3. Maintenance of Properties............................. 74 SECTION 7.1.4. Insurance............................................. 74 SECTION 7.1.5. Bank Meeting; Books and Records....................... 76 SECTION 7.1.6. Environmental Law Covenant............................ 76 SECTION 7.1.7. Use of Proceeds....................................... 77 SECTION 7.1.8. Mortgages............................................. 77 SECTION 7.1.9. Future Subsidiaries................................... 78 SECTION 7.1.10. Additional Collateral................................. 80 SECTION 7.1.11. Consummation of Merger................................ 80 SECTION 7.1.12. Maintenance of Corporate Separateness................. 80 SECTION 7.1.13. Holdings Stockholders Agreement....................... 80 SECTION 7.2. Negative Covenants.......................................... 81 SECTION 7.2.1. Business Activities................................... 81 SECTION 7.2.2. Indebtedness.......................................... 81 SECTION 7.2.3. Liens................................................. 84 SECTION 7.2.4. Financial Condition and Operations.................... 86
-iv- Table of Contents (continued)
Page SECTION 7.2.5. Investments........................................... 87 SECTION 7.2.6. Restricted Payments, etc.............................. 89 SECTION 7.2.7. Capital Expenditures, etc............................. 90 SECTION 7.2.8. No Prepayment of Subordinated Debt.................... 91 SECTION 7.2.9. Capital Stock of Subsidiaries......................... 91 SECTION 7.2.10. Consolidation, Merger, Acquisitions, etc.............. 92 SECTION 7.2.11. Permitted Dispositions................................ 92 SECTION 7.2.12. Modification of Certain Agreements.................... 93 SECTION 7.2.13. Transactions with Affiliates.......................... 94 SECTION 7.2.14. Restrictive Agreements, etc........................... 95 SECTION 7.2.15. Sale and Leaseback.................................... 95 SECTION 7.2.16. Take or Pay Contracts................................. 96 SECTION 7.2.17. Fiscal Year........................................... 96 SECTION 7.2.18. Activities of Holdings................................ 96 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default................................ 96 SECTION 8.1.1. Non-Payment of Obligations............................ 96 SECTION 8.1.2. Breach of Warranty.................................... 97 SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations........................................... 97 SECTION 8.1.4. Non-Performance of Other Covenants and Obligations........................................... 97 SECTION 8.1.5. Default on Other Indebtedness......................... 97 SECTION 8.1.6. Judgments............................................. 97 SECTION 8.1.7. Pension Plans......................................... 98 SECTION 8.1.8. Change in Control..................................... 98 SECTION 8.1.9. Bankruptcy, Insolvency, etc........................... 98 SECTION 8.1.10. Impairment of Security, etc........................... 99 SECTION 8.1.11. Failure of Subordination.............................. 99 SECTION 8.1.12. Additional Equity Investment.......................... 99 SECTION 8.2. Action if Bankruptcy........................................ 99 SECTION 8.3. Action if Other Event of Default............................ 99
-v- Table of Contents (continued)
Page ARTICLE IX HOLDINGS GUARANTY SECTION 9.1. Guaranty................................................... 100 SECTION 9.2. Acceleration of Holdings Guaranty.......................... 100 SECTION 9.3. Guaranty Absolute, etc..................................... 100 SECTION 9.4. Reinstatement, etc......................................... 101 SECTION 9.5. Waiver, etc................................................ 102 SECTION 9.6. Postponement of Subrogation, etc........................... 102 SECTION 9.7. Successors, Transferees and Assigns; Transfers of Notes, etc................................................. 102 ARTICLE X THE AGENTS SECTION 10.1. Appointments and Authorizations; Actions................... 102 SECTION 10.2. Funding, Reliance, etc..................................... 104 SECTION 10.3. Exculpation................................................ 104 SECTION 10.4. Successor.................................................. 104 SECTION 10.5. Credit Extensions by each Agent............................ 105 SECTION 10.6. Credit Decisions........................................... 105 SECTION 10.7. Copies, etc................................................ 106 SECTION 10.8. Reliance by Agents......................................... 106 SECTION 10.9. Notice of Defaults......................................... 106 ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc................................... 107 SECTION 11.2. Notices; Time.............................................. 109 SECTION 11.3. Payment of Costs and Expenses.............................. 109 SECTION 11.4. Indemnification............................................ 110 SECTION 11.5. Survival................................................... 111 SECTION 11.6. Severability............................................... 111 SECTION 11.7. Headings................................................... 111 SECTION 11.8. Execution in Counterparts, Effectiveness, etc.............. 111 SECTION 11.9. Governing Law; Entire Agreement............................ 112
-vi- Table of Contents (continued)
Page SECTION 11.10. Successors and Assigns..................................... 112 SECTION 11.11. Sale and Transfer of Credit Extensions; Participations in Credit Extensions Notes.................. 112 SECTION 11.12. Other Transactions......................................... 115 SECTION 11.13. Independence of Covenants.................................. 115 SECTION 11.14. Forum Selection and Consent to Jurisdiction................ 115 SECTION 11.15. Waiver of Jury Trial....................................... 116
-vii- Table of Contents (continued)
Page EXHIBITS EXHIBIT A-1 - Form of Revolving Note EXHIBIT A-2 - Form of Swing Line Note EXHIBIT A-3 - Form of Term Loan Note EXHIBIT B-1 - Form of Borrowing Request EXHIBIT B-2 - Form of Issuance Request EXHIBIT C - Form of Continuation/Conversion Notice EXHIBIT D - Form of Closing Date Certificate EXHIBIT E - Form of Compliance Certificate EXHIBIT F-1 - Form of Mergerco Guaranty EXHIBIT F-2 - Form of Subsidiary Guaranty EXHIBIT G-1 - Form of Holdings Pledge Agreement EXHIBIT G-2 - Form of Borrower Security and Pledge Agreement EXHIBIT G-3 - Form of Subsidiary Security and Pledge Agreement EXHIBIT H - Form of Perfection Certificate EXHIBIT I - Form of Solvency Certificate EXHIBIT J - Form of Interco Subordination Agreement EXHIBIT K - Form of Lender Assignment Agreement EXHIBIT L - Form of Term Loan Escrow Agreement SCHEDULES SCHEDULE I - Disclosure Schedule
-viii- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of April 19, 2002, is made by and among, ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation ("AMI"), ASSOCIATED MATERIALS HOLDINGS INC., a Delaware corporation ("Holdings"), the various financial institutions and other Persons from time to time parties hereto (the "Lenders"), UBS AG, Stamford Branch, as administrative agent (in such capacity, the "Administrative Agent"), CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as syndication agent (in such capacity, the "Syndication Agent"), CIBC WORLD MARKETS CORP., as documentation agent (in such capacity, the "Documentation Agent"), and UBS WARBURG LLC and CREDIT SUISSE FIRST BOSTON CORPORATION, as joint lead arrangers (in such capacity, the "Joint Lead Arrangers"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, Holdings, its wholly-owned Subsidiary, Simon Acquisition Corp., a Delaware corporation ("Mergerco"), and AMI have entered into an Agreement and Plan of Merger, dated as of March 16, 2002 (as amended in accordance herewith, the "Acquisition Agreement"), pursuant to which Mergerco will acquire AMI (the "Acquisition") as follows: (i) Mergerco has made a cash tender offer (the "Tender Offer") for 100% of all outstanding shares of Capital Stock of AMI (the "Shares") at a price of $50.00 per Share (the "Tender Offer Consideration"); provided that the Tender Offer is subject to the condition (among others) that a sufficient number of Shares be tendered (and not withdrawn) so as to permit the merger of Mergerco with and into AMI (the "Merger", with the corporation surviving such Merger being the "Surviving Corporation") without need of the affirmative vote or other consent of any other shareholder of AMI (such condition being the "Minimum Condition", and such sufficient number of Shares being the "Minimum Shares"); and (ii) upon the effectiveness of the Merger, all Shares not tendered pursuant to the Tender Offer will be cancelled for per Share cash consideration (the "Merger Consideration") equal to the price per Share paid in the Tender Offer (subject to the right of each holder of any such Shares to pursue appraisal rights under the DGCL) and, as a result thereof, the Surviving Corporation shall become the wholly-owned Subsidiary of Holdings, which in turn, will be owned and controlled by the Investors (defined below); WHEREAS, in connection with the Acquisition, AMI will be required, among other things, to refinance or defease (collectively, the "Refinancing") not less than $70,000,000 in the aggregate of its outstanding 9-1/4% senior subordinated notes due 2008 (the "Existing Notes"), which Refinancing shall be accomplished pursuant to and in accordance with the terms of the Debt Tender; WHEREAS, approximately $471,200,000 will be required in order to consummate the Acquisition and the Refinancing and to pay related fees, costs and expenses, including prepayment premiums resulting from the Refinancing (the foregoing, including the Tender Offer and the Merger, and all transactions related thereto (including the capital raising transactions described below in this recital), being herein referred to as the "Transaction"), which amount (the "Total Uses") will be raised from the following sources: (i) except to the extent provided below, at least $7,200,000 from cash on hand of AMI (the "Cash on Hand"); (ii) at least $171,960,000 from equity investments in Holdings (collectively, the "Equity Investment"), which shall be comprised of the following: (x) at least $159,500,000 of cash equity contributions (the "Cash Equity Contribution") made by certain funds managed by Harvest Partners, Inc. ("Harvest Partners") and certain other investors (together with Harvest Partners and such funds, the "Investors"), which contributions shall, in turn, be contributed by Holdings as cash common equity to Mergerco; and (y) on or before the Merger Closing Date, certain existing management shareholders of AMI may, in lieu of accepting the Tender Offer Consideration or Merger Consideration, exchange all or a portion of their Shares (or options to purchase Shares) for Capital Stock of Holdings (the "Rollover Equity"); provided that (A) the entire Cash Equity Contribution shall be made as of the Closing Date, and (B) to the extent the aggregate amount provided pursuant to clauses (i) and (ii) of this recital is, as of the earlier of (x) the date on which all fees, costs and expenses of Harvest Partners and Holdings related to the Transaction have been paid in full and (y) the 30th Business Day following the Closing Date, less than the Minimum Non-Debt Investment Amount, an additional Cash Equity Contribution shall be made by the Investors to Holdings in an amount at least equal to such deficiency (the "Additional Equity Investment") on or before such 30th Business Day following the Closing Date; (iii) the issuance or incurrence by Mergerco of at least $165,000,000 in aggregate gross proceeds of unsecured senior or unsecured senior subordinated indebtedness pursuant to the following (collectively, the "Mergerco Debt Financing"): (x) a public offering or Rule 144A or other private placement of senior subordinated notes (the "New Notes", with such offering or placement being, collectively, the "New Notes Offering"); or (y) in the event the New Notes are not issued or the proceeds therefrom are not otherwise available to Mergerco on the date of consummation of the Tender Offer (the "Tender Offer Closing Date"), the borrowing of senior unsecured bridge loans (such bridge loans, together with (A) any senior unsecured term loans into which any such bridge loans may be converted pursuant to the terms of the Bridge Loan Agreement and (B) any senior unsecured exchange notes for which such bridge loans or term loans, as the case may be, may be exchanged pursuant to the terms of the Bridge Loan Agreement, being, collectively, the "Bridge Loans") made pursuant to the Bridge Loan Agreement; -2- (iv) the borrowing by AMI of $125,000,000 in aggregate principal amount of Term Loans and up to $2,000,000 in aggregate principal amount of Swingline Loans under this Agreement. WHEREAS, in connection with the foregoing and to finance the ongoing working capital needs and general corporate purposes of the Borrower and its Subsidiaries, the Borrower desires to obtain the following financing facilities from the Lenders: (i) a Term Loan Commitment pursuant to which Term Loans, in a maximum aggregate principal amount not to exceed $125,000,000, may be made to the Borrower in a single drawing on the Tender Offer Closing Date; provided that (x) the proceeds of such Term Loans shall be used solely for the purpose of (1) consummating the Refinancing, (2) refinancing a portion of any outstanding Bridge Loans on the Merger Closing Date or, to the extent not used for such purpose, financing the Merger Consideration, and (3) paying fees, costs and expenses related to the Refinancing and this Agreement and the other Loan Documents (including prepayment premiums related to the Refinancing), and (y) as more fully described herein, to the extent that proceeds of the Term Loans exceed the amount required, as of the Tender Offer Closing Date, for the purposes set forth in clause (x) above, such excess shall be placed in escrow (the "Term Loan Escrow") with the Administrative Agent pursuant to, and for use and release as more fully described in, this Agreement and the Term Loan Escrow Agreement; (ii) a Revolving Loan Commitment (to include availability for Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to which Borrowings of Revolving Loans, in a maximum aggregate principal amount (together with all Swing Line Loans and Letter of Credit Outstandings) not to exceed $40,000,000 will be made to the Borrower from time to time on and subsequent to the Tender Offer Closing Date but prior to the Revolving Loan Commitment Termination Date; (iii) a Letter of Credit Commitment pursuant to which one or more Issuers will issue Letters of Credit for the account of the Borrower and its Subsidiaries from time to time on and subsequent to the Tender Offer Closing Date but prior to the Revolving Loan Commitment Termination Date in a maximum aggregate Stated Amount at any one time outstanding not to exceed $10,000,000; and (iv) a Swing Line Loan Commitment pursuant to which Borrowings of Swing Line Loans in an aggregate outstanding principal amount not to exceed $10,000,000 will be made on and subsequent to the Closing Date but prior to the Revolving Loan Commitment Termination Date; WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to extend the Commitments and make Loans to the Borrower and issue (or participate in) Letters of Credit. NOW, THEREFORE, the parties hereto agree as follows: -3- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Acquired Person" is defined in clause (m) of Section 7.2.2. "Acquisition" is defined in the first recital. "Acquisition Agreement" is defined in the first recital. "Additional Equity Investment" is defined in the third recital. "Administrative Agent" is defined in the preamble and includes each other Person appointed as the successor Administrative Agent pursuant to Section 10.4. "Affected Lender" is defined in Section 4.10. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. "Control" of a Person means the power, directly or indirectly, (i) to vote 10% or more of the Capital Stock (on a fully diluted basis) of such Person having ordinary voting power for the election of directors, managing members or general partners (as applicable), or (ii) to direct or cause the direction of the management and policies of such Person (whether by contract or otherwise). "Agents" means, unless the context requires otherwise, the Syndication Agent and the Administrative Agent. "Agents' Fee Letter" means the confidential letter captioned "Fee Letter", dated March 16, 2002 (as amended), among the Agents and Holdings. "Agreement" means, on any date, this Credit Agreement as originally in effect on the Closing Date and as thereafter amended, supplemented, amended and restated or otherwise modified from time to time and in effect on such date. "Alternate Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Administrative Agent's Base Rate in effect on such day and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Base Rate" shall mean the rate of interest per annum publicly announced or established from time to time by the Administrative Agent as its base rate in effect at its principal office in Stamford, Connecticut (the Base Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors) (any change in such rate announced or established by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change); and "Federal Funds Rate" shall mean, for any day, the weighted average of the rates (rounded upwards, if necessary, to the nearest 1/100th of 1%) on -4- overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York; provided that (x) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate for such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (y) if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Base Rate or the Federal Funds Rate, respectively. "Alternate Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "AmerCable Disposition" means the disposition, in accordance with Section 7.2.11, of the assets primarily utilized by the Borrower and its Subsidiaries in connection with the Borrower's "AmerCable" line of business for an amount no less than fair market value, as determined in good faith by management of the Borrower. "AMI" is defined in the preamble. "Annualized Basis" means, with respect to the determination of any amount for any period (for purposes of this definition, the "Subject Period"), the product obtained by multiplying (i) the amount accrued during the period commencing with (and including) the Closing Date and ending on the last day of the Subject Period and (ii) the quotient obtained by dividing (x) 365 by (y) the number of days from (and including) the Closing Date to (and including) the last day of the Subject Period. "Applicable Commitment Fee" means, (i) for each day from the Closing Date to (but excluding) the later of (x) if applicable, the earlier of (A) the date the Bridge Loans are repaid in full and (B) the one year anniversary of the Closing Date, and (y) the date upon which the Compliance Certificate for the second full Fiscal Quarter ended after the Closing Date is delivered pursuant to clause (c) of Section 7.1.1, a fee which shall accrue at a rate of 1/2 of 1% per annum, and (ii) at all times thereafter, a fee which shall accrue at the applicable rate per annum set forth below under the column entitled "Applicable Commitment Fee", determined by reference to the applicable Leverage Ratio referred to below:
Leverage Applicable Ratio Commitment Fee ----- -------------- > 3.75:1 0.50% < 3.75:1 0.375% -
The Leverage Ratio used to compute the Applicable Commitment Fee shall be that set forth in the Compliance Certificate most recently delivered by the Borrower to the Agents. Changes in the Applicable Commitment Fee resulting from a change in the Leverage Ratio shall become effective upon delivery by the Borrower to the Agents of a new Compliance Certificate pursuant -5- to clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance Certificate by the delivery due date specified in such clause, the Applicable Commitment Fee from and including the day immediately following such delivery due date to (but excluding) the date the Borrower delivers to the Agents a Compliance Certificate shall conclusively be equal to the highest Applicable Commitment Fee set forth above. "Applicable Margin" means, at any time of determination: (a) with respect to the unpaid principal amount of each Term Loan maintained as (i) an Alternate Base Rate Loan, 2.50% per annum and (ii) a Eurodollar Loan, 3.50% per annum; (b) for each day from the Closing Date to (but excluding) the later of (x) if applicable, the earlier of (A) the date the Bridge Loans are repaid in full and (B) the one year anniversary of the Closing Date, and (y) the date upon which the Compliance Certificate for the second full Fiscal Quarter ended after the Closing Date is delivered pursuant to clause (c) of Section 7.1.1, with respect to the unpaid principal amount of (i) each Swing Line Loan (which shall be borrowed and maintained only as an Alternate Base Rate Loan) and each Revolving Loan maintained as an Alternate Base Rate Loan, 2.00% per annum, and (ii) each Revolving Loan maintained as a Eurodollar Loan, 3.00% per annum; and (c) at all times after the date referred to in clause (b) above, with respect to the unpaid principal amount of (i) each Swing Line Loan (which shall be borrowed and maintained only as an Alternate Base Rate Loan) and each Revolving Loan maintained as an Alternate Base Rate Loan, the rate determined by reference to the applicable Leverage Ratio and at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for Alternate Base Rate Loans", and (ii) each Revolving Loan maintained as a Eurodollar Loan, the rate determined by reference to the applicable Leverage Ratio and at the applicable percentage per annum set forth below under the column entitled "Applicable Margin for Eurodollar Loans":
Applicable Margin Applicable Margin Leverage For Alternate Base For Eurodollar Ratio Rate Loans Loans ----- ---------- ----- > 3.75:1 2.00% 3.00% > 3.25:1 and < 3.75:1 1.75% 2.75% - > 2.50:1 and < 3.25:1 1.50% 2.50% - < 2.50:1 1.25% 2.25% -
The Leverage Ratio used to compute any Applicable Margin shall, at any time of determination, be the Leverage Ratio set forth in the Compliance Certificate most recently delivered by the Borrower to the Agents. Changes in the Applicable Margin resulting from a change in the Leverage Ratio shall become effective upon delivery by the Borrower to the Agents of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance Certificate by the delivery due date specified in such clause, the Applicable Margin from and including the day immediately following such delivery due date to (but -6- excluding) the date the Borrower delivers to the Agents a Compliance Certificate shall conclusively be equal to the highest Applicable Margin set forth above. "Approved Fund" means any Person (other than a natural Person) that (i) is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business, and (ii) is administered or managed by a Lender, an Affiliate of a Lender which is controlled by such Lender or its parent company or an entity or an Affiliate of an entity that administers or manages a Lender. "Assignee Lender" is defined in clause (a) of Section 11.11. "Assignor Lender" is defined in clause (a) Section 11.11. "Assumed Indebtedness" is defined in clause (m) of Section 7.2.2. "Authorized Officer" is defined in clause (b) of Section 5.1.1. "Borrower" means, at all times prior to the effectiveness of the Merger, AMI, and at all times thereafter, the Surviving Corporation. "Borrower Security and Pledge Agreement" means the Security and Pledge Agreement executed and delivered by an Authorized Officer of the Borrower pursuant to this Agreement, substantially in the form of Exhibit G-2 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Borrowing" means the Loans of the same type and, in the case of Eurodollar Loans, having the same Interest Period made by all Lenders required to make such Loans on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Request" means a Loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1 hereto. "Bridge Loan Agreement" means the bridge loan agreement, dated as of April 19, 2002, among Mergerco, as borrower thereunder, the lenders party thereto and UBS AG, Stamford Branch, as administrative agent thereunder, Credit Suisse First Boston, Cayman Islands Branch, as syndication agent thereunder, CIBC World Markets, as documentation agent thereunder, and Credit Suisse First Boston Corporation and UBS Warburg LLC, as joint lead arrangers and joint book-runners thereunder. "Bridge Loans" is defined in the third recital. "Business Day" means (i) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or Dallas, Texas, and (ii) relative to the making, continuing, prepaying or repaying of any Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day on which dealings in Dollars are carried on in the London interbank eurodollar market. -7- "Capital Expenditures" means, for any period, the aggregate amount of all expenditures of the Borrower and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, should be classified as capital expenditures. "Capital Stock" means, with respect to any Person, any and all shares, interests (including membership interests in limited liability companies), participations, rights (including options, warrants and the like convertible or exercisable into shares of Capital Stock) or other equivalents (however designated, whether voting or non-voting) of such Person's capital, whether now outstanding or issued after the Closing Date. "Capitalized Lease Liabilities" means all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which have been (or, in accordance with GAAP, should be) classified as capitalized leases. The amount of such monetary obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty. "Cash Collateralize" means, with respect to a Letter of Credit, the deposit of immediately available funds into a cash collateral account maintained with (or on behalf of) the Administrative Agent on terms reasonably satisfactory to the Administrative Agent in an amount equal to the Stated Amount of such Letter of Credit. "Cash Equity Contribution" is defined in the third recital. "Cash Equivalent Investment" means, at any time: (a) any direct obligation of (or obligation unconditionally guaranteed by) the United States of America or a State thereof (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States of America or a State thereof) maturing not more than six months after such time; (b) commercial paper maturing not more than 180 days from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any State of the United States or of the District of Columbia and rated A-1 or higher by S&P or P-1 or higher by Moody's, or (ii) any Lender (or its holding company); (c) any certificate of deposit, time deposit, money market deposit or bankers acceptance, maturing not more than six months after its date of issuance, which is issued by either (i) any bank organized under the laws of the United States (or any State thereof or the District of Columbia) or Canada and (in either case) which has (x) a credit rating of A or higher from S&P or A2 or higher from Moody's and (y) a combined capital and surplus greater than $500,000,000, or (ii) any Lender; (d) any repurchase agreement having a term of 7 days or less entered into with any Lender or any commercial banking institution satisfying the criteria set forth in -8- clause (c)(i) above which (i) is secured by a fully perfected security interest in any obligation of the type described in clause (a), and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder; or (e) investments in money market funds substantially all of whose assets are comprised of the securities of the types described in clauses (a) through (d) above. "Cash on Hand" is defined in the third recital. "Casualty Event" means the damage, destruction or condemnation, as the case may be, of any property of the Borrower, Holdings or any of their respective Subsidiaries. "Casualty Proceeds" means, with respect to any Casualty Event, the amount of any insurance proceeds or condemnation awards received after the Closing Date by the Borrower, Holdings or any of their respective Subsidiaries in connection therewith, but excluding (i) any proceeds from business interruption insurance, (ii) any proceeds or awards required to be paid to a creditor (other than any Secured Party) which holds a first-priority Lien permitted by Section 7.2.3 on the property which is the subject of such Casualty Event and (iii) any such proceeds received in respect of any Casualty Event (or any series of related Casualty Events) not exceeding $100,000 in respect of any such event (or series of related events) or $500,000 in the aggregate for all Casualty Events since the Closing Date. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means (a) (i) until the Merger Closing Date, any Person other than Holdings shall own any Capital Stock of Mergerco or otherwise have the ability to elect any members of the Board of Directors of Mergerco, and (ii) at all times from and after the Merger Closing Date, any Person other than Holdings shall own any Capital Stock of the Borrower or otherwise have the ability to elect any members of the Board of Directors of the Borrower; or (b) at all times from the Closing Date until the Merger Closing Date, Mergerco shall own less than the greater of (x) a majority of the Capital Stock of the Borrower and (y) that percentage of the Capital Stock of the Borrower tendered to (and purchased by) Mergerco on the Tender Offer Closing Date pursuant to the Tender Offer, in each case on a fully diluted basis, or shall fail to have the right to elect or designate for election the number of members of the Board of Directors of the Borrower which would hold a majority of the votes of such Board of Directors; or (c) at all times prior to a Qualified IPO, the Permitted Holders shall fail to have the right to elect or designate for election the number of members of the Board of -9- Directors (or similar managing body) of Holdings which would hold a majority of the votes of such Board of Directors; or (d) at all times prior to a Qualified IPO, the Permitted Holders shall cease to own at least 51% of the Capital Stock of Holdings held by the Permitted Holders on the Closing Date after giving effect to the Transaction; or (e) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holder, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), (except that such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time and except that any Person that is deemed to have beneficial ownership of shares solely as the result of being part of a group pursuant to Rule 13d-5(b)(1) of the Exchange Act shall be deemed not to have beneficial ownership of any shares held by a Permitted Holder forming a part of such group), directly or indirectly, of more than 30% of the total voting power of the Voting Stock of Holdings; provided that the Permitted Holders beneficially own (as defined in Rule 13d-5 of the Exchange Act), directly or indirectly, in the aggregate, a lesser percentage of the total voting power of the Voting Stock of Holdings than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of Holdings (for purposes of this clause (e), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity if such other person is the beneficial owner (as defined in this provision), directly or indirectly, of more than 30% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in this provision), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); or (f) at all times from and after a Qualified IPO, during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors (or similar managing body) of Holdings (together with any new directors whose election to such Board or whose nomination for election by the holders of the Capital Stock of Holdings was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors (or similar managing body) of Holdings then in office; or (g) the occurrence of any "Change of Control" (or similar term) under (and as defined in) any Other Debt Document in respect of any Unsecured Transaction Debt. "Closing Date" means the date of the initial Credit Extension hereunder. -10- "Closing Date Certificate" means the closing date certificate executed and delivered by Holdings, Mergerco and AMI pursuant to the terms of this Agreement, substantially in the form of Exhibit D hereto. "Code" means the Internal Revenue Code of 1986, and the final and temporary regulations thereunder, in each case as amended, reformed or otherwise modified from time to time. "Collateral Document" means any Security and Pledge Agreement, any Mortgage or any other agreement or document delivered pursuant hereto or in connection herewith pursuant to which the Secured Parties or any Agent or other Person on behalf of the Secured Parties is granted a Lien to secure any Obligations. "Commitment" means, as the context may require, a Lender's Term Loan Commitment, Revolving Loan Commitment or Letter of Credit Commitment, or the Swing Line Lender's Swing Line Loan Commitment. "Commitment Amount" means, as the context may require, the Term Loan Commitment Amount, the Revolving Loan Commitment Amount, the Letter of Credit Commitment Amount or the Swing Line Loan Commitment Amount. "Commitment Letter" means the confidential letter captioned "Bank and Bridge Facility Commitment Letter", dated March 16, 2002, between the Agents and Holdings, together with all annexes thereto. "Commitment Termination Date" means, as the context may require, the Term Loan Commitment Termination Date or the Revolving Loan Commitment Termination Date. "Commitment Termination Event" means (i) the occurrence of any Event of Default described in clauses (a) through (d) of Section 8.1.9 with respect to the Borrower, or (ii) the occurrence and continuance of any other Event of Default and either (x) the declaration of all or any portion of the Loans to be due and payable pursuant to Section 8.3, or (y) the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments referred to in such notice have been terminated. "Compliance Certificate" means a certificate duly completed and executed by the chief financial or accounting Authorized Officer of Holdings or the Borrower, as the case may be, substantially in the form of Exhibit E hereto, together with such changes thereto as the Agents may from time to time reasonably request for the purpose of conforming the terms thereof with the terms hereof. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Capital Stock of any other Person; provided that Contingent Liabilities shall not include customary indemnities set forth in -11- agreements entered into in the ordinary course of business between the Borrower and its Subsidiaries, on the one hand, and their customers on the other hand. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Copyright Security Agreement" means any Copyright Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit D to the applicable Security and Pledge Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Credit Extension" means, as the context may require, (i) the making of a Loan by a Lender, or (ii) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any existing Letter of Credit, by an Issuer. "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Current Assets" means, on any date, without duplication, all assets which, in accordance with GAAP, would be included as current assets on a consolidated balance sheet of Holdings and its Subsidiaries at such date as current assets. "Current Liabilities" means, on any date, without duplication, all amounts which, in accordance with GAAP, would be included as current liabilities on a consolidated balance sheet of Holdings and its Subsidiaries at such date, excluding current maturities of Indebtedness. "Debt Tender" means the tender offer and consent solicitation initiated by AMI to effect the Refinancing. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DGCL" is defined in Section 5.1.6. "Disbursement" is defined in Section 2.6.2. "Disbursement Date" is defined in Section 2.6.2. -12- "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I as it may be amended, supplemented, amended and restated or otherwise modified from time to time by the Borrower with (unless otherwise provided hereunder) the written consent of the Required Lenders. "Disposition" (or similar words such as "Dispose") means any sale, transfer, lease, contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, any of the Borrower's or its Subsidiaries' assets (including accounts receivables and Capital Stock of Subsidiaries) to any Person other than to the Borrower or another Subsidiary in a single transaction or series of related transactions. "Documentation Agent" is defined in the preamble. "Dollar" and the sign "$" mean lawful money of the United States. "Domestic Office" means the office of a Lender designated as its "Domestic Office" on its signature page hereto or in a Lender Assignment Agreement, or such other office within the United States as may be designated from time to time by notice from such Lender to the Agents and the Borrower. "Domestic Subsidiary" means any Subsidiary that is not a Foreign Subsidiary. "EBITDA" means, with respect to any Person for any applicable period, the sum of (a) Net Income of such Person, plus (b) to the extent deducted in determining such Net Income, the sum of (i) all non-cash charges, (ii) income tax expense (whether paid or deferred), (iii) Interest Expense and non-cash interest expense, (iv) fees, costs, expenses and prepayment premiums paid by Holdings or any of its Subsidiaries in respect of the Transaction in an amount not exceeding $32,500,000, (v) amounts attributable to amortization and depreciation of assets and (vi) extraordinary cash charges related to the extinguishment or repayment of Indebtedness, minus (c) to the extent included in such Net Income, non-cash credits; provided that, notwithstanding anything to the contrary contained in this Agreement or provided for pursuant to GAAP, the Borrower shall be deemed to have been a Subsidiary of Holdings for all applicable Fiscal Quarters prior to the Closing Date included in the calculation of EBITDA in this Agreement. "ECF Percentage" means, for purposes of determining the amount of any mandatory prepayment (pursuant to clause (f) of Section 3.1.1) in respect of Excess Cash Flow (if any) for any Fiscal Year, (i) 75%, in the event the Leverage Ratio as of the last day of such Fiscal Year is -13- greater than 3.5 to 1.0, (ii) 50%, in the event the Leverage Ratio for such Fiscal Year is equal to or less than 3.5 to 1.0, and (iii) 0%, in the event the Leverage Ratio for such Fiscal Year is less than 2.0 to 1.0. "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender which is controlled by such Lender or its parent company; (iii) an Approved Fund; or (iv) any other Person (other than a natural Person) approved (in the case of this clause (iv)) by the Agents, the Issuers (but only in the case of any assignment of the Revolving Loan Commitment) and unless (x) the assignment is being made to such Person by an Agent during the Primary Syndication or (y) an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that in the case of any assignment of Revolving Loan Commitments and related participations in Letters of Credit, Letter of Credit Outstandings and Swing Line Loans to a Lender that does not, immediately prior to such assignment, have a Revolving Loan Commitment, or any Affiliates of, or any Approved Funds related to, such Lender, such Lender shall not be an Eligible Assignee without the prior approval of the Administrative Agent. "Environmental Laws" means the common law and all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines having the force and effect of law (including consent decrees and administrative orders) relating to public health and safety, or pollution or protection of the environment (including ambient air, surface water, groundwater, soil, subsurface strata and natural resources such as flora and fauna) including without limitation the Clean Air Act, as amended, CERCLA, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act ("RCRA"), the Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, the Hazardous Materials Transportation Act, as amended, and any other law having a similar subject matter. "Environmental Permit" is defined in clause (d) of Section 6.1.12. "Equity Investment" is defined in the third recital. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA also refer to any successor Sections thereto. "Eurocurrency Reserve Requirements" means, for any Interest Period as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the first day of such Interest Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) maintained by a member bank of the Federal Reserve System. -14- "Eurodollar Base Rate" means, with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate System Incorporated Service screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate System Incorporated Service screen (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. "Eurodollar Lending Office" means, as to any Lender, the office of such Lender which shall be making or maintaining Eurodollar Loans. "Eurodollar Loan" means, any Loans which carries or maintains a rate of interest based upon a Eurodollar Rate. "Eurodollar Rate" means, with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default" is defined in Section 8.1. "Excess Cash Flow" means, for any Fiscal Year, the excess (if any), of (a) the sum of (i) EBITDA for such Fiscal Year of Holdings and its Subsidiaries, and (ii) the amount of any net decrease in Current Assets, other than cash and Cash Equivalents, over Current Liabilities of Holdings and its Subsidiaries for such Fiscal Year over (b) the sum (for such Fiscal Year), without duplication, of (i) Interest Expense paid in cash by Holdings and its Subsidiaries, (ii) voluntary prepayments and scheduled principal repayments, to the extent actually made, of Term Loans pursuant to clauses (a) and (c) of Section 3.1.1, (iii) to the extent included in EBITDA, any portion of the amount of cash gains of Holdings and its Subsidiaries applied toward the repayment of Term Loans pursuant to clause (d) or (e) of Section 3.1.1, (iv) repayments of Revolving Loans or Swing Line Loans or Cash Collateralization of Letter of Credit Outstandings -15- pursuant to clause (b) of Section 3.1.1, (v) voluntary prepayments of Revolving Loans or Swing Line Loans or any voluntary Cash Collateralization of Letter of Credit Outstandings, in each case to the extent accompanied by a permanent reduction in the Revolving Loan Commitment Amount, (vi) without duplication, (A) all income Taxes paid in cash by Holdings and its Subsidiaries (less any cash tax refunds received) and (B) all Restricted Payments made in cash by or to Holdings pursuant to clauses (a) and (b) (to the extent financed with internally generated cash flow of the Borrower and its Subsidiaries or with Revolving Loans or Swingline Loans) of Section 7.2.6 (in each case, to the extent that such amounts have not already reduced EBITDA), (vii) Capital Expenditures made in cash by Holdings and its Subsidiaries in such Fiscal Year to the extent financed with internally generated cash flow of Holdings and its Subsidiaries or with Revolving Loans or Swingline Loans, (viii) the aggregate amount of cash expended by Holdings and its Subsidiaries during such Fiscal Year in respect of Permitted Acquisitions to the extent financed with internally generated cash flow of Holdings and its Subsidiaries or with Revolving Loans or Swingline Loans, (ix) to the extent incurred in such Fiscal Year and included in the calculation of EBITDA for such Fiscal Year, the amount of all fees, costs, expenses and prepayment premiums paid by Holdings or any of the Subsidiaries in respect of the Transaction, (x) all cash charges of the type described in subclause (b)(vi) of the definition of "EBITDA" contained in this Agreement, and (xi) the amount of the net increase of Current Assets, other than cash and Cash Equivalent Investments, over Current Liabilities of Holdings and its Subsidiaries for such Fiscal Year. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exemption Certificate" is defined in clause (e) of Section 4.6. "Existing Credit Agreement" means the Second Amended and Restated Loan and Security Agreement, dated as of April 2, 1996, between AMI and Society National Bank, as amended, supplemented, amended and restated or otherwise modified from time to time prior to the Closing Date. "Existing Notes" is defined in the second recital. "Existing Notes Indenture" means the Indenture dated as of March 1, 1998, between AMI and U.S. Trust Company of Texas, N.A., as trustee. "Filing Agent" is defined in Section 5.1.22. "Filing Statements" is defined in Section 5.1.22. "Fiscal Quarter" means a quarter ending on the last day of March, June, September or December, or, at any time after the Borrower so notifies the Administrative Agent in writing, the 13th, 26th, 39th or 52nd (or 53rd, as applicable) week of each calendar year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31 or, if the Borrower's Fiscal Quarters are adjusted as set forth in the definition of Fiscal Quarter, the last day of the fourth Fiscal Quarter; references to a Fiscal Year with a -16- number corresponding to any calendar year (e.g., the "2002 Fiscal Year") refer to the Fiscal Year ending on December 31 of such calendar year or, if applicable, the last day of the fourth Fiscal Quarter. "Fixed Charge Coverage Ratio" means, as of the close of any Fiscal Quarter, the ratio computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters of: (a) (i) EBITDA (for all such Fiscal Quarters) of Holdings and its Subsidiaries minus all Capital Expenditures of Holdings and its Subsidiaries made during such period (other than Capital Expenditures to the extent funded from the proceeds of (i) an incurrence of Indebtedness, (ii) an issuance of Capital Stock or a capital contribution or (iii) an asset sale or a Casualty Event); to (b) to the extent included in EBITDA for such Fiscal Quarters, the sum (for all such Fiscal Quarters) of, without duplication, (i) Interest Expense of Holdings and its Subsidiaries during such period, (ii) scheduled principal repayments of Indebtedness of Holdings and its Subsidiaries required to be made in cash during such period, and (iii) all income Taxes paid in cash by Holdings and its Subsidiaries during such period (net of any cash refunds received during such period); provided that in the event the applicable four-Fiscal-Quarter period would include any period of time prior to the Closing Date, the amounts referred to in subclauses (i) and (iii) of this clause (b) shall be determined, for the purposes of this clause (b), on an Annualized Basis. "Foreign Permitted Acquisition" means a Permitted Acquisition, whether of Capital Stock, assets or otherwise, of a Person or a business which, as of the time of such Permitted Acquisition, either (i) is incorporated or organized in a jurisdiction other than the United States (a "Non-U.S. Jurisdiction") or (ii) had more than 15% of its asset located in a Non-U.S. Jurisdiction or derived more than 15% of its annual revenues from operations and business located in Non-U.S. Jurisdictions. "Foreign Pledge Agreement" means any supplemental pledge agreement governed by the laws of a jurisdiction other than the United States or a State thereof executed and delivered by the Borrower or any of its Subsidiaries pursuant to the terms of this Agreement, in form and substance reasonably satisfactory to the Agents, as may be necessary or desirable under the laws of organization or incorporation of a Subsidiary to further protect or perfect the Lien on and security interest in any Collateral (as defined in the Security and Pledge Agreement). "Foreign Subsidiary" means any Subsidiary of the Borrower which is organized under the laws of any jurisdiction outside of the United States of America. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. -17- "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to such governments. "Granting Bank" is defined in clause (f) of Section 11.11. "Guarantors" means, collectively, Holdings, Mergerco and each Subsidiary Guarantor. "Guaranty" means, as the context may require, the Holdings Guaranty, the Mergerco Guaranty or the Subsidiary Guaranty. "Harvest Partners" is defined in the third recital. "Hazardous Material" means (i) any "hazardous substance", as defined by CERCLA, (ii) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended, (iii) any solid waste that is generated in the diagnosis, treatment (e.g., provision of medical services) or immunization of human beings or animals, in research pertaining thereto, or in the production or testing of biologicals, and (iv) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance (including, without limitation, crude oil and any petroleum product) subject to regulation, or which can give rise to liability, under any Environmental Law. "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and, without limiting the generality of the foregoing, all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "herein", "hereof", "hereto", "hereunder" and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document. "Holdings" is defined in the preamble. "Holdings Guaranty" means the Obligations of Holdings undertaken pursuant to Article IX. "Holdings Pledge Agreement" means the Security and Pledge Agreement executed and delivered by an Authorized Officer of Holdings pursuant to this Agreement, substantially in the form of Exhibit G-1 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Holdings Stockholders Agreement" means the Amended and Restated Stockholders Agreement, as dated as of April 19, 2002, by and among Holdings and certain of its shareholders. -18- "Impermissible Qualification" means any qualification or exception to the opinion or certification of any independent public accountant as to any financial statement of Holdings, the Borrower or any other Obligor (i) which is of a "going concern" or similar nature, (ii) which relates to the limited scope of examination of matters relevant to such financial statement, or (iii) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause Holdings, the Borrower or such other Obligor to be in Default. "including" and "include" means including without limiting the generality of any description preceding such term, and, for purposes of each Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money or advances and all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all Capitalized Lease Liabilities of such Person; (d) all net liabilities of such Person under all Hedging Obligations; (e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business) and indebtedness secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on property owned or being acquired by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse (provided that to the extent such indebtedness is not assumed by such Person or the recourse against such Person by the obligee of such indebtedness is limited to the assets so secured, the amount of such indebtedness shall be deemed to be the lesser of (x) the aggregate amount of such indebtedness and (y) the fair market value of the assets securing such indebtedness); (f) all obligations arising under Synthetic Leases of such Person; (g) all Redeemable Capital Stock of such Person; and (h) all Contingent Liabilities of such Person in respect of any of the foregoing. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such -19- Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Liabilities" is defined in Section 11.4. "Indemnified Parties" is defined in Section 11.4. "Interco Subordination Agreement" means the Intercompany Subordination Agreement, substantially in the form of Exhibit J hereto, executed and delivered by two or more Obligors pursuant to the terms of this Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Intercompany Note" means, with respect to the Borrower or any of its Subsidiaries, as the maker thereof, a promissory note substantially in the form of Exhibit A to the relevant Security and Pledge Agreement (with such modifications as the Administrative Agent may consent to, such consent not to be unreasonably withheld), which promissory note shall be duly endorsed and pledged by the payee in favor of the Administrative Agent. "Interest Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters of: (a) EBITDA (for all such Fiscal Quarters) of Holdings and its Subsidiaries to (b) the sum (for all such Fiscal Quarters) of Interest Expense of Holdings and its Subsidiaries paid or payable during such period; provided that in the event the applicable four-Fiscal-Quarter period would include any period of time prior to the Closing Date, Interest Expense for the purposes of this clause (b) shall be determined on an Annualized Basis. "Interest Expense" means, with respect to any Person for any Fiscal Quarter, the aggregate interest expense (both accrued and paid) of such Person and its Subsidiaries for such Fiscal Quarter that has been paid or is payable in cash, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense (net of investment interest income paid during such period to Holdings or any of its Subsidiaries). "Interest Period" means, relative to any Eurodollar Loan, the period beginning on (and including) the date on which such Eurodollar Loan is made or continued as, or converted into, a Eurodollar Loan pursuant to Sections 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three, six, or if then available to each applicable Lender, nine or twelve months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Sections 2.3 or 2.4; provided that (i) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates, (ii) if such Interest Period would otherwise end on a day which is not a -20- Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day), (iii) no Interest Period for any Loan may end later than the Stated Maturity Date for such Loan and (iv) during the Primary Syndication, only seven day Interest Periods will be permitted. "Investment" means, relative to any Person, (i) any loan, advance or extension of credit made by such Person to any other Person, including (A) the issuance of any letter of credit with respect to which such Person is obligated to reimburse the issuer thereof for drawings thereunder and any other Person is the account party with respect to such letter of credit and (B) the purchase by such Person of any bonds, notes, debentures or other debt securities of any other Person (exclusive of receivables owing to such Person to the extent created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of such Person), and (ii) any Capital Stock held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment. "Investors" is defined in the third recital. "ISP Rules" is defined in Section 11.9. "Issuance Request" means a Letter of Credit request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-2 hereto. "Issuer" means the Administrative Agent in its capacity as Issuer of the Letters of Credit and, at the request of the Administrative Agent and with the Borrower's consent, one or more other Lenders or Affiliates of the Administrative Agent. "Joint Lead Arrangers" is defined in the preamble. "Lender Assignment Agreement" means an assignment agreement substantially in the form of Exhibit K hereto. "Lender Default" means (i) the refusal (which has not been retracted) or other failure of a Lender to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.6.1 or (ii) a Lender having notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its obligations under Section 2.1 or 2.6.1, including in either case as a result of any takeover of such Lender by any Governmental Authority. "Lenders" is defined in the preamble and includes each Person that becomes a Lender pursuant to Section 11.11. "Lender's Environmental Liability" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever -21- (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Agent, any Lender, any Issuer or any of such Person's Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from: (a) any Hazardous Material on, in, under or affecting all or any portion of any property of the Borrower or any of its Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to the extent caused by Releases from the Borrower's or any of its Subsidiaries' or any of their respective predecessors' properties; (b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 6.13; (c) any violation or claim of violation by the Borrower or any of its Subsidiaries of any Environmental Laws; or (d) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, Release or threatened Release of Hazardous Material by the Borrower or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Borrower or any of its Subsidiaries. "Letter of Credit" is defined in Section 2.1.2. "Letter of Credit Commitment" means each Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and, with respect to each Revolving Loan Lender, the obligations of each such Lender to participate in such Letters of Credit pursuant to Section 2.6.1. "Letter of Credit Commitment Amount" means, on any date, a maximum amount of $10,000,000, as such amount may be permanently reduced from time to time pursuant to Section 2.2. "Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (i) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, and (ii) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "Leverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) Total Debt outstanding on the last day of such Fiscal Quarter to (b) EBITDA of Holdings and its Subsidiaries computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters. -22- "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against property, or other priority or preferential arrangement of any kind or nature whatsoever, to secure payment of a debt or performance of an obligation. "Loan" means, as the context may require, a Revolving Loan, a Term Loan or a Swing Line Loan of any type. "Loan Documents" means, collectively, (i) this Agreement, the Letters of Credit, the Notes, the Agents' Fee Letter (solely for purposes of Article VIII and Section 11.9), each Collateral Document and the provisions of the Commitment Letter relating to the syndication of the Commitments and the Loans and (ii) each other agreement, certificate, document or instrument delivered in connection with any Loan Document and designated to be a "Loan Document", whether or not specifically mentioned herein or therein, including, solely for purposes of the Collateral Documents and the Guaranties, all Rate Protection Agreements. "Management Agreement" means the management agreement, dated as of April 19, 2002, between AMI and Harvest Partners, as amended, supplemented, amended and restated or otherwise modified in accordance with this Agreement. "Management Investors" is defined in clause (m) of Section 7.2.5. "Management Loans" is defined in clause (m) of Section 7.2.5. "Management Shares" is defined in clause (m) of Section 7.2.5. "Margin Stock" means, as at any time of determination, Shares owned by Mergerco which were purchased by Mergerco in the Tender Offer and, at such time of determination, constitute "margin stock", as defined in F.R.S. Board Regulation U; provided that, immediately upon the effectiveness of the Merger, all Shares shall cease to be Margin Stock. "Material Adverse Effect" means the following: (i) at all times prior to the Merger Closing Date and solely with respect to any representation or warranty made (or to be made) or deemed (or to be deemed) to be made in connection with any Borrowing of Term Loans for the purpose of financing the Debt Tender or the Refinancing, or for the purpose of financing part of the Merger Consideration or to repay a portion of the outstanding Bridge Loans, Pre-Merger Material Adverse Effect; and (ii) with respect to any other purpose hereunder at any time, Post-Merger Material Adverse Effect. "Material Subsidiary" means each Subsidiary of the Borrower other than a Non-Material Subsidiary. "Material Transaction Documents" means each of the Acquisition Agreement, each Other Debt Document relating to the Unsecured Transaction Debt and the Management Agreement, in -23- each case as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with this Agreement. "Merger" is defined in the first recital. "Merger Closing Date" means the date of the consummation of the Merger. "Merger Consideration" is defined in the first recital. "Mergerco" is defined in the first recital. "Mergerco Debt Financing" is defined in the third recital. "Mergerco Guaranty" means the guaranty executed and delivered by Mergerco pursuant to the terms of this Agreement, substantially in the form of Exhibit F-1 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Minimum Condition" is defined in the first recital. "Minimum Debt Tender Condition" means that, as a result of the Debt Tender and Refinancing, each of the following shall have been completed or satisfied on or prior to the Closing Date: (a) holders of a sufficient aggregate principal amount of Existing Notes have irrevocably consented to eliminate all covenants and related events of default described in Sections 1.3, 1.4, 1.5, 1.6 and 1.7 of the Supplemental Indenture; (b) AMI shall have repurchased and redeemed for cash all Existing Notes, together with all related interest, prepayment, premiums and other amounts due and payable thereon, which have been tendered to AMI for repurchase or redemption pursuant to the Debt Tender and Refinancing; (c) after giving effect to such repurchase or redemption of the Existing Notes described in clause (b) above and the defeasance described in clause (d) below, not more than $5,000,000 in aggregate outstanding principal amount of Existing Notes shall remain outstanding and undefeased (in accordance with the terms and provisions of the Existing Notes Indenture); (d) in the event the aggregate principal amount of Existing Notes which remain outstanding on the Closing Date after giving effect to the Debt Tender and Refinancing exceeds $5,000,000, such excess principal amount of Existing Notes shall have been fully defeased pursuant to and in accordance with Section 11.02 of the Existing Notes Indenture, and the amount of such excess shall have been fully escrowed or cash collateralized (in accordance with such Section 11.04) with proceeds from the Term Loans; and -24- (e) AMI and the trustee under the Existing Notes Indenture shall have entered into, executed and delivered the Supplemental Indenture in the form delivered pursuant to Section 5.1.5. "Minimum Non-Debt Investment Amount" means (i) $179,160,000 less (ii) the amount by which the total costs, fees and expenses (excluding prepayment premiums) of Harvest Partners and Holdings related to the Transaction and required to be paid within 30 Business Days after the Closing Date is less than $25,000,000; provided that in no event shall the Minimum Non-Debt Investment Amount be less than $171,960,000. "Minimum Shares" is defined in the first recital. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means each mortgage, deed of trust or agreement executed and delivered by any Obligor in favor of the Administrative Agent for the benefit of the Secured Parties pursuant to the requirements of this Agreement, under which a Lien is granted on the real property and fixtures described therein, in form and substance reasonably satisfactory to the Agents, in each case as amended, supplemented, amended and restated or otherwise modified from time to time. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. "Net Debt Proceeds" means with respect to the incurrence, sale or issuance after the Closing Date by Holdings or any of its Subsidiaries of any Indebtedness (other than any Indebtedness permitted by Section 7.2.2), the excess of: (a) the gross cash proceeds received by such Person from such incurrence, sale or issuance, over (b) all customary underwriting commissions and discounts and customary legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements actually incurred in connection with such incurrence, sale or issuance which have not been paid to Harvest Partners or any of its Affiliates in connection therewith (other than those fees and expenses set forth in the Management Agreement). "Net Disposition Proceeds" means, with respect to any Disposition of any assets after the Closing Date of Holdings or any of its Subsidiaries (other than Dispositions permitted pursuant to clause (a), (b), (c), (e), (g) , (h) , (i) or (j) of Section 7.2.11), the excess of (a) the gross cash proceeds received by such Person from any such Disposition and any cash payments received in respect of promissory notes or other non-cash consideration delivered to such Person in respect thereof (other than payments in respect of interest), -25- over (b) the sum (without duplication) of (i) all customary legal, investment banking, brokerage, appraisal and accounting and other professional fees and disbursements actually incurred in connection with such Disposition which have not been paid to Harvest Partners or any of its Affiliates in connection therewith (other than those fees and expenses set forth in the Management Agreement), (ii) all taxes and other governmental costs and expenses actually paid or estimated by such Person (in good faith) to be payable in cash in connection with such Disposition, (iii) in respect of any such Disposition, the amount, if any, reserved by Holdings or any of its Subsidiaries, as the case may be, in respect of any post-closing purchase price adjustments related to such Disposition, estimated (if necessary) in good faith by management of Holdings or such Subsidiary, as the case may be, (iv) the portion of the purchase price in respect of any such Disposition which is placed in escrow to secure the payment by Holdings or any of its Subsidiaries, as the case may be, in respect of any indemnity or similar obligations of such Person in respect of such Disposition, and (v) payments made by such Person to retire Indebtedness (other than the Credit Extensions) or other unassumed liabilities related to the assets Disposed, in each case of such Person where payment and satisfaction of such Indebtedness or other liabilities is required in connection with such Disposition; provided that if, (x) after the payment of all taxes with respect to such Disposition, the amount of estimated taxes, if any, pursuant to clause (b)(ii) above exceeded the tax amount actually paid in cash in respect of such Disposition, the aggregate amount of such excess shall, at such time, constitute Net Disposition Proceeds and (y) in the event that the amount reserved in respect of any post-closing purchase price adjustment (referred to in clause (b)(iii) above) or the amount placed in escrow in respect of any indemnity or similar claims (referred to in clause (b)(iv) above) exceeds the amount actually paid in respect of any such adjustments or claims, such excess amount shall, at the time of determination thereof, constitute Net Disposition Proceeds. "Net Equity Proceeds" means with respect to the sale or issuance after the Closing Date by Holdings of any of its Capital Stock in a registered public offering under the Securities Act of 1933, the excess of (a) the gross cash proceeds received by Holdings from such sale, exercise or issuance, over (b) all customary underwriting commissions and discounts and customary legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements actually incurred in connection with such sale or issuance which have not been paid to Harvest Partners or any of its Affiliates in connection therewith (other than those fees and expenses set forth in the Management Agreement). -26- "Net Income" means, with respect to any Person for any period, the aggregate of all amounts (excluding all amounts in respect of extraordinary gains and extraordinary non-cash losses, but including and together with all amounts in respect of extraordinary cash losses; provided that, for purposes of determining Net Income in any such period, the amount of any such extraordinary cash losses for such period, if any, shall be reduced to the extent of any extraordinary cash gains for such period) which would be included as net income on the consolidated financial statements of such Person and its Subsidiaries for such period; provided that the portion of Net Income of any Subsidiary of such Person that is not the Borrower or a Subsidiary Guarantor shall be excluded from Net Income to the extent that the declaration or payment of dividends or similar distributions by such Person of that portion of such Net Income is not at the date of determination permitted without any prior governmental approval that has not been obtained or, directly or indirectly, by operation of the terms of its Organic Documents or any agreement (other than an agreement with Holdings or its Subsidiaries), instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Person or its stockholders. "New Notes" is defined in the third recital. "New Notes Offering" is defined in the third recital. "Non-Domestic Lender" means any Lender that is not a "United States person", as defined under Section 7701(a)(30) of the Code. "Non-Excluded Taxes" means any Taxes other than net income, profits, gains and franchise taxes imposed with respect to any Secured Party by a Governmental Authority under the laws of which such Secured Party is organized or in which it maintains its principal office or applicable lending office. "Non-Material Subsidiary" means any Subsidiary that (a) accounted for no more than 5% (and, when taken together with all other Non-Material Subsidiaries, accounted for no more than 10% in the aggregate) of consolidated revenues of Holdings and its Subsidiaries for the four consecutive Fiscal Quarters ending on December 31, 2001, or if later, the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 7.1.1, financial statements have been, or are required to have been, delivered to the Administrative Agent, and (b) has assets which represent no more than 5% (and, when taken together with all other Non-Material Subsidiaries, represent no more than 10% in the aggregate) of the consolidated assets of Holdings and its Subsidiaries as of December 31, 2001, or if later, the last day of the last Fiscal Quarter of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 7.1.1, financial statements have been, or are required to have been, delivered to the Administrative Agent. "Non-U.S. Jurisdiction" is defined within the definition of Foreign Permitted Acquisition. -27- "Note" means, as the context may require, a Revolving Note, a Term Note or a Swing Line Note. "Obligations" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of each Obligor arising under or in connection with a Loan Document, including the principal of and premium, if any, and interest (including interest accruing during the pendency of any proceeding of the type described in Section 8.1.9, whether or not allowed in such proceeding) on the Loans and all Reimbursement Obligations. "Obligor" means, as the context may require, Holdings, the Borrower, and each other Person (other than a Secured Party) obligated under any Loan Document. "Organic Document" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement, operating agreement and all shareholder agreements, voting trusts and similar arrangements applicable to any of such Obligor's partnership interests, limited liability company interests or authorized shares of Capital Stock. "Other Debt Documents" means, collectively, each of the loan agreements, indentures, note purchase agreements, promissory notes, guarantees and other instruments and agreements evidencing the terms of any Indebtedness constituting or evidenced by, as the case may be, any Unsecured Transaction Debt, any Qualifying Subordinated Debt, any Permitted Seller Notes or any Indebtedness of the type described in clause (o) of Section 7.2.2, in each case, as amended, supplemented, amended and restated or otherwise modified in accordance with this Agreement. "Other Person" is defined in the definition of "Subsidiary". "Other Taxes" means any and all stamp, documentary or similar taxes, or any other excise or property taxes or similar levies that arise on account of any payment made or required to be made under any Loan Document or from the execution, delivery, registration, recording or enforcement of any Loan Document. "Participant" is defined in clause (c) of Section 11.11. "Patent Security Agreement" means any Patent Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit B to the applicable Security and Pledge Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Payment Default" means any Default described in Section 8.1.1. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan), and to which Holdings, the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, has liability (actual or contingent), including any liability by -28- reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Percentage" means, as the context may require, any Lender's Revolving Loan Percentage or Term Percentage. "Perfection Certificate" means the Perfection Certificate executed and delivered by an Authorized Officer of each Obligor that is a party to the Security and Pledge Agreement pursuant to Section 5.1.22 or 7.1.9, substantially in the form of Exhibit H hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Permitted Acquisition" means an acquisition (exclusive of the Acquisition), whether pursuant to a merger or an acquisition of Capital Stock, assets or otherwise, by the Borrower or any of its Subsidiaries of all or substantially all of the assets or Capital Stock of any Person (or any part of the assets constituting all or substantially all of a business or line of business of any Person), whether or not such acquisition is effected in a single transaction or in a series of related transactions, and as to which the following conditions are satisfied: (a) immediately before and after giving effect to such acquisition, no Default shall have occurred and be continuing or would result therefrom (including under Section 7.2.1); (b) such acquisition is consummated pursuant to a negotiated merger, purchase or similar agreement between the Borrower and/or any of its Subsidiaries, on the one hand, and such Person and/or any of its Affiliates, on the other hand; (c) in the case of an acquisition of Capital Stock by the Borrower or a Subsidiary, such acquisition results in the issuer of such Capital Stock becoming a wholly-owned Subsidiary of the Borrower; (d) consideration for such acquisition shall be comprised of Capital Stock of Holdings, the issuance of a Permitted Seller Note, the assumption, incurrence or issuance of Indebtedness permitted under clause (m) of Section 7.2.2 and/or cash and the aggregate amount of the consideration for such acquisition (based on the fair market value of Capital Stock issued, the amount of Indebtedness issued and/or assumed and the cash expended in connection therewith) shall not exceed $25,000,000 and, when added to the total aggregate amount of consideration for all other such acquisitions pursuant to this subclause (d) since the Closing Date, shall not exceed $75,000,000 (provided that either of the foregoing amounts may be increased by up to $25,000,000 to the extent such acquisitions are financed with new equity proceeds or Capital Stock of Holdings; provided, further, that Foreign Permitted Acquisitions shall not exceed $25,000,000 in the aggregate over the term of this Agreement, except to the extent financed with new equity proceeds (not otherwise subject to clause (h) of Section 3.1.1) received by Holdings or Capital Stock of Holdings); (e) immediately after giving effect to such acquisition, at least $15,000,000 of the Revolving Loan Commitment Amount shall be unused; -29- (f) in the case of any acquisition in which the total aggregate amount of consideration therefor is in excess of $2,500,000, the Borrower shall have delivered to the Agents a Compliance Certificate for the period of four full Fiscal Quarters immediately preceding such acquisition (prepared in good faith and in a manner and using such methodology which is consistent with the most recent financial statements delivered pursuant to Section 7.1.1) giving pro forma effect to the consummation of such acquisition and evidencing compliance with the covenants set forth in Section 7.2.4 and the preceding clauses (a) through (e); and (g) with respect to any such acquisition which requires the delivery of a Compliance Certificate pursuant to clause (f) above, if, based upon such Compliance Certificate, such acquisition does not, immediately after giving effect thereto, increase the EBITDA of Holdings and its Subsidiaries on a Pro Forma Basis, Holding's Leverage Ratio (as computed in such Compliance Certificate) for the period of four full Fiscal Quarters immediately preceding such acquisition (prepared in good faith and in a manner and using such methodology which is consistent with the most recent financial statements delivered pursuant to Section 7.1.1), after giving pro forma effect to the consummation of such acquisition, shall be equal to or below 3.50:1. "Permitted Holders" means, collectively, Harvest Partners, its controlled affiliates and funds controlled by Harvest Partners and such affiliates ("control" (and its derivatives) of a Person, for the purposes of this definition of "Permitted Holders," means the power, directly or indirectly, to direct or cause the direction of the management, policies and investment decisions of such Person (whether by contract or otherwise)). "Permitted Liens" means Liens permitted pursuant to Section 7.2.3. "Permitted Seller Note" means an unsecured subordinated promissory note issued by Holdings or the Borrower in connection with a Permitted Acquisition, which note (i) provides for a final stated maturity date that is not prior to the first anniversary of the latest Stated Maturity Date for any Tranche then in effect of all Loans hereunder (but which may provide for scheduled amortization of the original principal amount thereof on each anniversary of the issuance thereof to the extent each such required amortization payment does not exceed 20% of the original principal amount thereof), (ii) bears cash interest at an annual rate not in excess of 10%, although any such interest payable in excess of 10% per annum either shall be payable with the issuance of additional promissory notes in form and substance substantially similar to such promissory note (it being understood and agreed that each such additional promissory note shall constitute a Permitted Seller Note) or shall continue to accrue, (iii) does not provide the holders thereof with the guaranty of any Subsidiary of the Borrower, (iv) does not contain any financial maintenance covenants or any cross-default provisions (it being understood that a cross-acceleration provision with respect to Indebtedness in an aggregate principal amount in excess of $10,000,000 shall be acceptable) and (v) contains such other terms and provisions (including as to subordination, if any,) as are reasonably acceptable to each of the Agents. "Person" means any natural person, corporation, limited liability company, partnership, joint venture, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity. -30- "Pledged Subsidiary" means each Subsidiary in respect of which the Administrative Agent has been granted a security interest in or a pledge of (i) any of the Capital Stock of such Subsidiary or (ii) any Intercompany Notes of such Subsidiary owing to the Borrower or a Subsidiary Guarantor. "Post-Merger Material Adverse Effect" means a material adverse effect on the condition (financial or otherwise), business, operations, assets, liabilities (contingent or otherwise), properties or prospects of Holdings and its Subsidiaries, taken as a whole. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of preferred or preference stock of such Person. "Pre-Merger Material Adverse Effect" means a material adverse effect on (i) the ability of any party to the Acquisition Agreement to perform its obligations thereunder or to consummate the transactions contemplated thereby or (ii) the assets, liabilities (actual or contingent), condition, results of operations or business of the Borrower and its Subsidiaries, taken as a whole, excluding any change or development resulting from or arising in connection with (1) economic, financial market, regulatory or political conditions generally or generally affecting the principal markets in which the Borrower conducts business, which in each case do not affect the Borrower disproportionately to other companies in the building products/siding and windows industry, (2) changes affecting the building products/siding and windows industry generally which do not affect the Borrower disproportionately to other companies in the building products/siding and windows industry, (3) the Acquisition Agreement or any transaction contemplated by the Acquisition Agreement or the announcement thereof, (4) any matters disclosed in the Disclosure Schedule (as defined in the Acquisition Agreement as in effect on the date of the Commitment Letter) or (5) the failure of any holder of Existing Notes to tender its Existing Notes to AMI in the Note Tender. "Primary Syndication" means the period commencing on or prior to the Closing Date and ending on the earlier of (i) 90 days after the Closing Date and (ii) the date that the Joint Lead Arrangers have declared the primary syndication of the Credit Extensions to have ended. "Pro Forma Basis" means, with respect to any determination for any period for any Person, after giving pro forma effect to each Permitted Acquisition and Disposition of a Person, business or all or substantially all of the assets of a Person or business consummated during such period, together with all transactions relating thereto consummated during such period (including any incurrence, assumption, refinancing or repayment of Indebtedness), as if such Permitted Acquisition, Disposition and related transactions had been consummated on the first day of such period, in each case based on historical results accounted for in accordance with GAAP and, to the extent applicable, (x) reasonable assumptions acceptable to the Agents that are specified in reasonable detail in the relevant Compliance Certificate or other certificate furnished to any Agent or Lender in connection with the terms of this Agreement or (y) assumptions prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended, and the Exchange Act, and the Securities and Exchange Commission's rules and guidelines with respect to pro forma financial statements and that are specified in reasonable detail in the relevant Compliance Certificate. -31- "Qualified IPO" means an initial public offering by Holdings of its Voting Stock in a registered public offering under the Securities Act of 1933 pursuant to which not less than 20% of Holdings' issued and outstanding Voting Stock is sold pursuant to such offering. "Qualifying Subordinated Debt" means unsecured senior subordinated notes of Holdings or the Borrower in an aggregate principal amount not to exceed $50,000,000 containing terms and conditions no less favorable to the Borrower (other than interest rates; provided that any yield in excess of 13% per annum shall be payable in additional unsecured senior subordinated notes or shall be capitalized or accreted discount), and no more favorable to the holders thereof, in each case in any material respect, than those of the New Notes or containing such other terms and conditions (including rate of interest, maturity, covenants, events of default and subordination provisions) reasonably acceptable to the Agents; provided that, immediately prior to the issuance of any such notes, the Borrower shall have delivered to the Agents a Compliance Certificate for the period of four full Fiscal Quarters immediately preceding such issuance (prepared in good faith and in a manner and using such methodology which is consistent with the most recent financial statements delivered pursuant to Section 7.1.1) giving pro forma effect to such issuance and the application of the proceeds therefrom and evidencing compliance with the covenants set forth in Section 7.2.4. "Quarterly Payment Date" means the last Business Day of March, June, September and December. "Rate Protection Agreement" means, collectively, any interest rate swap, cap, collar or similar agreement entered into by the Borrower or any of its Subsidiaries under which the counterparty of such agreement is (or at the time such agreement was entered into, was) a Lender or an Affiliate of a Lender, so long as a fully executed copy of such agreement has been provided to the Agents. "Redeemable Capital Stock" means Capital Stock of Holdings or any of its Subsidiaries that, either by its terms or by the terms of any security into which it is convertible or exchangeable, at the option of the holder thereof, (i) is or upon the happening of an event (other than a voluntary call by the issuer thereof or change of control so long as, in the case of a change of control, all Obligations hereunder must first be paid in full) or passage of time would be required to be redeemed (for consideration other than common stock of Holdings or pay-in-kind Preferred Stock of Holdings) on or prior to the first anniversary of the latest Stated Maturity Date for any Tranche then in effect of all Loans hereunder, (ii) is redeemable at the option of the holder thereof (for consideration other than common stock of Holdings or pay-in-kind Preferred Stock of Holdings) at any time prior to such date or (iii) is convertible at the option of the holder thereof into or exchangeable for debt securities of the Borrower, Holdings or any of their respective Subsidiaries at any time prior to such anniversary other than debt securities constituting Qualifying Subordinated Debt. "Refinancing" is defined in the second recital. "Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2. "Register" is defined in clause (b) of Section 2.7. -32- "Reimbursement Obligation" is defined in Section 2.6.3. "Release" means a "release", as such term is defined in CERCLA. "Replacement Lender" is defined in Section 4.10. "Replacement Notice" is defined in Section 4.10. "Required Lenders" means, at any time, (a) with respect to any provision of this Agreement or any other Loan Document other than the taking of any remedial action under this Agreement or any other Loan Document following the declaration of the acceleration of the maturity of all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable pursuant to Section 8.3, Lenders holding at least a majority of the sum of (i) the Revolving Loan Commitments (or, following the Revolving Loan Commitment Termination Date, the aggregate principal amount of the Revolving Loans and Swing Line Loans then outstanding plus the Letter of Credit Outstandings (after giving effect to the participation of the Lenders therein)) and (ii) the Term Loan Commitments (or, following the Term Loan Commitment Termination Date, the aggregate principal amount of the Term Loans then outstanding); or (b) with respect to the taking of any remedial action under this Agreement or any other Loan Document following the declaration of the acceleration of the maturity of all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable pursuant to Section 8.3, Lenders holding at least a majority of the sum of the aggregate principal amount of outstanding Loans plus the Letter of Credit Outstandings (after giving effect to the participation of the Lenders therein). "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended. "Restricted Payment" means the declaration or payment of any dividend (other than dividends payable solely in Capital Stock (other than Redeemable Capital Stock) of Holdings or any Subsidiary of Holdings) on, or the making of any payment or distribution on account of, or setting apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of any class of Capital Stock of Holdings or any Subsidiary or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or the making of any other payment or distribution in respect thereof, either directly or indirectly, whether in cash or property, obligations of Holdings or any Subsidiary or otherwise. "Revolving Loan" is defined in Section 2.1.1. "Revolving Loan Commitment" is defined in Section 2.1.1. "Revolving Loan Commitment Amount" means, on any date, $40,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. -33- "Revolving Loan Commitment Termination Date" means the earliest of (i) the fifth anniversary of the Closing Date, (ii) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to the terms of this Agreement, (iii) the date on which any Commitment Termination Event occurs, and (iv) if the Merger is not consummated within 180 days after the Closing Date, then the date which is the one and one-half year anniversary of the Closing Date. Upon the occurrence of any event described in the preceding clause (iii), the Revolving Loan Commitments shall terminate automatically and without any further action. "Revolving Loan Lender" means a Lender that has a Revolving Loan Commitment. "Revolving Loan Percentage" means, relative to any Lender, the applicable percentage relating to Revolving Loans set forth below its signature on the signature pages hereto opposite the reference to "Revolving Loan Commitment" or set forth in a Lender Assignment Agreement under the Revolving Loan Commitment column, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreements executed by such Lender and its Assignee Lender and delivered pursuant to Section 11.11. A Lender shall not have any Revolving Loan Commitment if its percentage under the Revolving Loan Commitment column is zero. "Revolving Note" means a promissory note of the Borrower payable to any Revolving Loan Lender, in the form of Exhibit A-I hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Revolving Loan Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Rollover Equity" is defined in the third recital. "S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill, Inc. "SEC" means the Securities and Exchange Commission. "Secured Parties" means, collectively, (i) the Lenders, each Issuer and the Agents, (ii) for purposes of each agreement pursuant to which the Administrative Agent is granted a Lien to secure any Obligation or receives a guaranty of any Obligation or pursuant to which any Person subordinates any obligation payable by Holdings or any of its Subsidiaries to it to the Obligations or any insurance or indemnity with respect to the same (including Section 11.4 hereof), each counterparty to a Rate Protection Agreement that is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate thereof, and (iii) in each case, each of their respective successors, transferees and assigns. "Security and Pledge Agreement" means, as the context may require, the Holdings Pledge Agreement, the Borrower Security and Pledge Agreement and/or the Subsidiary Security and Pledge Agreement. "Shares" is defined in the first recital. -34- "Solvent" means, with respect to any Person and its Subsidiaries on a particular date, that on such date (i) the fair value of the property of such Person and its Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including contingent liabilities, of such Person and its Subsidiaries on a consolidated basis, (ii) the present fair salable value of the assets of such Person and its Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the probable liability of such Person and its Subsidiaries on a consolidated basis on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it or its Subsidiaries will, incur debts or liabilities beyond the ability of such Person and its Subsidiaries to pay such debts and liabilities as the same mature, and (iv) such Person and its Subsidiaries on a consolidated basis is not engaged in business or a transaction, and such Person and its Subsidiaries on a consolidated basis is not about to engage in business or a transaction, for which the property of such Person and its Subsidiaries on a consolidated basis would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability. "SPC" is defined in clause (f) of Section 11.11. "Stated Amount" means, on any date and with respect to a particular Letter of Credit, the total amount then available to be drawn under such Letter of Credit. "Stated Expiry Date" is defined in Section 2.6. "Stated Maturity Date" means (i) with respect to all Term Loans, the seventh anniversary of the Closing Date, and (ii) with respect to all Revolving Loans and Swing Line Loans, the fifth anniversary of the Closing Date; provided that if the Merger does not occur within 180 days after the Closing Date, the Stated Maturity Date for the Term Loans, Revolving Loans and Swing Line Loans shall be the date that is the one and one-half year anniversary of the Closing Date. "Subordinated Debt" means unsecured subordinated Indebtedness of any Obligor in respect of the New Notes, any Permitted Seller Notes, Qualifying Subordinated Debt or Indebtedness incurred pursuant to clause (o) of Section 7.2.2. "Subordination Provisions" is defined in Section 8.1.11. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership or other entity ("Other Person") of which more than 50% of the outstanding Voting Stock of such Other Person (irrespective of whether at the time Capital Stock of any other class or classes of such Other Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term "Subsidiary" shall be a reference to a Subsidiary of the Borrower. "Subsidiary Guarantor" means each Subsidiary of the Borrower which has executed and delivered to the Administrative Agent the Subsidiary Guaranty (or a supplement thereto). -35- "Subsidiary Guaranty" means the subsidiary guaranty executed and delivered by Subsidiaries of the Borrower pursuant to this Agreement, substantially in the form of Exhibit F-2 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Subsidiary Security and Pledge Agreement" means the Security and Pledge Agreement executed and delivered by an Authorized Officer of each Subsidiary Guarantor pursuant to this Agreement, substantially in the form of Exhibit G-3 hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Supplemental Indenture" means the First Supplemental Indenture, dated as of April 4, 2002, between AMI and The Bank of New York Trust Company of Florida, N.A. "Surviving Corporation" is defined in the first recital. "Swing Line Lender" means the Administrative Agent, in its capacity as the Swing Line Lender. "Swing Line Loan" is defined in Section 2.1.1. "Swing Line Loan Commitment" is defined in Section 2.1.1. "Swing Line Loan Commitment Amount" means, on any date, $10,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Swing Line Note" means a promissory note of the Borrower payable to the Swing Line Lender, in the form of Exhibit A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting from outstanding Swing Line Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Syndication Agent" is defined in the preamble. "Synthetic Lease" means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is not a capital lease in accordance with GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for federal income tax purposes, other than any such lease under which that Person is the lessor. "Taxes" means any and all income, stamp or other taxes, duties, levies, imposts, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all interest and penalties with respect thereto. "Tender Offer" is defined in the first recital. "Tender Offer Closing Date" is defined in the third recital. -36- "Tender Offer Consideration" is defined in the first recital. "Term Loan" is defined in Section 2.1.3. "Term Loan Commitment" means, relative to any Lender, such Lender's obligation (if any) to make Term Loans pursuant to Section 2.1.3. "Term Loan Commitment Amount" means, on any date, $125,000,000. "Term Loan Commitment Termination Date" means the earliest of (i) the Closing Date (immediately after the making of the Term Loans on such date), and (ii) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (ii), the Term Loan Commitments shall terminate automatically and without any further action. "Term Loan Escrow" is defined in the fourth recital. "Term Loan Escrow Agreement" is defined in Section 7.1.7. "Term Note" means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A-3 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term Percentage" means, relative to any Lender, the applicable percentage relating to Term Loans set forth below its signature on the signature pages hereto opposite the reference to "Term Loan Commitment" or set forth in a Lender Assignment Agreement under the Term Loan Commitment column, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreements executed by such Lender and its Assignee Lender and delivered pursuant to Section 11.11. A Lender shall not have any Term Loan Commitment if its percentage under the Term Loan Commitment column is zero. "Termination Date" means the date on which all Obligations (other than any indemnities that are not then due and payable) have been paid in full in cash, all Letters of Credit have been terminated, expired or Cash Collateralized and all Commitments shall have terminated. "Total Debt" means, on any date, without duplication, the outstanding principal amount of all Indebtedness of Holdings and its Subsidiaries of the type referred to in clause (a), clause (b) (excluding obligations relative to the face amount of letters of credit to the extent such face amount has not been drawn or, if drawn, to the extent the amount of such drawing has been reimbursed to the issuer thereof by the obligor with respect thereto), clause (c), clause (e) (but, in the case of such clause (e), only to the extent accounted for as debt on a balance sheet in accordance with GAAP), clause (f) and clause (g), in each case of the definition of "Indebtedness", and any Contingent Liability in respect of any of the foregoing; provided that (i) Indebtedness in respect of paid-in-kind interest on the Bridge Loans shall not be included in the calculation of Total Debt and (ii) Indebtedness of the type described in clause (o) of Section 7.2.2 or incurred in respect of Permitted Seller Notes and Qualifying Subordinated Debt -37- shall not be included in the calculation of Total Debt to the extent that such notes and/or debt (x) are issued by Holdings and are not guaranteed by any Subsidiary of Holdings and (y) do not provide for any scheduled repayments or mandatory prepayments or redemptions of the principal thereof prior to the first anniversary of the latest Stated Maturity Date for any Tranche then in effect of all Loans or for any payment of cash interest or regularly accruing fees with respect thereto prior to such anniversary. "Total Exposure Amount" means, on any date of determination (and without duplication), the outstanding principal amount of all Loans, the aggregate amount of all Letter of Credit Outstandings and the unfunded amount of the Commitments. "Trademark Security Agreement" means any Trademark Security Agreement executed and delivered by any Obligor substantially in the form of Exhibit C to the applicable Security and Pledge Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Tranche" means, as the context may require, the Loans constituting Term Loans, Revolving Loans or Swing Line Loans. "Transaction" is defined in the third recital. "type" means, relative to any Loan, the portion thereof, if any, being maintained as an Alternate Base Rate Loan or a Eurodollar Loan. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if, with respect to any Filing Statement or by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Administrative Agent pursuant to the applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Loan Document and any Filing Statement relating to such perfection or effect of perfection or non-perfection. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. "Unsecured Transaction Debt" means any Indebtedness (other than the Obligations) of Holdings, Mergerco, the Borrower or any other Obligor incurred in connection with the financing of the Acquisition (including the Tender Offer and the Merger), whether in respect of the Bridge Loans, the New Notes or any other Indebtedness issued in exchange or substitution therefor pursuant to the terms thereof, as amended or otherwise modified pursuant to this Agreement. "Voting Stock" means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the managing body of such Person. "Welfare Plan" means a "welfare plan", as such term is defined in Section 3(l) of ERISA. -38- "wholly-owned Subsidiary" means, with respect to any Person, any Subsidiary of such Person all of the outstanding common stock (or similar equity interest) of which (other than any director's qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by such Person. Unless the context otherwise requires, the term "wholly-owned Subsidiary" shall be a reference to a wholly-owned Subsidiary of the Borrower. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each other Loan Document and the Disclosure Schedule, and each notice and other communication delivered from time to time in connection with any Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in a Loan Document to any Article or Section are references to such Article or Section of such Loan Document, and references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. (a) Unless otherwise specified, all accounting terms used in each Loan Document shall be interpreted, and all accounting determinations and computations thereunder (including under Section 7.2.4 and the definitions used in such calculations) shall be made, in accordance with those generally accepted accounting principles in the United States ("GAAP") applied in the preparation of the Borrower's financial statements for its Fiscal Year ended December 31, 2001, subject to any changes or amendments to GAAP in effect as of January 1, 2002. Unless otherwise expressly provided all financial covenants and defined financial terms shall be computed on a consolidated basis for Holdings and its Subsidiaries (including AMI), in each case without duplication. (b) For purposes of computing the Leverage Ratio, the Interest Coverage Ratio and the Fixed Charge Ratio (under Section 7.2.4), such ratios (and any financial calculations or components required to be made or included therein, including EBITDA) shall be determined on a Pro Forma Basis. ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, Notes AND LETTERS OF CREDIT SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement, the Lenders and each Issuer severally agree to make Credit Extensions as set forth below. SECTION 2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment. From time to time on any Business Day occurring on and after the Closing Date but prior to the Revolving Loan Commitment Termination Date, (i) each Lender agrees that it will make loans (relative to such Lender, its "Revolving Loans") to the Borrower equal to such Lender's Revolving Loan Percentage of the aggregate amount of each Borrowing of Revolving Loans requested by the Borrower to be made on such day, and (ii) the Swing Line Lender agrees that it -39- will make loans (its "Swing Line Loans") to the Borrower equal to the principal amount of the Swing Line Loan requested by the Borrower to be made on such day. The Commitment of each such Revolving Loan Lender described above is herein referred to as its "Revolving Loan Commitment", and the Commitment of the Swing Line Lender described above is herein referred to as its "Swing Line Loan Commitment". On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Revolving Loans and Swing Line Loans. No Revolving Loan Lender shall be permitted or required to make any Revolving Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Revolving Loans of such Revolving Loan Lender, together with such Lender's Revolving Loan Percentage of the aggregate amount of all Swing Line Loans and Letter of Credit Outstandings, would exceed such Lender's Revolving Loan Percentage of the then existing Revolving Loan Commitment Amount. Furthermore, the Swing Line Lender shall not be permitted or required to make Swing Line Loans if, after giving effect thereto, the aggregate outstanding principal amount of all Swing Line Loans would exceed (x) the then existing Swing Line Loan Commitment Amount or (y) when combined with the aggregate outstanding principal amount of Revolving Loans and Letter of Credit Outstandings, the then existing Revolving Loan Commitment Amount. SECTION 2.1.2. Letter of Credit Commitment. From time to time on any Business Day occurring on and after the Closing Date but prior to the Revolving Loan Commitment Termination Date, each Issuer agrees that it will (i) issue one or more trade letters of credit or standby letters of credit (each a "Letter of Credit") for the account of the Borrower or any Subsidiary in the Stated Amount requested by the Borrower on such day, or (ii) extend the Stated Expiry Date of an existing Letter of Credit previously issued hereunder. No Stated Expiry Date shall extend beyond the earlier of (x) 30 days prior to the Revolving Loan Commitment Termination Date in the case of trade Letters of Credit or 10 days prior to the Revolving Loan Commitment Termination Date in the case of standby Letters of Credit and (y) unless otherwise agreed to by the respective Issuer in its sole discretion, 364 days from the date of such issuance or extension. No Issuer shall be permitted or required to issue any Letter of Credit if, after giving effect thereto, (i) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (ii) the sum of the aggregate amount of all Letter of Credit Outstandings plus the aggregate principal amount of all Revolving Loans and Swing Line Loans then outstanding would exceed the Revolving Loan Commitment Amount. SECTION 2.1.3. Term Loan Commitment. In a single drawing on any Business Day occurring on or prior to the Term Loan Commitment Termination Date, each Lender that has a Term Loan Commitment agrees that it will make loans (relative to such Lender, its "Term Loans") to the Borrower equal to such Lender's Term Loan Percentage of the aggregate amount of the Borrowings of Term Loans requested by the Borrower to be made on such day. No amounts paid or prepaid with respect to Term Loans may be reborrowed. SECTION 2.2. Reduction of the Commitment Amounts. The Borrower may, from time to time on any Business Day occurring after the Closing Date, voluntarily reduce the amount of the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount, the Letter of Credit Commitment Amount or the Term Loan Commitment Amount on the Business Day so specified by the Borrower; provided that all such reductions shall require at least one Business Day's prior notice to the Administrative Agent and be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $1,000,000 and in an -40- integral multiple of $100,000. Any optional or mandatory reduction of the Revolving Loan Commitment Amount pursuant to the terms of this Agreement which reduces the Revolving Loan Commitment Amount below the sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit Commitment Amount shall result in an automatic and corresponding reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount (as directed by the Borrower in a notice to the Administrative Agent delivered together with the notice of such voluntary reduction in the Revolving Loan Commitment Amount or, in the absence of such direction, pro rata based upon the respective amounts thereof) to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or the Issuers. SECTION 2.3. Borrowing Procedures. Loans (other than Swing Line Loans) shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in accordance with Section 2.3.2. SECTION 2.3.1. Borrowing Procedures. In the case of Loans other than Swing Line Loans, by delivering a Borrowing Request to the Administrative Agent not later than 2:00 p.m. on a Business Day, the Borrower may from time to time irrevocably request, on not less than one Business Day's notice in the case of Alternate Base Rate Loans, or three Business Days' notice in the case of Eurodollar Loans, and in either case not more than five Business Days' notice, that a Borrowing be made, in the case of either Eurodollar Loans or Alternate Base Rate Loans, in a minimum amount of either $1,000,000 and in an integral multiple of $100,000 or the unused amount of the applicable Commitment; provided that, subject to the Borrower's right to convert such Loans to Eurodollar Loans pursuant to Section 2.4, all of the Loans made on the Closing Date shall be made as Alternate Base Rate Loans. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. In the case of Loans other than Swing Line Loans, not later than 1:00 p.m. on such Business Day each Lender that has a Commitment to make the Loans being requested shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall promptly make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.3.2. Swing Line Loan Borrowing Procedures. In the case of Swing Line Loans: (a) By telephonic notice to the Swing Line Lender not later than 12:00 noon on a Business Day (followed (within one Business Day) by the delivery of a confirming Borrowing Request), the Borrower may from time to time irrevocably request that Swing Line Loans be made by the Swing Line Lender in an aggregate minimum principal amount of $500,000 and in an integral multiple of $100,000. All Swing Line Loans shall be made as Alternate Base Rate Loans and shall not be entitled to be converted into Eurodollar Loans. The proceeds of each Swing Line Loan shall be made available by the Swing Line Lender to the Borrower by wire transfer to the account the Borrower shall -41- have specified in its notice therefor not later than 4:00 p.m. on the Business Day telephonic notice is received by the Swing Line Lender. (b) If (i) any Swing Line Loan shall be outstanding for more than three Business Days, (ii) any Swing Line Loan is or will be outstanding on a date when the Borrower requests that a Revolving Loan be made, or (iii) any Default shall occur and be continuing, then each Revolving Loan Lender (other than the Swing Line Lender) irrevocably agrees that it will, at the request of the Swing Line Lender, make a Revolving Loan (which shall initially be funded as an Alternate Base Rate Loan) in an amount equal to such Lender's Revolving Loan Percentage of the aggregate principal amount of all such Swing Line Loans then outstanding (such outstanding Swing Line Loans hereinafter referred to as the "Refunded Swing Line Loans"). Not later than 1:00 p.m. on the first Business Day following receipt by each Revolving Loan Lender of a request to make Revolving Loans as provided in the preceding sentence, each Revolving Loan Lender shall deposit in an account specified by the Swing Line Lender the amount so requested in same day funds and such funds shall be applied by the Swing Line Lender to repay the Refunded Swing Line Loans. At the time the Revolving Loan Lenders make the above referenced Revolving Loans the Swing Line Lender shall be deemed to have made, in consideration of the making of the Refunded Swing Line Loans, Revolving Loans in an amount equal to the Swing Line Lender's Revolving Loan Percentage of the aggregate principal amount of the Refunded Swing Line Loans. Upon the making (or deemed making, in the case of the Swing Line Lender) of any Revolving Loans pursuant to this clause (b), the amount so funded shall become outstanding under such Revolving Loan Lender's Revolving Note and shall no longer be owed under the Swing Line Note. All interest payable with respect to any Revolving Loans made (or deemed made, in the case of the Swing Line Lender) pursuant to this clause (b) shall be appropriately adjusted to reflect the period of time during which the Swing Line Lender had outstanding Swing Line Loans in respect of which such Revolving Loans were made. Each Revolving Loan Lender's obligation to make the Revolving Loans referred to in this clause (b) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, any Obligor or any Person for any reason whatsoever; (ii) the occurrence or continuance of any Default; (iii) any adverse change in the condition (financial or otherwise) of any Obligor; (iv) the acceleration or maturity of any Obligations or the termination of any Commitment after the making of any Swing Line Loan; (v) any breach of any Loan Document by any Person; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Administrative Agent not later than 2:00 p.m. on a Business Day, the Borrower may from time to time irrevocably elect, on not less than one Business Day's notice in the case of conversions into Alternate Base Rate Loans, or three Business Days' notice in the case of continuations of or conversions into Eurodollar Loans, and in either case not more than five Business Days' notice, that all, or any portion in an aggregate minimum amount of $1,000,000 and in an integral multiple of $100,000 be, in the case of Alternate Base Rate Loans, converted into Eurodollar Loans or be, in the case of Eurodollar -42- Loans, converted into Alternate Base Rate Loans or continued as Eurodollar Loans (in the absence of delivery of a Continuation/ Conversion Notice with respect to any Eurodollar Loan at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such Eurodollar Loan shall, on such last day, automatically convert to an Alternate Base Rate Loan); provided that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders that have made such Loans, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, Eurodollar Loans when any Payment Default or Event of Default has occurred and is continuing to the extent the Administrative Agent or Required Lenders have notified the Borrower that the occurrence and continuance of such Payment Default or Event of Default shall prevent the Borrower from so continuing or converting such Loans. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert Eurodollar Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Eurodollar Loan; provided that such Eurodollar Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Eurodollar Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, for purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all Eurodollar Loans by purchasing Dollar deposits in its Eurodollar Office's interbank eurodollar market (as such office may be changed from time to time pursuant to Section 4.11 or otherwise). SECTION 2.6. Letter of Credit Issuance Procedures. By delivering to the Administrative Agent an Issuance Request not later than 12:00 noon on a Business Day, the Borrower may from time to time irrevocably request on not less than three nor more than ten Business Days' notice, in the case of an initial issuance of a Letter of Credit and not less than three Business Days' prior notice, in the case of a request for the extension of the Stated Expiry Date of a Letter of Credit (in each case, unless a shorter notice period is agreed to by the applicable Issuer, in its sole discretion), that such Issuer issue, or extend the Stated Expiry Date of, a Letter of Credit on behalf of the Borrower (whether issued for the account of or on behalf of the Borrower or any Subsidiary) in such form as may be requested by the Borrower and approved by such Issuer (such approval not to be unreasonably withheld), solely for the purposes described in Section 7.1.7. Notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, the Borrower hereby acknowledges and agrees that it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder (whether the account party on such Letter of Credit is the Borrower or a Subsidiary) and shall be obligated to reimburse the Issuer of such Letter of Credit in accordance with the reimbursement provisions herein. Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier to occur of (i) 30 days prior to the Revolving Loan Commitment Termination Date in the case of standby Letters of Credit or 10 days prior to the Revolving Loan Commitment Termination Date in the case of trade Letters of Credit or (ii) (unless otherwise agreed to by the applicable Issuer, in its sole discretion), 364 days from the date of its issuance. The Issuer of a Letter of Credit hereunder will make available to the beneficiary thereof the original of such Letter of Credit which it issues. -43- SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each Letter of Credit, and without further action, each Revolving Loan Lender (other than the Issuer thereof) shall be deemed to have irrevocably purchased, to the extent of its Revolving Loan Percentage of such Letter of Credit, a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Revolving Loan Lender shall, to the extent of its Revolving Loan Percentage of such Letter of Credit, be responsible for reimbursing within one Business Day such Issuer for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 2.6.3. In addition, such Revolving Loan Lender shall be entitled to receive its Revolving Loan Percentage of the Letter of Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of Credit (other than the issuance fees payable to the Issuer of such Letter of Credit pursuant to the last sentence of Section 3.3.3) and of interest payable pursuant to Section 2.6.2 with respect to any Reimbursement Obligation. To the extent that any Revolving Loan Lender has reimbursed an Issuer of a Letter of Credit for a Disbursement, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Borrower or otherwise) in respect of such Disbursement. SECTION 2.6.2. Disbursements. Each Issuer of a Letter of Credit hereunder will notify the Borrower and the Administrative Agent promptly of the presentment for payment of such Letter of Credit, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, such Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Not later than 12:00 noon on the first Business Day following the Disbursement Date, the Borrower will reimburse the Administrative Agent, for the account of such Issuer, for all amounts which such Issuer has disbursed under such Letter of Credit in good faith, together with interest thereon at a rate per annum equal to the rate per annum then in effect for Alternate Base Rate Loans (with the then Applicable Margin for Revolving Loans accruing on such amount) pursuant to Section 3.2 for the period from the Disbursement Date through the date of such reimbursement. Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, the Borrower hereby acknowledges and agrees that it shall be obligated to reimburse each Issuer upon each Disbursement by such Issuer of a Letter of Credit made by such Issuer in good faith, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder (whether the account party on such Letter of Credit is the Borrower or a Subsidiary). SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement Obligation") of the Borrower under Section 2.6.2 to reimburse each Issuer hereunder with respect to each Disbursement (including interest thereon) under Letters of Credit issued by such Issuer, and, upon the failure of the Borrower to reimburse such Issuer therefor, each Revolving Loan Lender's obligation under Section 2.6.1 to reimburse such Issuer, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or such Revolving Loan Lender, as the case may be, may have or have had against such Issuer or any Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in an Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit so long -44- as such Disbursement is made in good faith; provided that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of the Borrower or such Lender, as the case may be, to commence any proceeding against an Issuer for any wrongful Disbursement made by such Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuer. SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the continuation of any Default under Section 8.1.9 or, upon notification by the Administrative Agent (acting at the direction of the Required Lenders) to the Borrower of its obligations under this Section, at any time following the occurrence and during the continuation of any other Event of Default, (i) the aggregate Stated Amount of all Letters of Credit shall, without demand upon or notice to the Borrower or any other Person, be deemed to have been paid or disbursed by the applicable Issuers of such Letters of Credit (notwithstanding that such amount may not in fact have been paid or disbursed), and (ii) the Borrower shall be immediately obligated to deposit with the Administrative Agent the amount deemed to have been so paid or disbursed by the Issuers. Amounts payable by the Borrower pursuant to this Section shall be deposited in immediately available funds with the Administrative Agent and held as collateral security for the Reimbursement Obligations. When all Defaults giving rise to the deemed disbursements under this Section have been cured or waived the Administrative Agent shall return to the Borrower all amounts then on deposit with the Administrative Agent pursuant to this Section which have not been applied to the satisfaction of actual Reimbursement Obligations not arising by operation of this Section 2.6.4. SECTION 2.6.5. Nature of Reimbursement Obligations. Each Obligor and, to the extent set forth in Section 2.6.1, each Revolving Loan Lender shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. No Issuer (except to the extent of its own bad faith, gross negligence or willful misconduct) shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, telecopier, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. -45- SECTION 2.7. Register; Notes. (a) Each Lender may maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. In the case of a Lender that does not request, pursuant to clause (c) below, execution and delivery of a Note evidencing the Loans made by such Lender to the Borrower, such account or accounts shall, to the extent not inconsistent with the notations made by the Administrative Agent in the Register, be conclusive and binding on the Borrower absent manifest error; provided that the failure of any Lender to maintain such account or accounts shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. (b) The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for the purpose of this clause (b), to maintain a register (the "Register") in which the Administrative Agent will record each Lender's Commitments, the Loans made by each Lender and each repayment in respect of the principal amount of the Loans of each Lender and annexed to which the Administrative Agent shall retain a copy of each Lender Assignment Agreement delivered to the Administrative Agent pursuant to Section 11.11. Failure to make any recordation, or any error in such recordation, shall not affect the Borrower's obligation in respect of such Loans. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person in whose name a Loan (and as provided in clause (c) the Note evidencing such Loan, if any) is registered as the owner thereof for all purposes of this Agreement, notwithstanding notice or any provision herein to the contrary. A Lender's Commitment and the Loans made pursuant thereto may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer in the Register. Any assignment or transfer of a Lender's Commitment and/or the Loans made pursuant thereto shall be registered in the Register only upon delivery to the Administrative Agent of a Lender Assignment Agreement duly executed by the assignor and assignee thereof. No assignment or transfer of a Lender's Commitment or the Loans made pursuant thereto shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section. (c) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender, as applicable, a Revolving Note, Term Note and/or Swing Line Note evidencing the Loans made by such Lender. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal amount of, and the interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall, to the extent not inconsistent with the notations made by the Administrative Agent in the Register, be conclusive and binding on the Borrower absent manifest error; provided that the failure of any Lender to make any such notations or any error in any such notation shall not limit or otherwise affect any -46- Obligations of any Obligor. The Loans evidenced by any such Note and interest thereon shall at all times (including after assignment pursuant to Section 11.11) be represented by one or more Notes payable to the order of the payee named therein and its registered assigns. A Note and the obligation evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Note and the obligation evidenced thereby in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of an obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such obligation, accompanied by a Lender Assignment Agreement duly executed by the assignor thereof, and thereupon, if requested by the assignee, one or more new Notes shall be issued to the designated assignee and the old Note shall be returned by the Administrative Agent to the Borrower marked "exchanged". No assignment of a Note and the obligation evidenced thereby shall be effective unless it shall have been recorded in the Register by the Administrative Agent as provided in this Section. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments; Application. The Borrower agrees that the Loans shall be repaid and prepaid pursuant to the following terms. SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid principal amount of each Loan upon the applicable Stated Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall or may be made as set forth below. (a) From time to time on any Business Day, the Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any (i) Loans (other than Swing Line Loans); provided that (A) any such prepayment of the Term Loans shall be made pro rata among Term Loans of the same type and, if applicable, having the same Interest Period of all Lenders that have made such Term Loans, (to be applied as set forth in Section 3.1.2), and any such prepayment of Revolving Loans shall be made pro rata among the Revolving Loans of the same type and, if applicable, having the same Interest Period of all Lenders that have made such Revolving Loans; (B) all such voluntary prepayments shall require at least one but no more than five Business Days' prior written notice to the Administrative Agent; and (C) all such voluntary partial prepayments shall be, in the case of Eurodollar Loans, in an aggregate minimum amount of $1,000,000 and in an integral multiple of $100,000 and, in the case of Alternate Base Rate Loans, in an aggregate minimum amount of $1,000,000 and in an integral multiple of $100,000; and (ii) Swing Line Loans; provided that (A) all such voluntary prepayments shall require prior telephonic notice to the Swing Line Lender not later than 2:00 p.m. on the day of such prepayment (such notice to be confirmed -47- in writing within 24 hours thereafter); and (B) all such voluntary partial prepayments shall be in an aggregate minimum amount of $500,000 and in an integral multiple of $100,000. (b) On each date when the sum of (i) the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans and (ii) the aggregate amount of all Letter of Credit Outstandings exceeds the Revolving Loan Commitment Amount (as it may be reduced from time to time pursuant to this Agreement), the Borrower shall make a mandatory prepayment of Revolving Loans or Swing Line Loans (or both) and, if necessary, Cash Collateralize Letter of Credit Outstandings, in an aggregate amount equal to such excess. (c) With respect to the Term Loans, (i) on each Quarterly Payment Date occurring during the period commencing on (and including) December 31, 2002 through and including June 30, 2008, the Borrower shall make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term Loans in an aggregate amount equal to $312,500, and (ii) on each Quarterly Payment Date occurring thereafter and on the Stated Maturity Date for Term Loans, the Borrower shall make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term Loans in an aggregate amount equal to $29,453,125 (in each case as such amounts may have been reduced pursuant to clause (b) of Section 3.1.2). (d) Following the receipt by Holdings or any of its Subsidiaries of any Casualty Proceeds in excess of $1,000,000 (individually or in the aggregate when taken together with all other Casualty Proceeds and all Net Disposition Proceeds) over the course of a Fiscal Year, the Borrower shall deliver to the Administrative Agent a calculation of the amount of such Casualty Proceeds and make a mandatory prepayment of the Term Loans in an amount equal to 100% of such Casualty Proceeds within 30 days of the receipt thereof to be applied as set forth in Section 3.1.2; provided that no mandatory prepayment on account of Casualty Proceeds shall be required under this clause if the Borrower informs the Administrative Agent in writing no later than 30 days following receipt of such Casualty Proceeds of its or such Subsidiary's good faith intention to apply such Casualty Proceeds to the rebuilding or replacement of the damaged, destroyed or condemned assets or property and the Borrower or such Subsidiary in fact uses such Casualty Proceeds to rebuild or replace such assets or property within 360 days following the receipt of such Casualty Proceeds, with the amount of such Casualty Proceeds unused after such 360-day period being applied to the repayment of Term Loans pursuant to Section 3.1.2; provided, further, that at any time when any Payment Default or Event of Default shall have occurred and be continuing, all Casualty Proceeds (together with Net Disposition Proceeds not applied as provided in clause (e) below) shall be deposited in an account maintained with the Administrative Agent to pay for such rebuilding, replacement or use whenever no Payment Default or Event of Default is then continuing or except as otherwise agreed to by the Administrative Agent for disbursement at the request of the Borrower or such Subsidiary, as the case may be. -48- (e) Following the receipt by Holdings or any of its Subsidiaries of any Net Disposition Proceeds in excess of $1,000,000 (individually or in the aggregate when taken together with all other Net Disposition Proceeds and all Casualty Proceeds) over the course of a Fiscal Year, the Borrower shall deliver to the Administrative Agent a calculation of the amount of such Net Disposition Proceeds and make a mandatory prepayment of the Term Loans in an amount equal to 100% of such Net Disposition Proceeds within one Business Day of the receipt thereof to be applied as set forth in Section 3.1.2; provided that no mandatory prepayment on account of Net Disposition Proceeds shall be required under this clause (e) either (i) if the Borrower informs the Administrative Agent in writing promptly following the receipt of such Net Disposition Proceeds of its or such Subsidiary's good faith intention to reinvest such Net Disposition Proceeds in assets or property that will be used or useful in its business and the Borrower or such Subsidiary in fact so reinvests such Net Disposition Proceeds within 360 days following the receipt of such Net Disposition Proceeds, with the amount of such Net Disposition Proceeds not so reinvested after such 360-day period being applied to the repayment of Term Loans pursuant to Section 3.1.2 or (ii) to the extent of the outstanding aggregate principal amount of the Bridge Loans, if such Net Disposition Proceeds are in respect of the AmerCable Disposition, so long as such Net Disposition Proceeds are applied to repay the Bridge Loans or, if the Merger Closing Date has not yet then occurred, deposited in an account maintained with the Administrative Agent pending application to repayment of the Bridge Loans on the Merger Closing Date; provided further that at any time when any Payment Default or Event of Default shall have occurred and be continuing, all Net Disposition Proceeds (together with Casualty Proceeds not applied as provided in clause (d) above) shall be deposited in an account maintained with the Administrative Agent to be so used whenever no Payment Default or Event of Default is then continuing or except as otherwise agreed to by the Administrative Agent for disbursement at the request of the Borrower. (f) No later than five Business Days following the delivery of its annual audited financial reports required pursuant to clause (b) of Section 7.1.1, the Borrower shall deliver to the Agents a calculation of the Excess Cash Flow for the Fiscal Year then last ended and make a mandatory prepayment of the Term Loans in an amount equal to the applicable ECF Percentage of Excess Cash Flow (if any) for such Fiscal Year, to be applied as set forth in Section 3.1.2. (g) Concurrently with the receipt by Holdings, the Borrower or any Subsidiary of any Net Debt Proceeds, the Borrower shall deliver to the Administrative Agent a calculation of the amount of such Net Debt Proceeds, and make a mandatory prepayment of the Term Loans in an amount equal to 100% of such Net Debt Proceeds to be applied as set forth in Section 3.1.2; provided that no such mandatory prepayment with respect to any such Net Debt Proceeds received after the Closing Date shall be required to the extent (but only to the extent) such Net Debt Proceeds are received from the issuance of Unsecured Transaction Debt and are used for purposes of paying or prepaying Bridge Loans. (h) Concurrently with the receipt by Holdings of any Net Equity Proceeds, the Borrower shall deliver to the Administrative Agent a calculation of the amount of such -49- Net Equity Proceeds and make a mandatory prepayment of the Term Loans in an amount equal to 50% of such Net Equity Proceeds to be applied as set forth in Section 3.1.2; provided that no such mandatory prepayment with respect to any such Net Equity Proceeds shall be required (i) to the extent such Net Equity Proceeds are used solely to repay or prepay outstanding Bridge Loans (together with all breakage costs and related fees and expenses (if any) payable under the Bridge Loan Agreement) or (ii) if the Leverage Ratio was less than 2.00:1 as of the last day of the most recent Fiscal Quarter for which a Compliance Certificate was delivered pursuant to clause (c) of Section 7.1.1. (i) Immediately upon any acceleration of any Loans pursuant to Section 8.2 or Section 8.3, the Borrower shall repay all the Loans, unless, pursuant to Section 8.3, only a portion of all the Loans is so accelerated (in which case the portion so accelerated shall be so repaid). Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4. SECTION 3.1.2. Application. Amounts prepaid pursuant to Section 3.1.1 shall be applied as set forth in this Section. (a) Subject to clause (b), each prepayment or repayment of the principal of the Loans shall be applied, to the extent of such prepayment or repayment, first, to the principal amount thereof being maintained as Alternate Base Rate Loans, and second, subject to the terms of Section 4.4, to the principal amount thereof being maintained as Eurodollar Loans. (b) Each prepayment of Term Loans made pursuant to clauses (a), (d), (e), (f), (g) and (h) of Section 3.1.1 shall be applied (i) first, to a mandatory prepayment of the outstanding principal amount of all Term Loans (with the amount of such prepayment of the Term Loans being applied to the remaining scheduled amortization payments of the Term Loans, pro rata against such remaining Term Loan amortization payments, unless the Borrower notifies the Administrative Agent, in writing, at the time of such mandatory prepayment, of its election to apply such amounts (in which event such amounts will be applied) in direct order of such scheduled amortization payments, and (ii) second, once all Term Loans have been repaid in full, to the repayment of any outstanding Revolving Loans (with no corresponding reduction to the Revolving Loan Commitment Amount). SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable by the Borrower in accordance with the terms set forth below. SECTION 3.2.1. Rates. Subject to Section 2.3.2, pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum (i) on that portion maintained from time to time as an Alternate Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; provided that Swing Line Loans shall always accrue interest at the then effective Applicable Margin for Revolving Loans maintained as Alternate Base Rate Loans, and (ii) on that portion maintained as a Eurodollar Loan, during each -50- Interest Period applicable thereto, equal to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin. All Eurodollar Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurodollar Loan. SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of any Loan or Reimbursement Obligation is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay interest (after as well as before judgment) on such delinquent amounts at a rate per annum equal to 2% plus the higher of (i) the Alternate Base Rate from time to time in effect plus the Applicable Margin for Alternate Base Rate Loans and (ii) the rate otherwise applicable to such Loan or other monetary Obligation. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; (c) with respect to Alternate Base Rate Loans, on each Quarterly Payment Date occurring after the Closing Date; (d) with respect to Eurodollar Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the date occurring on each three-month interval occurring after the first day of such Interest Period); (e) with respect to any Alternate Base Rate Loans converted into Eurodollar Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth below. Except as otherwise provided in the Agents' Fee Letter, all such fees shall be non-refundable. SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Loan Lender, for the period (including any portion thereof when the Revolving Loan Commitment is suspended by reason of the Borrower's inability to satisfy any condition of Section 5.1 or 5.2) commencing on the Closing Date and continuing through the Revolving Loan Commitment Termination Date, a commitment fee in an -51- amount equal to the Applicable Commitment Fee, in each case on such Lender's Revolving Loan Percentage of the sum of the average daily unused portion of the Revolving Loan Commitment Amount (net of Letter of Credit Outstandings). All commitment fees payable pursuant to this Section shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date following the Closing Date and on the Revolving Loan Commitment Termination Date. Payments by the Borrower to the Swing Line Lender in respect of accrued interest on any Swing Line Loan shall be net of the commitment fee payable in respect of the Swing Line Lender's Revolving Loan Commitment (or, in the case such Revolving Loan Commitment exceeds the aggregate principal amount of such Swing Line Loan, the portion of such Revolving Loan Commitment equal to such aggregate principal amount) for the period during which such Swing Line Loan was outstanding. SECTION 3.3.2. Agents' Fee. The Borrower agrees to pay the fees in the amounts and on the dates set forth in the Agents' Fee Letter. SECTION 3.3.3. Letter of Credit Fees. The Borrower agrees to pay to the Administrative Agent, for the pro rata account of each Revolving Loan Lender, a Letter of Credit fee in an amount per annum equal to the then effective Applicable Margin for Revolving Loans maintained as Eurodollar Loans, multiplied by the Stated Amount of each such Letter of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date following the date of issuance of each Letter of Credit and on the Revolving Loan Commitment Termination Date. The Borrower further agrees to pay to each Issuer (subject to the proviso to this sentence) quarterly in arrears on each Quarterly Payment Date following the date of each issuance and extension of each Letter of Credit issued or extended by such Issuer and on the Revolving Loan Commitment Termination Date, a facing fee in an amount equal to 1/8 of 1% per annum on the Stated Amount of such Letter of Credit; provided that, if on the date any Letter of Credit is issued and on each anniversary thereof the facing fee which would accrue with respect to such Letter of Credit over the succeeding 365 days (assuming such Letter of Credit would remain undrawn until its Stated Expiry Date) would be less than $500, the Borrower shall pay such Issuer a facing fee of $500 with respect to such Letter of Credit in advance on the date of such issuance or anniversary. In addition to the fees described in the preceding two sentences of this Section 3.3.3, the Borrower agrees to pay to each Issuer its customary processing fees for issuing, modifying and making payment under each Letter of Credit issued by it. ARTICLE IV CERTAIN EURODOLLAR AND OTHER PROVISIONS SECTION 4.1. Eurodollar Lending Unlawful. If any Lender shall in good faith determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan as, or to convert any Loan into, a Eurodollar Loan, the obligations of such Lender to make, continue or convert any such Eurodollar Loan shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Loans payable to such Lender shall -52- automatically convert into Alternate Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to it in the interbank eurodollar market; or (b) by reason of circumstances affecting the interbank eurodollar market, adequate means do not exist for ascertaining the interest rate applicable hereunder to Eurodollar Loans; then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, Eurodollar Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3. Increased Eurodollar Loan Costs, etc. The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, such Lender's Commitments hereunder in respect of Eurodollar Loans (including the making, continuing or maintaining (or of such Lender's obligation to make or continue) any Eurodollar Loans) that arise in connection with any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in after the Closing Date of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority, except for such changes with respect to increased capital costs and Taxes which are governed by Sections 4.5 and 4.6, respectively. Each affected Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, stating, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make or continue any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a Eurodollar Loan (but excluding any loss of margin after the date of the relevant conversion, repayment, prepayment or failure to borrow, continue or convert) as a result of (a) any conversion or repayment or prepayment of the principal amount of any Eurodollar Loan on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Article III or otherwise; (b) any Loans not being made as Eurodollar Loans in accordance with the Borrowing Request therefor; or -53- (c) any Loans not being continued as, or converted into, Eurodollar Loans in accordance with the Continuation/Conversion Notice therefor; then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.5. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its good faith discretion) that the rate of return on its or such controlling Person's capital as a consequence of the Commitments or the Credit Extensions made, or the Letters of Credit participated in, by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then upon notice from time to time by such Lender to the Borrower, the Borrower shall within five days following receipt of such notice pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts and setting forth in reasonable detail the calculation thereof shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Lender may use any reasonable method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable; provided that such Lender may not impose materially greater costs on the Borrower than on any similarly situated borrower by virtue of any such averaging or attribution method. SECTION 4.6. Taxes. The Borrower covenants and agrees as follows with respect to Taxes. (a) Any and all payments by the Borrower under each Loan Document shall be made without setoff, counterclaim or other defense, and free and clear of, and without deduction or withholding for or on account of, any Taxes. In the event that any Taxes are required by any law or Governmental Authority to be deducted or withheld from any payment required to be made by the Borrower to or on behalf of the Administrative Agent or any Lender under any Loan Document, then: (i) subject to clause (f), if such Taxes are Non-Excluded Taxes, the amount of such payment shall be increased as may be necessary such that such payment is made, after withholding or deduction for or on account of such Taxes, in an amount that is not less than the amount provided for in such Loan Document; and (ii) the Borrower shall withhold the full amount of such Taxes from such payment (as increased pursuant to clause (a)(i)) and shall pay -54- such amount to the Governmental Authority imposing such Taxes in accordance with applicable law. (b) In addition, the Borrower shall pay any and all Other Taxes imposed to the relevant Governmental Authority imposing such Other Taxes in accordance with applicable law. (c) As promptly as practicable after the payment of any Taxes or Other Taxes, and in any event within 45 days of any such payment being due, the Borrower shall furnish to the Administrative Agent a copy of an official receipt (or a certified copy thereof (or, if such copy or copy thereof is not available from the relevant taxing authority within 45 days of such payment being due, within 5 days of the day on which such copy or copy thereof is first available from the relevant taxing authority)), evidencing the payment of such Taxes or Other Taxes. The Administrative Agent shall make copies thereof available to any Lender upon request therefor. (d) Subject to clause (f), the Borrower shall indemnify each Agent and each Lender for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed on (and whether or not paid directly by) such Agent or Lender (whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the relevant Governmental Authority). Promptly upon having knowledge that any such Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and promptly upon notice thereof by any Agent or Lender, the Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the relevant Governmental Authority (provided that no Agent or Lender shall be under any obligation to provide any such notice to the Borrower). In addition, the Borrower shall indemnify each Agent and each Lender for any incremental Taxes that may become payable by such Agent or Lender as a result of any failure of the Borrower to pay any Taxes when due to the appropriate Governmental Authority (except to the extent such incremental Taxes result solely from the failure of the Secured Party to give notice to the Borrower of Taxes subject to indemnity under this clause (d) and the Borrower did not otherwise have knowledge of such Taxes) or to deliver to the Administrative Agent, pursuant to clause (c), documentation evidencing the payment of Taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other Taxes actually paid by any Agent or Lender or the indemnification provided in the immediately preceding sentence, such indemnification shall be made within 30 days after the date such Agent or Lender makes written demand therefor. The Borrower acknowledges that any payment made to any Agent or Lender or to any Governmental Authority in respect of the indemnification obligations of the Borrower provided in this clause shall constitute a payment in respect of which the provisions of clause (a) and this clause shall apply. (e) Each Non-Domestic Lender, on or prior to the date on which such Non-Domestic Lender becomes a Lender hereunder, shall deliver to the Borrower and the Administrative Agent either (iii) two materially accurate and duly completed copies of either (A) Internal Revenue Service Form W-8BEN claiming benefits of an -55- income tax treaty (or an applicable successor form) or (B) Internal Revenue Service Form W-8ECI (or an applicable successor form); or (iv) in the case of a Non-Domestic Lender that is not legally entitled to deliver either form listed in clause (e)(i), (x) a certificate of a duly authorized officer of such Non-Domestic Lender to the effect that such Non-Domestic Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code (such certificate, an "Exemption Certificate"), (y) two materially accurate and duly completed copies of Internal Revenue Service Form W-8BEN (or applicable successor form) and (z) such forms that establish a complete exemption from United States withholding tax with respect to any payment hereunder other than principal and interest. In addition, each Non-Domestic Lender agrees that from time to time after the Closing Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower or the Administrative Agent two materially accurate and duly completed original signed replacement copies of, as applicable, such form or forms and an Exemption Certificate, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such form or Exemption Certificate. (f) The Borrower shall not be obligated to gross up any payments to any Agent or any Lender pursuant to clause (a)(i), or to indemnify any Agent or any Lender pursuant to clause (d), in respect of United States federal withholding taxes to the extent imposed as a result of (i) the failure of any Agent or Lender to deliver to the Borrower the form or forms and/or an Exemption Certificate, as applicable to such Agent or Lender, pursuant to clause (e), (ii) such form or forms and/or Exemption Certificate not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by such Agent or such Lender being untrue or inaccurate on the date delivered in any material respect, or (iii) the Lender designating a successor lending office at which it maintains its Loans which has the effect of causing such Agent or Lender to become obligated for tax payments in excess of those in effect immediately prior to such designation; provided that the Borrower shall be obligated to gross up any payments, excluding payments other than principal and interest made to a Non-Domestic Lender providing forms under clause (e)(ii), to any such Agent or Lender pursuant to clause (a)(i), and to indemnify any such Agent or Lender pursuant to clause (d), in respect of United States federal withholding taxes if (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or Exemption Certificate to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable statute, treaty, regulation or other applicable law or any case law, revenue ruling or notice or pronouncement by a Governmental Authority interpreting any of the foregoing occurring after the Closing Date, which change rendered such Agent or Lender no longer legally -56- entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or certifications made in such form or forms or Exemption Certificate untrue or inaccurate in a material respect or (ii) the obligation to gross up payments to any such Agent or Lender pursuant to clause (a)(i) or to indemnify any such Agent or Lender pursuant to clause (d) is with respect to an Assignee Lender that becomes an Assignee Lender as a result of an assignment made at the request of the Borrower. (g) If the Administrative Agent or any Lender receives a refund in respect of Taxes as to which it has been grossed up by the Borrower pursuant to clause (a)(i) or indemnified by the Borrower pursuant to clause (d) and the Administrative Agent or the Lender, as applicable, determines in its sole, good faith judgment that such refund is attributable to such gross up or indemnification, then the Lender or the Administrative Agent, as the case may be, shall pay such amount to the Borrower as the Lender or the Administrative Agent determines to be the proportion of the refund as will leave it, after such payment, in no better or worse financial position with respect to Tax liabilities and related expenses than it would have been in absent such payment. Neither the Lenders nor the Administrative Agent shall be obligated to disclose information regarding its tax affairs or computations to the Borrower in connection with this clause (g) or any other provision of this Section 4.6. SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly provided in a Loan Document, all payments by the Borrower pursuant to each Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Administrative Agent and the Lenders entitled to receive such payment. All payments shall be made without setoff, deduction or counterclaim not later than 12:00 noon on the date due in same day or immediately available funds to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest (including interest on Eurodollar Loans) and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on an Alternate Base Rate Loan, 365 days or, if appropriate, 366 days). Payments due on a day other than a Business Day shall (except as otherwise required by clause (iii) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees in connection with that payment. SECTION 4.8. Sharing of Payments. If any Secured Party shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Credit Extension or Reimbursement Obligation (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 or 4.6) in excess of its pro rata share of payments obtained by all Secured Parties, such Secured Party shall purchase from the other Secured Parties such participations in Credit Extensions made by them as shall be necessary to cause such purchasing Secured Party to share the excess payment or other recovery ratably (to the extent such other Secured Parties were entitled to receive a portion of such payment or recovery) with each of them; provided that if all -57- or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Secured Party, the purchase shall be rescinded and each Secured Party which has sold a participation to the purchasing Secured Party shall repay to the purchasing Secured Party the purchase price to the ratable extent of such recovery together with an amount equal to such selling Secured Party's ratable share (according to the proportion of (a) the amount of such selling Secured Party's required repayment to the purchasing Secured Party to (b) total amount so recovered from the purchasing Secured Party) of any interest or other amount paid or payable by the purchasing Secured Party in respect of the total amount so recovered. The Borrower agrees that any Secured Party purchasing a participation from another Secured Party pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Secured Party were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law any Secured Party receives a secured claim in lieu of a setoff to which this Section applies, such Secured Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Secured Parties entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. Setoff. Each Agent and each Lender shall, upon the occurrence and during the continuance of any Event of Default described in clauses (a) through (d) of Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Agent and each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with each Agent and each Lender; provided that any such appropriation and application shall be subject to the provisions of Section 4.8. Each Agent and each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by each Agent and each Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Agent and each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Agent and such Lender may have. SECTION 4.10. Replacement of Lenders. If any Lender (an "Affected Lender") (x) makes a demand upon the Borrower for (or if the Borrower is otherwise required to pay) amounts pursuant to Section 4.3, 4.5 or 4.6 (and the payment of such amounts are more onerous in the reasonable judgment of the Borrower than with respect to the other Lenders), or gives notice pursuant to Section 4.1 requiring a conversion of such Affected Lender's Eurodollar Loans to Alternate Base Rate Loans or suspending such Lender's obligation to make Loans as, or to convert Loans into, Eurodollar Loans, or (y) is then subject to a Lender Default, the Borrower may, within 30 days of receipt by the Borrower of such demand or notice, as the case may be, give notice (a "Replacement Notice") in writing to the Agents and such Affected Lender of its intention to replace such Affected Lender with a financial institution or other Person (a "Replacement Lender") designated in such Replacement Notice; provided that no Replacement Notice may be given by the Borrower and no such replacement may occur if (i) such replacement conflicts or would conflict with any applicable law or regulation, (ii) unless the Agents otherwise consent, any Event of Default shall have occurred and be continuing at the time of the giving of -58- such notice or the time of such replacement or (iii) prior to the giving of such notice or the time of any such replacement, such Lender, in the Borrower's reasonable judgment, shall have taken any necessary action under Section 4.3, 4.5 or 4.6 (if applicable) so as to eliminate the continued need for payment of amounts owing pursuant to Section 4.3, 4.5 or 4.6 or shall have cured the failure or other event that resulted in any relevant Lender Default. If the Administrative Agent shall, in the exercise of its reasonable discretion and within five Business Days of its receipt of such Replacement Notice, notify the Borrower and such Affected Lender in writing that the Replacement Lender is satisfactory to the Administrative Agent (such consent not being required where the Replacement Lender is already a Lender), then such Affected Lender shall, subject to the payment of any amounts due to the Affected Lender pursuant to Section 4.4, assign, in accordance with Section 11.11, all of its Commitments, Loans, Notes (if any) and other rights and obligations under this Agreement and all other Loan Documents (including Reimbursement Obligations, if applicable) to such Replacement Lender; provided that (i) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Affected Lender and such Replacement Lender, (ii) the purchase price paid by such Replacement Lender shall be in the amount of such Affected Lender's Loans and its Percentage of outstanding Reimbursement Obligations, together with all accrued and unpaid interest and fees in respect thereof, plus all other amounts (including the amounts demanded and unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Affected Lender hereunder and (iii) the Borrower shall pay to the Affected Lender and the Administrative Agent to the extent so requested all reasonable out-of-pocket expenses incurred by the Affected Lender and the Agents in connection with such assignment and assumption (including the processing fees described in Section 11.11). Upon the Closing Date of an assignment described above, the Replacement Lender shall become a "Lender" for all purposes under this Agreement and the other Loan Documents. SECTION 4.11. Change of Lending Office. Each Lender agrees that if it makes any demand for payment under Sections 4.3, 4.4, 4.5 or 4.6, or if any introduction or change of the type described in Section 4.1 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under Section 4.3, 4.4, 4.5 or 4.6, or would eliminate or reduce the effect of any introduction or change described in Section 4.1. ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extension. The obligations of the Lenders and, if applicable, each Issuer to fund the initial Credit Extension shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1; provided that each condition precedent set forth in this Article V that can only be satisfied upon the funding of the initial Credit Extension hereunder shall be deemed to be satisfied immediately prior to such funding, provided that all other actions or events required to have been taken or to have occurred in order for such condition to be satisfied shall have been taken or have occurred -59- at or prior to such time and that all other actions and events required not to have occurred in order for such condition to be satisfied shall not have occurred at or prior to such time. SECTION 5.1.1. Resolutions, etc. The Agents shall have received from each Obligor, as applicable, (i) a copy of a good standing certificate, dated a date reasonably close to the Closing Date, for each such Person and (ii) a certificate, dated the Closing Date, duly executed and delivered by such Person's Secretary or Assistant Secretary, managing member or general partner, as applicable, as to (a) resolutions of each such Person's Board of Directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing, to the extent relevant, all aspects of the Transaction applicable to such Person and the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby; (b) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person (each, an "Authorized Officer"); and (c) the full force and validity of each Organic Document of such Person and copies thereof; upon which certificates each Secured Party may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, managing member or general partner, as applicable, of any such Person canceling or amending the prior certificate of such Person. SECTION 5.1.2. Material Transaction Documents. None of the Material Transaction Documents (including the Acquisition Agreement) shall have been amended, supplemented, waived or otherwise modified in any material respect after the date of the Commitment Letter without the prior written consent of the Agents (which consent shall not be unreasonably withheld). The Agents shall have received (with copies for each Lender that has expressly requested copies thereof) fully executed copies of each of the Material Transaction Documents, certified to be true and complete copies thereof by an Authorized Officer of Holdings. The Material Transaction Documents shall be in full force and effect as of the Tender Offer Closing Date and the parties thereto shall be in full compliance therewith in all material respects. SECTION 5.1.3. Tender Offer Completed. On the Closing Date, Mergerco shall have accepted for purchase not less than the Minimum Shares, the Minimum Condition shall have been satisfied concurrently with the initial Credit Extension hereunder, and all other aspects of the Tender Offer required to be completed on the Closing Date shall have been consummated pursuant to the Material Transaction Documents. The Tender Offer and the financing thereof shall have been consummated in compliance with all applicable laws and regulations (including Regulation U of the F.R.S. Board) and shall not be subject to any injunction or similar order. SECTION 5.1.4. Debt Tender Offer. On the Closing Date, the Minimum Debt Tender Condition shall have been satisfied, and AMI shall have accepted for repurchase all Existing Notes tendered (and not withdrawn) by the holders thereof pursuant to the Debt Tender and Refinancing, and AMI shall have undertaken to pay to such holders all principal, interest and -60- premiums then due and payable on or in respect of such Existing Notes as a result of the Debt Tender, the Refinancing or otherwise, in all cases in full and in cash with proceeds of the Term Loans, the Cash on Hand and, if necessary, the Additional Equity Investment. SECTION 5.1.5. Supplemental Indenture. The Agents shall have received a copy of the Supplemental Indenture in form and substance, reasonably acceptable to the Agents. SECTION 5.1.6. Antitakeover Statutes. The restrictions in Section 203 of the Delaware General Corporation Law (the "DGCL") shall be inapplicable to the acquisition of the Shares and to any subsequent transactions between Mergerco or any of its affiliates and the Borrower or any of its affiliates, and all conditions to avoiding the restrictions contained therein shall have been satisfied. SECTION 5.1.7. No Impediments to the Merger. The Agents shall be reasonably satisfied that, after giving effect to the consummation of the Tender Offer, there are no legal impediments to effecting the Merger under Section 251 or Section 253, as the case may be, of the DGCL, and the Merger can be consummated pursuant to the terms of the Acquisition Agreement. SECTION 5.1.8. Mergerco Debt Financing. Mergerco shall have received not less than $165,000,000 in aggregate gross proceeds from the Mergerco Debt Financing, which shall be on terms and conditions (including, as applicable, as to Subordination Provisions) and pursuant to documentation reasonably satisfactory to the Agents. SECTION 5.1.9. Equity Investment. Mergerco shall have received a Cash Equity Contribution from the Investors of not less than $159,500,000, which shall be on terms and conditions and pursuant to documentation reasonably satisfactory to the Agents. SECTION 5.1.10. Payment of Outstanding Indebtedness, etc. All Indebtedness identified in Item 7.2.2(b) of the Disclosure Schedule (including all Indebtedness outstanding under the Existing Credit Agreement), together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full from the proceeds of the initial Credit Extension and the commitments in respect of such Indebtedness (including all commitments under the Existing Credit Agreement) shall have been terminated, and all Liens securing payment of any such Indebtedness have been released; provided that nothing herein shall limit the requirements of the condition precedent set forth above in Section 5.1.4. The Administrative Agent shall have received such releases of all Liens (except Permitted Liens) securing payment of any such Indebtedness as may have been reasonably requested by the Administrative Agent, which releases shall be in form and substance reasonably satisfactory to the Agents. Without limiting the foregoing, there shall have been delivered (i) properly executed termination statements (Form UCC-3 or such other termination statements as shall be required by local law) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to the Borrower and any of its Subsidiaries, or its predecessors in interest, in connection with any security interests created with respect to any Indebtedness listed on Item 7.2.2(b) of the Disclosure Schedule and the documentation related thereto, (ii) properly executed payoff letters with respect to any Indebtedness listed in Item 7.2.2(b) of the Disclosure Schedule, (iii) terminations of -61- assignments of any security interest in, or Lien on, any patents, trademarks, copyrights or similar interests of the Borrower and any of its Subsidiaries, on which filings have been made to secure any Indebtedness listed on Item 7.2.2(b) of the Disclosure Schedule, (iv) terminations of all mortgages, leasehold mortgages and deeds of trust created with respect to property of Holdings, the Borrower and any of their respective Subsidiaries, or their respective predecessors in interest, in each case to secure the obligations under any Indebtedness listed on Item 7.2.2(b) of the Disclosure Schedule, all of which shall be in form and substance reasonably satisfactory to the Agents and (v) all collateral owned by the Borrower and any of its Subsidiaries in the possession of any agent, collateral agent or trustee for the creditors under any Indebtedness listed on Item 7.2.2(b) of the Disclosure Schedule or any financial institution party to any agreement in respect of any such Indebtedness or any related agreement. SECTION 5.1.11. Closing Date Certificate. The Agents shall have received the Closing Date Certificate, dated the Closing Date and duly executed and delivered by an Authorized Officer of each of Holdings and AMI, in which certificate Holdings and AMI shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of such Person as of such date and, at the time such certificate is delivered such statements shall in fact be true and correct. All material documents and agreements required to be appended to the Closing Date Certificate shall be in form and substance reasonably satisfactory to the Agents. SECTION 5.1.12. Delivery of Notes. The Agents shall have received, for the account of each Lender that has requested in writing two Business Days prior to the Closing Date a Note or Notes, such Lender's Note or Notes duly executed and delivered by an Authorized Officer of the Borrower. SECTION 5.1.13. Closing Fees, Expenses, etc. The Agents shall have received for their respective accounts, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable on or prior to the Closing Date in accordance with the Agents' Fee Letter and pursuant to Section 3.3 and, to the extent then invoiced, Section 11.3. SECTION 5.1.14. No Material Adverse Effect. Since December 31, 2001, there has been no change, development or event which, individually or when taken together with all other circumstances, changes or events, has had, or would reasonably be expected to have, a Material Adverse Effect. SECTION 5.1.15. Term Loan Escrow Account. The Agents shall have received, with counterparts for each Lender, the Term Loan Escrow Agreement, dated as of the Closing Date, duly executed and delivered by the Administrative Agent, the Borrower and the escrow agent thereunder. SECTION 5.1.16. Mergerco Guaranty. The Agents shall have received, with counterparts for each Lender, the Mergerco Guaranty, dated as of the Closing Date, duly executed and delivered by an Authorized Officer of Mergerco. SECTION 5.1.17. Subsidiary Guaranty. The Agents shall have received, with counterparts for each Lender, the Subsidiary Guaranty, dated as of the Closing Date, duly -62- executed and delivered by an Authorized Officer of each wholly-owned Domestic Subsidiary of the Borrower. SECTION 5.1.18. Solvency Certificate. The Agents shall have received, with counterparts for each Lender, a certificate duly executed and delivered by the chief financial or accounting Authorized Officer of the Borrower, dated the Closing Date, in the form of Exhibit I attached hereto. SECTION 5.1.19. Security and Pledge Agreements. The Agents shall have received, with counterparts for each Lender, each Security and Pledge Agreement, dated as of the Closing Date and duly executed and delivered by an Authorized Officer of each of Holdings, the Borrower and each Subsidiary Guarantor, as applicable, together with (a) certificates evidencing all of the issued and outstanding Capital Stock pledged pursuant to the applicable Security and Pledge Agreement, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any such shares of Capital Stock pledged pursuant to such Security and Pledge Agreement are uncertificated securities, the Administrative Agent shall have obtained "control" (as defined in the UCC) over such shares of Capital Stock) and such other instruments and documents as may be necessary under applicable law, in the reasonable opinion of the Administrative Agent, to perfect the first priority security interest of the Administrative Agent in such shares of Capital Stock; (b) all Intercompany Notes, if any, pledged pursuant to the Security and Pledge Agreement; (c) executed copies of Filing Statements naming each such Obligor as a debtor and the Administrative Agent as the secured party, or other similar instruments or documents to be filed under the Uniform Commercial Code of all jurisdictions as the Administrative Agent may reasonably require to perfect the security interests of the Administrative Agent pursuant to the Security and Pledge Agreement; (d) executed copies of proper UCC termination statements (Form UCC-3), if any, necessary to release all Liens and other rights of any Person (i) in any collateral described in the applicable Security and Pledge Agreement previously granted by any Person, and (ii) securing any of the Indebtedness identified in Item 7.2.2(b) of the Disclosure Schedule and required to be released pursuant to Section 5.1.10; and (e) certified copies of UCC Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements which name each such Obligor (under its present name and any previous names under which it has done business during the five-year period prior to the Closing Date) as the debtor and which are filed in the jurisdictions in which filings are to be made pursuant to clause (c) above, together with copies of such financing statements (none of which shall cover collateral described in any Loan Document except to the extent being released pursuant to clause (d) above or constituting Permitted Liens. -63- The Agents shall be reasonably satisfied that (i) the Lien granted to the Administrative Agent, for the benefit of the Secured Parties in the collateral described above is a first priority (or local equivalent thereof) security interest subject only to Permitted Liens; and (ii) no Lien exists on any of the collateral described above other than the Lien created in favor of the Administrative Agent, for the benefit of the Secured Parties, pursuant to a Loan Document and Permitted Liens. SECTION 5.1.20. Patent Security Agreement, Copyright Security Agreement and Trademark Security Agreement. The Agents shall have received the Patent Security Agreement, the Copyright Security Agreement and the Trademark Security Agreement, as applicable, each dated as of the Closing Date, duly executed and delivered by an Authorized Officer of each Obligor that has delivered a Security and Pledge Agreement. SECTION 5.1.21. Mortgages. The Agents shall have received each Mortgage for each owned property, dated as of the Closing Date, duly executed and delivered by the applicable Obligor, together with (a) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of each such Mortgage as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to create a valid, first priority perfected Lien (subject only to Liens permitted hereunder) against the properties purported to be covered thereby; (b) mortgagee's title insurance policies in favor of the Administrative Agent for the benefit of the Secured Parties in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Administrative Agent, with respect to the property purported to be covered by each Mortgage, insuring the Mortgagor's title to such property and that the interests created by each Mortgage constitute valid first Liens thereon free and clear of all material defects and encumbrances other than as permitted hereunder or as otherwise approved by the Administrative Agent, and such policies shall also include, if required by the Administrative Agent and if available, revolving credit endorsement, comprehensive endorsement, variable rate endorsement, access and utilities endorsements, mechanic's lien endorsement and such other endorsements as the Administrative Agent shall reasonably request and shall be accompanied by evidence of the payment in full of all premiums thereon; and (c) such other approvals, opinions or documents as the Administrative Agent may reasonably request with respect to such real property. SECTION 5.1.22. Perfection Certificate, Filing Agent, etc. The Agents shall have received Perfection Certificates, dated the Closing Date, duly executed and delivered by an Authorized Officer of each Obligor that is a party to a Collateral Document. All UCC financing statements (Form UCC-1) or other similar financing statements and UCC termination statements (Form UCC-3) (collectively, the "Filing Statements") required to be delivered on the Closing Date pursuant to the Loan Documents shall have been delivered to CT Corporation System or another similar filing service company acceptable to the Agents (the "Filing Agent"). The Filing Agent shall have acknowledged in a writing satisfactory to the Agents (i) the Filing Agent's receipt of all Filing Statements, (ii) that the Filing Statements have either been submitted for -64- filing in the appropriate filing offices or will be submitted for filing in the appropriate offices within ten days following the Closing Date and (iii) that the Filing Agent will notify the Agents of the results of such submissions within 30 days following the Closing Date. SECTION 5.1.23. Insurance. The Agents shall have received insurance certificates, from one or more insurance companies reasonably satisfactory to the Agents, evidencing coverage required to be maintained pursuant to the Loan Documents. SECTION 5.1.24. Approvals. All material governmental, shareholder and third party consents (including Hart-Scott-Rodino clearance) and approvals necessary in connection with the consummation of the Acquisition and all other parts of the Transaction, and the related financings and other transactions contemplated hereby and thereby, shall have been duly obtained and all applicable waiting periods shall have expired without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the Acquisition or any other part of the Transaction or the continued operations of Holdings, the Borrower or any of their respective Subsidiaries. SECTION 5.1.25. Opinions of Counsel. The Agents shall have received opinions, dated the Closing Date and addressed to the Agents and all Lenders, from: (a) White & Case LLP, counsel to the Obligors, in form and substance reasonably satisfactory to the Agents; (b) Jones, Day, Reavis & Pogue, counsel to AMI, in form and substance reasonably satisfactory to the Agents; (c) Vinson & Elkins L.L.P., Texas local counsel to the Obligors on Texas real estate matters, in form and substance reasonably satisfactory to the Agents; and (d) Vorys, Sater, Seymor and Pease, Ohio local counsel to the Obligors on Ohio real estate matters, in form and substance reasonably satisfactory to the Agents. SECTION 5.2. All Credit Extensions. The obligation of each Lender and each Issuer to make any Credit Extension (including the initial Credit Extension) shall be subject to, and the satisfaction of, each of the conditions precedent set forth below. SECTION 5.2.1. Compliance with Warranties, No Default, etc. At the time of each Credit Extension and after giving effect thereto (i) the representations and warranties set forth in each Loan Document shall, in each case, be true and correct in all material respects with the same effect as if then made (unless stated to relate to a specified earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and (ii) no Default shall have then occurred and be continuing. SECTION 5.2.2. Credit Extension Request, etc. Subject to Section 2.3.2, the Administrative Agent shall have received a Borrowing Request if Loans are being requested, or an Issuance Request if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the -65- date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1, are true and correct in all material respects. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Agents and the Lenders to enter into this Agreement and to make Credit Extensions hereunder, each of Holdings and the Borrower makes (as to itself and its Subsidiaries) the following representations, warranties and agreements as of the Closing Date (both before and after giving effect to the Credit Extensions occurring on such date and the Transaction and all references to the Agents and the Lenders herein and elsewhere in this Agreement, shall, unless otherwise specifically indicated, be references to the Agents and the Lenders after giving effect to the Transaction) and as of the date of each Credit Extension, which representations, warranties and agreements shall survive the execution and delivery of this Agreement and the Notes and the occurrence of each Credit Extension (with the occurrence of each Credit Extension being deemed to constitute a representation and warranty that the matters specified in this Article VI are true and correct in all material respects on and as of the date of such Credit Extension unless such representations and warranties are stated to relate to a specific earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date). SECTION 6.1. Organization, etc. Each of Holdings, the Borrower and each Subsidiary of the Borrower (i) is validly organized and existing and in good standing under the laws of the state or jurisdiction of its incorporation or organization, (ii) is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction where the nature of its business requires such qualification and where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect) and (iii) has full corporate, partnership or limited liability company power and authority, as the case may be, to own and hold under lease its property and to conduct its business substantially as currently conducted by it. SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each Obligor of each Loan Document executed or to be executed by it, each such Obligor's participation in the consummation of all aspects of the Transaction, and the execution, delivery and performance by such Obligor of the agreements executed and delivered by it in connection with the Transaction are in each case within each such Person's corporate, partnership or limited liability company powers, as the case may be, have been duly authorized by all necessary corporate, partnership or limited liability company action, as the case may be, and, except as disclosed in Item 6.2 of the Disclosure Schedule, do not (i) contravene any (A) Obligor's Organic Documents, (B) material contractual restriction binding on or affecting any Obligor, (C) court decree or order binding on or affecting any Obligor or (D) material law or governmental regulation binding on or affecting any Obligor, or (ii) result in, or require the creation or imposition of, any Lien on any Obligor's properties (except as permitted by this Agreement). -66- SECTION 6.3. Government Approval, Regulation, etc. No material authorization or approval or other action by, and no material notice to or filing with, any Governmental Authority or other Person (other than those (x) that have been, or on the Closing Date, will be, or, in the case of Filing Statements delivered on the Closing Date, will be within 10 days of the Closing Date, duly obtained or made and which are, or on the Closing Date will be, or, in the case of Filing Statements delivered on the Closing Date, will be within 10 days of the Closing Date, in full force and effect and (y) that are contemplated or required to be made after the Closing Date in accordance with the terms of the Loan Documents and the Material Transaction Documents) is required for (i) the due execution, delivery or performance by any Obligor of any Loan Document to which it is a party or (ii) the due execution, delivery and/or performance by any Obligor of the Material Transaction Documents to which each is a party, or (iii) the conduct of the business of the Borrower and its Subsidiaries as currently conducted following the Closing Date. Neither Holdings, the Borrower nor any of their respective Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.4. Validity, etc. Each Loan Document and the Material Transaction Documents to which each Obligor is a party constitute, or will, on the due execution and delivery thereof by such Obligor, constitute, the legal, valid and binding obligations of such Obligor, enforceable against it in accordance with their respective terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity). SECTION 6.5. Financial Information. Holdings and the Borrower each represent and warrant that all balance sheets, all statements of operations, shareholders' equity and cash flow and all other financial information relating to Holdings furnished pursuant to Section 7.1.1 have been and will for periods following the Closing Date be prepared in accordance with GAAP consistently applied, and present fairly in all material respects the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. SECTION 6.6. No Material Adverse Effect. There has been no event, occurrence, omission or change which has resulted in a Material Adverse Effect since December 31, 2001. SECTION 6.7. Litigation. There is no pending or, to the knowledge of the Borrower, threatened litigation, action or proceeding (i) affecting Holdings, the Borrower or any of their respective Subsidiaries or any of their respective properties, businesses, assets or revenues, which could reasonably be expected to have a Material Adverse Effect, or (ii) which purports to affect the legality, validity or enforceability of any Loan Document. SECTION 6.8. Labor Matters. There is no labor strike, work stoppage, lockout or other work action or other labor controversy, and no such dispute or controversy is actually pending or, to Holdings', the Borrower's or any of their respective Subsidiaries' knowledge, threatened against or affecting Holdings, the Borrower of any of their respective Subsidiaries that has had or could reasonably be expected to have a Material Adverse Effect. -67- SECTION 6.9. Subsidiaries. Holdings has no Subsidiaries except for (i) immediately prior to the Tender Offer Closing Date, Mergerco; and (ii) at all times thereafter, Mergerco, the Borrower and the Subsidiaries of the Borrower described in the succeeding sentence. The Borrower has no Subsidiaries, except those Subsidiaries (A) which are identified in Item 6.9 of the Disclosure Schedule, none of which are Foreign Subsidiaries, or (B) which are permitted to have been organized or acquired in accordance with the terms of this Agreement. Item 6.9 of the Disclosure Schedule, as of the Closing Date, (i) lists, with respect to each Subsidiary, (A) the state or jurisdiction of such Subsidiary's incorporation or organization and (B) the percentage of shares of the Capital Stock of such Subsidiary owned by Holdings, the Borrower or another Subsidiary, (ii) identifies each Subsidiary which is a Foreign Subsidiary and (iii) identifies each Subsidiary which is a Non-Material Subsidiary. SECTION 6.10. Ownership of Properties. Each of Holdings, the Borrower and each Subsidiary of the Borrower maintains (i) in the case of material owned real property, good and marketable fee title to, (ii) in the case of material owned personal property, good and valid title to, or (iii) in the case of material leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of such properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Liens permitted pursuant to Section 7.2.3. Item 6.10 of the Disclosure Schedule contains a complete and accurate description, by owner/lessor and location (by street address) of all owned and/or leased real properties as of the Closing Date (as supplemented from time to time with information provided by Holdings or the Borrower, as the case may be, in the Compliance Certificate delivered by Holdings or the Borrower, as the case may be, to the Agents pursuant to clause (c) of Section 7.1.1; provided that Item 6.10 shall not be required to be supplemented at any time other than such times as the Compliance Certificate is delivered or required to be delivered hereunder). SECTION 6.11. Taxes. The Borrower and each of their respective Subsidiaries has filed all material Tax returns and reports required by law to have been filed by it, has withheld all material Taxes that were required to be withheld in respect of compensation or other amounts paid to any employee or independent contractor (or, in the case of independent contractors, Holdings, the Borrower or the relevant Subsidiary has the right to indemnification with respect thereto) and has paid all material Taxes and governmental charges thereby shown or required to be due and owing, except any such Taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.12. Pension and Welfare Plans. During the twelve- consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, (i) no steps have been taken to terminate any Pension Plan, (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA and (iii) no steps have been taken to effect a partial or complete withdrawal from any Multiemployer Plan, in each case which could (individually or in the aggregate) reasonably be expected to result in liabilities of Holdings or any of its Subsidiaries in excess of $5,000,000 or a Material Adverse Effect. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by Holdings, the Borrower or any member of the Controlled Group of any -68- material liability, fine or penalty, that could (individually or in the aggregate) reasonably be expected to result in liabilities in excess of $5,000,000 or a Material Adverse Effect None of Holdings, the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA, which could reasonably be expected to result in a Material Adverse Effect. SECTION 6.13. Environmental Warranties. The Borrower represents and warrants that, except as disclosed in Item 6.13 of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by Holdings, the Borrower or any of their respective Subsidiaries and their operations are in compliance with all Environmental Laws, except for any such noncompliance that could not (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (b) there are no pending or, to the knowledge of Holdings, any threatened (i) claims, complaints, notices, requests for information, proceedings, or investigation against or involving Holdings, the Borrower or any of their respective Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to Holdings, the Borrower or any of their respective Subsidiaries regarding actual or potential liability under any Environmental Law, that, with respect to clauses (i) and (ii) of this paragraph, could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (c) there have been no Releases of Hazardous Materials at, on or under or from any property or facility now owned, leased or operated by Holdings, or to the knowledge of Holdings, the Borrower or any of their respective Subsidiaries previously owned, leased or operated by Holdings, the Borrower or any of their respective Subsidiaries, that could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (d) Holdings and its Subsidiaries have been issued all permits, certificates, approvals, licenses and other authorizations pursuant to Environmental Laws necessary for the operation of their business ("Environmental Permits") and are in compliance with all Environmental Permits (except to the extent the failure to have or be in compliance with any such Environmental Permit could not (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect); (e) no property or facility now or previously owned, leased or operated by Holdings or its Subsidiaries is listed, or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites with respect to any clean up responsibility or similar liability of Holdings or one of its Subsidiaries which would be reasonably likely to result in a Material Adverse Effect; (f) there are no underground storage tanks or related piping, active or abandoned, including petroleum storage tanks, on or under any property now owned or -69- leased by Holdings, the Borrower or any of their respective Subsidiaries or, to the knowledge of Holdings or the Borrower, at any property previously owned or leased by Holdings, or the Borrower or any of their respective Subsidiaries, that could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (g) none of Holdings, the Borrower nor any of their respective Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which, to the Borrower's knowledge, is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against Holdings, the Borrower or such Subsidiary for any investigatory or remedial work, damage to natural resources or personal injury or property damage, including claims under CERCLA, which could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by Holdings, the Borrower or any of their respective Subsidiaries that could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect; (i) none of Holdings, the Borrower nor any of their respective Subsidiaries has manufactured or sold any product containing asbestos, the result of which could (individually or in the aggregate) reasonably be expected to result in a Material Adverse Effect; and (j) no conditions exist at, on or under any property now or previously owned or leased by Holdings or the Borrower or any of their respective Subsidiaries, or to the knowledge of Holdings or the Borrower, at any property previously owned or leased by Holdings, the Borrower or any of their respective Subsidiaries, that could, with the passage of time, or the giving of notice or both, reasonably be expected (individually or in the aggregate) to have a Material Adverse Effect under any Environmental Law. SECTION 6.14. Accuracy of Information. None of the factual information (excluding projections) heretofore or contemporaneously furnished in writing to any Agent or any Lender by or on behalf of any Obligor in connection with any Loan Document or any transaction contemplated hereby (including the Transaction), taken as a whole, contains any untrue statements of material fact, or omits to state any material facts necessary in either case to make such information taken as a whole not materially misleading in light of the circumstances under which such information was provided and no other factual information hereafter furnished in connection with any Loan Document by or on behalf of any Obligor, any Agent or to any Lender will contain any untrue statements of material fact or will omit to state any material facts in either case necessary to make such information taken as a whole not materially misleading on the date as of which such information is dated or certified in light of the circumstances under which such information was provided. -70- SECTION 6.15. Regulations U and X. None of Holdings, the Borrower or any of their respective Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and, except to pay the Merger Consideration, or to refinance outstanding Bridge Loans no proceeds of any Credit Extensions will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.16. Issuance of Subordinated Debt, Status of Obligations as Senior Indebtedness, etc. Mergerco has the corporate power and authority to incur the Unsecured Transaction Debt and has duly authorized, executed and delivered the Other Debt Documents applicable to such Unsecured Transaction Debt. The subordination provisions contained in the Other Debt Documents applicable to the Unsecured Transaction Debt that is subordinated are enforceable against the holders of the applicable Unsecured Transaction Debt by the holder of any "Senior Indebtedness" or similar term referring to the Obligations (as defined in the applicable Other Debt Documents). All Obligations, including those to pay principal of and interest (including interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, reorganization or similar proceeding, whether or not allowed as a claim under such proceeding) on the Loans and Reimbursement Obligations, and fees and expenses in connection therewith, constitute "Senior Indebtedness" or similar term relating to the Obligations (as defined in the applicable Other Debt Documents) and all such Obligations are entitled to the benefits of the subordination created by such Other Debt Documents. The Borrower acknowledges that each Agent, each Lender and each Issuer is entering into this Agreement and is extending its Commitments in reliance upon the subordination provisions of the Other Debt Documents relating to the Unsecured Transaction Debt. SECTION 6.17. Solvency. After giving effect to each Credit Extension hereunder, Holdings, the Borrower and each Subsidiary Guarantor (taken together) are Solvent. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. Holdings and the Borrower agree with each Secured Party hereto that, until the Termination Date has occurred, Holdings and the Borrower will perform, or cause to be performed, the obligations set forth below. SECTION 7.1.1. Financial Information, Reports, Notices, etc. Holdings and the Borrower will furnish, or cause to be furnished, to the Administrative Agent and to the Syndication Agent copies of the following financial statements, reports, notices and information: (a) (i) as soon as available and in any event within 30 days after the end of each calendar month (other than the last month of a Fiscal Quarter), the unaudited consolidated balance sheets of Holdings as of the end of such calendar month and the related unaudited consolidated statements of income and cash flows of Holdings for such -71- calendar month and for the elapsed portion of the Fiscal Year ended with the end of such calendar month, and including (in each case), in comparative form the figures for the corresponding calendar month in, and year to date portion of, the immediately preceding Fiscal Year and comparable budgeted figures for such period, and (ii) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the unaudited consolidated balance sheet of Holdings as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of Holdings for such Fiscal Quarter and for the elapsed portion of the Fiscal Year ended with the end of such Fiscal Quarter, and including (in each case), in comparative form the figures for the corresponding Fiscal Quarter in, and year to date portion of, the immediately preceding Fiscal Year and comparable budgeted figures for such period, in each case certified by the chief financial or accounting Authorized Officer of Holdings that they present fairly in all material respects in accordance with GAAP the financial position of Holdings as of the date indicated and the results of its operations and changes in its cash flows for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes; (b) as soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the consolidated balance sheet of Holdings and the related consolidated statements of income and cash flows of Holdings for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year and comparable budgeted figures for such period in each case audited (without any Impermissible Qualification) by a nationally recognized accounting firm or other independent public accountants reasonably acceptable to the Agents, which shall include a separate report from such independent public accountants that in connection with their audit, nothing came to the attention of such accountants that Holdings and its Subsidiaries were not in compliance with the terms, covenants, provision and conditions of Section 7.2.4 insofar as they relate to accounting matters (including the application of accounting terms in connection with the covenants set forth in Section 7.2.4); (c) concurrently with the delivery of the financial information pursuant to clauses (a)(ii) and (b) of this Section 7.1.1, a Compliance Certificate, executed by the chief financial or accounting Authorized Officer of Holdings, showing compliance with the financial covenants set forth in Section 7.2.4 and stating that no Default has occurred and is continuing (or, if a Default has occurred, specifying the details of such Default and the action that the applicable Obligor has taken or proposes to take with respect thereto); (d) as soon as available and in any event within 60 days after the end of each Fiscal Year, capital and operating budgets for Holdings, in form and scope customarily prepared by management for its internal use and consistent with past practice prepared by Holdings (and approved by the Board of Directors of Holdings) for each calendar month of the succeeding Fiscal Year prepared in reasonable detail with discussion of the principal assumptions upon which such budgets are based; (e) as soon as possible and in any event within three Business Days after any officer of any Obligor obtains knowledge of the occurrence of a Default, a statement of -72- an Authorized Officer of Holdings or the Borrower setting forth details of such Default and the action which such Obligor has taken and proposes to take with respect thereto; (f) as soon as possible and in any event within three Business Days after any officer of any Obligor obtains knowledge of the commencement of any litigation, action, proceeding or labor controversy or of an adverse development in any existing litigation, action, proceeding or labor controversy which could reasonably be expected to have a Material Adverse Effect, notice thereof and, to the extent either the Administrative Agent or the Syndication Agent requests, copies of all material and non-privileged documentation relating thereto; (g) promptly after the sending or filing thereof, copies of all reports, notices, prospectuses and registration statements which any Obligor files with the SEC or any national securities exchange; (h) as soon as possible and in any event within three Business Days of any officer of any Obligor becoming aware of any of the following which, individually or in the aggregate, could reasonably be expected to result in liabilities to Holdings or any of its Subsidiaries in excess of $5,000,000 or a Material Adverse Effect: (i) the institution of any steps by any Person to terminate any Pension Plan, (ii) the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, (iii) the taking of any action with respect to a Pension Plan which could result in the requirement that any Obligor furnish a bond or other security to the PBGC or such Pension Plan, (iv) the complete or partial withdrawal of any of Holdings, the Borrower or any member of the Controlled Group from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization, or (v) the occurrence of any event with respect to any Pension Plan which could result in the incurrence by any Obligor of any liability, fine or penalty, notice thereof and copies of all documentation relating thereto; (i) promptly upon receipt thereof, copies of all final "management letters" submitted to any Obligor by the independent public accountants referred to in clause (b) in connection with each audit made by such accountants; (j) promptly following the mailing or receipt of any notice or report delivered under the terms of any Subordinated Debt with respect to a breach or default thereunder, copies of such notice or report; and (k) such other financial and other information as the Required Lenders, the Administrative Agent or the Syndication Agent may from time to time reasonably request, and, in the event a Default has occurred and is continuing or in the event a Lender or Issuer has not had an opportunity to request such other financial or other information pursuant to a bank meeting or visit referred to in Section 7.1.5 or otherwise in any 90-day period, such other financial and other information as such Lender or Issuer may reasonably request. -73- SECTION 7.1.2. Maintenance of Existence; Compliance with Laws, etc. Each of Holdings and the Borrower will (a) preserve and maintain (i) its legal existence and (ii) its qualification as a foreign corporation in each jurisdiction where the nature of its business or the location of its assets requires it to be so qualified, except to the extent the failure to be so qualified would not result in a Material Adverse Effect; (b) cause each of its Subsidiaries to, except as otherwise permitted by Section 7.2.10, preserve and maintain its legal existence and qualification as a foreign entity in each jurisdiction where the nature of the business or the location of its assets requires it to be so qualified, except to the extent the failure to be so qualified would not result in a Material Adverse Effect; and (c) comply with all applicable laws, rules, regulations and orders, including the payment (before the same become delinquent) of all taxes, assessments and governmental charges imposed upon Holdings, the Borrower or any of their respective Subsidiaries or upon their property except (i) to the extent being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on the books of Holdings, the Borrower or any such Subsidiary, as applicable, or (ii) to the extent such non-compliance or non-payment could not reasonably be expected to have a Material Adverse Effect. SECTION 7.1.3. Maintenance of Properties. Each of Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, maintain, preserve, protect and keep its and their respective material properties in good repair, working order and condition (ordinary wear and tear and damage or taking by a Casualty Event excepted), and make necessary repairs, renewals and replacements to the extent necessary to operate the business carried on by Holdings and its Subsidiaries as it is currently conducted, unless Holdings, the Borrower or any such Subsidiary determines in good faith that the continued maintenance of such property is no longer economically desirable. SECTION 7.1.4. Insurance. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, maintain insurance with financially sound and reputable insurance companies, and with respect to property and risks of a character usually maintained by Persons of comparable size engaged in the same or similar business and similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such Persons. Holdings, the Borrower, and their respective Subsidiaries shall furnish to each Lender, upon written request, full information as to the insurance carried. The provisions of this Section 7.1.4 shall be deemed to be supplemental to, but not duplicative of, the provisions of any other Loan Document that requires the maintenance of insurance. All such insurance shall be written by financially responsible companies selected by Holdings and the Borrower and (except for automobile insurance) having an A.M. Best rating of "A" (or any equivalent successor rating) or better and being in a financial size category of VII or larger (or an equivalent rating of any successor publication of a similar nature), or by other companies acceptable to the Administrative Agent. Holdings shall cause each of the other -74- Obligors to, and the Borrower shall, keep its property insured in favor of the Administrative Agent, and all policies (including mortgage title insurance policies) or certificates (or certified copies thereof) with respect to casualty, commercial, general liability, automobile and property insurance) (i) shall be endorsed to the Administrative Agent's satisfaction for the benefit of the Administrative Agent and (ii) shall name the Administrative Agent as loss payee (to the extent covering risk of loss or damage to tangible property) and as an additional named insured as its interests may appear (to the extent covering any other risk). Each policy referred to in this Section 7.1.4 shall provide that (i) the respective insurers irrevocably waive any and all rights of subrogation with respect to the Administrative Agent, (ii) it will not be canceled or reduced, or allowed to lapse without renewal, except after not less than 30 days' written notice (or, in the case of non-payment of premiums, 10 days' notice) to the Administrative Agent and (iii) the interests of the Administrative Agent and the Lenders shall not be invalidated by (A) any act or negligence of Holdings or the Borrower, any of their respective Subsidiaries or any Person having an interest in any property covered by a Mortgage or (B) occupancy or use of any such property for purposes more hazardous than permitted by such policy. Each of Holdings and the Borrower will advise the Administrative Agent promptly of any significant policy cancellation (other than any such cancellation in connection with the replacement thereof), reduction or amendment. The Administrative Agent agrees to turn over to the Borrower or relevant Subsidiary any insurance proceeds received by it as loss payee following receipt by the Administrative Agent of written notice from the Borrower or its relevant Subsidiary of its intended use of such proceeds, to the extent such proceeds are not required to be (i) applied at such time to repay Loans or Cash Collateralize Letter of Credit Outstandings or held in an account by the Administrative Agent pursuant to Section 3.1.1 or (ii) held by the Agents pursuant to the terms of any Mortgage or Security and Pledge Agreement. On or before the Closing Date, Holdings and the Borrower will deliver to the Administrative Agent certificates of insurance reasonably satisfactory to the Administrative Agent evidencing the existence of all insurance required to be maintained by Holdings and the Borrower hereunder setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. Neither Holdings nor the Borrower will, nor will either of them permit any of their respective Subsidiaries to, obtain or carry separate insurance concurrent in form or contributing in the event of loss with that required by this Section 7.1.4 unless the Administrative Agent is the named insured thereunder, for the benefit of the Secured Parties, with loss payable as provided herein. Each of Holdings and the Borrower will promptly (but in any event within five Business Days) notify the Administrative Agent whenever any such separate insurance is obtained and shall deliver to the Administrative Agent the certificates evidencing the same. Without limiting the obligations of Holdings and its Subsidiaries under the foregoing provisions of this Section 7.1.4, in the event Holdings, the Borrower or any of their respective Subsidiaries, as the case may be, shall fail to maintain in full force and effect insurance as required by the foregoing provisions of this Section 7.1.4, or if Holdings, the Borrower or any of their respective Subsidiaries, as the case may be, shall fail to endorse and deposit all policies or certificates with respect thereto, then the Administrative Agent may (upon notice to Holdings, the Borrower or the respective Subsidiary, as the case may be), but shall have no obligation so to do, procure insurance covering the interests of the Lenders and the Administrative Agent in such amounts and against such risks as the Administrative Agent (or the Required Lenders) shall -75- deem reasonably appropriate, and Holdings, the Borrower or the respective Subsidiary, as the case may be, shall reimburse the Administrative Agent in respect of any premiums, costs and expenses paid by the Administrative Agent in procuring such insurance to the extent such premiums, costs and expenses do not exceed the premiums, costs and expenses necessary to obtain the insurance required above pursuant to this Section 7.1.4. SECTION 7.1.5. Bank Meeting; Books and Records. (a) The Required Lenders, the Administrative Agent or the Syndication Agent may request, at their election upon reasonable notice to Holdings and the Borrower, a bank meeting to be held by Holdings and the Borrower at a location reasonably determined by the Required Lenders, Administrative Agent or Syndication Agent, as the case may be; provided that Holdings and the Borrower shall not be required to hold more than one bank meeting in any Fiscal Year; provided further, that, if a Default has occurred and is continuing and a bank meeting pursuant to this clause (a) has theretofore been held in the Fiscal Year in which such Default has occurred, the Required Lenders, the Administrative Agent or the Syndication Agent may request, at their election at reasonable times and intervals upon reasonable notice to Holdings and the Borrower, a bank meeting by conference telephone. (b) Each of Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, keep books and records in accordance with GAAP which accurately reflect in all material respects its business affairs and transactions and permit the Administrative Agent, the Syndication Agent, or any Lender or Issuer whose visit is coordinated with either the Administrative Agent or the Syndication Agent, or any of their respective designated representatives, at reasonable times and intervals upon reasonable notice to the chief financial officer or an Authorized Officer of Holdings or the Borrower, as the case may be, to visit each of such Person's offices, to discuss such Person's financial matters with its officers and employees, and its independent public accountants (and each of Holdings and the Borrower hereby authorizes such independent public accountant to so discuss each of such Person's financial matters whether or not any representative of such Person is present) and to examine (and photocopy extracts from) any of such Person's books and records; provided that so long as no Default has occurred and is continuing, no Lender or Issuer shall request more than two visits pursuant to this clause (b) per Fiscal Year; provided, further, that if the bank meeting pursuant to clause (a) of this Section 7.1.5 is held in any Fiscal Year, such bank meeting shall constitute one visit by such Lenders or Issuer in such Fiscal Year (whether or not such Lender or Issuer is present at such bank meeting). Holdings or the Borrower, as the case may be, shall pay any fees of its independent public accountant incurred in connection with any consultation pursuant to this Section 7.1.5. SECTION 7.1.6. Environmental Law Covenant. Each of Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, (a) (i) use and operate all of its and their facilities and properties in material compliance with all Environmental Laws, (ii) keep all materials, permits, approvals, certificates, licenses and other authorizations required under applicable Environmental Laws in effect and remain in compliance therewith, and (iii) handle, treat, store, dispose of and transfer all Hazardous Materials in compliance with all applicable Environmental -76- Laws, except to the extent that the failure of any of the foregoing could not reasonably be expected to have a Material Adverse Effect; and (b) promptly notify the Agents and provide copies upon receipt of all written claims, complaints, notices or inquiries relating (i) to the condition of its facilities and properties in respect of, or (ii) to compliance with or under, Environmental Laws, which claims, complaints, notices or inquiries could (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect, and shall promptly resolve any material non-compliance with or under, Environmental Laws and keep its property and facilities free of any Lien imposed under any Environmental Law (other than to the extent constituting a Permitted Lien which is being diligently contested in good faith by appropriate proceedings). SECTION 7.1.7. Use of Proceeds. The Borrower shall use the Credit Extensions solely for the following purposes: (a) In the case of the Term Loans, to finance the Refinancing (and/or, at the request of the Borrower, the defeasance of the Existing Notes), pay fees and expenses attributable to this Agreement and the Refinancing (including prepayment premiums) and, if applicable, such defeasance and, to the extent that the Merger Closing Date occurs on the Closing Date, to pay the Merger Consideration. Unless the Merger Closing Date occurs on the Tender Offer Closing Date, all proceeds of the Term Loans that remain after completing the Tender Offer and the Refinancing and the payment of all fees as described above shall be placed in the Term Loan Escrow with the Administrative Agent pursuant to an escrow agreement substantially in the form of Exhibit L (the "Term Loan Escrow Agreement"), such escrowed funds to be released on the terms and conditions set forth in the Escrow Agreement for use as part of the Merger Consideration or to repay, in part, outstanding Bridge Loans. (b) In the case of Revolving Loans and Swing Line Loans, for working capital and general corporate purposes of Holdings and its Subsidiaries. (c) In the case of Letters of Credit, for purposes of supporting working capital and general corporate purposes of the Borrower and its Subsidiaries. SECTION 7.1.8. Mortgages. At the request of the Agents or the Required Lenders (in their sole discretion), at any time after the Closing Date, Holdings, the Borrower and/or each Subsidiary Guarantor shall cause the Administrative Agent and the Secured Parties to have, at all times, a first priority perfected security interest (subject only to Liens permitted hereunder) in all of the fee owned and leased real property of Holdings, the Borrower or the Subsidiary Guarantors, so long as the book value or fair market value of each such property made subject to a Mortgage hereunder exceeds $2,000,000, by executing and delivering Mortgages that may be necessary in the reasonable opinion of the Administrative Agent to create a valid, first priority perfected Lien (subject only to Liens permitted hereunder) against such real property. Should the Agents or Required Lenders elect to exercise the option described in the immediately preceding paragraph, in connection with the execution and delivery of such -77- Mortgages, Holdings and the Borrower shall, and shall cause each such Subsidiary Guarantor to as promptly as practicable: (a) provide evidence of the completion or satisfactory arrangements, for the completion of all recordings and filings of each such Mortgage as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to create a valid, first priority perfected Lien (subject only to Liens permitted hereunder) against the properties purported to be covered thereby; (b) obtain mortgagee's title insurance policies in favor of the Administrative Agent for the benefit of the Secured Parties in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Administrative Agent, with respect to the property purported to be covered by each Mortgage, insuring the mortgagor's title to such property and that the interests created by each Mortgage constitute valid first Liens thereon free and clear of all material defects and encumbrances other than as permitted hereunder or as otherwise approved by the Administrative Agent, and, if requested by the Administrative Agent, such policies shall also include a survey reading, and, if required by the Administrative Agent and if available, revolving credit endorsement, comprehensive endorsement, variable rate endorsement, access and utilities endorsements, mechanic's lien endorsement and such other endorsements as the Administrative Agent shall reasonably request and shall be accompanied by evidence of the payment in full of all premiums thereon; and (c) provide such other approvals, opinions, or documents as the Administrative Agent may reasonably request with respect to such real property, including, consents and estoppel agreements from landlords, and a reasonably current survey of each property purported to be covered by a Mortgage in form and substance reasonably satisfactory to the Administrative Agent and the title insurer; provided that Holdings and its Subsidiaries shall not be required to use more than commercially reasonable efforts (and shall not be required to make any payments) to obtain any such documentation, or to obtain consents for leasehold mortgages, in each case from third parties; provided that without limiting the foregoing, leasehold mortgages only shall be required with respect to real property containing a material manufacturing facility with a lease term (including extension options) of at least 5 years. SECTION 7.1.9. Future Subsidiaries. Without limiting the effect of any provision contained herein, within five Business Days after any Person becomes either a direct or indirect wholly-owned Subsidiary of the Borrower, (a) such Person (other than a Foreign Subsidiary), if not theretofore a party to the Subsidiary Security and Pledge Agreement and the Subsidiary Guaranty, shall execute and deliver to the Administrative Agent a supplement to each of the Subsidiary Security and Pledge Agreement and the Subsidiary Guaranty for the benefit of the Secured Parties; -78- (b) the Borrower or, if not the Borrower, the wholly-owned Subsidiary of the Borrower that will own shares of the Capital Stock of such Person (which Subsidiary, if not theretofore a party to the Subsidiary Security and Pledge Agreement, shall, unless such Subsidiary is a Foreign Subsidiary, execute and deliver to the Administrative Agent a supplement to the Subsidiary Security and Pledge Agreement for the purpose of becoming a pledgor thereunder) shall, pursuant to the applicable Security and Pledge Agreement, deliver to the Administrative Agent (i) certificates evidencing all of the issued and outstanding Capital Stock pledged pursuant to the applicable Security and Pledge Agreement, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any such shares of Capital Stock pledged pursuant to such Security and Pledge Agreement are uncertificated securities, the Administrative Agent shall have obtained "control" (as defined in the UCC) over such shares of Capital Stock and such other instruments and documents as may be necessary under applicable law, in the reasonable opinion of the Administrative Agent, to perfect the first priority security interest of the Administrative Agent in such shares of Capital Stock; provided that no more than 65% of the shares of Capital Stock held by the Borrower or a Subsidiary of the Borrower of a Foreign Subsidiary will be required to be pledged to the Administrative Agent hereunder; provided, further, that, in the event of any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive or guideline of any Governmental Authority that eliminates the increase in income tax attributable to Holdings and its Subsidiaries as a result of the pledge of more than 65% of such shares of Capital Stock of any such Foreign Subsidiary (including with respect to the operation of Section 956 (or any successor provision thereto) of the Code), the Administrative Agent or the Required Lenders may require the pledge of more than 65% of such shares of Capital Stock; (ii) all Intercompany Notes, if any, pledged pursuant to the applicable Security and Pledge Agreement; (iii) executed copies of Filing Statements naming such Obligor as a debtor and the Administrative Agent as the secured party, or other similar instruments or documents to be filed under the Uniform Commercial Code of all jurisdictions as may be necessary, in the reasonable opinion of the Administrative Agent, to perfect the security interests of the Administrative Agent pursuant to the applicable Security and Pledge Agreement; (iv) executed copies of proper UCC termination statements (Form UCC-3), if any, necessary to release all Liens and other rights of any Person in any collateral described in the applicable Security and Pledge -79- Agreement previously granted by any Person, except to the extent such Liens are otherwise permitted hereunder; (v) to the extent requested by the Administrative Agent, certified copies of UCC Requests for Information or Copies (Form UCC-11) or a similar search report listing all effective financing statements which name such Person (under its present name and any previous names under which it has conducted business during the five-year period prior to the Closing Date) as the debtor and which are filed in the jurisdictions in which filings are to be made pursuant to clause (iii) above, together with copies of such financing statements (none of which shall cover any collateral described in any Loan Document, except to the extent such Liens are otherwise permitted hereunder or are being released pursuant to clause (iv) above), together, in each case, with such opinions of legal counsel as the Agents may reasonably request, which legal opinions shall be in form and substance reasonably satisfactory to such Agents; and (c) the Borrower shall have delivered to the Administrative Agent an updated Item 6.9 of the Disclosure Schedule, which shall be true, accurate and correct in all material respects as of the date of delivery thereof. The Agents shall be satisfied that the Lien granted to the Administrative Agent, for the benefit of the Secured Parties in the collateral described above is a first priority (or local equivalent thereof) security interest, subject only to Liens permitted hereunder and no Lien exists on any of the collateral described above other than the Lien created in favor of the Administrative Agent, for the benefit of the Secured Parties, pursuant to a Loan Document, and the other Liens permitted hereunder. SECTION 7.1.10. Additional Collateral. Without limiting the provisions of Sections 7.1.8 and 7.1.9, Holdings and the Borrower shall, and shall cause each of their respective wholly-owned Domestic Subsidiaries to, cause the Lenders to have at all times a first priority perfected security interest (subject only to Permitted Liens) in all of the personal property owned from time to time by each such Person to the extent the same constitutes or would constitute collateral under the applicable Security and Pledge Agreement. SECTION 7.1.11. Consummation of Merger. Holdings shall use reasonable best efforts to cause the Merger to be consummated as soon as possible after the Tender Offer Closing Date and, in any event, within five Business Days after the Tender Offer Closing Date if at least 90% of the Shares are tendered pursuant to the Tender Offer. SECTION 7.1.12. Maintenance of Corporate Separateness. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, satisfy customary corporate formalities. SECTION 7.1.13. Holdings Stockholders Agreement. To the extent that Holdings receives any cash contributions from its stockholders under the Holdings Stockholders -80- Agreement, Holdings shall use its best efforts to make a capital contribution to the Borrower of the proceeds of such payments received by Holdings. SECTION 7.2. Negative Covenants. Each of Holdings and the Borrower covenants and agrees with each Lender hereto that, until the Termination Date has occurred, Holdings and the Borrower will perform, or cause to be performed, the obligations set forth below. SECTION 7.2.1. Business Activities. Neither Holdings nor the Borrower will, nor will either of them permit any of their respective Subsidiaries to, engage in any business except those businesses in which Holdings and its Subsidiaries are engaged on the Closing Date, businesses which are reasonable extensions thereof and businesses reasonably incidental or complimentary thereto or expansions thereof. SECTION 7.2.2. Indebtedness. Neither Holdings nor the Borrower will, nor will either of them permit any of their respective Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, other than: (a) Indebtedness in respect of the Obligations; (b) until the Closing Date, Indebtedness that is to be repaid in full as (and to the extent) further identified in Item 7.2.2(b) of the Disclosure Schedule; (c) Indebtedness existing as of the Closing Date which is identified in Item 7.2.2(c) of the Disclosure Schedule, and refinancing of such Indebtedness by the Borrower or, if other than the Borrower, the original obligor thereof; (d) Indebtedness of Mergerco (at all times prior to the Merger) or the Borrower (after giving effect to the Merger) constituting Unsecured Transaction Debt in an aggregate principal amount not to exceed $215,000,000 (plus any interest thereon that is paid-in-kind), at any time prior to the Merger, or $165,000,000 (plus any interest thereon that is paid-in-kind), at any time on or after the effectiveness of the Merger, and unsecured Contingent Liabilities of Holdings and the Subsidiary Guarantors under the Other Debt Documents governing such Unsecured Transaction Debt; (e) Indebtedness (which, except to the extent permitted pursuant to clause (r) of Section 7.2.3, shall be unsecured) of the Borrower or any of its Subsidiaries in respect of performance, surety or appeal bonds or completion guarantees provided in the ordinary course of business, but excluding (in each case), Indebtedness incurred through the borrowing of money or Contingent Liabilities in respect thereof; (f) Indebtedness of the Borrower and its Subsidiaries (i) in respect of industrial revenue bonds or other similar governmental or municipal bonds, (ii) evidencing the deferred purchase price of newly acquired property or incurred to finance the acquisition of property of the Borrower and its Subsidiaries (pursuant to purchase money mortgages or otherwise, whether owed to the seller or a third party) used in the ordinary course of business of the Borrower and its Subsidiaries (provided that such Indebtedness is incurred within 90 days of the acquisition of such property) and -81- (iii) Capitalized Lease Liabilities; provided that the aggregate amount of all Indebtedness outstanding pursuant to this clause shall not at any time exceed $5,000,000; (g) Indebtedness of any Subsidiary Guarantor owing to the Borrower or any other Subsidiary Guarantor, which Indebtedness, if evidenced by one or more Intercompany Notes and payable to the Borrower or a Subsidiary Guarantor that is a Domestic Subsidiary, shall be duly executed and delivered in pledge to the Administrative Agent pursuant to a Security and Pledge Agreement; (h) Indebtedness of Foreign Subsidiaries owing to the Borrower or a Subsidiary Guarantor which, when aggregated with the amount of Investments made by the Borrower and the Subsidiary Guarantors in Foreign Subsidiaries under clause (f) of Section 7.2.5, does not exceed $3,500,000 at any time outstanding (determined without giving effect to any write-downs or write-offs thereof), and if evidenced by one or more Intercompany Notes, shall be duly executed and delivered in pledge to the Administrative Agent pursuant to a Security and Pledge Agreement; (i) Indebtedness of Foreign Subsidiaries that are wholly-owned Subsidiaries owing to other Foreign Subsidiaries; (j) Indebtedness of Foreign Subsidiaries incurred for working capital purposes in an aggregate principal amount at any time outstanding not to exceed $3,000,000; provided that such Indebtedness is not guaranteed by, or in any way secured by the assets of Holdings or any of its Domestic Subsidiaries; (k) unsecured Indebtedness of the Borrower owing to (i) a Subsidiary Guarantor or (ii) a Subsidiary that has previously executed and delivered to the Agents the Interco Subordination Agreement (or a supplement thereto); (l) unsecured Indebtedness of Holdings or the Borrower in respect of Permitted Seller Notes, so long as the aggregate principal amount of Permitted Seller Notes issued, when aggregated with the aggregate principal amount of Indebtedness assumed or acquired pursuant to clause (m) of this Section 7.2.2, does not exceed $10,000,000 (as such amount may be increased through interest that is capitalized or paid-in-kind); (m) Indebtedness of a Person existing at the time such Person became a Subsidiary of the Borrower (such Person, an "Acquired Person"), together with all Indebtedness assumed by the Borrower, Holdings or any of their respective Subsidiaries in connection with any Permitted Acquisition, including any Permitted Acquisition of assets (all such Indebtedness being referred to in this clause (m) as "Assumed Indebtedness"), which does not exceed $10,000,000 in the aggregate for all Permitted Acquisitions made since the Closing Date, but only to the extent that such Indebtedness was not created or incurred in contemplation of such Person becoming a Subsidiary or such Permitted Acquisition; (n) Indebtedness of the Borrower and its Subsidiaries in respect of Hedging Obligations incurred with respect to Indebtedness of the Borrower and its Subsidiaries -82- otherwise permitted to be incurred hereunder to the extent (i) the notional principal amount with respect to the relevant Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates and (ii) such Hedging Obligations are not for speculative purposes; (o) Indebtedness of Holdings incurred in connection with repurchases of its Capital Stock from employees, officers, directors or consultants of Holdings or its Subsidiaries upon their ceasing to be employees, officers, directors or consultants of Holdings or any such Subsidiary, as the case may be, or upon such Person's death or disability; provided that (i) the aggregate principal amount of such repurchases funded with Indebtedness does not exceed $7,500,000 in the aggregate outstanding at any time and (ii) such Indebtedness is subordinated to the Obligations on terms no less favorable to the Secured Parties than those set forth on Exhibit J hereto; (p) Indebtedness of Holdings in respect of intercompany notes permitted by clause (o) of Section 7.2.5; (q) guaranties by Holdings, the Borrower and the Subsidiary Guarantors of Indebtedness and lease obligations of Holdings and its Domestic Subsidiaries to the extent that such Indebtedness or lease obligations created in respect of any such guaranty would otherwise be permitted to be incurred as a direct obligation by Holdings, the Borrower or such Subsidiary Guaranty, as the case may be, under this Section 7.2.2 or otherwise under this Agreement; (r) Indebtedness of the Borrower or any of its Subsidiaries arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business so long as such Indebtedness is extinguished within three Business Days of the incurrence thereof; (s) Indebtedness of the Borrower or any of its Subsidiaries arising from agreements of the Borrower or any of its Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations in respect of any Permitted Acquisition or the disposition of any business, assets or a Subsidiary of the Borrower that is permitted under this Agreement; provided that the maximum liability in respect of such Indebtedness shall at no time exceed the purchase price for such Permitted Acquisition or the gross cash proceeds actually received by the Borrower and its Subsidiaries in connection with such disposition, as the case may be; (t) Indebtedness under the New Notes; provided that, in the event any Bridge Loans are outstanding at the time such New Notes are issued and the proceeds therefrom are made available to the Borrower, concurrently with the issuance of the New Notes and the proceeds therefrom being made available to the Borrower, all Indebtedness in respect of such Bridge Loans or otherwise under the Bridge Loan Agreement shall be repaid or prepaid (after deducting customary underwriter, initial purchaser or placement agent discounts and commissions relating to such issuance) on a dollar-for-dollar basis with the proceeds of such issuance; -83- (u) Qualifying Subordinated Debt; and (v) other (i) unsecured Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness of Foreign Subsidiaries owing to the Borrower or any Subsidiary Guarantor) and (ii) secured Indebtedness of Foreign Subsidiaries in an aggregate principal amount at any time outstanding not to exceed $5,000,000; provided that no Indebtedness otherwise permitted by clauses (f), (h) (m), (u) or (v) shall be assumed or otherwise incurred if a Default has occurred and is then continuing or would result therefrom. SECTION 7.2.3. Liens. Neither Holdings nor the Borrower will, nor will either of them permit any of their respective Subsidiaries to, create, incur, assume or permit to exist any Lien upon any of its property (including Capital Stock of any Person), revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations; (b) until the Closing Date, Liens securing payment of Indebtedness of the type described in clause (b) of Section 7.2.2; (c) Liens existing as of the Closing Date and disclosed and described in Item 7.2.3(c) of the Disclosure Schedule securing Indebtedness described in clause (c) of Section 7.2.2, and refinancings of such Indebtedness; provided that no such Lien shall encumber any additional property and the amount of Indebtedness secured by such Lien is not increased from that existing on the Closing Date (as such Indebtedness may have been permanently reduced subsequent to the Closing Date); (d) Liens securing Indebtedness of the type permitted under clause (f) of Section 7.2.2; provided that (i) such Lien is granted within 90 days after such Indebtedness is incurred or any refinancing thereof permitted under such clause and (ii) such Lien secures only the assets that are the subject of the Indebtedness referred to in such clause; (e) Liens securing Indebtedness permitted by clause (m) of Section 7.2.2; provided that such Liens existed prior to such Person becoming a Subsidiary or such Permitted Acquisition occurring, were not created in anticipation thereof and do not attach to any other asset of the Borrower or any of its Subsidiaries theretofore or thereafter existing; (f) Liens in favor of carriers, warehousemen, mechanics, materialmen and landlords granted in the ordinary course of business for amounts which are not overdue or are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (g) Liens incurred or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance or other forms of governmental insurance or benefits (other than Liens in favor of the PBGC), or to secure -84- performance of tenders, statutory obligations, bids, leases or other similar obligations (other than for borrowed money) entered into in the ordinary course of business; (h) Liens arising from judgments, decrees or attachments under circumstances which do not otherwise result in an Event of Default under Section 8.1.6; (i) easements, land use covenants, rights-of-way, zoning restrictions, minor defects or irregularities in title and other similar encumbrances not interfering in any material respect with the marketability or use of the property to which such Lien is attached; (j) Liens for Taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (k) Liens securing Indebtedness of the type permitted by clauses (h), (i), (j) and (v) of Section 7.2.2 and covering only assets of the Foreign Subsidiary obligated under such Indebtedness; (l) Liens arising from precautionary UCC-1 financing statement filings regarding operating leases entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business; (m) licenses, leases or subleases which (i) have been granted in the ordinary course of business and do not interfere in any material respect with the business of the Borrower or any of its Subsidiaries and (ii) in the event granted to an Affiliate of Holdings or any of its Subsidiaries, comply with Section 7.2.13; (n) restrictions imposed in the ordinary course of business on the sale or distribution of designated inventory that arise from the sale of such inventory to one or more customers; (o) Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (p) Liens securing the Margin Stock; (q) Liens in connection with the Term Loan Escrow Agreement, the New Notes Escrow Agreement (as defined in the indenture governing the New Notes) and the Bridge Escrow Agreement (as defined in the Bridge Loan Agreement); and (r) other Liens on property of the Borrower or any of its Subsidiaries; provided that the fair market value of the property encumbered by Liens described in this clause (r), and the Indebtedness and other obligations secured thereby, does not exceed $2,500,000. -85- SECTION 7.2.4. Financial Condition and Operations. Holdings and the Borrower will not permit any of the events set forth below to occur. (a) Holdings and the Borrower will not permit the Leverage Ratio as of the last day of each Fiscal Quarter below to be greater than the ratio set forth opposite such Fiscal Quarter below:
Leverage Fiscal Quarter Ratio -------------- ----- The third Fiscal Quarter of the 2002 Fiscal Year 5.00:1 The fourth Fiscal Quarter of the 2002 Fiscal Year 4.75:1 and the first and second Fiscal Quarters of the 2003 Fiscal Year The third Fiscal Quarter of the 2003 Fiscal Year 4.50:1 The fourth Fiscal Quarter of the 2003 Fiscal Year 4.25:1 and the first Fiscal Quarter of the 2004 Fiscal Year The second and third Fiscal Quarters of the 4.00:1 2004 Fiscal Year The fourth Fiscal Quarter of the 2004 Fiscal Year 3.75:1 and the first Fiscal Quarter of the 2005 Fiscal Year The second Fiscal Quarter of the 2005 Fiscal Year 3.50:1 and each Fiscal Quarter thereafter
(b) Holdings and the Borrower will not permit the Interest Coverage Ratio as of the last day of each Fiscal Quarter below to be less than the ratio set forth opposite such Fiscal Quarter below:
Interest Fiscal Quarter Coverage Ratio -------------- -------------- The third and fourth Fiscal Quarters of the 2002 Fiscal 2.20:1 Year The first, second, third and fourth Fiscal Quarters 2.30:1 of the
-86-
Interest Fiscal Quarter Coverage Ratio -------------- -------------- 2003 Fiscal Year The first, second, third and fourth Fiscal Quarters 2.50:1 of the 2004 Fiscal Year The first Fiscal Quarter of the 2005 Fiscal Year and each Fiscal Quarter 2.75:1 thereafter
(c) Holdings and the Borrower will not permit the Fixed Charge Coverage Ratio as of the last day of each Fiscal Quarter below be less than the ratio set forth opposite such Fiscal Quarter set forth below:
Fixed Charge Fiscal Quarter Coverage Ratio -------------- -------------- The third and fourth Fiscal Quarters of the 2002 Fiscal 1.00:1 Year The first, second, third and fourth Fiscal Quarters 1.20:1 of the 2003 Fiscal Year The first, second, third and fourth Fiscal Quarters 1.25:1 of the 2004 Fiscal Year The first Fiscal Quarter of the 2005 Fiscal Year and 1.30:1 each Fiscal Quarter thereafter
SECTION 7.2.5. Investments. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, purchase, make, incur, assume or permit to exist any Investment in any other Person, except: (a) Investments existing on the Closing Date and identified in Item 7.2.5(a) of the Disclosure Schedule; (b) cash and Cash Equivalent Investments; (c) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (d) Capital Expenditures to the extent permitted pursuant to Section 7.2.7; -87- (e) Investments by way of contributions to capital or purchases of Capital Stock (i) by the Borrower in any Subsidiary Guarantor or by any Subsidiary Guarantor in other Subsidiary Guarantors or (ii) by Holdings or any Subsidiary in the Borrower; (f) Investments by the Borrower or a Subsidiary Guarantor by way of contributions to capital or purchases of Capital Stock of Foreign Subsidiaries not to exceed $1,000,000, net of repayments thereof and excluding, without duplication, permitted Indebtedness incurred pursuant to clause (h) of Section 7.2.2 to the extent such Indebtedness, together with all outstanding Investments under this clause (f), do not exceed $3,500,000 in the aggregate at any time outstanding; (g) Investments by a Foreign Subsidiary in any other Foreign Subsidiary that is a wholly-owned Subsidiary; (h) Investments (without duplication) that are permitted as Indebtedness pursuant to Section 7.2.2; (i) Investments made by the Borrower and its Subsidiaries that constitute (i) accounts receivable arising, (ii) trade debt granted, or (iii) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business; (j) Investments in respect of Permitted Acquisitions; (k) Investments consisting of any deferred portion of the sales price received by the Borrower or any Subsidiary in connection with any Disposition permitted under Section 7.2.11; (l) Investments by the Borrower and its Subsidiaries in respect of (i) payroll, moving, travel and similar advances made in the ordinary course of business to cover matters that are expected at the time of such advance ultimately to be treated as expenses (in accordance with GAAP), and (ii) loans and advances to their respective employees, officers, directors and consultants in the ordinary course of business in an aggregate amount (determined without giving effect to any write-downs or write-offs of such loans and advances) not to exceed $2,000,000; (m) Investments in respect of loans or extensions of credit made by Holdings or the Borrower ("Management Loans") to employees, officers, directors or consultants ("Management Investors") of Holdings or any of its Subsidiaries in connection with their purchase of newly issued Capital Stock of Holdings ("Management Shares"), so long as the proceeds of such loans (if any) are used concurrently dollar-for-dollar for the purchase of such Management Shares and then contributed concurrently by Holdings as a capital contribution to the Borrower; (n) Restricted Payments permitted pursuant to Section 7.2.6; -88- (o) Investments by the Borrower in the form of intercompany loans to Holdings the proceeds of which are used to make payments permitted pursuant to Section 7.2.6; (p) Investments pursuant to Hedging Obligations permitted hereunder; (q) Investments in respect of the ownership of the Capital Stock of Subsidiaries created or acquired in accordance with the terms of this Section 7.2.5 or Section 7.2.9; (r) advances to subcontractors in the ordinary course of business; (s) non-cash consideration issued to the Borrower or any of its Subsidiaries by the purchaser of assets in connection with a sale of such assets to the extent permitted by Section 7.2.11; and (t) other Investments by the Borrower and its Subsidiaries in an amount not to exceed $5,000,000 over the term of this Agreement plus other Investments (including Investments constituting Foreign Permitted Acquisitions) to the extent financed with new equity proceeds (not subject to clause (h) of Section 3.1.1) received by Holdings (and contributed to the Borrower) or Capital Stock of Holdings; provided that (i) any Investment which when made complies with the requirements of clause (a), (b) or (c) of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (ii) no Investment otherwise permitted by clauses (f), (j) or (t) shall be permitted to be made if any Default has occurred and is continuing or would result therefrom. SECTION 7.2.6. Restricted Payments, etc. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, declare or make a Restricted Payment, or make any deposit for any Restricted Payment, except: (a) the Borrower may make Restricted Payments to Holdings for the purpose of paying, so long as all proceeds are promptly used by Holdings to pay, (i) reasonable fees for audit, legal and similar administrative services and other corporate overhead, (ii) customary fees to non-officer directors of Holdings who are not Affiliates of Holdings, (iii) out-of-pocket expenses to directors or observers of the board of directors of Holdings and (iv) taxes payable by Holdings; (b) so long as at the time of such purchase (and after giving effect thereto) there shall exist no Default, Holdings may (and the Borrower may make Restricted Payments to Holdings to permit Holdings to) repurchase Management Shares from any Management Investor or repay (or make interest payments on) Indebtedness incurred -89- pursuant to clause (o) of Section 7.2.2 (i) with proceeds of the key-man life insurance maintained on the life of such Management Investor and (ii) with cash in an aggregate amount not exceeding $2,500,000 per year up to a maximum aggregate amount equal to $10,000,000 over the term of this Agreement; provided that to the extent the amount of cash used to make such repurchases (or repayments and payments of such Indebtedness) in any Fiscal Year is less than $2,500,000, 100% of such unused amount may be carried forward to succeeding Fiscal Years and utilized to make such repurchases (or repayments and payments of such Indebtedness) in such succeeding Fiscal Years (up to such maximum amount); (c) (i) any Subsidiary of the Borrower may make Restricted Payments to the Borrower or any wholly-owned Subsidiary of the Borrower which is the parent of such Subsidiary and (ii) any non-wholly-owned Subsidiary of the Borrower may make Restricted Payments to its shareholders generally so long as the Borrower or its Subsidiary which owns the equity interest in the Subsidiary making such Restricted Payment receives at least its proportionate share thereof (based upon its relative holding of the equity interests in the Subsidiary making such Restricted Payment); (d) so long as no Default then exists or would result therefrom, the Borrower may make Restricted Payments to Holdings at the times, and in the amounts, necessary to enable Holdings to make any regularly scheduled interest or principal payments that are due and payable on any Permitted Seller Notes or in respect of any Qualifying Subordinated Debt to the extent that such payments are permitted to be made pursuant to Section 7.2.8; (e) repurchases of Capital Stock of Holdings deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof and so long as no cash is paid or distributed by Holdings or any of its Subsidiaries in connection therewith; and (f) the Tender Offer and the Merger shall be permitted. SECTION 7.2.7. Capital Expenditures, etc. (a) Subject (in the case of Capitalized Lease Liabilities) to clause (f) of Section 7.2.2, the Borrower will not, and will not permit any of its Subsidiaries to, make or commit to make any Capital Expenditures on or after the Closing Date, other than Capital Expenditures made or committed to be made by the Borrower and its Subsidiaries in any Fiscal Year (or, in the case of the 2002 Fiscal Year, for the period from the Closing Date through December 31, 2002) which in the aggregate do not exceed $17,500,000 for such Fiscal Year (or such portion of the 2002 Fiscal Year, as the case may be); provided that to the extent that Capital Expenditures made by the Borrower and its Subsidiaries during any Fiscal Year (or portion thereof) are less than the maximum amount permitted to be made for such Fiscal Year 100% of such unused amount (each such amount, a "carry-forward amount") may be carried forward to the immediately succeeding Fiscal Year and utilized to make Capital Expenditures in such succeeding Fiscal Year (it being understood and agreed that no carry forward amount may be carried -90- beyond the Fiscal Year immediately succeeding the Fiscal Year in which it arose); provided, further, that, in addition to the foregoing, from and after the consummation of any Permitted Acquisition, the maximum Capital Expenditure amounts set forth above for each Fiscal Year shall be increased by an amount equal to 3% of the gross sales of each Person or business acquired in each such Permitted Acquisition for the 12 month period most recently ended prior to the consummation of such Permitted Acquisition for which financial statements available for such Person or business, (provided that the Capital Expenditure amount for the Fiscal Year in which such Permitted Acquisition is consummated shall only be increased by the amount set forth above in this proviso multiplied by a fraction the numerator of which is the number of days remaining in such Fiscal Year and the denominator of which is 365 or 366, as the case may be). (b) In addition to any Capital Expenditures permitted pursuant to clause (a) above, the Borrower and its Subsidiaries may make Capital Expenditures (i) with Casualty Proceeds and Net Disposition Proceeds to the extent permitted by clauses (d) and (e) of Section 3.1.1, (ii) with Net Equity Proceeds or other equity proceeds not required to be applied to repay Term Loans pursuant to clause (h) of Section 3.1.1, (iii) with Excess Cash Flow for the immediately preceding Fiscal Year retained by the Borrower and not required to be applied to repay Term Loans pursuant to clause (f) of Section 3.1.1, (iv) with respect to the West Salem, Ohio facility in an aggregate amount not to exceed $8,000,000 to fully in-source the window lineal extrusion production capacity of such facility and (v) from and after January 1, 2005, so long as the Leverage Ratio is less than 2.50:1 as set forth in the most recent Compliance Certificate delivered pursuant to clause (c) of Section 7.1.1, an additional amount not to exceed $5,000,000. For the avoidance of doubt, any portion of any Permitted Acquisition that is permitted under Section 7.2.5 that is accounted for as Capital Expenditure shall not constitute a Capital Expenditure for purposes of this Section 7.2.7 (provided that the aggregate limit for Permitted Acquisitions shall be decreased dollar-for-dollar by the amount expended in respect of such Permitted Acquisition that is so accounted as a Capital Expenditure). SECTION 7.2.8. No Prepayment of Subordinated Debt. Except as otherwise permitted by clause (b) of Section 7.2.6, Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, (i) make any payment or prepayment of principal of, or premium or interest on, any Subordinated Debt (A) other than the stated, scheduled payment of principal or interest set forth in the applicable Other Debt Documents related to such Indebtedness, or (B) which would violate the terms of this Agreement or the applicable Other Debt Documents related to such Indebtedness, (ii) redeem, retire, purchase, defease or otherwise acquire any Subordinated Debt (except with proceeds from the escrow described in clause (q) of Section 7.2.3), or (iii) make any deposit (including the payment of amounts into a sinking fund or other similar fund) for any of the foregoing purposes (except with proceeds from the escrow described in clause (q) of Section 7.2.3). SECTION 7.2.9. Capital Stock of Subsidiaries. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, issue any Capital Stock (whether for value or otherwise), other than (x) Capital Stock of Holdings (other than Redeemable Capital Stock not otherwise permitted to be issued pursuant to Section 7.2.2), (y) Capital Stock of the Borrower issued to Holdings and pledged pursuant to the Holdings Pledge Agreement and (z) in the case of -91- Subsidiaries of the Borrower, Capital Stock issued (i) to the Borrower or another Subsidiary of the Borrower, (ii) for purposes of transfers permitted under this Agreement and replacements of then outstanding shares of capital stock, (iii) for purposes of stock splits, stock dividends and additional issuances which are permitted under this Agreement and do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of the capital stock of such Subsidiaries, (iv) with respect to Foreign Subsidiaries, to qualify directors or local nationals to the extent (but only to the extent) required by applicable law, (v) in respect of Subsidiaries formed after the Closing Date and permitted pursuant to this Agreement and (vi) issuances of Capital Stock permitted pursuant to Section 7.2.5; provided that the Capital Stock of all direct wholly-owned Domestic Subsidiaries of the Borrower shall be pledged pursuant to the Borrower Pledge and Security Agreement. SECTION 7.2.10. Consolidation, Merger, Acquisitions, etc. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other Person, or otherwise enter into or consummate any acquisition of any Person or all or substantially all of the assets of any Person or any business of such Person, except (a) any Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower (so long as the Borrower is the continuing or surviving corporation) or any other Subsidiary (provided that a Subsidiary Guarantor may only liquidate or dissolve into, or merge with and into, the Borrower or another Subsidiary Guarantor), and the assets or Capital Stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary (provided that the assets or Capital Stock of any Subsidiary Guarantor may only be purchased or otherwise acquired by the Borrower or another Subsidiary Guarantor); provided, further, that in no event shall any Pledged Subsidiary consolidate with or merge with and into any Subsidiary other than another Pledged Subsidiary unless after giving effect thereto, the Administrative Agent shall have a perfected pledge of, and security interest in and to, at least the same percentage of the issued and outstanding interests of Capital Stock (on a fully diluted basis) of the surviving Person as the Administrative Agent had immediately prior to such merger or consolidation in form and substance satisfactory to the Administrative Agent, pursuant to such documentation and opinions as shall be necessary in the reasonable opinion of the Administrative Agent to create, perfect or maintain the collateral position of the Secured Parties therein; and (b) Permitted Acquisitions in accordance with the definition hereof and, without duplication, Investments as, and to the extent, permitted by Section 7.2.5. SECTION 7.2.11. Permitted Dispositions. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, Dispose of any of the Borrower's or such Subsidiaries' assets (including accounts receivable, Capital Stock of Subsidiaries or any proceeds thereof) to any Person, in one transaction or series of transactions, except for the following: (a) Dispositions of (i) inventory Disposed of in the ordinary course of its business, (ii) assets which are obsolete, worn out or otherwise no longer useful in the business of the Borrower and its Subsidiaries in the good faith judgment of management -92- or (iii) other assets with a fair market value of $75,000 or less (up to an aggregate amount not to exceed $500,000 in any year); (b) Dispositions permitted by Section 7.2.10; (c) Dispositions made pursuant to non-exclusive licensing arrangements entered into by the Borrower or any of its Subsidiaries with respect to any of its intellectual property in the ordinary course of its business; (d) (i) Dispositions for not less than the fair market value of the assets to be Disposed, (ii) the consideration received by the Borrower or applicable Subsidiary consists of at least 75% cash, (iii) the net book value of such assets, together with the net book value of all other assets Disposed of pursuant to this clause (d), does not exceed $2,000,000 in any Fiscal Year or $10,000,000 over the term of this Agreement and (iv) immediately prior to and after giving effect to such Disposition no Default shall have occurred and be continuing; (e) Dispositions in respect of the sale or exchange of specific items of equipment, so long as the purpose of each such sale or exchange is to acquire (and results within 120 days of such sale or exchange in the acquisition of) replacement items of equipment which are the functional equivalent of the item of equipment so sold or exchanged; (f) the AmerCable Disposition; (g) Dispositions in respect of the sale or discount of receivables in the ordinary course of business and not as part of any financing transaction; (h) Dispositions in respect of leases or subleases granted to other Persons in the ordinary course of business; (i) Dispositions of Shares so long as such Shares constitute Margin Stock; and (j) without duplication, Dispositions in respect of sales or leasebacks permitted under Section 7.2.15. SECTION 7.2.12. Modification of Certain Agreements. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, consent to any amendment, supplement, waiver or other modification of, or enter into any forbearance from exercising any rights with respect to the terms or provisions (i) of any of the Subordinated Debt, other than any amendment, supplement, waiver or modification for which no fee is payable to the holders of such Subordinated Debt and which (x) extends the date or reduces the amount of any required repayment, prepayment or redemption of the principal of such Subordinated Debt, (y) reduces the rate or extends the date for payment of the interest, premium (if any) or fees payable on such Subordinated Debt or (z) makes the covenants, events of default or remedies in respect of such Subordinated Debt less restrictive on the obligors thereunder, or (ii) any of the other Material Transaction Documents other than any amendment, supplement, waiver or modification which -93- would not impair, or in any manner be adverse to, the right, interests or obligations of any Secured Party under any Loan Document or (iii) any Organic Document of Holdings, the Borrower or any of their respective Subsidiaries, other than any amendment, supplement, waiver or modification which would not impair, or in any manner be adverse to, the rights, interests or obligations of any Secured Party under any Loan Document. SECTION 7.2.13. Transactions with Affiliates. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, enter into or cause or permit to exist any arrangement, transaction or contract (including for the purchase, lease or exchange of property or the rendering of services) with any of its other Affiliates, unless such arrangement, transaction or contract is on terms customary for similar arrangements, transactions or contracts entered into by Persons generally and such terms are no less favorable to Holdings or such Subsidiary than it could obtain in an arm's-length transaction with a Person that is not an Affiliate, except: (a) Restricted Payments may be made to the extent provided in Section 7.2.6; (b) transactions exclusively between or among the Borrower and one or more Subsidiary Guarantors that are wholly-owned Subsidiaries of the Borrower and not Foreign Subsidiaries or exclusively between or among such Subsidiary Guarantors; (c) Holdings and its Subsidiaries may conduct any transaction otherwise permitted pursuant to (i) clauses (c), (g), (h), (i), (k), (o), (p), (q) and (v) of Section 7.2.2, (ii) clauses (c), (i), (k) and (m) of Section 7.2.3, (iii) clauses (a), (e), (f), (g), (l), (m), (o), (q) and (t) of Section 7.2.5, (iv) Section 7.2.6, Section 7.2.9, (vi) clause (a) of Section 7.2.10 and (vii) to the extent otherwise permitted pursuant to clause (c)(i) above, clause (h) of Section 7.2.5; (d) the Borrower and its Subsidiaries may make payments to Harvest Partners and its Affiliates pursuant to the Management Agreement as in effect on the Closing Date; (e) customary fees to non-officer directors of Holdings and its Subsidiaries; and (f) employment, employee benefit, consulting and indemnity arrangements with officers, directors, employees and consultants of Holdings and its Subsidiaries in the ordinary course of business. Except for the transactions permitted above pursuant to this Section 7.2.13, (i) prior to entering into any transaction or series related transactions with any Affiliate of the Borrower or any Affiliate of the Borrower's Subsidiaries involving or having a value in excess of $1,000,000 the Borrower shall deliver to the Agents a certificate of an Authorized Officer stating that, in the good faith determination of the Board of Directors of the Borrower (as evidenced by a resolution), the transaction is on terms in all material respects no less favorable to Holdings, the Borrower or any of their respective Subsidiaries, as the case may be, than could be obtained from an unaffiliated party and (ii) Holdings, the Borrower or any of their respective Subsidiaries shall not enter into any transaction with any of their respective Affiliates involving or having a value of more than $10,000,000 or if there is no member of the Board of Directors of the Borrower -94- who does not have any direct or indirect financial interest in or with respect to the transaction being considered, unless Holdings, the Borrower or such Subsidiary, as the case may be, has received an opinion from an independent financial advisor to the effect that such transaction (or series of transactions) is fair to Holdings, the Borrower or such Subsidiary, as the case may be, from a financial point of view. SECTION 7.2.14. Restrictive Agreements, etc. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, enter into any agreement prohibiting (a) the creation or assumption of any Lien upon any properties, revenues or assets of any Obligor, whether now owned or hereafter acquired, for the benefit of any Secured Party; (b) the ability of any Obligor to amend or otherwise modify any Loan Document; or (c) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower, including by way of dividends, advances, repayments of loans, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or transfer any of its assets or property to the Borrower. The foregoing prohibitions shall not apply to restrictions contained (i) in any Loan Document, (ii) in the case of clauses (a) and (c), in any agreement governing any Indebtedness permitted by clause (f) of Section 7.2.2 as to the assets financed with the proceeds of such Indebtedness and (iii) in the case of clauses (a) and (c), pursuant to (A) applicable law, (B) customary non-assignment provisions in leases or other contracts, (C) customary provisions restricting the transfer of property or assets that are subject to a Permitted Lien or an agreement to transfer such property or assets and (D) in any agreement governing any Indebtedness permitted by clauses (j), (m) and (v)(ii) of Section 7.2.2; provided that, with respect to any such Indebtedness of the type permitted by clause (m) of Section 7.2.2, this clause (D) shall only apply with respect to agreements in effect as of the time such Indebtedness is assumed. SECTION 7.2.15. Sale and Leaseback. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, directly or indirectly enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental of such property or other similar property from such Person; provided that the Borrower and its Subsidiaries may enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental of such property or other similar property from such Person so long as at the time of determination the present value (discounted at the interest rate implicit in the lease) of the obligation of the lessee of the property subject to such sale and leaseback transaction for rental payments during the remaining term of the lease included in such transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended or until the earliest date on which the lessee may terminate such lease without penalty or upon payment of penalty (in which case the rental payments shall include such penalty), after excluding all amounts required to be paid on -95- account of maintenance and repairs, insurance, taxes, assessments, water, utilities and similar charges, does not exceed at any time $2,500,000. SECTION 7.2.16. Take or Pay Contracts. Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by Holdings, the Borrower or such Subsidiary regardless of whether such materials, supplies, other property or services are delivered or furnished to it except in the ordinary course of business and consistent with past practices. SECTION 7.2.17. Fiscal Year. Except as contemplated by the definition of Fiscal Year, the Borrower will not change its Fiscal Year. SECTION 7.2.18. Activities of Holdings. Notwithstanding any provision to the contrary herein and without limiting the effect of any provision contained in this Article VII, Holdings will not (a) create, incur, assume or suffer to exist any Indebtedness (other than (i) Indebtedness in respect of the guaranty contained in Article IX, Permitted Seller Notes, Bridge Loans, Qualifying Subordinated Debt and the repurchase of its Capital Stock, and (ii) as provided in clauses (o), (p), and (q) of Section 7.2.2), (b) create, assume, or suffer to exist any Lien upon, or grant any options or other rights with respect to, any of its revenues, property or other assets, whether now owned or hereafter acquired (other than as provided in clauses (a) and (j) of Section 7.2.3), (c) wind-up, liquidate or dissolve itself (or suffer to exist any of the foregoing), consolidate or amalgamate with or merge into or with any other Person, or convey, sell, transfer, lease or otherwise dispose of all or any part of its assets, in one transaction or a series of transactions, to any Person or Persons, (d) create, incur, assume or suffer to exist any Investment in any Person (other than its continuing ownership of all the shares of Capital Stock of the Borrower and Investments otherwise permitted under Section 7.2.5), (e) declare or make a Restricted Payment, or make any deposit for any Restricted Payment (other than provided in Section 7.2.6), (f) permit to be taken any action that would result in a Change in Control or (g) engage in any other business activity except in compliance with its Obligations under the Loan Documents and except for any business activity that Holdings is expressly permitted to conduct pursuant to a specific provision hereunder. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Article shall constitute an "Event of Default". SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default in the payment or prepayment when due of (a) any principal of any Loan, any Reimbursement Obligation or any deposit of cash for collateral purposes pursuant to Section 2.6.4; or -96- (b) any interest on any Loan, any fee described in Article III or any other monetary Obligation, and such default shall continue unremedied for a period of three Business Days after such amount was due. SECTION 8.1.2. Breach of Warranty. Any representation or warranty of any Obligor made or deemed to be made in any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made or deemed to have been made in any material respect. SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. Holdings or the Borrower shall default in the due performance or observance of any of its obligations under clause (e) of Section 7.1.1, clause (a)(i) of Section 7.1.2, Section 7.1.11 or Section 7.2. SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. (a) Holdings or the Borrower shall default in the due performance or observance of any of its obligations under clause (a), (b) or (c) of Section 7.1.1 and such default shall continue unremedied for a period of 30 days. (b) Holdings or the Borrower shall default in the due performance or observance of any of its obligations under Section 7.1.1 (other than clause (a), (b), (c) or (e) thereof), 7.1.8, 7.1.9 or 7.1.10 and such default shall continue unremedied for a period of 30 days; or any Obligor shall default in the due performance and observance of any agreement contained in any Loan Document executed by it (other than the agreements described in Section 8.1.1, 8.1.2, 8.1.3 or clause (a) of Section 8.1.4(a)), and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by any Agent or the Required Lenders. SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the payment of any amount when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal or stated amount of, or interest or fees on, any Indebtedness (other than Indebtedness described in Section 8.1.1) of Holdings, the Borrower or any of their respective Subsidiaries having a principal or stated amount, individually or in the aggregate, in excess of $5,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause or declare such Indebtedness to become due and payable or to require such Indebtedness to be prepaid, redeemed, purchased or defeased, or require an offer to purchase or defease such Indebtedness to be made, prior to its expressed maturity. SECTION 8.1.6. Judgments. Any judgment or order for the payment of money, individually or in the aggregate, in excess of $5,000,000 (exclusive of any amounts fully covered by insurance (less any applicable deductible) to the extent the provider of such insurance is not denying its liability with respect thereto) shall be rendered against Holdings, the Borrower or any of their respective Subsidiaries and such judgment shall not have been paid, vacated or discharged or stayed or bonded pending appeal within 30 days after the entry thereof or -97- enforcement proceedings shall have been commenced by any creditor upon such judgment or order. SECTION 8.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan or Multiemployer Plan (i) the institution of any steps by Holdings, the Borrower, any member of the Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, Holdings, the Borrower or any such member is required to make a contribution to such Pension Plan, or could reasonably be expected to incur a liability or obligation to such Pension Plan, in excess of $5,000,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in an amount in excess of $5,000,000 or (iii) the complete or partial withdrawal of any of Holdings, the Borrower or any member of the Controlled Group from a Multiemployer Plant that results in or would reasonably be likely to result in withdrawal liability of Holdings or any of its Subsidiaries in an amount in excess of $5,000,000 or a Material Adverse Effect. SECTION 8.1.8. Change in Control. Any Change in Control shall occur. SECTION 8.1.9. Bankruptcy, Insolvency, etc. Holdings, the Borrower or any Material Subsidiary shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due; (b) apply for, consent to or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent, sufferance or assignment, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; provided that Holdings and the Borrower (for themselves and their Material Subsidiaries) hereby expressly authorize each Secured Party to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by Holdings, the Borrower or any such Material Subsidiary, such case or proceeding shall be consented to or acquiesced in by such Person or shall result in the entry of an order for relief or shall remain for 60 days undismissed; provided that Holdings and the Borrower (for themselves and their Material Subsidiaries) hereby expressly authorize each Secured Party to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or -98- (e) take any board of director action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. Impairment of Security, etc. Any material provision of any Loan Document or any Lien granted thereunder with respect to any material assets shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; any Obligor shall contest in any manner such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien. SECTION 8.1.11. Failure of Subordination. Unless otherwise waived or consented to by the Required Lenders, the Agents and the Issuers in writing, the subordination provisions relating to any Subordinated Debt (the "Subordination Provisions") shall fail to be enforceable by the Lenders, the Agents and the Issuers in material accordance with the terms thereof or the monetary Obligations shall fail to constitute "Senior Indebtedness" (or a similar term) referring to the Obligations; or any Obligor shall disavow or contest in any manner, or shall support or fail to contest any holder of Subordinated Debt which disavows or contests in any manner, (i) the effectiveness, validity or enforceability of any of the material Subordination Provisions, (ii) that the Subordination Provisions exist for the benefit of the Lenders, the Agents and the Issuers or (iii) that all payments of principal of or premium and interest on the Subordinated Debt, or realized from the liquidation of any property of any Obligor, shall be subject to any of such Subordination Provisions. SECTION 8.1.12. Additional Equity Investment. Holdings shall not have received, and simultaneously contributed to the Borrower, the Additional Equity Investments, if required, as set forth in subclause (B) of the proviso in clause (ii) of the third recital within 30 Business Days after the Closing Date. SECTION 8.2. Action if Bankruptcy. If any Event of Default described in clauses (a) through (d) of Section 8.1.9 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations (including Reimbursement Obligations) shall automatically be and become immediately due and payable by the Borrower, without notice or demand to any Person, and the Borrower shall automatically and immediately be obligated to Cash Collateralize all Letter of Credit Outstandings. SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 8.1.9 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the written direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations (including Reimbursement Obligations) to be due and payable by the Borrower and/or the relevant Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the relevant Commitments shall terminate and the -99- Borrower shall automatically and immediately be obligated to Cash Collateralize all Letter of Credit Outstandings. ARTICLE IX HOLDINGS GUARANTY SECTION 9.1. Guaranty. Holdings hereby absolutely, unconditionally and irrevocably (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the Borrower now or hereafter existing, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section 506(b)), and (b) indemnifies and holds harmless each Secured Party and each holder of a Note for any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by such Secured Party or such holder, as the case may be, in enforcing any rights under the guaranty set forth in this Article IX. The guaranty set forth in this Article IX constitutes a guaranty of payment when due and not of collection, and Holdings specifically agrees that it shall not be necessary or required that any Secured Party or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of Holdings under the guaranty set forth in this Article IX. SECTION 9.2. Acceleration of Holdings Guaranty. Holdings agrees that, in the event of the occurrence of an Event of Default described under Section 8.1.9 with respect to the Borrower, and if such event shall occur at a time when any of the Obligations of the Borrower and each other Obligor may not then be due and payable, Holdings agrees that it will pay to the Administrative Agent for the account of the Secured Parties forthwith the full amount which would be payable under the guaranty set forth in this Article IX by Holdings if all such Obligations were then due and payable. SECTION 9.3. Guaranty Absolute, etc. The guaranty set forth in this Article IX shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations of the Borrower and each other Obligor have been paid in full in cash, all obligations of Holdings under the guaranty set forth in this Article IX shall have been paid in full in cash, all Letters of Credit have been terminated or expired and all Commitments shall have terminated. Holdings guarantees that the Obligations of the Borrower will be paid strictly in accordance with the terms of this Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party or any holder of any Note with respect thereto. The liability of Holdings under the -100- guaranty set forth in this Article IX shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Secured Party or any holder of any Note (i) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person (including any other guarantor (including Holdings)) under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor (including Holdings) of, or collateral securing, any Obligations of the Borrower; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower, or any other extension, compromise or renewal of any Obligation of the Borrower; (d) any reduction, limitation, impairment or termination of any Obligations of the Borrower for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Holdings hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations of the Borrower or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Secured Party or any holder of any Note securing any of the Obligations of the Borrower; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any surety or any guarantor. SECTION 9.4. Reinstatement, etc. Holdings agrees that the guaranty set forth in this Article IX shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Secured Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. -101- SECTION 9.5. Waiver, etc. Holdings hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower and the guaranty set forth in this Article IX and any requirement that the Administrative Agent, any other Secured Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Borrower, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Borrower. SECTION 9.6. Postponement of Subrogation, etc. Holdings agrees that it will not exercise any rights which it may acquire by way of rights of subrogation under the guaranty set forth in this Article IX, by any payment made under the guaranty set forth in this Article IX or otherwise, until the prior payment in full in cash of all Obligations of the Borrower and each other Obligor, the termination or expiration of all Letters of Credit and the termination of all Commitments. Any amount paid to Holdings on account of any such subrogation rights prior to the payment in full in cash of all Obligations of the Borrower and each other Obligor shall be held in trust for the benefit of the Secured Parties and each holder of a Note and shall immediately be paid to the Administrative Agent for the benefit of the Secured Parties and each holder of a Note and credited and applied against the Obligations of the Borrower and each other Obligor, whether matured or unmatured, in accordance with the terms of this Agreement. In furtherance of the foregoing, for so long as any Obligations or Commitments remain outstanding, Holdings shall refrain from taking any action or commencing any proceeding against the Borrower or any other Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under the guaranty set forth in this Article IX to any Secured Party or any holder of a Note. SECTION 9.7. Successors, Transferees and Assigns; Transfers of Notes, etc. The guaranty set forth in this Article IX shall: (a) be binding upon Holdings, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by the Administrative Agent and each other Secured Party. Without limiting the generality of the foregoing clause (b), any Lender may assign or otherwise transfer (in whole or in part) any Note or Credit Extension held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to such Lender under any Loan Document (including the guaranty set forth in this Article IX) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 11.11 and Article X. ARTICLE X THE AGENTS SECTION 10.1. Appointments and Authorizations; Actions. (a) Each Lender hereby appoints Credit Suisse First Boston, Cayman Islands Branch, as its Syndication Agent and UBS AG, Stamford Branch, as its Administrative Agent under and for purposes of each Loan Document. Each Lender authorizes the Administrative Agent and/or the Syndication Agent to -102- act on behalf of such Lender under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Agents (with respect to which each such Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of each such Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent, pro rata according to such Lender's proportionate Total Exposure Amount, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, each such Agent in any way relating to or arising out of any Loan Document, including reasonable attorneys' fees, and as to which each such Agent is not reimbursed by the Borrower; provided however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from such Agent's gross negligence or willful misconduct. Neither Agent shall be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of either Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. Notwithstanding any provision to the contrary contained elsewhere in any Loan Document, neither Agent shall have any duties or responsibilities except those expressly set forth herein, nor shall either such Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into any Loan Document or otherwise exist against either such Agent. (b) Each Issuer shall act on behalf of the Lenders with respect to the Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for such Issuer with respect thereto; provided that each Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Section 10.1 with respect to any acts taken or omissions of such Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Agent", as used in this Section 10.1, included each such Issuer with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to each such Issuer. (c) The Swing Line Lender shall have all of the benefits and immunities (i) provided to the Agents in this Section 10.1 with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with Swing Line Loans made or proposed to be made by it as fully as if the term "Agent", as used in this Section 10.1, included the Swing Line Lender with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Swing Line Lender. -103- (d) The Lenders authorize the Administrative Agent to hold, for and on behalf of the Lenders, security in the assets and properties of Holdings and each of its Subsidiaries securing the Obligations. SECTION 10.2. Funding, Reliance, etc. Unless the Administrative Agent shall have been notified in writing by any Lender by 3:00 p.m. on the Business Day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of the Borrower) and (in the case of a Lender), at the Federal Funds Rate, for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION 10.3. Exculpation. Neither Agent nor any of its respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under any Loan Document, in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals, statements, representations or warranties herein or therein or in any certificate, report, statement or other document referred to or provided for herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the observance or performance by any Obligor of its Obligations. Any such inquiry which may be made by either Agent shall not obligate it to make any further inquiry or to take any action. Each such Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION 10.4. Successor. The Syndication Agent may resign as such upon 10 Business Day's notice to the Borrower and the Administrative Agent. It is agreed that to the extent the Syndication Agent has resigned, all provisions of any Loan Document requiring the consent of the Syndication Agent or the Agents shall be deemed to require the consent of the Administrative Agent. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch -104- or agency of a commercial banking institution, and having a combined capital and surplus of at least $250,000,000 to act as Administrative Agent until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above; provided that if, such retiring Administrative Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in above, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor as provided for above. The appointment of any successor Administrative Agent pursuant to the fifth sentence of this Section 10.4 shall require the consent of the Borrower, which consent shall not be unreasonably withheld or delayed and which consent shall not be required if a Default has occurred and is then continuing. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under the Loan Documents, and Sections 11.3 and 11.4 shall continue to inure to its benefit. SECTION 10.5. Credit Extensions by each Agent. Each of the Agents, and each Issuer shall have the same rights and powers with respect to (x)(i) in the case of an Agent, the Credit Extensions made by it or any of its Affiliates and (ii) in the case of each Issuer, the Loans made by it or any of its Affiliates, and (y) the Loans held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not an Agent or an Issuer. Each Agent, each Issuer and each and each of their respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if such Agent or such Issuer were not an Agent or an Issuer hereunder. The Lenders acknowledge that, pursuant to such activities, the Agents or their respective Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Affiliate) and acknowledge that the Agents and their respective Affiliates shall be under no obligation to provide such information to them. SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower and its Subsidiaries, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under the Loan Documents. -105- SECTION 10.7. Copies, etc. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of the Loan Documents (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of the Loan Documents. SECTION 10.8. Reliance by Agents. Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any certification, notice or other communication (including any thereof by telephone, telecopy, telegram or cable) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person, and upon advice and statements of legal counsel, independent accountants and other experts selected by such Agent. As to any matters not expressly provided for by the Loan Documents, each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of the Lenders as is required in such circumstance or as such Agent deems appropriate, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Secured Parties; prior to acting, or refraining from acting, in any such circumstance, either such Agent may request confirmation from the Lenders of their obligation to indemnify such Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. For purposes of applying amounts in accordance with this Section, each Agent shall be entitled to rely upon any Secured Party that has entered into a Rate Protection Agreement with any Obligor for a determination (which such Secured Party agrees to provide or cause to be provided upon request of the Administrative Agent) of the outstanding Obligations owed to such Secured Party under any Rate Protection Agreement. Unless it has actual knowledge evidenced by way of written notice from any such Secured Party and the Borrower to the contrary, each of the Agents, in acting in such capacity under the Loan Documents, shall be entitled to assume that no Rate Protection Agreements or Obligations in respect thereof are in existence or outstanding between any Secured Party and any Obligor. SECTION 10.9. Notice of Defaults. Neither Agent shall be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default unless such Agent has received a written notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that either Agent receives such a notice of the occurrence of a Default or Event of Default, such Agent shall give prompt notice thereof to the Lenders. Each of the Agents shall (subject to Section 11.1) take such action with respect to such Default or Event of Default as shall be directed by the Required Lenders (or, if required, all Lenders) and in accordance with the terms of this Agreement; provided that unless and until either such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all Lenders, as applicable. -106- ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc. The provisions of each Loan Document (other than Letters of Credit and the Agents' Fee Letter (which documents may be amended or otherwise modified in accordance with the terms thereof)) may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided that no such amendment, modification or waiver shall: (a) modify this Section 11.1 without the consent of all Lenders (except such amendments as may be required for the purpose (but solely for the purpose) of effecting an increase of a Commitment Amount or the inclusion of a new commitment pursuant to clause (g) below); (b) increase the aggregate amount of any Credit Extensions required to be made by a Lender pursuant to a Commitment (it being understood that waivers or modifications (x) of conditions precedent, covenants, Defaults or Events of Default or (y) of a mandatory reduction in the Commitment Amount relating to such Commitment shall not constitute an increase of the aggregate amount of Credit Extensions that may be required to be made by such Lender pursuant to such Commitment), extend any final Commitment Termination Date or reduce any fees described in Article III payable to any Lender (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 1.4 shall not constitute a reduction in the fees payable under Article III), in each case without the consent of such Lender; (c) extend the final Stated Maturity Date for any Lender's Loan, or, except for the waiver of any applicable post default increase in interest rates or fees, reduce the principal amount of, rate of interest or fees on any Loan or Reimbursement Obligations (which shall in each case include the conversion of all or any part of the Obligations into equity of any Obligor (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 1.4 shall not constitute a reduction in the rate of interest or fees for the purposes of this clause (c) so long as the principal purpose of such amendment or modification was not to reduce the rate of interest or fees)), or extend the date on which interest or fees are payable in respect of such Loan or Reimbursement Obligation, in each case, without the consent of the Lender which has made such Loan or, in the case of a Reimbursement Obligation, the respective Issuer owed, and those Lenders participating in, such Reimbursement Obligation (it being understood and agreed, however, that any vote to rescind any acceleration made pursuant to Section 8.2 and Section 8.3 of amounts owing with respect to the Loans and other Obligations shall only require the vote of the Required Lenders); (d) reduce the percentage set forth in the definition of "Required Lenders" (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Closing Date) or modify any requirement -107- hereunder that any particular action be taken by all Lenders without the consent of all Lenders; (e) except as otherwise expressly provided in a Loan Document, (i) permit the assignment by the Borrower of its Obligations under the Loan Documents, (ii) release Holdings from its Obligations under the Holdings Guaranty, Mergerco from its Obligations under the Mergerco Guaranty or any Subsidiary Guarantor from its Obligations under the Subsidiary Guaranty (other than in connection with a Disposition of all or substantially all of the Capital Stock of such Subsidiary Guarantor in a transaction permitted by Section 7.2.11) or (iii) release all or substantially all of the collateral under the Loan Documents, in each case without the consent of all Lenders; provided that the Required Lenders may at any time consent to the release of any Subsidiary Guarantor that (A) accounted for no more than 15% of consolidated revenues of Holdings and its Subsidiaries for the four consecutive Fiscal Quarters of Holdings ending on December 31, 2001 or if more recent financial information is (or is required to be) available, the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 7.1.1, financial statements have been, or are required to have been, delivered by Holdings to the Administrative Agent and (B) has assets which represent no more than 15% of the consolidated assets of Holdings and its Subsidiaries as of December 31, 2001, or if more recent financial information is (or is required to be) available, the last day of the last Fiscal Quarter of the most recently completed Fiscal Quarter with respect to which, pursuant to Section 7.1.1, financial statements have been, or are required to have been, delivered by Holdings to the Administrative Agent; (f) amend, modify or waive clause (b) of Section 3.1.1 in a manner adverse to the holders of Revolving Loan Commitments unless such amendment, modification or waiver shall have been consented to by the holders of at least a majority of the Revolving Loan Commitments; (g) amend, modify or waive the provisions of clause (a)(i), (c), (d), (e), (f), (g) or (h) of Section 3.1.1 or clause (b) of Section 3.1.2, unless such amendment, modification or waiver shall have been consented to by the holders of at least a majority of the aggregate amount of Loans outstanding under the Tranche or Tranches adversely affected by such modification (it being agreed that, (x) in the event consented to by the Required Lenders, any increase in a Commitment Amount or the inclusion of another commitment to extend credit under this Agreement shall not be deemed for purposes of this clause (g) to constitute a modification that would adversely affect a Tranche and (y) the Required Lenders may waive, in whole or in part, any such prepayment, repayment or commitment reduction, as the case may be, required pursuant to any clause of Section 3.1.1 or 3.1.2 enumerated above, so long as the application, as among the various Tranches, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered); (h) change any of the terms of Section 2.3.2 without the consent of the Swing Line Lender; or -108- (i) affect adversely the interests, rights or obligations of any Agent (in its capacity as an Agent) or the Issuer, unless consented to by such Agent or the Issuer, as the case may be. No failure or delay on the part of any Agent, the Issuer or any Lender in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Obligor in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent, the Issuer or any Lender under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. For purposes of this Section 11.1, the Administrative Agent, in coordination with the Syndication Agent, shall have primary responsibility, together with the Borrower, in the negotiation, preparation and documentation relating to any amendment, modification or waiver under this Agreement, any other Loan Document or any other agreement or document related hereto or thereto contemplated pursuant to this Section. SECTION 11.2. Notices; Time. All notices and other communications provided under each Loan Document shall be in writing (including by facsimile) and addressed, delivered or transmitted, if to any Agent, Holdings or the Borrower, at its address or facsimile number set forth below its signature in this Agreement, and if to a Lender or an Issuer to the applicable Person at its address or facsimile number set forth below its signature in this Agreement or set forth in the Lender Assignment Agreement pursuant to which it became a Lender hereunder, or at such other address or facsimile number as may be designated by any such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. Unless otherwise indicated, all references to the time of a day in a Loan Document shall refer to New York City time. SECTION 11.3. Payment of Costs and Expenses. The Borrower agrees to pay on demand all reasonable expenses of each Agent (including the reasonable fees and out-of-pocket expenses of Mayer, Brown, Rowe & Maw, counsel to the Agents, and of local counsel, if any, who may be retained by or on behalf of the Agents) in connection with (a) the negotiation, preparation, execution and delivery and ongoing administration of each Loan Document, including schedules and exhibits, the syndication of the Loans and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; (b) the filing or recording of any Loan Document (including the Filing Statements) and all amendments, supplements, amendment and restatements and other modifications to any thereof, searches made following the Closing Date in jurisdictions -109- where Filing Statements (or other documents evidencing Liens in favor of the Secured Parties) have been recorded and any and all other documents or instruments of further assurance required to be filed or recorded by the terms of any Loan Document; and (c) the preparation and review of the form of any document or instrument relevant to any Loan Document. The Borrower further agrees to pay, and to save each Secured Party harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of each Loan Document, the Credit Extensions or the issuance of the Loans. The Borrower also agrees to reimburse each Secured Party upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and legal expenses of counsel to each Secured Party) incurred by such Secured Party in connection with the enforcement of any Obligations. SECTION 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Secured Party, the Borrower hereby indemnifies, exonerates and holds each Secured Party and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, whether incurred in connection with actions between or among the parties hereto or the parties hereto and third parties (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension, including all Indemnified Liabilities arising in connection with the Transaction; (b) the entering into and performance of any Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Credit Extension, provided that any such action is resolved pursuant to a final judgment in a court of competent jurisdiction in favor of such Indemnified Party); (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by any Obligor or any Subsidiary thereof of all or any portion of the Capital Stock or assets of any Person, whether or not an Indemnified Party is party thereto; (d) any investigation, litigation or proceeding under any Environmental Laws arising from the Release or threatened Release by any Obligor or any Subsidiary thereof of any Hazardous Material; (e) any investigation, claim, litigation, or proceeding related to personal injury arising from exposure or alleged exposure to Hazardous Materials handled by the Borrower or any of its Subsidiaries; -110- (f) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or Releases from, any real property owned or operated by any Obligor or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, such Obligor or Subsidiary; or (g) each Lender's Environmental Liability (the indemnification herein shall survive repayment of the Obligations and any transfer of the property of any Obligor or its Subsidiaries by foreclosure or by a deed in lieu of foreclosure for any Lender's Environmental Liability, regardless of whether caused by, or within the control of, such Obligor or such Subsidiary); except for Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of such Indemnified Party's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final proceeding. Each Obligor and its successors and assigns hereby waive, release and agree not to make any claim or bring any cost recovery action against any Indemnified Party under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted, with respect to any liabilities subject to indemnification under this Section 11.4. It is expressly understood and agreed that to the extent that any Indemnified Party is strictly liable under any Environmental Laws, each Obligor's obligation to such Indemnified Party under this indemnity shall likewise be without regard to fault on the part of any Obligor with respect to the violation or condition which results in liability of an Indemnified Party. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each Obligor agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 11.5. Survival. The obligations of the Borrower under Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4 and the obligations of the Lenders under Section 10.1, shall in each case survive any assignment from one Lender to another (in the case of Sections 11.3 and 11.4) and the occurrence of the Termination Date. The representations and warranties made by each Obligor in each Loan Document shall survive the execution and delivery of such Loan Document. SECTION 11.6. Severability. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. Headings. The various headings of each Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof. SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Agreement shall -111- become effective when counterparts hereof executed on behalf of the Borrower, each Agent and each Lender (or notice thereof satisfactory to the Agents), shall have been received by the Agents. SECTION 11.9. Governing Law; Entire Agreement. EACH LOAN DOCUMENT (OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) WILL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE LAWS OF THE STATE OF NEW YORK. The Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnified Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement. SECTION 11.11. Sale and Transfer of Credit Extensions; Participations in Credit Extensions Notes. Each Lender may assign, or sell participations in, its Loans, Letters of Credit and Commitments to one or more other Persons in accordance with this the terms set forth below. (a) Any Lender may assign ("Assignor Lender") to one or more Eligible Assignees ("Assignee Lender") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided however, that (i) except in the case of an assignment of the entire remaining amount of the Assignor Lender's Commitments and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitments (which for this purpose includes Loans outstanding thereunder) or principal outstanding balance of the Loans of the Assignor Lender subject to each such assignment (determined as of the date the Lender Assignment Agreement with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower, otherwise consent (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of -112- all the Assignor Lender's rights and obligations under this Agreement with respect to the Loans and/or the Commitments assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Tranches on a non-pro rata basis and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent a Lender Assignment Agreement (including, if the Assignee Lender is not a Lender, the delivery of administrative details information to the Administrative Agent), together with a processing and recordation fee of $3,500, to be paid by the Assignor Lender or the Assignee Lender. Subject to acceptance and recording thereof by the Administrative Agent pursuant to clause (b) below and the last sentence of clause (b) of Section 2.7, from and after the effective date specified in each Lender Assignment Agreement, the Assignee Lender thereunder shall be a party hereto and, to the extent of the interest assigned by such Lender Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the Assignor Lender thereunder shall, to the extent of the interest assigned by such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of the Assignor Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, but shall continue to be entitled to the benefits of any provisions of this Agreement which by their terms survive the termination of this Agreement). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with clause (c) below. If the consent of the Borrower to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in this Section), the Borrower shall be deemed to have given its consent five Business Days after the date written notice thereof has been received by the Borrower from the Administrative Agent unless such consent is expressly refused by the Borrower prior to such fifth Business Day. (b) The Administrative Agent shall record each assignment made in accordance with this Section in the Register pursuant to clause (b) of Section 2.7. The Register shall be available for inspection by the Borrower and (so long as Credit Suisse First Boston Corporation remains a Lender) Credit Suisse First Boston Corporation (or any of its affiliates), at any reasonable time and from time to time upon reasonable prior notice. (c) Any Lender may, without the consent of, or notice to, the Borrower or the Agents, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitments and/or the Loans owing to it); provided that (x) such Lender's obligations under this Agreement shall remain unchanged, (y) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (z) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the following: (i) modification of Section 11.1 (except as otherwise expressly permitted thereby), (ii) any reduction in the interest rate or amount of fees -113- that such Participant is otherwise entitled to receive (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 1.4 shall not constitute a reduction in the interest rate or the fees payable to such Participant), (iii) a decrease in the principal amount of, or an extension of the final Stated Maturity Date of, any Loan in which such Participant has purchased a participating interest, (iv) an extension of the date on which interest or fees are payable in respect of any Loan, (v) a reduction in the percentage set forth in the definition of "Required Lenders" (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on this Closing Date), or (vi) a release of all or substantially all of the collateral security under the Loan Documents or all or substantially all of the Guarantors from their obligations under the Guaranties, in each case except as otherwise specifically provided in the proviso to clause (e) of Section 11.1 or in any Loan Document. Subject to clause (d) below, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.4, 4.5, 4.6, 7.1.1, 11.3 and 11.4 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (a). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 4.9 as though it were a Lender, provided such Participant agrees to be subject to Section 4.8 as though it were a Lender. (d) Each Participant shall only be indemnified for increased costs and taxes pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which sold such participating interest to such Participant concurrently is entitled to make, and does make, a claim on the Borrower for such increased costs. Any Lender that sells a participating interest in any Loan, Commitment or other interest to a Participant under this Section shall indemnify and hold harmless the Borrower and the Administrative Agent from and against any taxes, penalties, interest or other costs or losses (including reasonable attorneys' fees and expenses) incurred or payable by the Borrower or the Administrative Agent as a result of the failure of the Borrower or the Administrative Agent to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Lender or the Administrative Agent, as the case may be, which Taxes would not have been incurred or payable if such Participant had been a Non-Domestic Lender that was entitled to deliver to the Borrower, the Administrative Agent or such Lender, and did in fact so deliver, a duly completed and valid Form W-8BEN or W-8ECI (or applicable successor forms) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes. (e) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (i) to secure obligations of such Lender, to secure obligations to a Federal Reserve Bank and (ii) in connection with any securitization of any portfolio loans of such Lender, in each case without the prior written consent of any other Person; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (f) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Bank") may grant to a special purpose funding vehicle (a "SPC"), identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrower, -114- the option to provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof and (iii) such SPC shall be granted no voting rights other than those permitted to be granted to a Participant pursuant to clause (c) of Section 11.11. The making of a Loan by a SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Bank or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. SECTION 11.12. Other Transactions. Nothing contained herein shall preclude the Administrative Agent, any Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by the Loan Documents, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13. Independence of Covenants. All covenants contained in this Agreement and each other Loan Document shall be given independent effect such that, in the event a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not, unless expressly so provided in such first covenant, avoid the occurrence of a Default or an Event of Default if such action is taken or such condition exists. SECTION 11.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, THE ISSUERS, HOLDINGS OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL -115- OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF HOLDINGS AND THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH OF HOLDINGS AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT HOLDINGS OR THE BORROWER, AS THE CASE MAY BE, HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS. SECTION 11.15. Waiver of Jury Trial. EACH AGENT, EACH LENDER, EACH ISSUER, HOLDINGS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SUCH AGENT, SUCH LENDER, SUCH ISSUER, HOLDINGS OR THE BORROWER IN CONNECTION THEREWITH. EACH OF HOLDINGS AND THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO THE LOAN DOCUMENTS. -116- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. ASSOCIATED MATERIALS INCORPORATED By: /s/ Robert L. Winspear ----------------------------------------- Name: Robert L. Winspear Title: Secretary Address: 2200 Ross Avenue Suite 4100 East Dallas, TX 75201 Facsimile No.: Attention: ASSOCIATED MATERIALS HOLDINGS, INC. By: /s/ Jonathan Angrist ----------------------------------------- Name: Jonathan Angrist Title: Secretary and Assistant Treasurer Address: 280 Park Avenue 33rd Floor New York, NY 10172 Facsimile No.: Attention: CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as the Syndication Agent By: /s/ Kevin S. Smith ----------------------------------------- Name: Kevin S. Smith Title: Managing Director By: /s/ Christopher G. Cunningham ----------------------------------------- Name: Christopher G. Cunningham Title: Managing Director Address: 11 Madison Avenue New York, NY 10010 Facsimile No.: Attention: UBS AG, STAMFORD BRANCH, as the Administrative Agent By: /s/ Wilfred V. Saint ------------------------------------ Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US By: /s/ Thomas R. Salzano ------------------------------------ Name: Thomas R. Salzano Title: Director Banking Products Services, US Address: 677 Washington Boulevard Stamford, CT 06901 Facsimile No.: 203-719-4176 Attention: Luke Goldsworthy CIBC WORLD MARKETS CORP., as the Documentation Agent By: /s/ Lindsay Gordon ------------------------------------ Name: Lindsay Gordon Title: Executive Director Address: 425 Lexington Avenue New York, NY 10017 Facsimile No.: 212-856-3991 Attention: CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as a Lender By: /s/ Kevin S. Smith ------------------------------------ Name: Kevin Smith Title: Managing Director By: /s/ Christopher G. Cunningham ------------------------------------ Name: Christopher G. Cunningham Title: Managing Director UBS AG, STAMFORD BRANCH, as a Lender By: /s/ Wilfred V. Saint ------------------------------------ Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US By: /s/ Thomas R. Salzano ------------------------------------ Name: Thomas R. Salzano Title: Director Banking Products Services, US CIBC INC., as a Lender By: /s/ Lindsay Gordon ------------------------------------ Name: Lindsay Gordon Title: Executive Director EX-10.2 11 y61690exv10w2.txt BORROWER SECURITY AND PLEDE AGREEMENT EXHIBIT 10.2 BORROWER SECURITY AND PLEDGE AGREEMENT This BORROWER SECURITY AND PLEDGE AGREEMENT, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Security Agreement"), is made by ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Grantor, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Grantor; and WHEREAS, as a condition precedent to the making of the Credit Extensions under the Credit Agreement, the Grantor is required to execute and deliver this Security Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Administrative Agent" is defined in the preamble. "Collateral" is defined in Section 2.1. "Collateral Account" is defined in clause (b) of Section 4.3. "Computer Hardware and Software Collateral" means: (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware; (b) all software programs (including both source code, object code and all related applications and data files), whether now owned, licensed or leased or hereafter acquired by the Grantor, designed for use on the computers and electronic data processing hardware described in clause (a) above; (c) all firmware associated therewith; (d) all documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c); and (e) all rights with respect to all of the foregoing, including any and all copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing. "Control Agreement" means an agreement in form and substance satisfactory to the Administrative Agent which provides for the Administrative Agent to have "control" (as defined in Section 8-106 of the UCC, as such term relates to investment property (other than certificated securities or commodity contracts), or as used in Section 9-106 of the UCC, as such term relates to commodity contracts). "Copyright Collateral" means all copyrights of the Grantor, whether statutory or common law, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of the Grantor's rights, titles and interests in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the United States copyrights referred to in Schedule V hereto, and registrations and recordings thereof and all applications for registration thereof, whether pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. "Credit Agreement" is defined in the first recital. "Distributions" means all non-cash dividends paid on Capital Stock, liquidating dividends paid on Capital Stock, shares of Capital Stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Capital Stock constituting Collateral, but excluding Dividends. "Dividends" means cash dividends and cash distributions with respect to any Capital Stock constituting Collateral that are not a liquidating dividend. -2- "Grantor" is defined in the preamble. "Intellectual Property Collateral" means, collectively, the Computer Hardware and Software Collateral, the Copyright Collateral, the Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral. "Patent Collateral" means: (a) all letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing and each United States patent and patent application referred to in Schedule III hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all patent licenses, and other agreements providing the Grantor with the right to use any items of the type referred to in clauses (a) and (b) above; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement of any patent license. "Receivables" is defined in clause (c) of Section 2.1. "Related Contracts" is defined in clause (c) of Section 2.1. "Securities Act" is defined in clause (a) of Section 6.2. "Security Agreement" is defined in the preamble. "Trademark Collateral" means: (a)(i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos and other source or business identifiers, whether statutory or common law or registered or unregistered, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired including those registered in the United States Patent and Trademark Office and referred to in Schedule IV hereto, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any other country or political subdivision thereof or otherwise, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to as the "Trademark"); -3- (b) all Trademark licenses for the grant by or to the Grantor of any right to use any Trademark; and (c) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a), and to the extent applicable clause (b); (d) the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a) and, to the extent applicable, clause (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by the Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world. "Trade Secrets Collateral" means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of the Grantor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement. SECTION 1.3. UCC Definitions. Unless otherwise defined herein or in the Credit Agreement or the context otherwise requires, terms for which meanings are provided in the UCC are used in this Security Agreement (whether or not capitalized herein), including its preamble and recitals, with such meanings. ARTICLE II SECURITY INTEREST SECTION 2.1. Grant of Security Interest. The Grantor hereby assigns, pledges, hypothecates, charges, mortgages, delivers and transfers to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, and hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the Grantor's right, title and interest in the following property, whether tangible or intangible, whether now or hereafter existing, owned or acquired by the Grantor, and wherever located (collectively, the "Collateral"): (a) (i) all investment property in which the Grantor has an interest (including the Capital Stock of each issuer of such Capital Stock described in Schedule I hereto) and (ii) all other Capital Stock which are interests in limited liability companies or -4- partnerships in which the Grantor has an interest (including the Capital Stock of each issuer of such Capital Stock described in Schedule I hereto), in each case together with Dividends and Distributions payable in respect of the Collateral described in the foregoing clauses (a)(i) and (a)(ii); (b) all goods, including all equipment and inventory in all of its forms; (c) all accounts, contracts, contract rights, chattel paper, documents, instruments, promissory notes and general intangibles (including tax refunds and all payment intangibles), whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such accounts, contracts, contract rights, chattel paper, documents, instruments, promissory notes, general intangibles and payment intangibles (all of the foregoing collectively referred to as the "Receivables", and any and all such security agreements, guaranties, leases and other contracts collectively referred to as the "Related Contracts"); (d) all Intellectual Property Collateral; (e) all deposit accounts; (f) all letter of credit rights; (g) all commercial tort claims in which the Grantor has rights (including as a plaintiff); (h) the Collateral Account, all cash, checks, drafts, notes, bills of exchange, money orders, other like instruments and all investment property held in the Collateral Account (or in any sub-account thereof) and all interest and earnings in respect thereof; (i) all books, records, writings, data - bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section; (j) all other property and rights of every kind and description and interests therein; and (k) all products, offspring, rents, issues, profits, returns, income, supporting obligations and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a) through (j), and, to the extent not otherwise included, all payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include (i) the Grantor's real property leaseholds, (ii) any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would (A) constitute a -5- violation of a valid and enforceable restriction in favor of a third party on such grant, unless and until any required consents shall have been obtained, or (B) give any other party to such contract, instrument, license or other document the right to terminate its obligations thereunder, or (iii) investment property consisting of Capital Stock of an issuer that is a Foreign Subsidiary (other than a Foreign Subsidiary that (x) is treated as a partnership under the Code, other than a partnership that owns, directly or indirectly in excess of 65% of the total voting power of all Capital Stock of an entity organized under the laws of any jurisdiction outside the United States that is treated as a "controlled foreign corporation" within the meaning of section 957(a) of the Code or (y) for U.S. federal income tax purposes, is not treated as an entity that is separate from (A) the Grantor; (B) any Person that is treated as a partnership under the Code, other than a partnership that owns, directly or indirectly in excess of 65% of the total voting power of all Capital Stock of an entity organized under the laws of any jurisdiction outside the United States that is treated as a "controlled foreign corporation" within the meaning of section 957(a) of the Code or (C) any "United States person" (as defined in Section 7701(a)(30) of the Code)) of the Grantor, in excess of 65% of the total combined voting power of all Capital Stock of each such Foreign Subsidiary. SECTION 2.2. Security for Obligations. This Security Agreement and the Collateral in which the Administrative Agent for the benefit of the Secured Parties is granted a security interest hereunder by the Grantor secure the payment of all Obligations now or hereafter existing. SECTION 2.3. Grantor Remains Liable. Anything herein to the contrary notwithstanding (a) the Grantor will remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and will perform all of its duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed; (b) the exercise by the Administrative Agent of any of its rights hereunder will not release the Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral; and (c) no Secured Party will have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Security Agreement, nor will any Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.4. Dividends on Pledged Shares. In the event that any Dividend with respect to any Capital Stock pledged hereunder is permitted to be paid (in accordance with the Credit Agreement), such Dividend or payment may be paid directly to the Grantor. If any Dividend or payment is paid in contravention of the Credit Agreement, the Grantor shall hold the same segregated and in trust for the Administrative Agent until paid to the Administrative Agent in accordance with Section 4.1.5 hereto. -6- SECTION 2.5. Security Interest Absolute, etc. This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date. All rights of the Secured Parties and the security interests granted to the Administrative Agent (for its benefit and the ratable benefit of each other Secured Party) hereunder, and all obligations of the Grantor hereunder, shall, in each case, be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of any Loan Document; (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against any Obligor or any other Person (including any other Guarantor) under the provisions of any Loan Document or otherwise, or (ii) to exercise any right or remedy against any guarantor (including any Guarantor) of, or collateral securing, any Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other extension, compromise or renewal of any Obligation; (d) any reduction, limitation, impairment or termination of any Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Loan Document; (f) any addition, exchange or release of any collateral or of any Person that is (or will become) a guarantor (including the Grantor) of the Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Secured Party securing any of the Obligations; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Obligor, any surety or any guarantor. ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce the Secured Parties to enter into the Credit Agreement and make Credit Extensions thereunder, and to induce Secured Parties to enter into Rate Protection Agreements, the Grantor represents and warrants to each Secured Party as set forth below. -7- SECTION 3.1. As to Capital Stock of Subsidiaries. With respect to any Subsidiary of the Grantor that is (a) a corporation, business trust, joint stock company or similar Person, all Capital Stock issued by such Subsidiary is duly authorized and validly issued, fully paid and non-assessable; and (b) a partnership or limited liability company, no Capital Stock issued by such Subsidiary (i) is dealt in or traded on securities exchanges or in securities markets, (ii) is expressly provided in such Subsidiary's Organic Documents to be a security governed by Article 8 of the UCC or (iii) is held in a securities account. The percentage of the issued and outstanding Capital Stock of each Subsidiary pledged by the Grantor hereunder is as set forth on Schedule I hereto. SECTION 3.2. Grantor Name, Location, etc. The jurisdiction in which the Grantor is located for purposes of Sections 9-301 and 9-307 of the UCC is set forth in Item A of Schedule II hereto. Set forth in Item B of Schedule II hereto is each location a secured party would have filed a UCC financing statement prior to July 1, 2001 (or October 1, 2001 if the location is Connecticut and January 1, 2002 if the location is Alabama, Florida or Mississippi) to perfect a security interest in equipment, inventory and general intangibles owned by the Grantor. The Grantor does not have any trade names other than those set forth in Item C of Schedule II hereto. During the four months preceding the date hereof, the Grantor has not been known by any legal name different from the one set forth on the signature page hereto, nor has the Grantor been the subject of any merger or other corporate reorganization, except as set forth in Item D of Schedule II hereto. The name set forth on the signature page hereto is the true and correct name of the Grantor. The Grantor's federal taxpayer identification number is (and, during the four months preceding the date hereof, the Grantor has not had a federal taxpayer identification number different from that) set forth in Item E of Schedule II hereto. If the Collateral of the Grantor includes any inventory located in the State of California, the Grantor is not a "retail merchant" within the meaning of Section 9102 of the California UCC. On the Closing Date, the Grantor is not a party to any material federal, state or local government contract except as set forth in Item F of Schedule II hereto. SECTION 3.3. Ownership, No Liens, etc. The Grantor owns its Collateral free and clear of any Lien, except for Liens (a) created by this Security Agreement, and, (b) in the case of Collateral other than the Capital Stock of each Subsidiary pledged hereunder, permitted by the Credit Agreement. No effective financing statement or other filing similar in effect covering any Collateral is on file in any recording office, except those filed in favor of the Administrative Agent relating to this Security Agreement or those filed in connection with Liens permitted by the Credit Agreement or as to which a duly executed termination statement relating to such financing statement or other instrument has been delivered to the Administrative Agent on the Closing Date. SECTION 3.4. Possession of Inventory, etc. The Grantor agrees that it will maintain exclusive possession of its goods, instruments, promissory notes and inventory, other than (a) inventory in transit in the ordinary course of business, (b) inventory which is in the -8- possession or control of a warehouseman, bailee agent or other Person in the ordinary course of business (other than a Person controlled by or under common control with the Grantor) that upon the reasonable request of the Administrative Agent, has been notified of the security interest created in favor of the Secured Parties pursuant to this Security Agreement, and has agreed to hold such inventory subject to the Secured Parties' Lien and waive any Lien held by it against such inventory, and (c) instruments or promissory notes that have been delivered to the Administrative Agent pursuant to Section 3.5. SECTION 3.5. Negotiable Documents, Instruments and Chattel Paper. The Grantor has delivered to the Administrative Agent possession of all originals of all negotiable documents, instruments, promissory notes and chattel paper that have a principal amount, or value, in excess of $50,000 and are owned or held by the Grantor on the Closing Date; provided that no more than $500,000 in principal amount, or value, of the foregoing shall be excluded from the delivery request. SECTION 3.6. Intellectual Property Collateral. With respect to any Intellectual Property Collateral the loss, impairment or infringement of which could reasonably be expected to have a Material Adverse Effect: (a) such Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable, in whole or in part; (b) such Intellectual Property Collateral is valid and enforceable; (c) the Grantor has made all necessary filings and recordations to protect its interest in such Intellectual Property Collateral that are registered, issued, or for which applications are pending, including recordations of all of its interests in the Patent Collateral and Trademark Collateral in the United States Patent and Trademark Office and (subject to the terms of the Credit Agreement) in corresponding offices throughout the world, where necessary, and its claims to the Copyright Collateral in the United States Copyright Office and (subject to the terms of the Credit Agreement) in corresponding offices throughout the world, where necessary; (d) the Grantor is the exclusive owner of the entire and unencumbered right, title and interest in and to the owned Intellectual Property Collateral and no claim has been made that the use of such owned Intellectual Property Collateral does or may violate the asserted rights of any third party; and (e) the Grantor has performed and will continue to perform in all material respects all acts and has paid and will continue to pay all required fees and taxes to prosecute and maintain each and every such item of Intellectual Property Collateral in full force and effect throughout the world, as applicable. The Grantor owns directly or is entitled to use by license or otherwise, all patents, Trademarks, Trade Secrets, copyrights, mask works, licenses, technology, know-how, processes and rights with respect to any of the foregoing used in, necessary for the conduct of the Grantor's business, except where the failure to so own or be entitled to use could not reasonably be expected to have a Material Adverse Effect. -9- SECTION 3.7. Validity, etc. This Security Agreement creates a valid security interest in the Collateral securing the payment of the Obligations. The Grantor has filed or caused to be filed or will promptly file or cause to be filed all Filing Statements in the appropriate offices therefor (or has authenticated and delivered to the Administrative Agent Filing Statements suitable for filing in such offices) or and has taken or will promptly take all of the actions necessary to create perfected and (in the case of Collateral other than the Capital Stock of each Subsidiary pledged hereunder, subject to the Credit Agreement) first-priority security interests in the applicable Collateral to the extent that such security interest can be perfected by a filing under the UCC, in the United States Copyright Office or in the United States Patent and Trademark Office, or in the case of Capital Stock (if certificated) and promissory notes, by delivery to the Administrative Agent. SECTION 3.8. Authorization, Approval, etc. Except as have been obtained or made and are in full force and effect, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required either (a) for the grant by the Grantor of the security interest granted hereby, the pledge by the Grantor of any Collateral pursuant hereto or for the execution, delivery and performance of this Security Agreement by the Grantor; (b) for the perfection of or the exercise by the Administrative Agent of its rights and remedies hereunder; or (c) for the exercise by the Administrative Agent of the voting or other rights provided for in this Security Agreement, except (i) with respect to any securities issued by a Subsidiary of the Grantor, as may be required in connection with a disposition of such securities by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Security Agreement, (ii) any "change of control" or similar filings required by state licensing agencies and (iii) for any filings or notice required to be delivered to a Governmental Authority in connection with governmental Receivables. ARTICLE IV COVENANTS The Grantor covenants and agrees that, until the Termination Date, the Grantor will perform, comply with and be bound by the obligations set forth below. SECTION 4.1. As to Investment Property, etc. SECTION 4.1.1. Capital Stock of Subsidiaries. The Grantor will not allow any of its Subsidiaries that is (a) a corporation, business trust, joint stock company or similar Person, to issue uncertificated securities; and -10- (b) a partnership or limited liability company, to (i) issue Capital Stock that is to be dealt in or traded on securities exchanges or in securities markets, (ii) expressly provide in its Organic Documents that its Capital Stock is a security governed by Article 8 of the UCC, or (iii) place such Subsidiary's Capital Stock in a securities account, unless, in each case, all actions are taken by the Grantor to grant to the Administrative Agent a perfected first priority security interest in such Collateral. SECTION 4.1.2. Investment Property (other than Certificated Securities). With respect to any investment property (other than certificated securities) owned by the Grantor, the Grantor will use commercially reasonable efforts to cause a Control Agreement relating to such investment property to be executed and delivered by the Grantor and the applicable financial intermediary in favor of the Administrative Agent; provided that if, after using commercially reasonable efforts, the Grantor shall fail to cause such Control Agreement to be executed and delivered by such financial intermediary, the Grantor shall, upon the request of the Administrative Agent, transfer such investment property to a financial intermediary mutually satisfactory to the Administrative Agent that has agreed to execute and deliver such Control Agreement. SECTION 4.1.3. Stock Powers, etc. The Grantor agrees that all certificated securities delivered by the Grantor pursuant to this Security Agreement will be accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Administrative Agent. SECTION 4.1.4. Continuous Pledge. The Grantor will (subject to the terms of the Credit Agreement and this Security Agreement) deliver to the Administrative Agent and at all times keep pledged to the Administrative Agent pursuant hereto, on a first-priority, perfected basis all investment property constituting Collateral, all Dividends and Distributions with respect thereto, all payment intangibles to the extent they are evidenced by a document, instrument, promissory note or chattel paper, and all interest and principal with respect to such payment intangibles, and all proceeds and rights from time to time received by or distributable to the Grantor in respect of any of the foregoing Collateral. The Grantor agrees that it will, promptly following receipt thereof, deliver to the Administrative Agent possession of all originals of negotiable documents, instruments, promissory notes and chattel paper that have a principal amount, or value, in excess of $50,000 that it acquires following the Closing Date; provided that no more than $500,000 in principal amount, or value, of the foregoing shall be excluded from the delivery request. SECTION 4.1.5. Voting Rights; Dividends, etc. The Grantor agrees: (a) promptly upon receipt of notice of the occurrence and continuance of an Event of Default from the Administrative Agent and upon request therefor by the Administrative Agent (although no such request shall be required if an Event of Default under Section 8.1.9 of the Credit Agreement has occurred and is continuing), so long as such Event of Default shall continue, to deliver (properly endorsed where required hereby or requested by the Administrative Agent) to the Administrative Agent all Dividends and Distributions with respect to investment property, all interest, principal, other cash payments on payment intangibles, and all proceeds of the Collateral, in each case -11- thereafter received by the Grantor, all of which shall be held by the Administrative Agent as additional Collateral; and (b) after any Event of Default shall have occurred and be continuing and the Administrative Agent has notified the Grantor of the Administrative Agent's intention to exercise its voting power under this clause, (i) that the Administrative Agent may exercise (to the exclusion of the Grantor) the voting power and all other incidental rights of ownership with respect to any investment property constituting Collateral and the Grantor hereby grants the Administrative Agent an irrevocable proxy, exercisable under such circumstances, to vote such investment property; and (ii) to promptly deliver to the Administrative Agent such additional proxies and other documents as may be necessary to allow the Administrative Agent to exercise such voting power. All Dividends, Distributions, interest, principal, cash payments, payment intangibles and proceeds which may at any time and from time to time be held by the Grantor but which the Grantor is then obligated to deliver to the Administrative Agent pursuant to the terms of this Security Agreement, shall, until delivery to the Administrative Agent, be held by the Grantor separate and apart from its other property in trust for the Administrative Agent. The Administrative Agent agrees that unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given the notice referred to in clause (b), the Grantor will have the exclusive voting power with respect to any investment property constituting Collateral and the Administrative Agent will, upon the written request of the Grantor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by the Grantor which are necessary to allow the Grantor to exercise that voting power; provided that no vote shall be cast, or consent, waiver, or ratification given, or action taken by the Grantor that would impair any such Collateral or be inconsistent with or violate any provision of any Loan Document. SECTION 4.2. Change of Name, etc. The Grantor will not change its name or place of incorporation or organization or federal taxpayer identification number except upon 30 days' prior written notice to the Administrative Agent. If the Grantor is organized outside of the United States, it will not change its "location" as determined in accordance with Section 9-301 and 9-307 of the UCC and as set forth in Item A of Schedule II hereto except upon 30 days' prior written notice to the Administrative Agent. SECTION 4.3. As to Receivables. (a) The Grantor shall have the right to collect all Receivables so long as no Event of Default shall have occurred and be continuing. (b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the delivery of written notice by the Administrative Agent to the Grantor, all proceeds of Receivables constituting Collateral received by the Grantor shall be delivered in kind to the Administrative Agent for deposit to a deposit account (the "Collateral Account") of -12- the Grantor maintained with the Administrative Agent, and the Grantor shall not commingle any such proceeds, and shall hold separate and apart from all other property, all such proceeds in express trust for the benefit of the Administrative Agent until delivery thereof is made to the Administrative Agent; provided that any amounts remaining in the Collateral Account which were received and deposited pursuant to this clause (b) are to be returned to the Grantor if such Event of Default is cured or otherwise ceases and there is no longer any Event of Default that is continuing. (c) Following the delivery of notice pursuant to clause (b)(ii) of this Section and so long as an Event of Default is continuing, the Administrative Agent shall have the right to apply any amount in the Collateral Account to the payment of any Obligations which are due and payable. (d) With respect to the Collateral Account, it is hereby confirmed and agreed that (i) deposits in each Collateral Account are subject to a security interest as contemplated hereby, (ii) each such Collateral Account shall be under the sole dominion and control of the Administrative Agent and (iii) the Administrative Agent shall have the sole right of withdrawal over such Collateral Account. SECTION 4.4. As to Collateral. (a) Subject to clause (b) of this Section, the Grantor (i) may in the ordinary course of its business, at its own expense, sell, lease or furnish under the contracts of service any of the inventory normally held by the Grantor for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by the Grantor for such purpose, (ii) will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Administrative Agent may reasonably request following the occurrence and during the continuance of an Event of Default or, in the absence of such request, as the Grantor may deem advisable, and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to such Collateral. (b) At any time following the occurrence and during the continuance of a an Event of Default, whether before or after the maturity of any of the Obligations, the Administrative Agent may upon written notice to the Grantor, (i) revoke any or all of the rights of the Grantor set forth in clause (a), (ii) notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder and (iii) enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. (c) Upon request of the Administrative Agent following the occurrence and during the continuance of an Event of Default, the Grantor will, at its own expense, notify -13- any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder. (d) At any time following the occurrence and during the continuation of an Event of Default, the Administrative Agent may endorse, in the name of the Grantor, any item, howsoever received by the Administrative Agent, representing any payment on or other proceeds of any of the Collateral. SECTION 4.5. As to Intellectual Property Collateral. The Grantor covenants and agrees to comply with the following provisions as such provisions relate to any Intellectual Property Collateral material to the operations or business of the Grantor: (a) the Grantor will use commercially reasonable efforts to not (i) do or fail to perform any act whereby any of the Patent Collateral may lapse or become abandoned or dedicated to the public or unenforceable, (ii) permit any of its licensees to (A) fail to continue to use any of the Trademark Collateral in order to maintain all of the Trademark Collateral in full force free from any claim of abandonment for non-use, (B) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, (C) fail to employ all of the Trademark Collateral registered with any federal or state or foreign authority with an appropriate notice of such registration, (D) adopt or use any other Trademark which is confusingly similar or a colorable imitation of any of the Trademark Collateral, (E) use any of the Trademark Collateral registered with any federal, state or foreign authority except for the uses for which registration or application for registration of all of the Trademark Collateral has been made or (F) do or permit any act or knowingly omit to do any act whereby any of the Trademark Collateral may lapse or become invalid or unenforceable, or (iii) do or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof, unless, in the case of any of the foregoing requirements in clauses (i), (ii) and (iii), the Grantor shall either (x) reasonably and in good faith determine that any of such Intellectual Property Collateral is of immaterial economic value to the Grantor, or (y) have a valid business purpose to do otherwise; (b) the Grantor shall promptly notify the Administrative Agent if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or any court) regarding the Grantor's ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same; (c) in no event will the Grantor or any of its agents, employees, designees or licensees file an application for the registration of any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office -14- or any similar office or agency in any other country or any political subdivision thereof, unless it informs the Administrative Agent within 60 days after such filing, and upon request of the Administrative Agent (subject to the terms of the Credit Agreement), executes and delivers all agreements, instruments and documents as the Administrative Agent may reasonably request to evidence the Administrative Agent's security interest in such Intellectual Property Collateral; (d) the Grantor will use commercially reasonable efforts, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or (subject to the terms of the Credit Agreement) any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, any material Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clause (a) or (b)); and (e) the Grantor will promptly (but no less than quarterly) execute and deliver to the Administrative Agent (as applicable) a Patent Security Agreement, Trademark Security Agreement and/or Copyright Security Agreement, as the case may be, in the forms of Exhibit A, Exhibit B and Exhibit C hereto following its obtaining an interest in any such registered, issued or pending Intellectual Property, and shall execute and deliver to the Administrative Agent any other document required to acknowledge or register or perfect the Administrative Agent's interest in any part of such item of Intellectual Property Collateral unless the Grantor shall determine in good faith that any Intellectual Property Collateral is of immaterial economic value to the Grantor. SECTION 4.6. Further Assurances, etc. The Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Administrative Agent may reasonably request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Grantor will (a) from time to time upon the request of the Administrative Agent, promptly deliver to the Administrative Agent such stock powers, instruments and similar documents, reasonably satisfactory in form and substance to the Administrative Agent, with respect to such Collateral as the Administrative Agent may reasonably request and will, from time to time upon the request of the Administrative Agent after the occurrence and during the continuance of any Event of Default promptly transfer any securities constituting Collateral into the name of any nominee designated by the Administrative Agent; if any Collateral shall be evidenced by an instrument, negotiable document, promissory note or chattel paper, deliver and pledge to the Administrative Agent hereunder such instrument, negotiable document, promissory note or chattel paper duly -15- endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Administrative Agent; (b) file (or cause to be filed) such Filing Statements or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. Section 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or that the Administrative Agent may reasonably request in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Administrative Agent hereby; (c) deliver to the Administrative Agent and at all times keep pledged to the Administrative Agent pursuant hereto, on a first-priority, perfected basis, at the reasonable request of the Administrative Agent, all investment property constituting Collateral, all Dividends and Distributions with respect thereto, and all interest and principal with respect to promissory notes, and all proceeds and rights from time to time received by or distributable to the Grantor in respect of any of the foregoing Collateral; (d) except as otherwise provided by the Credit Agreement or this Security Agreement, not take or omit to take any action the taking or the omission of which would result in any impairment or alteration of any obligation of the maker of any payment intangible or other instrument constituting Collateral; (e) furnish to the Administrative Agent, from time to time at the Administrative Agent's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail; (f) after the occurrence and during the continuance of an Event of Default, do all things reasonably requested by the Administrative Agent in order to enable the Administrative Agent to have control (as such term is defined in Article 8 and Article 9 of any applicable Uniform Commercial Code relevant to the creation, perfection or priority of Collateral consisting of deposit accounts, investment property, electronic chattel paper and letter of credit rights) over any Collateral; and (g) notify the Administrative Agent if the Grantor reasonably believes it is entitled to recover a commercial tort claim the value of which is in excess of $2,500,000 and the Grantor take all such action reasonably requested by the Administrative Agent to grant to the Administrative Agent and perfect a security interest in such commercial tort claim. With respect to the foregoing and the grant of the security interest hereunder, the Grantor hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral. The Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or any financing -16- statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. ARTICLE V THE ADMINISTRATIVE AGENT SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The Grantor hereby irrevocably appoints the Administrative Agent its attorney-in-fact, with full authority in the place and stead of the Grantor and in the name of the Grantor or otherwise, from time to time in the Administrative Agent's discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings which the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral; and (d) to perform the affirmative obligations of the Grantor hereunder. The Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. SECTION 5.2. Administrative Agent May Perform. If the Grantor fails to perform any agreement contained herein within five Business Days after written notice from the Administrative Agent, the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by the Grantor pursuant to Section 11.3 of the Credit Agreement. SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on the Administrative Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any investment property, whether or not the Administrative Agent has or is deemed to have knowledge of such matters, or -17- (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. SECTION 5.4. Reasonable Care. The Administrative Agent shall exercise reasonable care in the custody and preservation of all of the Collateral in its possession. ARTICLE VI REMEDIES SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and be continuing: (a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may (i) require the Grantor to, and the Grantor hereby agrees that it will, at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place to be designated by the Administrative Agent which is reasonably convenient to both parties, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. The Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days prior notice to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied by the Administrative Agent against, all or any part of the Obligations as follows: (i) first, to the payment of all Obligations owing to the Administrative Agent, in its capacity as the Administrative Agent, including fees and expenses of counsel to the Administrative Agent; -18- (ii) second, to the equal and ratable payment of Obligations, in accordance with each Secured Party's Obligations owing to it under or pursuant to the Credit Agreement or any other Loan Document, applied (A) first to fees and expense reimbursements then due to such Secured Party, (B) second to interest due to such Secured Party, (C) third to pay or prepay principal of the Loans owing to such Secured Party or to reduce the credit exposure of such Secured Party under such Rate Protection Agreement, as the case may be, and (D) fourth to pay the remaining outstanding Obligations and Cash Collateralize all Letter of Credit Outstandings; (iii) third, without duplication of any amounts paid pursuant to clause (b)(ii) above, to the Indemnified Parties to the extent of any amounts owing pursuant to Section 11.4 of the Credit Agreement; and (iv) fourth, paid over to the Grantor or to whomsoever may be lawfully entitled to receive such surplus. For purposes of this Security Agreement, the "credit exposure" at any time of any Secured Party with respect to a Rate Protection Agreement to which such Secured Party is a party shall be determined at such time in accordance with the customary methods of calculating credit exposure under similar arrangements by the counterparty to such arrangements, taking into account potential interest rate movements and the respective termination provisions and notional principal amount and term of such Rate Protection Agreement. (c) The Administrative Agent may (i) transfer all or any part of the Collateral into the name of the Administrative Agent or its nominee, with or without disclosing that such Collateral is subject to the Lien hereunder, (ii) notify the parties obligated on any of the Collateral to make payment to the Administrative Agent of any amount due or to become due thereunder, (iii) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, (iv) endorse any checks, drafts, or other writings in the Grantor's name to allow collection of the Collateral, -19- (v) take control of any proceeds of the Collateral, and (vi) execute (in the name, place and stead of the Grantor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. SECTION 6.2. Securities Laws. If the Administrative Agent shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 6.1, the Grantor agrees that, upon request of the Administrative Agent, the Grantor will, at its own expense: (a) execute and deliver, and cause (or, with respect to any issuer which is not a Subsidiary of the Grantor, use its best efforts to cause) each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Administrative Agent, advisable to register such Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the reasonable opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto; (b) use its best efforts to exempt the Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Administrative Agent; (c) cause (or, with respect to any issuer which is not a Subsidiary of the Grantor, use its best efforts to cause) each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; and (d) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. SECTION 6.3. Compliance with Restrictions. The Grantor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Administrative Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and the Grantor further agrees that such compliance shall not result in such sale being -20- considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable nor accountable to the Grantor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. SECTION 6.4. Protection of Collateral. The Administrative Agent may from time to time, at its option, perform any act which the Grantor fails to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of a Default of the type described in Section 8.1.9 of the Credit Agreement) and the Administrative Agent may from time to time take any other action which the Administrative Agent reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1. Loan Document. This Security Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7.2. Binding on Successors, Transferees and Assigns; Assignment. This Security Agreement shall remain in full force and effect until the Termination Date has occurred, shall be binding upon the Grantor and its successors, transferees and assigns and shall inure to the benefit of and be enforceable by each Secured Party and its successors, transferees and assigns; provided that the Grantor may not (unless otherwise permitted under the terms of the Credit Agreement) assign any of its obligations hereunder without the prior written consent of all Lenders. SECTION 7.3. Amendments, etc. No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by the Grantor from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (on behalf of the Lenders or the Required Lenders, as the case may be, pursuant to Section 11.1 of the Credit Agreement) and the Grantor and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 7.4. Notices. All notices and other communications provided for hereunder shall be in writing or by facsimile and addressed, delivered or transmitted to the appropriate party at the address or facsimile number of such party specified in the Credit Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other party. Any notice or other communication, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any such notice or other communication, if transmitted by facsimile, shall be deemed given when transmitted and electronically confirmed. -21- SECTION 7.5. Release of Liens. Upon (a) the Disposition of Collateral in accordance with the Credit Agreement or (b) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (i) such Collateral (in the case of clause (a)) or (ii) all Collateral (in the case of clause (b)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 7.6. No Waiver; Remedies. In addition to, and not in limitation of Section 2.4, no failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 7.7. Headings. The various headings of this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provisions thereof. SECTION 7.8. Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Security Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 7.10. Counterparts. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 7.11. Foreign Pledge Agreements. Without limiting any of the rights, remedies, privileges or benefits provided hereunder to the Administrative Agent for its benefit and the ratable benefit of the other Secured Parties, the Grantor and the Administrative Agent hereby agree that the terms and provisions of this Security Agreement in respect of any -22- Collateral subject to the pledge or other Lien of a Foreign Pledge Agreement are, and shall be deemed to be, supplemental and in addition to the rights, remedies, privileges and benefits provided to the Administrative Agent and the other Secured Parties under such Foreign Pledge Agreement and under applicable law to the extent consistent with applicable law; provided that in the event that the terms of this Security Agreement conflict or are inconsistent with the applicable Foreign Pledge Agreement or applicable law governing such Foreign Pledge Agreement, (i) to the extent that the provisions of such Foreign Pledge Agreement or applicable foreign law are, under applicable foreign law, necessary for the creation, perfection or priority of the security interests in the Collateral subject to such Foreign Pledge Agreement, the terms of such Foreign Pledge Agreement or such applicable law shall be controlling and (ii) otherwise, the terms hereof shall be controlling. -23- IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. ASSOCIATED MATERIALS INCORPORATED By: /s/ Robert L. Winspear ------------------------------------------ Name: Robert L. Winspear Title: Secretary UBS AG, STAMFORD BRANCH, as Administrative Agent By: /s/ Wilfred V. Saint ------------------------------------------ Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US By: /s/ Thomas R. Salzano ------------------------------------------ Name: Thomas R. Salzano Title: Director Banking Products Services, US SCHEDULE I to Borrower Security and Pledge Agreement
Common Stock ------------ Authorized Outstanding % of Shares Issuer (corporate) Cert. # # of Shares Shares Shares Pledged ------------------ ------- ----------- ------ ------ ------- AMI Management Company 001 1000 1000 1000 100 AmerCord Inc. 003 9.9 60,000 100 100 Alside, Inc. 1 100 1000 100 100
Limited Liability Company Interests ----------------------------------- % of Limited Liability Type of Limited Liability Issuer (limited liability company) Company Interests Pledged Company Interests Pledged ---------------------------------- ------------------------- ------------------------- NONE
Partnership Interests --------------------- % of Partnership % of Partnership Issuer (partnership) Interests Owned Interests Pledged -------------------- --------------- ----------------- NONE
SCHEDULE II to Borrower Security and Pledge Agreement Item A. Location of the Grantor: Associated Materials Incorporated 2200 Ross Avenue, Suite 4100 East Dallas, TX 75201 Item B. Filing locations prior to July 1, 2001 JURISDICTION Alabama - SOS Alabama - Jefferson County Arkansas - SOS Arkansas - Union County Arizona - SOS Arizona - Maricopa County California - SOS California - Sacramento County Colorado - SOS Colorado - Denver County Colorado - El Paso County Colorado - Mesa County Connecticut - SOS Connecticut - Hartford County Delaware - SOS Florida - SOS Florida - Orange County Georgia - Cobb County Georgia - Fayette County Iowa - SOS Iowa - Linn County Idaho - SOS Idaho - Ada County Illinois - SOS Illinois - Cook County Illinois - Du Page County Illinois - Kane County Illinois - Rock Island County Illinois - Tazewell County Indiana - SOS Indiana - Marion County Indiana - Pike County Kentucky - SOS Kentucky - Jefferson County JURISDICTION Louisiana - Jefferson Parish Massachusetts - SOS Massachusetts - Middlesex County Massachusetts - Norfolk County Massachusetts - Randolph County Massachusetts - Wilmington County Maryland - SOS Maryland - Anne Arundel Co. Maryland - Baltimore County Maryland - Prince Georges County Maine - SOS Maine - Cumberland County Michigan - SOS Michigan - Oakland County Michigan - Wayne County Minnesota - SOS Minnesota - Hennepin County Minnesota - Ramsey County Missouri - SOS Missouri - Clay County Missouri - Greene County Missouri - Jackson County Missouri - St. Louis County Montana - SOS Montana - Yellowstone County New Hampshire - SOS New Hampshire - Hillsborough County North Carolina - SOS North Carolina - Guilford County North Carolina - Lenoir County North Carolina - Mecklenburg County North Carolina - New Hanover County North Carolina - Randolph County North Carolina - Wake County New Jersey - SOS New Jersey - Passaic County New York - SOS New York - Albany County New York - Erie County New York - Monroe County New York - Nassau County New York - Niagara County New York - Onondaga County Ohio - SOS Ohio - Cuyahoga County Ohio - Franklin County Ohio - Hamilton County Ohio - Montgomery County Ohio - Stark County Ohio - Summit County JURISDICTION Ohio - Wayne County Ohio - Lake County Oregon - SOS Oregon - Clackamas County Oregon - Mutnomah County Oregon - Washington County Pennsylvania - SOS Pennsylvania - Allegheney County Pennsylvania - Bucks County Pennsylvania - Butler County Pennsylvania - Dauphin County Pennsylvania - Lancaster County Pennsylvania - Lehigh County Pennsylvania - Montgomery County Pennsylvania - Washington County Rhode Island - SOS Rhode Island - Pawtucket South Dakota - SOS South Dakota - Pennington County Tennessee - SOS Tennessee - Davidson County Tennessee - Knox County Tennessee - Shelby County Texas - SOS Texas - Brazoria County Texas - Dallas County Texas - Ellis County Texas - Harris County Texas - Lubbock County Texas - Tarrant County Utah - SOS Utah - Carbon County Utah - Salt Lake County Utah - Utah County Utah - Washington County Utah - Weber County Virginia - SOS Virginia - Fairfax County Virginia - Frederick County Virginia - Norfolk County Virginia - Tazewell County Washington - SOS Washington - King County Washington - Snohomish County Washington - Spokane County Wisconsin - SOS Wisconsin - Dane County Wisconsin - Waukesha County West Virginia - SOS West Virginia - Kanawha County JURISDICTION Wyoming - SOS Wyoming - Natrona County Wyoming - Sweetwater County Item C. Trade names. Alpine Alpine Industries, Inc. Alpine Windows Alside Alside Builders Service Company Alside Inc. Alside Installation Services Alside Supply Center Alside Window Alside Window Company Alside Window Company Central Alside Window Company Midwest Alside Window Company Northwest Alside Window Company Southeast AmerCable AMI Management Company Ennis Extruded Products Company Freeport Vinyl Technologies Company Guardall Building Materials Company, Inc. Offshore Marine Cable Specialists Premium Building Products Company Premium Garage Door Company Premium Window Company UltraGuard Item D. Merger or other corporate reorganization. NONE Item E. Taxpayer ID numbers. 75-1872487 Item F. Government Contracts: NONE Exhibit C SCHEDULE III to Borrower Security and Pledge Agreement Item A. Patents (Based on searches conducted on 4/9/02) ISSUED PATENTS ASSOCIATED MATERIALS, INC.
U.S. PAT. NO. TITLE INVENTOR(S) ISSUE DATE NOTES - ------------- ----- ----------- ---------- ----- 5,899,239 Tubular Fencing Components Coulis 05/04/99 Formed from Plastic sheet material 5,878,543 Interlocking side panel Mowery 03/09/99 5,775,042 Siding panel with Mowery et al. 07/07/98 interlocking projection 5,759,660 Plastic covered articles for Coulis 06/02/98 railings and a method of making the same 5,704,188 Post structure Coulis 01/06/98 5,661,939 Interlocking panel and method Coulis et al. 09/02/97 of making the same 5,445,208 Vinyl door panel section Shaner et al. 08/29/95 5,421,556 Modular fencing components Dodge et al. 06/06/95 6,050,041 Splicing Member for Siding Mowery 04/18/00 Panels 6,311,955 Fencing system with Partial McGarry et al. 11/06/01 Wrap Components and Tongue and Groove Board Substitute
Borrower Security and Pledge Agreement PENDING PATENT APPLICATIONS ASSOCIATED MATERIALS, INC.
U.S. APP. NO. FILING TITLE STATUS DATE 09/298,823 4/26/99 Fencing System with Partial Wrap Allowed, issue fee paid Components and Tongue and Groove Board 07/17/01 Substitute 09/321,739 5/28/99 Interlocking Panel with Channel Nailing Final Office Action response Head due 10/02/01 - request for instructions outstanding 09/496,496 2/2/00 Splicing Member for Siding Panels Final Office Action response due 10/29/01 09/497,545 2/3/00 Clip for Siding Panels Final Office Action response due 11/11/01
ISSUED PATENTS THAT HAVE EXPIRED WITHIN PAST 6 YEARS ASSOCIATED MATERIALS, INC.
U.S. PAT. NO. ISSUE DATE NOTES - ------------- ---------- ----- 4,320,613 03/23/82 -Grant of Security Interest from Associated Materials, Inc. to Associates Commercial Corp., 150 North Michigan Ave, Chicago, IL 60606 (Recorded 10/12/84; Reel/Frame 004321/0726) -Grant of security Interest from entity known as Wilen Products, Inc. to Bankers Trust 7/5/2001. Appears to be improperly recorded chain of title problem. 6,050,041 06/24/80 Splicing member for securing horizontally adjacent wallsiding panels. 4,209,049 06/24/80 Traction grip for tyre
Borrower Security and Pledge Agreement SCHEDULE IV to Borrower Security and Pledge Agreement Item A. Trademarks (Based on searches conducted on or about 03/21/02) ACTIVE U.S. TRADEMARKS OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE,INC. PRESERVATION SN: 76/219,994 Filed Pending Class 19 3/6/01 ECLIPSE- SN: 76/238,084 Filed Pending Class 19 FLATSEAM 4/10/01 VINYL SIDING PRESERVATION- SN: 76/235,418 Filed Pending Class 19 PRESERVING THE 4/4/01 CHARACTER OF YOUR HOME ULTRABEAM SN: 76/261,918 Filed Pending Class 19 5/25/01 CLIMASHIELD SN: 76/261,919 Filed Pending Class 17 5/25/01 ECLIPSE SN: 76/205,933 Filed Pending Class 19 2/7/01 EXCALIBUR Reg. 2,189,267 9/15/98 Registered Class 19 THE CENTURY Reg. 1,494,265 6/28/88 Registered SERIES Class 6 WESTWOOD Reg. 1,549,811 8/1/89 Registered Class 6 GREENBRIAR III Reg. 1,525,701 2/21/89 Registered Class 19 XPE Reg. 1,556,851 9/19/89 Registered Class 19
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS HISTORICAL SERIES Reg. 1,552,496 8/22/89 Registered Class 6 WILLIAMSPORT Reg. 1,656,826 9/10/91 Registered Class 19 ULTRAMAXX Reg. 1,699,824 7/7/92 Registered Class 19 SADDLEWOOD SUPREME Reg. 1,704,109 7/28/92 Registered Class 6 CYPRESS CREEK Reg. 1,802,741 11/2/93 Registered Class ULTRAGUARD Reg. 1,803,751 11/9/93 Registered Class 19 ALPHA Reg. 1,829,854 4/5/94 Registered Class 19 THE ULTIMATE FENCE Reg. 1,914,954 8/29/95 Registered Class 19 GREENBRIAR IV Reg. 1,945,878 1/2/96 Registered Class 19 HAMPSHIRE DUTCH LAP Reg. 1,521,836 1/24/89 Registered Class 19 ALSIDE Reg. 1,361,396 9/24/85 Registered Class 6 BLAIR-CUT 2000 Reg. 1,362,889 10/1/85 Registered Class 6 ALSIDE (STYLIZED) Reg. 1,362,890 10/1/85 Registered Class 6 FIRST ON AMERICA'S Reg. 1,361,397 9/24/85 Registered HOMES Class 6 LIFEWALL Reg. 1,715, 9/15/92 Registered 783 Class 19 SUPER STEEL SIDING Reg. 1,698,757 7/7/92 Registered Class 6
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS NOVA IV Reg. 1,523,504 2/7/89 Registered Class 19 SATINWOOD* Reg. 1,376,459 12/17/85 Registered Class 6 POLYMER P-5000 Reg. 1,373,253 12/3/85 Registered Class 2 FIRST ON AMERICAS'S Reg. 1,372,534 11/26/85 Registered HOMES Class 17 and 19 VYNASOL Reg. 1,375,459 12/17/85 Registered Class 6 ALSIDE Reg. 1,374,768 12/10/85 Registered Class 17 AIR-CUSHION Reg. 878,491 10/14/69 Registered Class 17 ALSIDE Reg. 1,366,665 10/22/85 Registered (STYLIZED) Class 17 & 19 MARQUIS Reg. 1,383,012 2/18/86 Registered Class 6 LIMITED EDITION Reg. 1,383,959 2/25/86 Registered SERIES (STYLIZED) Class 6 CENTURION Reg. 1,383,011 2/18/86 Registered Class 6 ODYSSEY Reg. 1,415,900 11/4/86 Registered Class 19 CONQUEST Reg. 2,126,899 1/6/98 Registered Class 19 CLIMATECH Reg. 2,420,765 1/16/01 Registered Class 19
* Supplemental Register 420134-1 Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. ("AMI") OMNI WINDOWS & Design Reg. 11/13/84 Registered *Grant of Security Interest from AMI to 1,305,040 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246). THE ENDURA SUPREME Reg. 2/2/84 Registered *Grant of Security Interest from AMI to SERIES 1,267,968 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE (STYLIZED) Reg. 3/26/85 Registered *Grant of Security Interest from AMI to 1,326,551 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE (STYLIZED) Reg. 3/26/85 Registered *Grant of Security Interest from AMI to 1,326,987 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) GUARD-ALL Reg. 2/14/84 Registered *Grant of Security Interest from AMI to 1,267,139 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) OMNI Reg. 8/14/84 Registered *Grant of Security Interest from AMI to 1,290,081 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) AMERICUT Reg. 10/2/84 Registered *Grant of Security Interest from AMI to 1,298,386 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ELEGANCE IV Reg. 10/16/84 Registered *Grant of Security Interest from AMI to 1,300,571 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) EXCALIBUR Reg. 10/23/84 Registered *Grant of Security Interest from AMI to 1,301,211 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS GUARD-ALL Reg. 11/13/84 Registered *Grant of Security Interest from AMI to 1,304,689 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) STEEL-KING Reg. 873,696 7/29/69 Registered *Grant of Security Interest from AMI to Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) WEATHER-GRAIN Reg. 968,479 9/18/73 Registered *Grant of Security Interest from AMI to (STYLIZED) Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) SAW-KERF Reg. 973,218 11/20/73 Registered *Grant of Security Interest from AMI to Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) THE DESIGNER'S Reg. 6/14/83 Registered *Grant of Security Interest from AMI to SELECTION 1,242,108 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) SUPER-PVC Reg. 827,371 4/11/67 Registered *Grant of Security Interest from AMI to (STYLIZED) Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) FORMULA PC Reg. 827,752 4/25/67 Registered *Grant of Security Interest from AMI to PROTECTIVE COATING Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) RIGID-STONE (STYLIZED) Reg. 824,306 2/21/67 Registered *Grant of Security Interest from AMI to Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE (STYLIZED) Reg. 507,692 3/15/49 Registered *Grant of Security Interest from AMI to Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC.; HOWEVER, COMPANY LISTS OWNERSHIP AS "AMERCABLE" TIGER Reg. 2,412,368 12/12/00 Registered Class 6 GEXOL Ser. 10/13/00 Pending Class 76/147,065 9, 17
FOREIGN FILED TRADEMARKS
MARK* SERIAL/REG. # FILING/REG. DATE STATUS NOTES ----- ALSIDE-Canada Reg. 111,282 8/22/88 Registered ALSIDE-Australia Reg. 708,426 5/13/96 Registered ALSIDE-Poland Serial # 4/21/00 Registered Z-163657 Class 19
ADDITIONAL TRADEMARKS(1) OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE,INC.
MARK* SERIAL/REG. # FILING/REG. STATUS NOTES DATE THE BEST CHOICE FOR Reg. 1,922,036 09/26/95 Reg. Class 19 YOUR HOME COLORCONNECT 78/111,492 02/27/02 Reg. Class 42 FAIRFIELD 78/108,324 02/12/02 Reg. Cl. 19
(1) The trademarks listed in this chart were not revealed by the company but were disclosed via our search results. While these trademarks may have been omitted by the Company due to alleged non-use they may, however, retain common law protection. Thus, we have included them in these schedules. Borrower Security and Pledge Agreement THE ARCHITECTURAL COLOR 78/099,211 12/19/01 Reg. Cl. 19 COLLECTION REVOLUTION BY ALSIDE 78/094,312 11/20/01 Reg. Cl. 19 REVOLUTION 78/094,307 11/20/01 Reg. Cl. 19 THE NATURE OF SIDING 78/092,136 11/07/01 Pending, Intent to Use, Class 19 EVERDOOR 78/089,994 10/24/01 Reg. Cl. 19 BROOKWOOD 1,457,169 09/15/87 Reg. Cl. 6
OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. PREMIUM POLY SHUTTERS 1,175,172 10/27/81 Reg. Cl. 19 *Grant of Security Interest from AMI to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) WINDBREAKER 1,184,432 01/05/82 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER STEEL SIDING 915,290 06/15/71 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) CAPE COD 5 820,917 12/20/66 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE ELECTROLON 815,722 09/27/66 Reg. Cl. 2 *Grant of Security Interest from AMI SUPER ELECTROSTATIC (alone) to Associated Commercial Corp. FINISH (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement BUILDERS ALUMINUM 726,365 01/09/62 Reg. Cl. 19 *Grant of Security Interest from AMI SIDING (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-FOAM 911,714 05/25/71 Reg. Cl. 17 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) WOOD-TONE 799,375 11/30/65 Reg. Cl. 19 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) TUFF-SIDE 743,230 01/08/63 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246 GARD-IT 757,584 10/01/63 Reg. Cl. 19 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SELECT A COLOR 791,654 06/29/65 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ELECTROLON 823,575 02/07/67 Reg. Cl. 2 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
(2) The trademarks listed in this chart were also not revealed by the company but were disclosed via our search results. Again, despite any non-use due to abandonment, cancellation or expiration, they may retain common law protection. Thus, we have included them in these schedules. Borrower Security and Pledge Agreement TRADEMARKS RENDERED ABANDONED, CANCELLED OR EXPIRED(2) OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE, INC. ----------------------------------------------------------------------------- HISTORICAL COLLECTION 1,887,912 Filed 04/04/95 -Cancelled 04/13/02 STERLING 74/493,556 Filed 2/23/94 -Abandoned after Inter-Partes Decision (10/11/96) HISTORICAL SERIES 74/411,193 Filed 07/12/93 -Abandoned - (ITU) Failure to Respond (09/13/94) ODYSSEY 74/379,400 Filed 04/16/93 -Cancelled - Section 8 (Recorded 01/07/01; Cancellation in OG 02/20/01) AMEREX 73/694,189 Filed 11/09/87 -Abandoned - After Inter Partes Decision (08/10/89) PREMIUM RIGID BRICK 1,413,390 Reg. 10/14/86 -Cancelled - Section 8 (recorded 04/19/93; OG 06/01/93) PREMIUM RIGID STONE 1,413,391 Reg. 10/14/86 -Cancelled - Section (recorded 04/19/93; OG 06/01/93) PREMIUM RIGID SHAKE 1,413,392 Reg. 10/14/86 -Cancelled - section 8 (recorded 04/19/93; OG 06/01/93) HISTORICAL 1,473,170 Reg. 01/19/88 -Cancelled - Section 8 (recorded 07/25/94; OG 09/06/94) HARBOR POINTE 1,500,548 Reg. 08/16/88 -Cancelled - Section 8 (recorded 02/20/95; OG 04/04/95) COUNTRY ESTATE 1,531,984 Reg. 03/28/89 -Cancelled - Section 8 (recorded 10/02/95; OG 11/14/95) CARRIAGE PATH 1,500,549 Reg. 08/16/88 -Cancelled - Section 8 (recorded 02/20/95; OG 04/04/95) DESIGNERS' CHOICE 1,540,113 Reg. 05/23/89 -Cancelled - Section 8 (recorded 11/27/95; OG Cancellation 01/09/96)
Borrower Security and Pledge Agreement AMI 1,582,219 Reg. 02/13/90 -Cancelled - Section 8 (cancellation recorded 08/20/96; cancellation in OG 10/01/96) EXCALIBUR 1,565,956 Reg. 11/14/89 -Cancelled - Section 8 (recorded 05/20/96; cancellation in OG07/02/96) PRO 900 1,649,492 Reg. 07/02/91 -Cancelled - Section 8 (cancellation recorded 01/06/98; cancellation in OG 02/17/98) LIFEWALL 1,316,981 Reg. 01/29/85 -Cancelled - Section 8 (cancellation recorded 05/29/92; cancellation in OG 07/07/92)
OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. BRIAR-CUT SUPREME 1,149,591 03/31/81 -Cancelled 04/06/02 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGID SHAKE 1,030,333 Reg. 01/13/76 -Expired - 10/21/96 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATACITE 888,536 Reg. 03/31/70 -Expired - 11/04/92 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-WAL 988,729 Reg. 07/23/74 -Expired - 05/01/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) LIFEWALL 603,195 Reg. 03/15/55 -Expired - 12/18/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement BRIAR-CUT 893,120 Reg. 06/23/70 -Expired 07/06/01 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) INTERNATIONAL 889,603 Reg. 04/21/70 -Expired 11/04/92 DESIGNS BY ALSIDE Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) RIVET-SEAL 902,481 Reg. 11/17/70 -Expired 11/04/92 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) LUSTRE-TONE 1,025,089 Reg. 11/18/75 -Expired 08/26/96 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) VYNASOL SATINWOOD 902,470 Reg. 11/17/70 -Expired (11/04/92) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGID-BRICK 976,213 Reg.01/08/74 -Expired 02/23/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGIDIZED 969,851 Reg. 10/02/73 -Expired (Supp. Reg.) 07/11/94 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALUMA KING 602,619 Reg. 03/01/55 -Expired 12/04/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ULTRA WEATHER GRAIN 1,085,875 Reg. 02/21/78 -Expired 11/30/98 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) VYNA-KLAD 1,078,749 Reg. 12/06/77 -Expired 09/14/98 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ULTRALUM 1,078,433 Reg. 11/29/77 -Expired (09/01/98) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-SASH 1,095,996 Reg. 07/11/78 -Expired (04/19/99) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALPHA 1,095,997 Reg. 07/11/78 -Expired (04/19/99) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) COMMODORE 1,095,998 Reg. 07/11/78 -Expired 04/19/99 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) POLY II 1,118,802 Reg. 05/22/79 -Expired (12/15/00) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ULTRA DEEP GRAIN 1,119,509 Reg. 06/05/79 -Expired 07/03/00 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ULTRA-GUARD 1,134,442 Reg. 05/06/80 -Cancelled - Section 8 (recorded 05/12/01; OG 06/26/01) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A AMERCABLE -------------------------------------------------------------------------- AMERGUIDE 74/527,133 Filed 05/09/94 -Abandoned - Failure to Respond (07/07/95) AMEREX 73/611,688 Filed 07/28/86 -Abandoned - Failure to Respond (05/15/87)
OWNER (PTO DATABASE) LISTED AS: ALPINE INDUSTRIES, INC. (AMI acquired substantially all of the assets of Alpine Industries, Inc. on or about October, 2000) Note: All of the IP owned by Alpine Industries, Inc. has been assigned to other entities, except for the few below (which are abandoned). ALPINE SOUND SHIELD 74/193,616 Filed 08/12/91 -Abandoned - Failure to Respond (10/01/92) SNOW-FIGHTER 73/396,268 Filed 09/30/82 -Abandoned - Failure to Respond (01/18/84)
Borrower Security and Pledge Agreement SCHEDULE V to Borrower Security and Pledge Agreement Item A. Copyrights/Mask Works Registered Copyrights/Mask Works NONE Copyright/Mask Work Pending Registration Applications NONE Borrower Security and Pledge Agreement EXHIBIT A to Borrower Security and Pledge Agreement PATENT SECURITY AGREEMENT This PATENT SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between ASSOCIATED MATERIALS INCORPORATED (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Grantor, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Borrower Security and Pledge Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Patent Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: Borrower Security and Pledge Agreement SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following property, whether now or hereafter existing or acquired by the Grantor (the "Patent Collateral"): (a) all of its letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing and each patent and patent application referred to in Schedule I attached hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all of its patent licenses, and other agreements providing the Grantor with the right to use any items of the type referred to in clauses (a) and (b) above; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement of any patent license. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Patent Collateral with the United States Patent and Trademark Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. SECTION 4. Release of Liens. Upon (i) the Disposition of Patent Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Patent Collateral (in the case of clause (i)) or (B) all Patent Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Patent Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the Security Borrower Security and Pledge Agreement Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * Borrower Security and Pledge Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. ASSOCIATED MATERIALS INCORPORATED By:_________________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Title: By:_________________________________ Title: Borrower Security and Pledge Agreement SCHEDULE I to Patent Security Agreement Item A. Patents (Based on searches conducted on 4/9/02) ISSUED PATENTS ASSOCIATED MATERIALS, INC.
U.S. PAT. NO. TITLE INVENTOR(S) ISSUE DATE NOTES - ------------- ----- ----------- ---------- ----- 5,899,239 Tubular Fencing Components Coulis 05/04/99 Formed from Plastic sheet material 5,878,543 Interlocking side panel Mowery 03/09/99 5,775,042 Siding panel with Mowery et al. 07/07/98 interlocking projection 5,759,660 Plastic covered articles for Coulis 06/02/98 railings and a method of making the same 5,704,188 Post structure Coulis 01/06/98 5,661,939 Interlocking panel and method Coulis et al. 09/02/97 of making the same 5,445,208 Vinyl door panel section Shaner et al. 08/29/95 5,421,556 Modular fencing components Dodge et al. 06/06/95 6,050,041 Splicing Member for Siding Mowery 04/18/00 Panels 6,311,955 Fencing system with Partial McGarry et al. 11/06/01 Wrap Components and Tongue and Groove Board Substitute
Borrower Security and Pledge Agreement PENDING PATENT APPLICATIONS ASSOCIATED MATERIALS, INC.
U.S. APP. NO. FILING TITLE STATUS DATE 09/298,823 4/26/99 Fencing System with Partial Wrap Allowed, issue fee paid Components and Tongue and Groove Board 07/17/01 Substitute 09/321,739 5/28/99 Interlocking Panel with Channel Nailing Final Office Action response Head due 10/02/01 - request for instructions outstanding 09/496,496 2/2/00 Splicing Member for Siding Panels Final Office Action response due 10/29/01 09/497,545 2/3/00 Clip for Siding Panels Final Office Action response due 11/11/01
ISSUED PATENTS THAT HAVE EXPIRED WITHIN PAST 6 YEARS ASSOCIATED MATERIALS, INC.
U.S. PAT. NO. ISSUE DATE NOTES - ------------- ---------- ----- 4,320,613 03/23/82 -Grant of Security Interest from Associated Materials, Inc. to Associates Commercial Corp., 150 North Michigan Ave, Chicago, IL 60606 (Recorded 10/12/84; Reel/Frame 004321/0726) -Grant of security Interest from entity known as Wilen Products, Inc. to Bankers Trust 7/5/2001. Appears to be an improperly recorded chain of title problem. 6,050,041 06/24/80 Splicing member for securing horizontally adjacent wallsiding panels. 4,209,049 06/24/80 Traction grip for tyre
Borrower Security and Pledge Agreement EXHIBIT B to Borrower Security and Pledge Agreement TRADEMARK SECURITY AGREEMENT This TRADEMARK SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between ASSOCIATED MATERIALS INCORPORATED (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Grantor, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Borrower Security and Pledge Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Trademark Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: Borrower Security and Pledge Agreement SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following property, whether now or hereafter existing or acquired by the Grantor (the "Trademark Collateral"): (a) (i) all of its trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos and other source or business identifiers, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired including those registered in the United States Patent and Trademark Office and referred to in Schedule I hereto, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any other country or political subdivision thereof or otherwise, and all common-law rights relating to the foregoing, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to as the "Trademark"); (b) all Trademark licenses for the grant by or to the Grantor of any right to use any Trademark; (c) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a), and to the extent applicable clause (b); (d) the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a) and, to the extent applicable, clause (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by the Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Trademark Collateral with the United States Patent and Trademark Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. Borrower Security and Pledge Agreement SECTION 4. Release of Liens. Upon (i) the Disposition of Trademark Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Trademark Collateral (in the case of clause (i)) or (B) all Trademark Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Trademark Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * Borrower Security and Pledge Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by Authorized Officer as of the date first above written. ASSOCIATED MATERIALS INCORPORATED By:_________________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Title: By:_________________________________ Title: Borrower Security and Pledge Agreement SCHEDULE I to Trademark Security Agreement Item A. Trademarks (Based on searches conducted on or about 03/21/02) ACTIVE U.S. TRADEMARKS OWNERSHIP (PTO DATABASE) LISTED AS: ALSIDE, INC.
MARK SERIAL/REG. FILING/REG. STATUS NOTES # DATE PRESERVATON SN: Filed 2/1/01 Pending Class 76/203,105 19 GALLERY SN: Filed 9/26/00 Pending Class 76/135,518 19 BRIAR-CUT SN: Filed 11/6/00 Pending Class SUPREME 76/160,325 19
OWNERSHIP (PTO DATABASE) LISTED AS: ALSIDE, INC., A DIVISION OF ASSOCIATED MATERIALS, INC. PRO 90 Reg. 9/24/85 Registered 1,361,884 Class 17
OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE, INC. PRESERVATION SN: Filed 3/6/01 Pending Class 76/219,994 19 ECLIPSE- SN: Filed 4/10/01 Pending Class FLATSEAM 76/238,084 19 VINYL SIDING PRESERVATION- SN: Filed 4/4/01 Pending Class PRESERVING THE 76/235,418 19 CHARACTER OF YOUR HOME
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS ULTRABEAM SN: Filed 5/25/01 Pending Class 76/261,918 19 CLIMASHIELD SN: Filed 5/25/01 Pending Class 76/261,919 17 ECLIPSE SN: Filed 2/7/01 Pending Class 76/205,933 19 EXCALIBUR Reg. 9/15/98 Registered 2,189,267 Class 19 THE CENTURY Reg. 6/28/88 Registered SERIES 1,494,265 Class 6 WESTWOOD Reg. 8/1/89 Registered 1,549,811 Class 6 GREENBRIAR III Reg. 2/21/89 Registered 1,525,701 Class 19 XPE Reg. 9/19/89 Registered 1,556,851 Class 19 HISTORICAL SERIES Reg. 8/22/89 Registered 1,552,496 Class 6 WILLIAMSPORT Reg. 9/10/91 Registered 1,656,826 Class 19 ULTRAMAXX Reg. 7/7/92 Registered 1,699,824 Class 19 SADDLEWOOD SUPREME Reg. 7/28/92 Registered 1,704,109 Class 6 CYPRESS CREEK Reg. 11/2/93 Registered 1,802,741 Class ULTRAGUARD Reg. 11/9/93 Registered 1,803,751 Class 19 ALPHA Reg. 4/5/94 Registered 1,829,854 Class 19
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS THE ULTIMATE FENCE Reg. 8/29/95 Registered 1,914,954 Class 19 GREENBRIAR IV Reg. 1/2/96 Registered 1,945,878 Class 19 HAMPSHIRE DUTCH LAP Reg. 1/24/89 Registered 1,521,836 Class 19 ALSIDE Reg. 9/24/85 Registered 1,361,396 Class 6 BLAIR-CUT 2000 Reg. 10/1/85 Registered 1,362,889 Class 6 ALSIDE (STYLIZED) Reg. 10/1/85 Registered 1,362,890 Class 6 FIRST ON AMERICA'S Reg. 9/24/85 Registered HOMES 1,361,397 Class 6 LIFEWALL Reg. 9/15/92 Registered 1,715,783 Class 19 SUPER STEEL SIDING Reg. 7/7/92 Registered 1,698,757 Class 6 NOVA IV Reg. 2/7/89 Registered 1,523,504 Class 19 SATINWOOD* Reg. 12/17/85 Registered 1,376,459 Class 6 POLYMER P-5000 Reg. 12/3/85 Registered 1,373,253 Class 2 FIRST ON AMERICAS'S Reg. 11/26/85 Registered HOMES 1,372,534 Class 17 and 19 VYNASOL Reg. 12/17/85 Registered 1,375,459 Class 6
* Supplemental Register 420134-1 Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS ALSIDE Reg. 12/10/85 Registered 1,374,768 Class 17 AIR-CUSHION Reg. 10/14/69 Registered 878,491 Class 17 ALSIDE Reg. 10/22/85 Registered (STYLIZED) 1,366,665 Class 17 & 19 MARQUIS Reg. 2/18/86 Registered 1,383,012 Class 6 LIMITED EDITION Reg. 2/25/86 Registered SERIES (STYLIZED) 1,383,959 Class 6 CENTURION Reg. 2/18/86 Registered 1,383,011 Class 6 ODYSSEY Reg. 11/4/86 Registered 1,415,900 Class 19 CONQUEST Reg. 1/6/98 Registered 2,126,899 Class 19 CLIMATECH Reg. 1/16/01 Registered 2,420,765 Class 19
OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. ("AMI") OMNI WINDOWS & Design Reg. 11/13/84 Registered *Grant of Security Interest from AMI to 1,305,040 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246). THE ENDURA SUPREME Reg. 2/2/84 Registered *Grant of Security Interest from AMI to SERIES 1,267,968 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE (STYLIZED) Reg. 3/26/85 Registered *Grant of Security Interest from AMI to 1,326,551 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS ALSIDE (STYLIZED) Reg. 3/26/85 Registered *Grant of Security Interest from AMI to 1,326,987 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) GUARD-ALL Reg. 2/14/84 Registered *Grant of Security Interest from AMI to 1,267,139 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) OMNI Reg. 8/14/84 Registered *Grant of Security Interest from AMI to 1,290,081 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) AMERICUT Reg. 10/2/84 Registered *Grant of Security Interest from AMI to 1,298,386 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ELEGANCE IV Reg. 10/16/84 Registered *Grant of Security Interest from AMI to 1,300,571 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) EXCALIBUR Reg. 10/23/84 Registered *Grant of Security Interest from AMI to 1,301,211 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) GUARD-ALL Reg. 11/13/84 Registered *Grant of Security Interest from AMI to 1,304,689 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) STEEL-KING Reg. 7/29/69 Registered *Grant of Security Interest from AMI to 873,696 Class 6 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) WEATHER-GRAIN Reg. 9/18/73 Registered *Grant of Security Interest from AMI to (STYLIZED) 968,479 Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ACTIVE U.S. TRADEMARKS SAW-KERF Reg. 973,218 11/20/73 Registered *Grant of Security Interest from AMI to Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) THE DESIGNER'S Reg. 1,242,108 6/14/83 Registered *Grant of Security Interest from AMI to SELECTION Class 19 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) SUPER-PVC Reg. 827,371 4/11/67 Registered *Grant of Security Interest from AMI to (STYLIZED) Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) FORMULA PC Reg. 827,752 4/25/67 Registered *Grant of Security Interest from AMI to PROTECTIVE COATING Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) RIGID-STONE (STYLIZED) Reg. 824,306 2/21/67 Registered *Grant of Security Interest from AMI to Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE (STYLIZED) Reg. 507,692 3/15/49 Registered *Grant of Security Interest from AMI to Class 12 Associates Commercial Corp. (Recorded 10/12/84; Reel/Frame 0483/0246)
OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC.; HOWEVER, COMPANY LISTS OWNERSHIP AS "AMERCABLE" TIGER Reg. 2,412,368 12/12/00 Registered Class 6 GEXOL Ser. 10/13/00 Pending Class 76/147,065 9, 17
FOREIGN FILED TRADEMARKS
MARK* SERIAL/REG. # FILING/REG. DATE STATUS NOTES ALSIDE-Canada Reg. 111,282 8/22/88 Registered
Borrower Security and Pledge Agreement FOREIGN FILED TRADEMARKS
MARK* SERIAL/REG. # FILING/REG. DATE STATUS NOTES ALSIDE-Australia Reg. 708,426 5/13/96 Registered ALSIDE-Poland Serial # 4/21/00 Registered Z-163657 Class 19
ADDITIONAL TRADEMARKS(2) OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE, INC.
MARK* SERIAL/REG. FILING/REG. DATE STATUS NOTES # THE BEST CHOICE FOR Reg. 09/26/95 Reg. Class 19 YOUR HOME 1,922,036 COLORCONNECT 78/111,492 02/27/02 Reg. Class 42 FAIRFIELD 78/108,324 02/12/02 Reg. Cl. 19 THE ARCHITECTURAL COLOR 78/099,211 12/19/01 Reg. Cl. 19 COLLECTION REVOLUTION BY ALSIDE 78/094,312 11/20/01 Reg. Cl. 19 REVOLUTION 78/094,307 11/20/01 Reg. Cl. 19
(2) The trademarks listed in this chart were not revealed by the company but were disclosed via our search results. While these trademarks may have been omitted by the Company due to alleged non-use they may, however, retain common law protection. Thus, we have included them in these schedules. Borrower Security and Pledge Agreement THE NATURE OF SIDING 78/092,136 11/07/01 Pending, Intent to Use, Class 19 EVERDOOR 78/089,994 10/24/01 Reg. Cl. 19 BROOKWOOD 1,457,169 09/15/87 Reg. Cl. 6
OWNERSHIP (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. PREMIUM POLY SHUTTERS 1,175,172 10/27/81 Reg. Cl. 19 *Grant of Security Interest from AMI to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) WINDBREAKER 1,184,432 01/05/82 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER STEEL SIDING 915,290 06/15/71 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) CAPE COD 5 820,917 12/20/66 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALSIDE ELECTROLON 815,722 09/27/66 Reg. Cl. 2 *Grant of Security Interest from AMI SUPER ELECTROSTATIC (alone) to Associated Commercial Corp. FINISH (recorded 10/12/84; Reel/Frame 0483/0246) BUILDERS ALUMINUM 726,365 01/09/62 Reg. Cl. 19 *Grant of Security Interest from AMI SIDING (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-FOAM 911,714 05/25/71 Reg. Cl. 17 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement WOOD-TONE 799,375 11/30/65 Reg. Cl. 19 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) TUFF-SIDE 743,230 01/08/63 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246 GARD-IT 757,584 10/01/63 Reg. Cl. 19 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SELECT A COLOR 791,654 06/29/65 Reg. Cl. 6 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ELECTROLON 823,575 02/07/67 Reg. Cl. 2 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
TRADEMARKS RENDERED ABANDONED, CANCELLED OR EXPIRED(2) OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A ALSIDE, INC. HISTORICAL COLLECTION 1,887,912 Filed 04/04/95 -Cancelled 04/13/02 STERLING 74/493,556 Filed 2/23/94 -Abandoned after Inter-Partes Decision (10/11/96) HISTORICAL SERIES 74/411,193 Filed 07/12/93 -Abandoned - (ITU) Failure to Respond (09/13/94)
(2) The trademarks listed in this chart were also not revealed by the company but were disclosed via our search results. Again, despite any non-use due to abandonment, cancellation or expiration, they may retain common law protection. Thus, we have included them in these schedules. Borrower Security and Pledge Agreement
ODYSSEY 74/379,400 Filed 04/16/93 -Cancelled - Section 8 (Recorded 01/07/01; Cancellation in OG 02/20/01) AMEREX 73/694,189 Filed 11/09/87 -Abandoned - After Inter Partes Decision (08/10/89) PREMIUM RIGID BRICK 1,413,390 Reg. 10/14/86 -Cancelled - Section 8 (recorded 04/19/93; OG 06/01/93) PREMIUM RIGID STONE 1,413,391 Reg. 10/14/86 -Cancelled - Section (recorded 04/19/93; OG 06/01/93) PREMIUM RIGID SHAKE 1,413,392 Reg. 10/14/86 -Cancelled - section 8 (recorded 04/19/93; OG 06/01/93) HISTORICAL 1,473,170 Reg. 01/19/88 -Cancelled - Section 8 (recorded 07/25/94; OG 09/06/94) HARBOR POINTE 1,500,548 Reg. 08/16/88 -Cancelled - Section 8 (recorded 02/20/95; OG 04/04/95) COUNTRY ESTATE 1,531,984 Reg. 03/28/89 -Cancelled - Section 8 (recorded 10/02/95; OG 11/14/95) CARRIAGE PATH 1,500,549 Reg. 08/16/88 -Cancelled - Section 8 (recorded 02/20/95; OG 04/04/95) DESIGNERS' CHOICE 1,540,113 Reg. 05/23/89 -Cancelled - Section 8 (recorded 11/27/95; OG cancellation 01/09/96) AMI 1,582,219 Reg. 02/13/90 -Cancelled - Section 8 (cancellation recorded 08/20/96; cancellation in OG 10/01/96) EXCALIBUR 1,565,956 Reg. 11/14/89 -Cancelled - Section 8 (recorded 05/20/96; cancellation in OG07/02/96) PRO 900 1,649,492 Reg. 07/02/91 -Cancelled - Section 8 (cancellation recorded 01/06/98; cancellation in OG 02/17/98)
Borrower Security and Pledge Agreement LIFEWALL 1,316,981 Reg. 01/29/85 -Cancelled - Section 8 (cancellation recorded 05/29/92; cancellation in OG 07/07/92)
OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. BRIAR-CUT SUPREME 1,149,591 03/31/81 -Cancelled 04/06/02 *Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGID SHAKE 1,030,333 Reg. 01/13/76 -Expired - 10/21/96 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATACITE 888,536 Reg. 03/31/70 -Expired - 11/04/92 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-WAL 988,729 Reg. 07/23/74 -Expired - 05/01/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) LIFEWALL 603,195 Reg. 03/15/55 -Expired - 12/18/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) BRIAR-CUT 893,120 Reg. 06/23/70 -Expired 07/06/01 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) INTERNATIONAL 889,603 Reg. 04/21/70 -Expired 11/04/92 DESIGNS BY ALSIDE Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement RIVET-SEAL 902,481 Reg. 11/17/70 -Expired 11/04/92 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) LUSTRE-TONE 1,025,089 Reg. 11/18/75 -Expired 08/26/96 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) VYNASOL SATINWOOD 902,470 Reg. 11/17/70 -Expired (11/04/92) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGID-BRICK 976,213 Reg.01/08/74 -Expired 02/23/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) SUPER RIGIDIZED 969,851 Reg. 10/02/73 -Expired (Supp. Reg.) 07/11/94 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALUMA KING 602,619 Reg. 03/01/55 -Expired 12/04/95 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ULTRA WEATHER GRAIN 1,085,875 Reg. 02/21/78 -Expired 11/30/98 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) VYNA-KLAD 1,078,749 Reg. 12/06/77 -Expired 09/14/98 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
Borrower Security and Pledge Agreement ULTRALUM 1,078,433 Reg. 11/29/77 -Expired (09/01/98) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) STRATA-SASH 1,095,996 Reg. 07/11/78 -Expired (04/19/99) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ALPHA 1,095,997 Reg. 07/11/78 -Expired (04/19/99) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) COMMODORE 1,095,998 Reg. 07/11/78 -Expired 04/19/99 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) POLY II 1,118,802 Reg. 05/22/79 -Expired (12/15/00) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ULTRA DEEP GRAIN 1,119,509 Reg. 06/05/79 -Expired 07/03/00 Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246) ULTRA-GUARD 1,134,442 Reg. 05/06/80 -Cancelled - Section 8 (recorded 05/12/01; OG 06/26/01) Grant of Security Interest from AMI (alone) to Associated Commercial Corp. (recorded 10/12/84; Reel/Frame 0483/0246)
OWNER (PTO DATABASE) LISTED AS: ALSIDE, INC. PORTRAIT 76/135,519 09/26/00 -Abandoned - Failure to Respond (01/09/02)
OWNER (PTO DATABASE) LISTED AS: ASSOCIATED MATERIALS, INC. D/B/A AMERCABLE Borrower Security and Pledge Agreement AMERGUIDE 74/527,133 Filed 05/09/94 -Abandoned - Failure to Respond (07/07/95) AMEREX 73/611,688 Filed 07/28/86 Abandoned - Failure to Respond (05/15/87)
OWNER (PTO DATABASE) LISTED AS: ALPINE INDUSTRIES, INC. (AMI acquired substantially all of the assets of Alpine Industries, Inc. on or about October, 2000) Note: All of the IP owned by Alpine Industries, Inc. has been assigned to other entities, except for the few below (which are abandoned). ALPINE SOUND SHIELD 74/193,616 Filed 08/12/91 -Abandoned - Failure to Respond (10/01/92) SNOW-FIGHTER 73/396,268 Filed 09/30/82 -Abandoned - Failure to Respond (01/18/84)
Borrower Security and Pledge Agreement EXHIBIT C to Borrower Security and Pledge Agreement COPYRIGHT SECURITY AGREEMENT This COPYRIGHT SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between ASSOCIATED MATERIALS INCORPORATED (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Grantor, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Borrower Security and Pledge Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Copyright Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following (the "Copyright Collateral"), whether now or hereafter existing or acquired by the Grantor: all copyrights of the Grantor, whether statutory or common law, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of the Grantor's right, title and interest in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the United States copyrights referred to in Schedule I hereto, and registrations and recordings thereof and all applications for registration thereof, whether pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Copyright Collateral with the United States Copyright Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. SECTION 4. Release of Liens. Upon (i) the Disposition of Copyright Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Copyright Collateral (in the case of clause (i)) or (B) all Copyright Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Copyright Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Copyright Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * Borrower Security and Pledge Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. ASSOCIATED MATERIAL INCORPORATED By: ___________________________________ Name: Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By: ___________________________________ Name: Title: By: ___________________________________ Name: Title: Borrower Security and Pledge Agreement SCHEDULE I to Copyright Security Agreement Item A. Copyrights/Mask Works Registered Copyrights/Mask Works NONE Copyright/Mask Work Pending Registration Applications NONE Borrower Security and Pledge Agreement EX-10.3 12 y61690exv10w3.txt FORM OF SUBSIDIARY SECURITY AND PLEDGE AGREEMENT EXHIBIT 10.3 FORM OF SUBSIDIARY SECURITY AND PLEDGE AGREEMENT This SUBSIDIARY SECURITY AND PLEDGE AGREEMENT, dated as of _____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Security Agreement"), is made by each Subsidiary of Associated Materials Incorporated from time to time party hereto (each individually a "Grantor" and collectively the "Grantors") in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; and WHEREAS, as a condition precedent to the making of the Credit Extensions under the Credit Agreement, each Grantor is required to execute and deliver this Security Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees, for the benefit of each Secured Party, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Administrative Agent" is defined in the preamble. "Collateral" is defined in Section 2.1. "Collateral Account" is defined in clause (b) of Section 4.3. "Computer Hardware and Software Collateral" means: (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware; (b) all software programs (including both source code, object code and all related applications and data files), whether now owned, licensed or leased or hereafter acquired by a Grantor, designed for use on the computers and electronic data processing hardware described in clause (a) above; (c) all firmware associated therewith; (d) all documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c); and (e) all rights with respect to all of the foregoing, including any and all copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing. "Control Agreement" means an agreement in form and substance satisfactory to the Administrative Agent which provides for the Administrative Agent to have "control" (as defined in Section 8-106 of the UCC, as such term relates to investment property (other than certificated securities or commodity contracts), or as used in Section 9-106 of the UCC, as such term relates to commodity contracts). "Copyright Collateral" means all copyrights of the Grantors, whether statutory or common law, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of the Grantors' rights, titles and interests in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the United States copyrights referred to in Schedule V hereto, and registrations and recordings thereof and all applications for registration thereof, whether pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. "Credit Agreement" is defined in the first recital. "Distributions" means all non-cash dividends paid on Capital Stock, liquidating dividends paid on Capital Stock, shares of Capital Stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, -2- consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Capital Stock constituting Collateral, but excluding Dividends. "Dividends" means cash dividends and cash distributions with respect to any Capital Stock constituting Collateral that are not a liquidating dividend. "Grantor" and "Grantors" are defined in the preamble. "Intellectual Property Collateral" means, collectively, the Computer Hardware and Software Collateral, the Copyright Collateral, the Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral. "Patent Collateral" means: (a) all letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing and each United States patent and patent application referred to in Schedule III hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all patent licenses, and other agreements providing a Grantor with the right to use any items of the type referred to in clauses (a) and (b) above; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement of any patent license. "Receivables" is defined in clause (c) of Section 2.1. "Related Contracts" is defined in clause (c) of Section 2.1. "Securities Act" is defined in clause (a) of Section 6.2. "Security Agreement" is defined in the preamble. "Trademark Collateral" means: (a) (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos and other source or business identifiers, whether statutory or common law or registered or unregistered, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired including those registered in the United States Patent and -3- Trademark Office and referred to in Schedule IV hereto, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any other country or political subdivision thereof or otherwise, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to as the "Trademark"); (b) all Trademark licenses for the grant by or to a Grantor of any right to use any Trademark; and (c) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a), and to the extent applicable clause (b); (d) the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a) and, to the extent applicable, clause (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by a Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world. "Trade Secrets Collateral" means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of a Grantor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement. SECTION 1.3. UCC Definitions. Unless otherwise defined herein or in the Credit Agreement or the context otherwise requires, terms for which meanings are provided in the UCC are used in this Security Agreement (whether or not capitalized herein), including its preamble and recitals, with such meanings. ARTICLE II SECURITY INTEREST SECTION 2.1. Grant of Security Interest. Each Grantor hereby assigns, pledges, hypothecates, charges, mortgages, delivers and transfers to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, and hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of such Grantor's right, title and interest in the following -4- property, whether tangible or intangible, whether now or hereafter existing, owned or acquired by such Grantor, and wherever located (collectively, the "Collateral"): (a) (i) all investment property in which such Grantor has an interest (including the Capital Stock of each issuer of such Capital Stock described in Schedule I hereto) and (ii) all other Capital Stock which are interests in limited liability companies or partnerships in which such Grantor has an interest (including the Capital Stock of each issuer of such Capital Stock described in Schedule I hereto), in each case together with Dividends and Distributions payable in respect of the Collateral described in the foregoing clauses (a)(i) and (a)(ii); (b) all goods, including all equipment and inventory in all of its forms; (c) all accounts, contracts, contract rights, chattel paper, documents, instruments, promissory notes and general intangibles (including tax refunds and all payment intangibles), whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such accounts, contracts, contract rights, chattel paper, documents, instruments, promissory notes, general intangibles and payment intangibles (all of the foregoing collectively referred to as the "Receivables", and any and all such security agreements, guaranties, leases and other contracts collectively referred to as the "Related Contracts"); (d) all Intellectual Property Collateral; (e) all deposit accounts; (f) all letter of credit rights; (g) all commercial tort claims in which such Grantor has rights (including as a plaintiff); (h) the Collateral Account, all cash, checks, drafts, notes, bills of exchange, money orders, other like instruments and all investment property held in the Collateral Account (or in any sub-account thereof) and all interest and earnings in respect thereof; (i) all books, records, writings, data-bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section; (j) all other property and rights of every kind and description and interests therein; and (k) all products, offspring, rents, issues, profits, returns, income, supporting obligations and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a) through (j), and, to the extent not otherwise included, all payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, -5- payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include (i) such Grantor's real property leaseholds, (ii) any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would (A) constitute a violation of a valid and enforceable restriction in favor of a third party on such grant, unless and until any required consents shall have been obtained or (B) give any other party to such contract, instrument, license or other document the right to terminate its obligations thereunder, or (iii) investment property consisting of Capital Stock of an issuer that is a Foreign Subsidiary (other than a Foreign Subsidiary that (x) is treated as a partnership under the Code, other than a partnership that owns, directly or indirectly in excess of 65% of the total combined voting power of all Capital Stock of an entity organized under the laws of any jurisdiction outside the United States that is treated as a "controlled foreign corporation" within the meaning of section 957(a) of the Code or (y) for U.S. federal income tax purposes, is not treated as an entity that is separate from (A) such Grantor; (B) any Person that is treated as a partnership under the Code , other than a partnership that owns, directly or indirectly in excess of 65% of the total combined voting power of all Capital Stock of an entity organized under the laws of any jurisdiction outside the United States that is treated as a "controlled foreign corporation" within the meaning of section 957(a) of the Code or (C) any "United States person" (as defined in Section 7701(a)(30) of the Code)) of such Grantor, in excess of 65% of the total combined voting power of all Capital Stock of each such Foreign Subsidiary. SECTION 2.2. Security for Obligations. This Security Agreement and the Collateral in which the Administrative Agent for the benefit of the Secured Parties is granted a security interest hereunder by the Grantors secure the payment of all Obligations now or hereafter existing. SECTION 2.3. Grantors Remain Liable. Anything herein to the contrary notwithstanding (a) the Grantors will remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and will perform all of their duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed; (b) the exercise by the Administrative Agent of any of its rights hereunder will not release any Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral; and (c) no Secured Party will have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Security Agreement, nor will any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. -6- SECTION 2.4. Dividends on Pledged Shares. In the event that any Dividend with respect to any Capital Stock pledged hereunder is permitted to be paid (in accordance with the Credit Agreement), such Dividend or payment may be paid directly to the applicable Grantor. If any Dividend or payment is paid in contravention of the Credit Agreement, such Grantor shall hold the same segregated and in trust for the Administrative Agent until paid to the Administrative Agent in accordance with Section 4.1.5 hereto. SECTION 2.5. Security Interest Absolute, etc. This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date. All rights of the Secured Parties and the security interests granted to the Administrative Agent (for its benefit and the ratable benefit of each other Secured Party) hereunder, and all obligations of the Grantors hereunder, shall, in each case, be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of any Loan Document; (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against any Obligor or any other Person (including any other Guarantor) under the provisions of any Loan Document or otherwise, or (ii) to exercise any right or remedy against any guarantor (including any Guarantor) of, or collateral securing, any Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other extension, compromise or renewal of any Obligation; (d) any reduction, limitation, impairment or termination of any Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Loan Document; (f) any addition, exchange or release of any collateral or of any Person that is (or will become) a guarantor (including the Grantors hereunder) of the Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Secured Party securing any of the Obligations; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Obligor, any surety or any guarantor. -7- SECTION 2.6. Postponement of Subrogation. Each Grantor agrees that it will not prior to the Termination Date exercise any rights which it may acquire by way of rights of subrogation under any Loan Document to which it is a party. No Grantor shall seek or be entitled to seek any contribution or reimbursement from any Obligor, in respect of any payment made under any Loan Document or otherwise, until following the Termination Date. Any amount paid to such Grantor on account of any such subrogation rights prior to the Termination Date shall be held in trust for the benefit of the Secured Parties and shall immediately be paid and turned over to the Administrative Agent for the benefit of the Secured Parties in the exact form received by such Grantor (duly endorsed in favor of the Administrative Agent, if required), to be credited and applied against the Obligations, whether matured or unmatured, in accordance with Section 6.1; provided that if such Grantor has made payment to the Secured Parties of all or any part of the Obligations and the Termination Date has occurred, then at such Grantor's request, the Administrative Agent (on behalf of the Secured Parties) will, at the expense of such Grantor, execute and deliver to such Grantor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Grantor of an interest in the Obligations resulting from such payment. In furtherance of the foregoing, at all times prior to the Termination Date, such Grantor shall refrain from taking any action or commencing any proceeding against any Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Security Agreement to any Secured Party. ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce the Secured Parties to enter into the Credit Agreement and make Credit Extensions thereunder, and to induce Secured Parties to enter into Rate Protection Agreements, the Grantors represent and warrant to each Secured Party as set forth below. SECTION 3.1. As to Capital Stock of Subsidiaries. With respect to any Subsidiary of any Grantor that is (a) a corporation, business trust, joint stock company or similar Person, all Capital Stock issued by such Subsidiary is duly authorized and validly issued, fully paid and non-assessable; and (b) a partnership or limited liability company, no Capital Stock issued by such Subsidiary (i) is dealt in or traded on securities exchanges or in securities markets, (ii) is expressly provided in such Subsidiary's Organic Documents to be a security governed by Article 8 of the UCC or (iii) is held in a securities account. The percentage of the issued and outstanding Capital Stock of each Subsidiary pledged by any Grantor hereunder is as set forth on Schedule I hereto. SECTION 3.2. Grantor Name, Location, etc. The jurisdiction in which each Grantor is located for purposes of Sections 9-301 and 9-307 of the UCC is set forth in Item A of Schedule II hereto. Set forth in Item B of Schedule II hereto is each location a secured party would have filed a UCC financing statement prior to July 1, 2001 (or October 1, 2001 if the location is -8- Connecticut and January 1, 2002 if the location is Alabama, Florida or Mississippi) to perfect a security interest in equipment, inventory and general intangibles owned by each Grantor. No Grantor has any trade names other than those set forth in Item C of Schedule II hereto. During the four months preceding the date hereof, no Grantor has been known by any legal name different from the one set forth on the signature page hereto, nor has such Grantor been the subject of any merger or other corporate reorganization, except as set forth in Item D of Schedule II hereto. The name set forth on the signature page hereto is the true and correct name of such Grantor. Each Grantor's federal taxpayer identification number is (and, during the four months preceding the date hereof, such Grantor has not had a federal taxpayer identification number different from that) set forth in Item E of Schedule II hereto. If the Collateral of any Grantor includes any inventory located in the State of California, such Grantor is not a "retail merchant" within the meaning of Section 9102 of the California UCC. On the Closing Date, no Grantor is a party to any material federal, state or local government contract except as set forth in Item F of Schedule II hereto. SECTION 3.3. Ownership, No Liens, etc. Such Grantor owns its Collateral free and clear of any Lien, except for Liens (a) created by this Security Agreement, and, (b) in the case of Collateral other than the Capital Stock of each Subsidiary pledged hereunder, permitted by the Credit Agreement. No effective financing statement or other filing similar in effect covering any Collateral is on file in any recording office, except those filed in favor of the Administrative Agent relating to this Security Agreement or those filed in connection with Liens permitted by the Credit Agreement or as to which a duly executed termination statement relating to such financing statement or other instrument has been delivered to the Administrative Agent on the Closing Date. SECTION 3.4. Possession of Inventory, etc. Each Grantor agrees that it will maintain exclusive possession of its goods, instruments, promissory notes and inventory, other than (a) inventory in transit in the ordinary course of business, (b) inventory which is in the possession or control of a warehouseman, bailee agent or other Person in the ordinary course of business (other than a Person controlled by or under common control with such Grantor) that, upon the reasonable request of the Administrative Agent has been notified of the security interest created in favor of the Secured Parties pursuant to this Security Agreement, and has agreed to hold such inventory subject to the Secured Parties' Lien and waive any Lien held by it against such inventory and (c) instruments or promissory notes that have been delivered to the Administrative Agent pursuant to Section 3.5. SECTION 3.5. Negotiable Documents, Instruments and Chattel Paper. Such Grantor has delivered to the Administrative Agent possession of all originals of all negotiable documents, instruments, promissory notes and chattel paper that have a principal amount, or value, in excess of $50,000 and are owned or held by such Grantor on the Closing Date; provided that no more than $500,000 in principal amount, or value, of the foregoing shall be excluded from the delivery request. SECTION 3.6. Intellectual Property Collateral. With respect to any Intellectual Property Collateral the loss, impairment or infringement of which could reasonably be expected to have a Material Adverse Effect: -9- (a) such Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable, in whole or in part; (b) such Intellectual Property Collateral is valid and enforceable; (c) such Grantor has made all necessary filings and recordations to protect its interest in such Intellectual Property Collateral that are registered, issued, or for which applications are pending, including recordations of all of its interests in the Patent Collateral and Trademark Collateral in the United States Patent and Trademark Office and (subject to the terms of the Credit Agreement) in corresponding offices throughout the world, where necessary, and its claims to the Copyright Collateral in the United States Copyright Office and (subject to the terms of the Credit Agreement) in corresponding offices throughout the world, where necessary; (d) such Grantor is the exclusive owner of the entire and unencumbered right, title and interest in and to the owned Intellectual Property Collateral and no claim has been made that the use of such owned Intellectual Property Collateral does or may violate the asserted rights of any third party; and (e) such Grantor has performed and will continue to perform in all material respects all acts and has paid and will continue to pay all required fees and taxes to prosecute and maintain each and every such item of Intellectual Property Collateral in full force and effect throughout the world, as applicable. Each Grantor owns directly or is entitled to use by license or otherwise, all patents, Trademarks, Trade Secrets, copyrights, mask works, licenses, technology, know-how, processes and rights with respect to any of the foregoing used in, necessary for the conduct of such Grantor's business, except where the failure to so own or be entitled to use could not reasonably be expected to have a Material Adverse Effect. SECTION 3.7. Validity, etc. This Security Agreement creates a valid security interest in the Collateral securing the payment of the Obligations. Each Grantor has filed or caused to be filed or will promptly file or cause to be filed all Filing Statements in the appropriate offices therefor (or has authenticated and delivered to the Administrative Agent Filing Statements suitable for filing in such offices) and has taken or will promptly take all of the actions necessary to create perfected and (in the case of Collateral other than the Capital Stock of each Subsidiary pledged hereunder, subject to the Credit Agreement) first-priority security interests in the applicable Collateral to the extent that such security interest can be perfected by a filing under the UCC, in the United States Copyright Office or in the United States Patent and Trademark Office, or in the case of Capital Stock (if certificated) and promissory notes, by delivery to the Administrative Agent . SECTION 3.8. Authorization, Approval, etc. Except as have been obtained or made and are in full force and effect, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required either -10- (a) for the grant by the Grantors of the security interest granted hereby, the pledge by the Grantors of any Collateral pursuant hereto or for the execution, delivery and performance of this Security Agreement by the Grantors; (b) for the perfection of or the exercise by the Administrative Agent of its rights and remedies hereunder; or (c) for the exercise by the Administrative Agent of the voting or other rights provided for in this Security Agreement, except (i) with respect to any securities issued by a Subsidiary of the Grantors, as may be required in connection with a disposition of such securities by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Security Agreement, (ii) any "change of control" or similar filings required by state licensing agencies and (iii) for any filings or notice required to be delivered to a Governmental Authority in connection with governmental Receivables. SECTION 3.9. Best Interests. It is in the best interests of such Grantor to execute this Security Agreement inasmuch as such Grantor will, as a result of being a Subsidiary of the Borrower, derive substantial direct and indirect benefits from the Credit Extensions made from time to time to the Borrower by the Lenders and the Issuer pursuant to the Credit Agreement and the execution and delivery of Rate Protection Agreements between the Borrower, other Obligors and certain Secured Parties, and each Grantor agrees that the Secured Parties are relying on this representation in agreeing to make Credit Extensions to the Borrower. ARTICLE IV COVENANTS Each Grantor covenants and agrees that, until the Termination Date, such Grantor will perform, comply with and be bound by the obligations set forth below. SECTION 4.1. As to Investment Property, etc. SECTION 4.1.1. Capital Stock of Subsidiaries. No Grantor will allow any of its Subsidiaries that is (a) a corporation, business trust, joint stock company or similar Person, to issue uncertificated securities; and (b) a partnership or limited liability company, to (i) issue Capital Stock that is to be dealt in or traded on securities exchanges or in securities markets, (ii) expressly provide in its Organic Documents that its Capital Stock is a security governed by Article 8 of the UCC, or (iii) place such Subsidiary's Capital Stock in a securities account; unless, in each case, all actions are taken by such Grantor to grant to the Administrative Agent a perfected first priority security interest in such Collateral. -11- SECTION 4.1.2. Investment Property (other than Certificated Securities). With respect to any investment property (other than certificated securities) owned by any Grantor, such Grantor will use commercially reasonable efforts to cause a Control Agreement relating to such investment property to be executed and delivered by such Grantor and the applicable financial intermediary in favor of the Administrative Agent; provided that if after using commercially reasonable efforts such Grantor shall fail to cause such Control Agreement to be executed and delivered by such financial intermediary, such Grantor shall, upon the request of the Administrative Agent, transfer such investment property to a financial intermediary mutually satisfactory to the Administrative Agent that has agreed to execute and deliver such Control Agreement. SECTION 4.1.3. Stock Powers, etc. Each Grantor agrees that all certificated securities delivered by such Grantor pursuant to this Security Agreement will be accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Administrative Agent. SECTION 4.1.4. Continuous Pledge. Each Grantor will (subject to the terms of the Credit Agreement and this Security Agreement) deliver to the Administrative Agent and at all times keep pledged to the Administrative Agent pursuant hereto, on a first-priority, perfected basis all investment property constituting Collateral, all Dividends and Distributions with respect thereto, all payment intangibles to the extent they are evidenced by a document, instrument, promissory note or chattel paper, and all interest and principal with respect to such payment intangibles, and all proceeds and rights from time to time received by or distributable to such Grantor in respect of any of the foregoing Collateral. Each Grantor agrees that it will, promptly following receipt thereof, deliver to the Administrative Agent possession of all originals of negotiable documents, instruments, promissory notes and chattel paper that have a principal amount, or value, in excess of $50,000 that it acquires following the Closing Date; provided that no more than $500,000 in principal amount, or value, of the foregoing shall be excluded from the delivery request. SECTION 4.1.5. Voting Rights; Dividends, etc. Each Grantor agrees: (a) promptly upon receipt of notice of the occurrence and continuance of an Event of Default from the Administrative Agent and upon request therefor by the Administrative Agent (although no such request shall be required if an Event of Default under Section 8.1.9 of the Credit Agreement has occurred and is continuing), so long as such Event of Default shall continue, to deliver (properly endorsed where required hereby or requested by the Administrative Agent) to the Administrative Agent all Dividends and Distributions with respect to investment property, all interest, principal, other cash payments on payment intangibles, and all proceeds of the Collateral, in each case thereafter received by such Grantor, all of which shall be held by the Administrative Agent as additional Collateral; and (b) after any Event of Default shall have occurred and be continuing and the Administrative Agent has notified such Grantor of the Administrative Agent's intention to exercise its voting power under this clause, -12- (i) that the Administrative Agent may exercise (to the exclusion of such Grantor) the voting power and all other incidental rights of ownership with respect to any investment property constituting Collateral and such Grantor hereby grants the Administrative Agent an irrevocable proxy, exercisable under such circumstances, to vote such investment property; and (ii) to promptly deliver to the Administrative Agent such additional proxies and other documents as may be necessary to allow the Administrative Agent to exercise such voting power. All Dividends, Distributions, interest, principal, cash payments, payment intangibles and proceeds which may at any time and from time to time be held by such Grantor but which such Grantor is then obligated to deliver to the Administrative Agent pursuant to the terms of this Security Agreement, shall, until delivery to the Administrative Agent, be held by such Grantor separate and apart from its other property in trust for the Administrative Agent. The Administrative Agent agrees that unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given the notice referred to in clause (b), such Grantor will have the exclusive voting power with respect to any investment property constituting Collateral and the Administrative Agent will, upon the written request of such Grantor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by such Grantor which are necessary to allow such Grantor to exercise that voting power; provided that no vote shall be cast, or consent, waiver, or ratification given, or action taken by such Grantor that would impair any such Collateral or be inconsistent with or violate any provision of any Loan Document. SECTION 4.2. Change of Name, etc. No Grantor will change its name or place of incorporation or organization or federal taxpayer identification number except upon 30 days' prior written notice to the Administrative Agent. If any Grantor is organized outside of the United States, it will not change its "location" as determined in accordance with Section 9-301 and 9-307 of the UCC and as set forth in Item A of Schedule II hereto except upon 30 days' prior written notice to the Administrative Agent. SECTION 4.3. As to Receivables. (a) Each Grantor shall have the right to collect all Receivables so long as no Event of Default shall have occurred and be continuing. (b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the delivery of written notice by the Administrative Agent to each Grantor, all proceeds of Receivables constituting Collateral received by such Grantor shall be delivered in kind to the Administrative Agent for deposit to a deposit account (the "Collateral Account") of such Grantor maintained with the Administrative Agent, and such Grantor shall not commingle any such proceeds, and shall hold separate and apart from all other property, all such proceeds in express trust for the benefit of the Administrative Agent until delivery thereof is made to the Administrative Agent provided that any amounts remaining in the Collateral Account which were received and deposited pursuant to this -13- clause (b) are to be returned to such Grantor if such Event of Default is cured or otherwise ceases and there is no longer any Event of Default that is continuing. (c) Following the delivery of notice pursuant to clause (b)(ii) of this Section, and so long as an Event of Default is continuing the Administrative Agent shall have the right to apply any amount in the Collateral Account to the payment of any Obligations which are due and payable. (d) With respect to the Collateral Account, it is hereby confirmed and agreed that (i) deposits in each Collateral Account are subject to a security interest as contemplated hereby, (ii) each such Collateral Account shall be under the sole dominion and control of the Administrative Agent and (iii) the Administrative Agent shall have the sole right of withdrawal over such Collateral Account. SECTION 4.4. As to Collateral. (a) Subject to clause (b) of this Section, each Grantor (i) may in the ordinary course of its business, at its own expense, sell, lease or furnish under the contracts of service any of the inventory normally held by such Grantor for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by such Grantor for such purpose, (ii) will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Administrative Agent may reasonably request following the occurrence and during the continuance of an Event of Default or, in the absence of such request, as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to such Collateral. (b) At any time following the occurrence and during the continuance of an Event of Default, whether before or after the maturity of any of the Obligations, the Administrative Agent may upon written notice to the Grantor (i) revoke any or all of the rights of each Grantor set forth in clause (a), (ii) notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder and (iii) enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. (c) Upon request of the Administrative Agent following the occurrence and during the continuance of an Event of Default, each Grantor will, at its own expense, notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder. (d) At any time following the occurrence and during the continuation of an Event of Default, the Administrative Agent may endorse, in the name of such Grantor, -14- any item, howsoever received by the Administrative Agent, representing any payment on or other proceeds of any of the Collateral. SECTION 4.5. As to Intellectual Property Collateral. Each Grantor covenants and agrees to comply with the following provisions as such provisions relate to any Intellectual Property Collateral material to the operations or business of such Grantor: (a) such Grantor will use commercially reasonable efforts to not (i) do or fail to perform any act whereby any of the Patent Collateral may lapse or become abandoned or dedicated to the public or unenforceable, (ii) permit any of its licensees to (A) fail to continue to use any of the Trademark Collateral in order to maintain all of the Trademark Collateral in full force free from any claim of abandonment for non-use, (B) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, (C) fail to employ all of the Trademark Collateral registered with any federal or state or foreign authority with an appropriate notice of such registration, (D) adopt or use any other Trademark which is confusingly similar or a colorable imitation of any of the Trademark Collateral, (E) use any of the Trademark Collateral registered with any federal, state or foreign authority except for the uses for which registration or application for registration of all of the Trademark Collateral has been made or (F) do or permit any act or knowingly omit to do any act whereby any of the Trademark Collateral may lapse or become invalid or unenforceable, or (iii) do or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof, unless, in the case of any of the foregoing requirements in clauses (i), (ii) and (iii), such Grantor shall either (x) reasonably and in good faith determine that any of such Intellectual Property Collateral is of immaterial economic value to such Grantor, or (y) have a valid business purpose to do otherwise; (b) such Grantor shall promptly notify the Administrative Agent if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or any court) regarding such Grantor's ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same; (c) in no event will such Grantor or any of its agents, employees, designees or licensees file an application for the registration of any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, unless it informs the Administrative Agent within 60 days after such filing, and upon request of the Administrative Agent (subject to the terms of the Credit Agreement), executes and delivers all agreements, instruments and documents as the Administrative -15- Agent may reasonably request to evidence the Administrative Agent's security interest in such Intellectual Property Collateral; (d) such Grantor will use commercially reasonable efforts, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or (subject to the terms of the Credit Agreement) any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, any material Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clause (a) or (b)); and (e) such Grantor will promptly (but no less than quarterly) execute and deliver to the Administrative Agent (as applicable) a Patent Security Agreement, Trademark Security Agreement and/or Copyright Security Agreement, as the case may be, in the forms of Exhibit A, Exhibit B and Exhibit C hereto following its obtaining an interest in any such registered, issued or pending Intellectual Property, and shall execute and deliver to the Administrative Agent any other document required to acknowledge or register or perfect the Administrative Agent's interest in any part of such item of Intellectual Property Collateral unless the Grantor shall determine in good faith that any Intellectual Property Collateral is of immaterial economic value to the Grantor. SECTION 4.6. Further Assurances, etc. Each Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Administrative Agent may reasonably request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, such Grantor will (a) from time to time upon the request of the Administrative Agent, promptly deliver to the Administrative Agent such stock powers, instruments and similar documents, reasonably, satisfactory in form and substance to the Administrative Agent, with respect to such Collateral as the Administrative Agent may reasonably request and will, from time to time upon the request of the Administrative Agent after the occurrence and during the continuance of any Event of Default promptly transfer any securities constituting Collateral into the name of any nominee designated by the Administrative Agent; if any Collateral shall be evidenced by an instrument, negotiable document, promissory note or chattel paper, deliver and pledge to the Administrative Agent hereunder such instrument, negotiable document, promissory note or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Administrative Agent; (b) file (or cause to be filed) such Filing Statements or continuation statements, or amendments thereto, and such other instruments or notices (including any -16- assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. Section 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or that the Administrative Agent may reasonably request in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Administrative Agent hereby; (c) deliver to the Administrative Agent and at all times keep pledged to the Administrative Agent pursuant hereto, on a first-priority, perfected basis, at the reasonable request of the Administrative Agent, all investment property constituting Collateral, all Dividends and Distributions with respect thereto, and all interest and principal with respect to promissory notes, and all proceeds and rights from time to time received by or distributable to such Grantor in respect of any of the foregoing Collateral; (d) except as otherwise provided by the Credit Agreement or this Security Agreement not take or omit to take any action the taking or the omission of which would result in any impairment or alteration of any obligation of the maker of any payment intangible or other instrument constituting Collateral; (e) furnish to the Administrative Agent, from time to time at the Administrative Agent's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail; (f) after the occurrence and during the continuance of an Event of Default do all things reasonably requested by the Administrative Agent in order to enable the Administrative Agent to have control (as such term is defined in Article 8 and Article 9 of any applicable Uniform Commercial Code relevant to the creation, perfection or priority of Collateral consisting of deposit accounts, investment property, electronic chattel paper and letter of credit rights) over any Collateral; and (g) notify the Administrative Agent if such Grantor reasonably believes it is entitled to recover a commercial tort claim the value of which is in excess of $2,500,000 and such Grantor take all such action reasonably requested by the Administrative Agent to grant to the Administrative Agent and perfect a security interest in such commercial tort claim. With respect to the foregoing and the grant of the security interest hereunder, each Grantor hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral. Each Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. -17- ARTICLE V THE ADMINISTRATIVE AGENT SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Administrative Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Administrative Agent's discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings which the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral; and (d) to perform the affirmative obligations of such Grantor hereunder. Each Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. SECTION 5.2. Administrative Agent May Perform. If any Grantor fails to perform any agreement contained herein within five Business Days after written notice from the Administrative Agent, the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section 11.3 of the Credit Agreement. SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on the Administrative Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any investment property, whether or not the Administrative Agent has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. -18- SECTION 5.4. Reasonable Care. The Administrative Agent shall exercise reasonable care in the custody and preservation of all of the Collateral in its possession. ARTICLE VI REMEDIES SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and be continuing: (a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may (i) require each Grantor to, and each Grantor hereby agrees that it will, at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place to be designated by the Administrative Agent which is reasonably convenient to both parties, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days prior notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied by the Administrative Agent against, all or any part of the Obligations as follows: (i) first, to the payment of all Obligations owing to the Administrative Agent, in its capacity as the Administrative Agent, including fees and expenses of counsel to the Administrative Agent; (ii) second, to the equal and ratable payment of Obligations, in accordance with each Secured Party's Obligations owing to it under or pursuant to the Credit Agreement or any other Loan Document, applied -19- (A) first to fees and expense reimbursements then due to such Secured Party, (B) second to interest due to such Secured Party, (C) third to pay or prepay principal of the Loans owing to such Secured Party or to reduce the credit exposure of such Secured Party under such Rate Protection Agreement, as the case may be, and (D) fourth to pay the remaining outstanding Obligations and Cash Collateralize all Letter of Credit Outstandings; (iii) third, without duplication of any amounts paid pursuant to clause (b)(ii) above, to the Indemnified Parties to the extent of any amounts owing pursuant to Section 11.4 of the Credit Agreement; and (iv) fourth, paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive such surplus. For purposes of this Security Agreement, the "credit exposure" at any time of any Secured Party with respect to a Rate Protection Agreement to which such Secured Party is a party shall be determined at such time in accordance with the customary methods of calculating credit exposure under similar arrangements by the counterparty to such arrangements, taking into account potential interest rate movements and the respective termination provisions and notional principal amount and term of such Rate Protection Agreement. (c) The Administrative Agent may (i) transfer all or any part of the Collateral into the name of the Administrative Agent or its nominee, with or without disclosing that such Collateral is subject to the Lien hereunder, (ii) notify the parties obligated on any of the Collateral to make payment to the Administrative Agent of any amount due or to become due thereunder, (iii) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, (iv) endorse any checks, drafts, or other writings in any Grantor's name to allow collection of the Collateral, (v) take control of any proceeds of the Collateral, and -20- (vi) execute (in the name, place and stead of any Grantor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. SECTION 6.2. Securities Laws. If the Administrative Agent shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 6.1, each Grantor agrees that, upon request of the Administrative Agent, such Grantor will, at its own expense: (a) execute and deliver, and cause (or, with respect to any issuer which is not a Subsidiary of such Grantor, use its best efforts to cause) each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Administrative Agent, advisable to register such Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the reasonable opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto; (b) use its best efforts to exempt the Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Administrative Agent; (c) cause (or, with respect to any issuer which is not a Subsidiary of such Grantor, use its best efforts to cause) each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; and (d) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. SECTION 6.3. Compliance with Restrictions. Each Grantor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Administrative Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and such Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable nor accountable to such Grantor for any discount allowed by the -21- reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. SECTION 6.4. Protection of Collateral. The Administrative Agent may from time to time, at its option, perform any act which any Grantor fails to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of a Default of the type described in Section 8.1.9 of the Credit Agreement) and the Administrative Agent may from time to time take any other action which the Administrative Agent reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1. Loan Document. This Security Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7.2. Binding on Successors, Transferees and Assigns; Assignment. This Security Agreement shall remain in full force and effect until the Termination Date has occurred, shall be binding upon the Grantors and their successors, transferees and assigns and shall inure to the benefit of and be enforceable by each Secured Party and its successors, transferees and assigns; provided that no Grantor may (unless otherwise permitted under the terms of the Credit Agreement) assign any of its obligations hereunder without the prior written consent of all Lenders. SECTION 7.3. Amendments, etc. No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by any Grantor from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (on behalf of the Lenders or the Required Lenders, as the case may be, pursuant to Section 11.1 of the Credit Agreement) and the Grantors and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 7.4. Notices. All notices and other communications provided for hereunder shall be in writing or by facsimile and addressed, delivered or transmitted to the appropriate party at the address or facsimile number of such party specified in the Credit Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other party. Any notice or other communication, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any such notice or other communication, if transmitted by facsimile, shall be deemed given when transmitted and electronically confirmed. SECTION 7.5. Release of Liens. Upon (a) the Disposition of Collateral in accordance with the Credit Agreement or (b) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (i) such Collateral (in the case of -22- clause (a)) or (ii) all Collateral (in the case of clause (b)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantors' sole expense, deliver to the Grantors, without any representations, warranties or recourse of any kind whatsoever, all Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination. SECTION 7.6. Additional Grantors. Upon the execution and delivery by any other Person of a supplement in the form of Annex I hereto, such Person shall become a "Grantor" hereunder with the same force and effect as if it were originally a party to this Security Agreement and named as a "Grantor" hereunder. The execution and delivery of such supplement shall not require the consent of any other Grantor hereunder, and the rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Security Agreement. SECTION 7.7. No Waiver; Remedies. In addition to, and not in limitation of Section 2.4, no failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 7.8. Headings. The various headings of this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provisions thereof. SECTION 7.9. Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 7.10. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Security Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 7.11. Counterparts. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. -23- SECTION 7.12. Foreign Pledge Agreements. Without limiting any of the rights, remedies, privileges or benefits provided hereunder to the Administrative Agent for its benefit and the ratable benefit of the other Secured Parties, each Grantor and the Administrative Agent hereby agree that the terms and provisions of this Security Agreement in respect of any Collateral subject to the pledge or other Lien of a Foreign Pledge Agreement are, and shall be deemed to be, supplemental and in addition to the rights, remedies, privileges and benefits provided to the Administrative Agent and the other Secured Parties under such Foreign Pledge Agreement and under applicable law to the extent consistent with applicable law; provided that in the event that the terms of this Security Agreement conflict or are inconsistent with the applicable Foreign Pledge Agreement or applicable law governing such Foreign Pledge Agreement, (i) to the extent that the provisions of such Foreign Pledge Agreement or applicable foreign law are, under applicable foreign law, necessary for the creation, perfection or priority of the security interests in the Collateral subject to such Foreign Pledge Agreement, the terms of such Foreign Pledge Agreement or such applicable law shall be controlling and (ii) otherwise, the terms hereof shall be controlling. -24- IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. [NAME OF GRANTOR] By:___________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:___________________________ Title: By:___________________________ Title: SCHEDULE I to Subsidiary Security and Pledge Agreement Name of Grantor:
Common Stock ------------ Issuer (corporate) # of Authorized Outstanding % of Shares Cert.# Shares Shares Shares Pledged ------ ------ ------ ------ -------
Limited Liability Company Interests ----------------------------------- Issuer (limited liability % of Limited Liability Type of Limited Liability company) Company Interests Pledged Company Interests Pledged - -------- ------------------------- -------------------------
Partnership Interests --------------------- % of Partnership % of Partnership Issuer (partnership) Interests Owned Interests Pledged - -------------------- --------------- -----------------
SCHEDULE II to Subsidiary Security and Pledge Agreement Item A. Locations of each Grantor: Name of Grantor: Location for purposes of UCC: Item B. Filing locations prior to July 1, 2001 Name of Grantor: Filing Locations prior to July 1, 2001 (or October 1, 2001 if the location is Connecticut and January 1, 2002 if the location is Alabama, Florida or Mississippi): Item C. Trade names. Name of Grantor: Trade Names: Item D. Merger or other corporate reorganization. Name of Grantor: Merger or other corporate reorganization: Item E. Taxpayer ID numbers. Name of Grantor: Taxpayer ID numbers: Item F. Government Contracts: Name of Grantor: Description of Contract: SCHEDULE III to Subsidiary Security and Pledge Agreement United States Patents - ---------------------
Issued United States Patents ---------------------------- Country Patent No. Issue Date Inventor(s) Title - ------- ---------- ---------- ----------- -----
Pending United States Patent Applications ----------------------------------------- Country Serial No. Filing Date Inventor(s) Title - ------- ---------- ----------- ----------- -----
SCHEDULE IV to Subsidiary Security and Pledge Agreement United States Trademarks - ------------------------
Registered United States Trademarks ----------------------------------- Country Trademark Registration No. Registration Date - ------- --------- ---------------- -----------------
Pending United States Trademark Applications -------------------------------------------- Country Trademark Serial No. Filing Date - ------- --------- ---------- -----------
SCHEDULE V to Subsidiary Security and Pledge Agreement United States Copyrights/Mask Works - -----------------------------------
Registered United States Copyrights/Mask Works ---------------------------------------------- Country Registration No. Registration Date Author(s) Title - ------- ---------------- ----------------- --------- -----
United States Copyright/Mask Work Pending Registration Applications ------------------------------------------------------------------- Country Serial No. Filing Date Author(s) Title - ------- ---------- ----------- --------- -----
EXHIBIT A to Subsidiary Security and Pledge Agreement PATENT SECURITY AGREEMENT This PATENT SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between [NAME OF GRANTOR] (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Subsidiary Security and Pledge Agreement, dated as of _____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Patent Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following property, whether now or hereafter existing or acquired by the Grantor (the "Patent Collateral"): (a) all of its letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing and each patent and patent application referred to in Schedule I attached hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all of its patent licenses, and other agreements providing the Grantor with the right to use any items of the type referred to in clauses (a) and (b) above; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement of any patent license. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Patent Collateral with the United States Patent and Trademark Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. SECTION 4. Release of Liens. Upon (i) the Disposition of Patent Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Patent Collateral (in the case of clause (i)) or (B) all Patent Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Patent Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. [NAME OF GRANTOR] By:_________________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Title: By:_________________________________ Title: SCHEDULE I to Patent Security Agreement United States Patents - ---------------------
United States Issued Patents ---------------------------- Country Patent No. Issue Date Inventor(s) Title - ------- ---------- ---------- ----------- -----
Pending United States Patent Applications ----------------------------------------- Country Serial No. Filing Date Inventor(s) Title - ------- ---------- ----------- ----------- -----
EXHIBIT B to Subsidiary Security and Pledge Agreement TRADEMARK SECURITY AGREEMENT This TRADEMARK SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between [NAME OF GRANTOR] (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Subsidiary Security and Pledge Agreement, dated as of _____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Trademark Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following property, whether now or hereafter existing or acquired by the Grantor (the "Trademark Collateral"): (a) (i) all of its trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos and other source or business identifiers, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired including those registered in the United States Patent and Trademark Office and referred to in Schedule I hereto, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any other country or political subdivision thereof or otherwise, and all common-law rights relating to the foregoing, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to as the "Trademark"); (b) all Trademark licenses for the grant by or to the Grantor of any right to use any Trademark; (c) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a), and to the extent applicable clause (b); (d) the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a) and, to the extent applicable, clause (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by the Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Trademark Collateral with the United States Patent and Trademark Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. SECTION 4. Release of Liens. Upon (i) the Disposition of Trademark Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Trademark Collateral (in the case of clause (i)) or (B) all Trademark Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Trademark Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by Authorized Officer as of the date first above written. [NAME OF GRANTOR] By:_________________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Title: By:_________________________________ Title: SCHEDULE I to Trademark Security Agreement United States Trademarks - ------------------------
Registered United States Trademarks ----------------------------------- Country Trademark Registration No. Registration Date - ------- --------- ---------------- -----------------
Pending United States Trademark Applications -------------------------------------------- Country Trademark Serial No. Filing Date - ------- --------- ---------- -----------
EXHIBIT C to Subsidiary Security and Pledge Agreement COPYRIGHT SECURITY AGREEMENT This COPYRIGHT SECURITY AGREEMENT, dated as of ________ __, 200_ (this "Agreement"), is made between [NAME OF GRANTOR] (the "Grantor"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, in connection with the Credit Agreement, the Grantor has executed and delivered a Subsidiary Security and Pledge Agreement, dated as of ____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Security Agreement"); WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent a continuing security interest in all of the Copyright Collateral (as defined below) to secure all Obligations; and WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees, for the benefit of each Secured Party, as follows: SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Security Agreement. SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for its benefit and the ratable benefit of each other Secured Party, a continuing security interest in all of the following (the "Copyright Collateral"), whether now or hereafter existing or acquired by the Grantor: all copyrights of the Grantor, whether statutory or common law, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of the Grantor's right, title and interest in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the United States copyrights referred to in Schedule I hereto, and registrations and recordings thereof and all applications for registration thereof, whether pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Administrative Agent in the Copyright Collateral with the United States Copyright Office and corresponding offices in other countries of the world, as applicable. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Administrative Agent for its benefit and the ratable benefit of each other Secured Party under the Security Agreement. The Security Agreement (and all rights and remedies of the Administrative Agent and each Secured Party thereunder) shall remain in full force and effect in accordance with its terms. SECTION 4. Release of Liens. Upon (i) the Disposition of Copyright Collateral in accordance with the Credit Agreement or (ii) the occurrence of the Termination Date, the security interests granted herein shall automatically terminate with respect to (A) such Copyright Collateral (in the case of clause (i)) or (B) all Copyright Collateral (in the case of clause (ii)). Upon any such Disposition or termination, the Administrative Agent will, at the Grantor's sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Copyright Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Copyright Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein. SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof. SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * Subsidiary Security and Pledge Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. [NAME OF GRANTOR] By:_________________________________ Title: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Title: By:_________________________________ Title: Subsidiary Security and Pledge Agreement SCHEDULE I to Copyright Security Agreement United States Copyrights/Mask Works - ----------------------------------- Registered United States Copyrights/Mask Works ----------------------------------------------
Registered United States Copyrights/Mask Works ---------------------------------------------- Country Registration No. Registration Date Author(s) Title - ------- ---------------- ----------------- --------- -----
United States Copyright/Mask Work Pending Registration Applications ------------------------------------------------------------------- Country Serial No. Filing Date Author(s) Title - ------- ---------- ----------- --------- -----
Subsidiary Security and Pledge Agreement ANNEX I to the Subsidiary Security and Pledge Agreement SUPPLEMENT NO. __ TO SUBSIDIARY Security and Pledge AGREEMENT This SUPPLEMENT, dated as of ____________ ___, _____ (this "Supplement"), is to the Subsidiary Security and Pledge Agreement, dated as of ____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Subsidiary Security and Pledge Agreement"), among the Grantors (such capitalized term, and other terms used in this Supplement, to have the meanings set forth in Article I of the Subsidiary Security and Pledge Agreement) from time to time party thereto, in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto in such capacity, the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H : WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among the Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; WHEREAS, pursuant to the provisions of Section 7.6 of the Subsidiary Security and Pledge Agreement, each of the undersigned is becoming a Grantor under the Subsidiary Security and Pledge Agreement; and WHEREAS, each of the undersigned desires to become a "Grantor" under the Subsidiary Security and Pledge Agreement in order to induce the Secured Parties to continue to extend Credit Extensions under the Credit Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the undersigned agrees, for the benefit of each Secured Party, as follows. SECTION 1. Party to Subsidiary Security and Pledge Agreement, etc. In accordance with the terms of the Subsidiary Security and Pledge Agreement, by its signature below each of the undersigned hereby irrevocably agrees to become a Grantor under the Subsidiary Security and Pledge Agreement with the same force and effect as if it were an original signatory thereto and each of the undersigned hereby (a) agrees to be bound by and comply with all of the terms and provisions of the Subsidiary Security and Pledge Agreement applicable to it as a Grantor and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct as of the date hereof, unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date. In furtherance of the foregoing, each reference to a "Grantor" and/or "Grantors" in the Subsidiary Security and Pledge Agreement shall be deemed to include each of the undersigned. SECTION 2. Representations. Each of the undersigned Grantor hereby represents and warrants that this Supplement has been duly authorized, executed and delivered by it and that this Supplement and the Subsidiary Security and Pledge Agreement constitute the legal, valid and binding obligation of each of the undersigned, enforceable against it in accordance with its terms. SECTION 3. Full Force of Subsidiary Security and Pledge Agreement. Except as expressly supplemented hereby, the Subsidiary Security and Pledge Agreement shall remain in full force and effect in accordance with its terms. SECTION 4. Severability. Wherever possible each provision of this Supplement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Supplement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Supplement or the Subsidiary Security and Pledge Agreement. SECTION 5. Governing Law, Entire Agreement, etc. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). This Supplement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 6. Counterparts. This Supplement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. * * * * * Subsidiary Security and Pledge Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer as of the date first above written. [NAME OF ADDITIONAL SUBSIDIARY] By:_________________________________ Title: [NAME OF ADDITIONAL SUBSIDIARY] By:_________________________________ Title: Subsidiary Security and Pledge Agreement ACCEPTED AND AGREED FOR ITSELF AND ON BEHALF OF THE SECURED PARTIES: UBS AG, STAMFORD BRANCH, as Administrative Agent By:_________________________________ Name: Title: Subsidiary Security and Pledge Agreement SCHEDULE I to Supplement No. ___ to Subsidiary Security and Pledge Agreement ([Name of Additional Subsidiary]) Capital Stock - -------------
Common Stock ------------ Authorized Outstanding % of Shares Issuer (corporate) Shares Shares Pledged - ------------------ ---------- ----------- -----------
Limited Liability Company Interests ----------------------------------- % of Limited Liability Type of Limited Liability Issuer (limited liability company) Company Interests Pledged Company Interests Pledged - ---------------------------------- ------------------------- -------------------------
Partnership Interests --------------------- % of Partnership % of Partnership Issuer (partnership) Interests Owned Interests Pledged - -------------------- --------------- -----------------
Subsidiary Security and Pledge Agreement SCHEDULE II to Supplement No. ___ to Subsidiary Security and Pledge Agreement Item A. Locations of each Grantor: Name of Grantor: Location for purposes of UCC: Item B. Filing locations prior to July 1, 2001 Name of Grantor: Filing Locations prior to July 1, 2001 (or October 1, 2001 if the location is Connecticut and January 1, 2002 if the location is Alabama, Florida or Mississippi): Item C. Trade names. Name of Grantor: Trade Names: Subsidiary Security and Pledge Agreement Item D. Merger or other corporate reorganization. Name of Grantor: Merger or other corporate reorganization: Item E. Taxpayer ID numbers. Name of Grantor: Taxpayer ID numbers: Item F. Government Contracts: Name of Grantor: Description of Contract: Subsidiary Security and Pledge Agreement SCHEDULE III to Supplement No. ___ to Subsidiary Security and Pledge Agreement ([Name of Additional Subsidiary]) United States Patents - ---------------------
United States Issued Patents ---------------------------- Country Patent No. Issue Date Inventor(s) Title - ------- ---------- ---------- ----------- -----
Pending United States Patent Applications ----------------------------------------- Country Serial No. Filing Date Inventor(s) Title - ------- ---------- ----------- ----------- -----
Subsidiary Security and Pledge Agreement SCHEDULE IV to Supplement No. ___ to Subsidiary Security and Pledge Agreement ([Name of Additional Subsidiary]) Item A. Trademarks ACTIVE U.S. TRADEMARKS
OWNERSHIP (PTO DATABASE) LISTED AS: ----------------------------------- MARK SERIAL/REG. FILING/REG. STATUS NOTES # DATE ---- ----------- ----------- ------ -----
OWNERSHIP (PTO DATABASE) LISTED AS: ----------------------------------- TRADEMARKS RENDERED ABANDONED, CANCELLED OR EXPIRED --------------------------------------------------- OWNER (PTO DATABASE) LISTED AS: -------------------------------
Pending United States Trademark Applications -------------------------------------------- Country Trademark Serial No. Filing Date - ------- --------- ---------- -----------
Subsidiary Security and Pledge Agreement SCHEDULE V to Supplement No. ___ to Subsidiary Security and Pledge Agreement ([Name of Additional Subsidiary]) United States Copyrights/Mask Works - -----------------------------------
Registered United States Copyrights/Mask Works ---------------------------------------------- Country Registration No. Registration Date Author(s) Title - ------- ---------------- ----------------- --------- -----
United States Copyright/Mask Work Pending Registration Applications ------------------------------------------------------------------- Country Serial No. Filing Date Author(s) Title - ------- ---------- ----------- --------- -----
Subsidiary Security and Pledge Agreement EX-10.4 13 y61690exv10w4.txt FORM OF SUBSIDIARY GUARANTY EXHIBIT 10.4 FORM OF SUBSIDIARY GUARANTY This SUBSIDIARY GUARANTY, dated as of _____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Guaranty"), is made by each Subsidiary of Associated Materials Incorporated from time to time party hereto (each individually a "Guarantor" and collectively the "Guarantors") in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto, in such capacity the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H: WHEREAS, pursuant to a Credit Agreement, dated as of April 19, 2002 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among Associated Materials Incorporated, as the Borrower, Associated Materials Holdings Inc., the various financial institutions and other Persons as are or may become parties thereto, as the Lenders, the Administrative Agent, Credit Suisse First Boston, Cayman Islands Branch, as Syndication Agent, CIBC World Markets Corp., as Documentation Agent, and UBS Warburg LLC and Credit Suisse First Boston Corporation, as Joint Lead Arrangers, the Lenders and the Issuers have extended Commitments to make Credit Extensions to the Borrower; and WHEREAS, as a condition precedent to the making of the Credit Extensions under the Credit Agreement, each Guarantor is required to execute and deliver this Guaranty; NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, each Guarantor agrees, for the benefit of each Secured Party, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Administrative Agent" is defined in the preamble. "Credit Agreement" is defined in the first recital. "Guarantor" and "Guarantors" are defined in the preamble. "Guaranty" is defined in the preamble. SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Credit Agreement. ARTICLE II GUARANTY PROVISIONS SECTION 2.1. Guaranty. Each Guarantor hereby absolutely, unconditionally and irrevocably (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the Borrower and each other Obligor, now or hereafter existing, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section 506(b)), and (b) indemnifies and holds harmless each Secured Party for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by such Secured Party in enforcing any rights under this Guaranty; provided that each Guarantor shall only be liable under this Guaranty for the maximum amount of such liability that can be hereby incurred without rendering this Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. This Guaranty constitutes a guaranty of payment when due and not of collection, and each Guarantor specifically agrees that it shall not be necessary or required that any Secured Party exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of such Guarantor hereunder. SECTION 2.2. Acceleration of Guaranty. Each Guarantor agrees that, in the event of the occurrence of an Event of Default described under Section 8.1.9 of the Credit Agreement, and if such Event of Default shall occur at a time when any of the Obligations of any Obligor may not then be due and payable, such Guarantor agrees that it shall pay to the Administrative Agent for the account of the Secured Parties forthwith the full amount which would be payable hereunder by such Guarantor if all such Obligations were then due and payable. SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until the Termination Date has occurred. Each Guarantor guarantees that the Obligations of the Borrower and each other Obligor will be paid strictly in accordance with the terms of each Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any -2- Secured Party with respect thereto. The liability of each Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of any Loan Document; (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Obligor or any other Person (including any other guarantor) under the provisions of any Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor (including any Guarantor) of, or collateral securing, any Obligations of the Borrower or any other Obligor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower or any other Obligor, or any other extension, compromise or renewal of any Obligation of the Borrower or any other Obligor; (d) any reduction, limitation, impairment or termination of any Obligations of the Borrower or any other Obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations of the Borrower or any other Obligor or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of any Loan Document; (f) any addition, exchange or release of any collateral or of any Person that is (or will become) a guarantor (including any Guarantor) of the Obligations, or surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty, held by any Secured Party securing any of the Obligations of the Borrower or any other Obligor; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Obligations of the Borrower or any other Obligor, any surety or any guarantor. SECTION 2.4. Reinstatement, etc. Each Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored to any Obligor by any Secured Party, upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise, all as though such payment had not been made. SECTION 2.5. Waiver, etc. Each Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower or any other Obligor and of this Guaranty and any requirement that any Secured Party protect, -3- secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Borrower, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Borrower or such Obligor. SECTION 2.6. Postponement of Subrogation, etc. Each Guarantor hereby agrees that, at all times prior to the Termination Date, it will not exercise any rights which it may acquire by way of rights of subrogation under this Guaranty, by any payment made hereunder or otherwise. Any amount paid to any Guarantor on account of any such subrogation rights prior to the Termination Date shall be held in trust for the benefit of the Secured Parties and shall immediately be paid to the Administrative Agent for the benefit of the Secured Parties and credited and applied against the Obligations of the Borrower and each other Obligor, whether matured or unmatured, in accordance with the terms of the Credit Agreement. In furtherance of the foregoing, each Guarantor shall, at all times prior to the Termination Date, refrain from taking any action or commencing any proceeding against the Borrower or any other Obligor (or any of its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Guaranty to any Secured Party. SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc. This Guaranty shall (a) be binding upon each Guarantor, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by each Secured Party. Without limiting the generality of clause (b), any Lender may assign or otherwise transfer (in whole or in part) any Note or Credit Extension held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to such Lender under any Loan Document (including this Guaranty) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 11.11 and Article X of the Credit Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce the Secured Parties to enter into the Credit Agreement and make Credit Extensions thereunder, and to induce Secured Parties to enter into Rate Protection Agreements, each Guarantor represents and warrants to each Secured Party as set forth below. SECTION 3.1. Credit Agreement Representations and Warranties. Each Guarantor hereby represents and warrants for itself unto each Secured Party that the representations and warranties contained in Article VI of the Credit Agreement, insofar as the representations and warranties contained therein are applicable to such Guarantor and its properties, are true and correct in all material respects, each such representation and warranty set forth in such Article (insofar as applicable as aforesaid), and all other terms of the Credit Agreement to which reference is made therein and applicable to such Guarantor and its properties together with all related definitions and ancillary provisions, being hereby incorporated into this Guaranty to such extent by this reference as though specifically set forth in this Article. -4- SECTION 3.2. Financial Condition of each Obligor. Each Guarantor has knowledge of the Borrower's and each other Obligor's financial condition and affairs and that it has adequate means to obtain from the Borrower and each such other Obligor on an ongoing basis information relating thereto and to the Borrower's and each such other Obligor's ability to pay and perform its respective Obligations, and agrees to assume the responsibility for keeping, and to keep, so informed for so long as this Guaranty is in effect. Each Guarantor acknowledges and agrees that the Secured Parties shall have no obligation to investigate the financial condition or affairs of the Borrower or any other Obligor for the benefit of such Guarantor nor to advise such Guarantor of any fact respecting, or any change in, the financial condition or affairs of the Borrower or any other Obligor that might become known to any Secured Party at any time, whether or not such Secured Party knows or believes or has reason to know or believe that any such fact or change is unknown to such Guarantor, or might (or does) materially increase the risk of such Guarantor as guarantor, or might (or would) affect the willingness of such Guarantor to continue as a guarantor of the Obligations. SECTION 3.3. Best Interests. It is in the best interests of each Guarantor to execute this Guaranty inasmuch as such Guarantor will, as a result of being a Subsidiary of the Borrower, derive substantial direct and indirect benefits from the Credit Extensions made from time to time to the Borrower by the Lenders and the Issuers pursuant to the Credit Agreement and the execution and delivery of Rate Protection Agreements between the Borrower or any other Obligor and certain Secured Parties, and each Guarantor agrees that the Secured Parties are relying on this representation in agreeing to make Credit Extensions to the Borrower. ARTICLE IV COVENANTS, ETC. SECTION 4.1. Covenants. Each Guarantor covenants and agrees that, at all times prior to the Termination Date, such Guarantor will, and will cause each of its Subsidiaries to, perform, comply with and be bound by all the agreements, covenants and obligations contained in Article VII of the Credit Agreement applicable to such Guarantor, such Subsidiary or their respective properties. Each such agreement, covenant and obligation contained in Article VII of the Credit Agreement and all related definitions and ancillary provisions are hereby incorporated into this Guaranty as though specifically set forth herein. ARTICLE V MISCELLANEOUS PROVISIONS SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof. SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In addition to, and not in limitation of, Section 2.7, this Guaranty shall be binding upon each -5- Guarantor and its successors, transferees and assigns and shall inure to the benefit of and be enforceable by each Secured Party and its successors, transferees and assigns (to the fullest extent provided pursuant to Section 2.7); provided, that, except as provided in the Credit Agreement, this Guaranty may not be discharged and no Guarantor may assign any of its obligations hereunder without the prior written consent of the Required Lenders (or to the extent required pursuant to the Credit Agreement, all Lenders). SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (on behalf of the Lenders or the Required Lenders, as the case may be, pursuant to Section 11.1 of the Credit Agreement) and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 5.4. Notices. All notices and other communications provided hereunder shall be in writing (including by facsimile) and addressed, delivered or transmitted, if to any Guarantor, at the address or facsimile number of the Borrower specified in the Credit Agreement, and if to the Administrative Agent, at its address or facsimile number specified in the Credit Agreement, or at such other address or facsimile number as may be designated by any such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. SECTION 5.5. Additional Guarantors. Upon the execution and delivery by any other Person of an instrument in the form of Annex I hereto, such Person shall become a "Guarantor" hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Guaranty. SECTION 5.6. No Waiver; Remedies. In addition to, and not in limitation of, Section 2.3 and Section 2.5, no failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 5.7. Headings. The various headings of this Guaranty are inserted for convenience only and shall not affect the meaning or interpretation of this Guaranty or any provisions hereof. SECTION 5.8. Setoff. Each Secured Party shall, upon the occurrence of any Event of Default described in Section 8.1.9 of the Credit Agreement with respect to the Borrower or, with the consent of the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations -6- owing to it (whether or not then due), and (as security for such Obligations) such Guarantor hereby grants to each Secured Party a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Guarantor then or thereafter maintained with such Secured Party, except for any of the foregoing to the extent covered by the Bridge Escrow Agreement (as defined in the Bridge Loan Agreement); provided that any such appropriation and application shall be subject to the provisions of Section 4.8 of the Credit Agreement. Each Secured Party agrees promptly to notify such Guarantor, the Borrower and the Administrative Agent after any such setoff and application made by such Secured Party; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Secured Party under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Secured Party may have. SECTION 5.9. Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Guaranty or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 5.10. Governing Law; Entire Agreement. THIS GUARANTY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). This Guaranty constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect hereto. SECTION 5.11. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY SECURED PARTY OR ANY GUARANTOR IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK IN CARE OF THE BORROWER AT THE ADDRESS OF THE BORROWER SPECIFIED IN THE CREDIT AGREEMENT. EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY -7- CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS. SECTION 5.12. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT (ON BEHALF OF THE SECURED PARTIES) AND EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY AND EACH OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SUCH SECURED PARTIES AND SUCH GUARANTORS IN CONNECTION HEREWITH OR THEREWITH. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES ENTERING INTO THE LOAN DOCUMENTS. SECTION 5.13. Counterparts. This Guaranty may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. -8- IN WITNESS WHEREOF, each of the parties hereto has caused this Guaranty to be duly executed and delivered by its Authorized Officer as of the date first above written. [NAME OF GUARANTOR] By: ------------------------------- Title: ACCEPTED BY: UBS AG, STAMFORD BRANCH, as Administrative Agent By: ----------------------- Name: Title: By: ----------------------- Name: Title: ANNEX I to Subsidiary Guaranty SUPPLEMENT NO. __ TO SUBSIDIARY GUARANTY SUPPLEMENT NO. ___, dated as of ____________ ___, _____ (this "Supplement"), to the Subsidiary Guaranty, dated as of _____ __, ____ (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Guaranty"), among the initial signatories thereto and each other Person which from time to time thereafter became a party thereto pursuant to Section 5.5 thereof (each individually a "Guarantor" and collectively the "Guarantors"), in favor of UBS AG, STAMFORD BRANCH, as administrative agent (together with its successor(s) thereto, in such capacity the "Administrative Agent") for each of the Secured Parties. W I T N E S S E T H: WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty; and WHEREAS, the Guaranty provides that additional parties may become Guarantors under the Guaranty by execution and delivery of an instrument in the form of this Supplement; and WHEREAS, pursuant to the provisions of Section 5.5 of the Guaranty, the undersigned is becoming a Guarantor under the Guaranty; and WHEREAS, the undersigned desires to become a "Guarantor" under the Guaranty in order to induce the Secured Parties to continue to make Credit Extensions under the Credit Agreement as consideration therefor; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees, for the benefit of each Secured Party, as follows: SECTION 1. In accordance with the Guaranty, the undersigned by its signature below becomes a Guarantor under the Guaranty with the same force and effect as if it were an original signatory thereto as a Guarantor and the undersigned hereby (a) agrees to all the terms and provisions of the Guaranty applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct in all material respects on and as of the date hereof. In furtherance of the foregoing, each reference to a "Guarantor" in the Guaranty shall be deemed to include the undersigned. SECTION 2. The undersigned hereby represents and warrants that this Supplement has been duly authorized, executed and delivered by the undersigned and constitutes a legal, valid and binding obligation of the undersigned, enforceable against it in accordance with its terms. SECTION 3. Except as expressly supplemented hereby, the Guaranty shall remain in full force and effect in accordance with its terms. SECTION 4. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty shall not in any way be affected or impaired. SECTION 5. Without limiting the provisions of the Credit Agreement (or any other Loan Document, including the Guaranty), the undersigned agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including reasonable attorneys' fees and expenses of the Administrative Agent. SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). SECTION 7. This Supplement shall be deemed to be a part of the Guaranty. SECTION 8. This Supplement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Supplement to the Guaranty to be duly executed and delivered by its Authorized Officer as of the date and year first above written. [GUARANTOR] By: -------------------------- Title: ACCEPTED BY: UBS AG, STAMFORD BRANCH, as Administrative Agent By: -------------------------- Title: EX-10.5 14 y61690exv10w5.txt ASSUMPTION AGREEMENT EXHIBIT 10.5 ASSUMPTION AGREEMENT ASSUMPTION AGREEMENT (this "Agreement"), dated as of April 19, 2002, is by Associated Materials Incorporated, a Delaware corporation (the "Company"), and certain of the Company's subsidiaries as set forth on the signature pages hereto (the "Guarantors"). W I T N E S S E T H WHEREAS, Simon Acquisition Corp., a Delaware corporation ("Acquisition Corp."), has heretofore executed and delivered to Credit Suisse First Boston Corporation, UBS Warburg LLC, and CIBC World Markets Corp. (the "Purchasers") a purchase agreement (the "Purchase Agreement"), dated as of April 18, 2002, providing for the terms pursuant to which the Purchasers will purchase $165,000,000 aggregate principal amount of 9 3/4% Senior Subordinated Notes due 2012 (the "Notes") of Acquisition Corp.; WHEREAS, Acquisition Corp. has been merged with and into the Company (the "Merger"); WHEREAS, pursuant to the Purchase Agreement, the Company upon consummation of the Merger is required to assume all of the obligations of Acquisition Corp. under the Purchase Agreement and to execute and deliver this Agreement concurrently with the Merger; and WHEREAS, pursuant to the Purchase Agreement, immediately subsequent to the Merger, each of the Guarantors is required to become a party to the Purchase Agreement and to guarantee the obligations of the Company with respect to the Notes thereunder on a senior subordinated basis; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and each of the Guarantors mutually covenant and agree for the benefit of the Purchasers as follows: 1. ASSUMPTION. The Company hereby acknowledges that by operation of law it has become successor to all of the obligations of Acquisition Corp. and expressly agrees to assume all of the obligations of Acquisition Corp. under the Purchase Agreement (including the representations and warranties therein, provided, however, that representations and warranties made by Acquisition Corp. which explicitly state that such representations and warranties are made by Acquisition Corp. "to the best knowledge of Acquisition Corp. after -2- due inquiry" shall be made on the date hereof by the Company without such knowledge and due inquiry qualification. 2. GUARANTORS. The Guarantors hereby agree to be deemed the "Guarantors" and "Issuers" for all purposes under the Purchase Agreement and to perform all obligations and duties of the Guarantors and the Issuers, as the case may be, under such agreement and agree to take all action required pursuant to the Purchase Agreement to be named as Guarantor thereunder. 3. NEW YORK LAW TO GOVERN. The internal law of the State of New York, without regard to the choice of law principles thereof, shall govern and be used to construe this Agreement. 4. COUNTERPARTS. The parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. 5. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered, all as of the date first above written, which is the date of the Merger. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway ----------------------------------- Name: D. Keith LaVanway Title: Vice President and Chief Financial Officer AMI MANAGEMENT COMPANY By: /s/ D. Keith LaVanway ----------------------------------- Name: D. Keith LaVanway Title: Vice President, Chief Financial Officer, Secretary and Treasurer EX-10.11 15 y61690exv10w11.txt MANAGEMENT AGREEMENT Exhibit 10.11 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT (the "Agreement"), dated as of April 19, 2002, by and between Harvest Partners, Inc. ("Harvest"), a New York corporation, and Associated Materials Incorporated (the "Company"), a Delaware corporation . W I T N E S S E T H: WHEREAS, the Company is engaged in the building products industry, electrical cable manufacturing industry and activities related to each of the foregoing (the "Business"); and WHEREAS, affiliates of Harvest have caused Simon Acquisition Corp. ("Simon"), a Delaware corporation , to be formed to invest in the capital stock of the Company; and WHEREAS, Associated Materials Holdings Inc. ("Holdings"), a Delaware corporation controlled by affiliates of Harvest, Simon and the Company have entered into a Merger Agreement (the "Merger Agreement"), dated as of March 16, 2002, pursuant to which Simon has been merged (the "Merger") with and into the Company, with the Company as the surviving entity; WHEREAS, the Company desires that Harvest cause Holdings to designate representatives with financial and/or management expertise to serve on the Board of Directors of the Company, and Harvest desires to cause Holdings to designate such representatives to serve on the Board of Directors of the Company, and that such representatives render counsel, guidance and directorial assistance to the Company and/or its subsidiaries and affiliates while serving on the Board of Directors of the Company (the "Director Services"); and WHEREAS, the Company further desires that Harvest provide the Company and/or its subsidiaries and affiliates with financial advisory and strategic planning services (the "Harvest Services"), including, without limitation, various advisory services, consulting, marketing, management, strategic planning, corporate organization and structure, financial matters in connection with the operation of the businesses of the Company, expansion of services, acquisitions and business opportunities and review and advise the Company regarding its overall progress, needs and condition. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, hereto, intending to be legally bound hereby, agree as follows: 1. Effective Date. This Agreement shall be effective as of the date first above written (the "Effective Date"). 2. Services. Harvest shall cause certain of its employees, directors or designees (the "Harvest Directors") with financial and/or management expertise to serve on the Board of Directors of the Company. Harvest shall cause the Harvest Directors to provide, the Director Services and shall devote such time and attention as is reasonably necessary to provide the Director Services. Harvest shall also provide the Harvest Services to the Company from time to time as requested by the Company. The Harvest Services may be rendered both through the Harvest Directors and directly by Harvest. 3. Compensation. (a) Subject to Sections 3(f) and 4 below, as full payment for the Director Services and the Harvest Services to be rendered by the Harvest Directors and Harvest hereunder, the Company shall pay to Harvest a fee (the "Harvest Fee") equal to the sum of $750,000 (to be adjusted annually in accordance with the U.S. Consumer Price Index) for each year (such years to begin on each April 1 and ending on each March 31; provided however that the initial year shall commence on the Effective Date (each, a "Harvest Year")). Except as otherwise provided in Section 3(c) below, the Harvest Fee shall be payable in equal quarterly installments during each year of this Agreement, in advance, on the first day of each quarterly period commencing on the Effective Date. (b) In addition to the payment of the Harvest Fee provided for in Section 3(a) above and in Section 3(c) below, the Company agrees to pay to Harvest, in consideration of Harvest's efforts to direct the relevant entity to, and provide advice and strategic planning to the relevant entity in connection with a Transaction, from time to time, a fee (each, a "Transaction Fee") concurrently, with, and as a condition to, the closing of (i) a sale, merger (other than the "Merger"), joint venture formation or other business combination or recapitalization of Holdings, the Company or one or more of its subsidiaries in connection with which direct or indirect control of such entity is assumed by an unaffiliated third party (each, a "Business Combination"), (ii) a sale, lease or conveyance of all or substantially all of Holdings' or the Company's or one or more of its subsidiaries' assets (an "Asset Sale"), (iii) any offering of Holdings' or the Company's or one or more of its subsidiaries capital stock or indebtedness (an "Offering"), or (iv) any declaration of an extraordinary dividend by Holdings or the Company (an "Extraordinary Dividend" and, together with a Business Combination, an Asset Sale and an Offering, a "Transaction"). The amount of any Transaction Fee shall be equal to (x) 1% of the "Transaction Amount" (as defined below) in connection with a Business Combination, Asset Sale or Extraordinary Dividend, provided, that, in the case of a Business Combination, Asset Sale or Extraordinary Dividend, the gross proceeds from such a Business Combination, Asset Sale or, as the case may be, Extraordinary Dividend generate a cumulative annual eight percent (8%) compound internal rate of return on the initial investment in Holdings by holders of capital stock of Holdings on the Effective Date; and (y) 2% of the net proceeds to the relevant entity in connection with an Offering. "Transaction Amount," as used herein, shall mean the total consideration (including, without limitation, cash; securities; earnouts (when and if paid); dividends or other distribution to stockholders; evidences of indebtedness; other debt instruments, capital leases and preferred securities or interests remaining on the financial statements, indebtedness, capital leases, preferred securities or interests and debt and other obligations assumed, retired or defeased by the purchaser; and any other property or form of consideration) distributed or directly or indirectly paid, payable or contributed, for the assets and/or existing and newly issued stock and/or other ownership interest in connection with the relevant Transaction; provided, however, that Transaction Amount shall exclude (i) refinanced indebtedness of the Company and (ii) proceeds from Offerings by Holdings to holders of capital stock of Holdings on the Effective Date (other than any such holder that is managed by Harvest). Any securities that form part or all of the Transaction Amount shall be valued at the quoted public market price or, in the absence of a quoted market price, the fair value thereof, as -2- determined in good faith by the Board of Directors of the Company. Any other Transaction Amount that is not represented by cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors of the Company. A Transaction Fee shall in any and all circumstances be payable in cash at the closing of Transaction. In the event of a recapitalization of any person or entity, a Transaction Amount shall also include, without duplication, the value of cash, notes, property and securities distributed to the person's or entity's stockholders or members. The Transaction Fee will be payable so long as a Transaction is consummated or a definitive agreement providing for a Transaction is entered into at any time during the Initial Term or Renewal Term or within the two (2) year period subsequent to the termination hereof. Notwithstanding anything else herein to the contrary, in lieu of payment thereof by the Company, the Company may cause any of its subsidiaries to pay any Transaction Fee payable to Harvest in connection with a Transaction; provided, that nothing in this sentence shall affect the absolute right of Harvest to be paid such Transaction Fee and the Company shall in all respects remain liable therefor until such obligation is paid in full. The Company may agree to pay Harvest a fee in connection with any other transaction, including without limitation, an acquisition of capital stock or assets of another person or entity, so long as such fee is approved by a majority of the members of the Board of Directors of the Company other than the Harvest Directors. (c) Concurrent with, and as a condition to, the closing of any Business Combination or Asset Sale involving the Company, the Company shall pay to Harvest, in a lump sum payment, an amount equal to the aggregate Harvest Fee which would otherwise be payable by the Company through the completion of the then-remaining Initial Term or Renewal Term, as the case may be. Notwithstanding anything else herein to the contrary, in lieu of payment thereof by the Company, the Company may cause any of its subsidiaries to pay the amount of any Harvest Fee payable to Harvest pursuant to this Section 3(c); provided, that nothing in this sentence shall affect the absolute right of Harvest to be paid such Harvest Fee and the Company shall in all respects remain liable therefor until such obligation is paid in full. (d) In addition to the fees provided for in Section 3(a), (b) and (c) above, the Company agrees to pay to Harvest a fee in the amount of $5,000,000 plus all out of pocket expenses incurred by Harvest in connection with the consummation of the Merger (the "Closing Fee") upon consummation of the Merger. The Closing Fee shall be payable in cash upon consummation of the Merger. (e) In addition to the fees to be paid to Harvest under Sections 3(a), 3(b), 3(c) and 3(d), the Company shall pay to, or on behalf of, Harvest, promptly as billed, all reasonable out-of-pocket expenses incurred by Harvest in connection with the Director Services and the Harvest Services rendered hereunder. Such expenses shall include, among other things, reasonable fees and disbursements of counsel, travel expenses, messenger and duplicating services, facsimile expenses and other reasonable and customary expenditures. (f) In addition to the fees otherwise payable hereunder, in consideration of the Director Services provided to the Company by any Harvest Director who is not an employee or director of Harvest, the Company shall pay reasonable and customary director's fees to such Harvest Director, in addition to reimbursing the reasonable out-of-pocket expenses (including, but not limited to, travel expenses) of such Harvest Director. -3- (g) Notwithstanding the foregoing, if the payment of an amount in respect of the Harvest Fee would result in a breach or event of default pursuant to an instrument of indebtedness to which the Company is a party (the "Indebtedness") such payment shall not be paid to the extent that the payment of such amount would result in such breach or default, but instead shall be accrued on the books of the Company and shall bear interest at 8% per annum and be payable as soon as and to the extent permitted by the terms of the Indebtedness, together with interest thereon as aforesaid. The Company covenants and agrees that it shall not agree to an amendment of the terms of the Indebtedness which would specifically prohibit the payment of the Harvest Fee hereunder or impose any higher financial test ratio or other pre-condition more onerous that any terms of the Indebtedness in effect on the date hereof. The Company covenants and agrees that, in the event that it incurs additional indebtedness, it shall not grant in favor of the holders of such additional indebtedness a covenant or right specifically prohibiting the payment of the Harvest Fee hereunder or imposing any higher financial test ratio or other pre-condition more onerous than is applicable to the Indebtedness. 4. Stock Options. Harvest and employees of Harvest shall not be eligible for any grant of stock options by Holdings or the Company for the duration of the Initial Term and any Renewal Term. 5. Term. (a) The term of this Agreement shall commence on the date hereof and shall terminate upon the earlier of (i) March 31, 2007 (such period being referred to herein as the "Initial Term"), unless this Agreement is automatically renewed as provided below in this Section 5, (ii) the date on which this Agreement is terminated for cause as provided in Section 7 below and (iii) the closing of any Business Combination or Asset Sale involving the Company. Notwithstanding the foregoing the term of this Agreement shall automatically and immediately be extended for additional one-year periods (each such period being referred to herein as a "Renewal Term") if written notice of termination of this Agreement has not been given by Harvest to the Company at least three (3) years prior to the end of the Initial Term or, as the case may be, a Renewal Term. (b) Notwithstanding anything to the contrary contained herein, the obligations of the Company set forth in Sections 3(b), 3(c), 3(e), 3(f) and 8 of this Agreement shall survive termination of this Agreement. 6. Right to Engage in Other Activities. The Director Services provided herein are not to be deemed exclusive. Nothing contained herein shall restrict Harvest or any of its shareholders, directors, officers, employees or agents from engaging in any other business or devoting time and attention to the management, investment, involvement or other aspects of any other business, including becoming an officer or director thereof, or rendering services of any kind to any other Company, firm, individual or association. 7. Termination for Cause. This Agreement may be terminated for cause by the party whose conduct is not the cause for such termination if (a) either party materially breaches its obligations as set forth herein (which, in this case of Harvest, should be terminated for willful misconduct or gross negligence), or (b) either party files a voluntary petition in bankruptcy or is adjudicated as bankrupt or insolvent, or such party files a petition under any chapter of the United States Bankruptcy Code or any other present or future applicable Federal, -4- state or other statute or law regarding bankruptcy, insolvency or other relief for debtors, or any party seeks, or consents to, or acquiesces in the appointment of, any trustee, receiver, conservator or liquidator of itself or of all or any substantial portion of its property. 8. Indemnification. The Company shall (i) indemnify Harvest, its affiliates, and their respective partners, directors, officers, employees, agents and controlling persons and their respective affiliates, and any Harvest Directors (collectively, the "Indemnified Parties"), to the fullest extent permitted by law, from and against any and all losses, suits, proceedings, demands, judgments, claims, damages and liabilities, joint or several, to which any Indemnified Party may become subject, caused by, related to or arising out of the Director Services or the Harvest Services or any other advice or services contemplated by this Agreement or the engagement of Harvest pursuant to, and the performance by any Indemnified Party of the Director Services or the Harvest Services contemplated by, this Agreement, and (ii) promptly reimburse each Indemnified Party for all costs and expenses (including reasonable attorney's fees and expenses), as incurred, in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by or on behalf of the Company and whether or not resulting in any liability. 9. Limited Liability. The Company agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort, or otherwise) to the Company, holders of its securities or its creditors related to or arising out of the engagement of Harvest pursuant to, or the performance by any Indemnified Party of the Director Services or the Harvest Services contemplated by, this Agreement, except to the extent that any loss, claim, damage, liability, cost or expense is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from Harvest's willful misconduct or gross negligence. 10. Independent Contractor. The Company acknowledges that Harvest has been retained hereunder solely as an advisor to the Company, and not as an advisor to or agent of any other person, and that the Company's engagement of Harvest is as an independent contractor and not in any other capacity including as a fiduciary. 11. Information. The Company agrees to furnish or cause to be furnished to Harvest all necessary or appropriate information for use in its engagement and hereby warrants that any information relating to the Company or a Transaction that is furnished to Harvest by or on behalf of the Company will be true and correct in all material respects and not misleading. 12. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the court, shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. 13. Assignment. Neither Harvest nor the Company may assign this Agreement or any of their respective rights or obligations hereunder, except that either of them may assign or transfer this Agreement to any other person who or which acquires all or substantially all of their respective property, business and assets, provided, however, that, in the case of -5- Harvest, this Agreement may be assigned or transferred, in whole or in part, to any affiliate of Harvest, and thereafter references in this Agreement to "Harvest" shall include such affiliate. 14. Severability. The invalidity or unenforceability of any provision of this Agreement shall not in any manner or way affect any other provision hereof, and this Agreement shall be construed, if possible, as if amended to conform to legal requirements, failing which it shall be construed as if any such offending provision were omitted. 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 16. Entire Agreement. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof. 17. Binding Nature. Subject to the restrictions on assignability contained herein and the rights and obligations of the Indemnified Parties under Sections 7 and 8 above, each and all of the covenants, terms, conditions, provisions and agreements herein contained shall be binding upon, and inure only to the benefit of, the parties hereto and their respective successors, heirs and permitted assigns. 18. Amendment, etc. The provisions of this Agreement may not be amended, waived, modified or changed except by an instrument in writing signed by all of the parties hereto. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one and the same instrument. -6- IN WITNESS WHEREOF, the parties hereto have caused this Management Agreement to be executed by their representatives thereunto duly authorized on the date first above written. HARVEST PARTNERS, INC., a New York corporation By: /s/ Ira D. Kleinman ---------------------------------------- Name: Ira D. Kleinman Title: General Partner ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation By: /s/ Michael J. Caporale, Jr. ---------------------------------------- Name: Michael J. Caporale, Jr. Title: President and Chief Executive Officer -7- EX-10.12 16 y61690exv10w12.txt ASSET PURCHASE AGREEMENT Exhibit 10.12 ASSET PURCHASE AGREEMENT Dated as of June 24, 2002 By and Between ASSOCIATED MATERIALS INCORPORATED and AMERCABLE INCORPORATED ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of June 24, 2002, is entered into by and between Associated Materials Incorporated ("SELLER"), a Delaware corporation, and AmerCable Incorporated ("BUYER"), a Delaware corporation. W I T N E S S E T H : WHEREAS, Seller's AmerCable division (the "DIVISION") is in the business of manufacturing, distributing and selling certain specialty electrical cables and cable accessories for use in underground and surface mining, marine and offshore drilling, automotive assembly robotics, telecommunications and a variety of other industrial applications under the tradenames of "AmerCable" and "Offshore/Marine Cable Specialists" (the "BUSINESS"); WHEREAS, Buyer wishes to purchase and Seller wishes to sell substantially all of the assets and properties used or held for use in the conduct of the Business upon and subject to the terms and conditions set forth in this Agreement; and WHEREAS, in connection with such purchase and sale, Buyer shall assume certain Liabilities (as defined below) and Seller shall retain certain Liabilities upon the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the terms and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. When used in this Agreement, the following terms shall have the respective meanings specified therefor below (such meanings to be equally applicable to both the singular and the plural forms of the terms defined). "ACQUIRED ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 2.1(j). "ACQUIRED CONTRACTS" shall have the meaning set forth in Section 2.1(d). "ACQUIRED CURRENT ITEMS" shall have the meaning set forth in Section 2.1(i). "ACQUIRED INVENTORY" shall have the meaning set forth in Section 2.1(c). "ACQUIRED LEASED REAL PROPERTY" shall have the meaning set forth in Section 2.1(a). 1 "ACQUIRED TANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in Section 2.1(b). "AFFILIATE" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; provided that, for the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "AGREED CLAIMS" shall have the meaning set forth in Section 10.4(d). "AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "AMERCABLE EMPLOYEE HEALTH BENEFIT ACCOUNT" shall have the meaning set forth in Section 5.2(a). "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the assignment and assumption agreement to be executed by Buyer and Seller in substantially the form of Exhibit A. "ASSUMED EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section 5.3(a). "ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.2. "ASSUMED TAXES" shall have the meaning set forth in Section 2.2(f). "BOOKS AND RECORDS" shall mean books, records, files and data, including electronic or computerized data, certificates and other documents, including accounting and financial records and sales and promotional literature. "BUSINESS" shall have the meaning set forth in the first recital. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which banks located in New York, New York shall be authorized or required by law to close. "BUYER" shall have the meaning set forth in the preamble to this Agreement. "BUYER INDEMNIFIED PARTY" shall have the meaning set forth in Section 10.2(a). "CERCLA" shall have the meaning set forth in the definition of "ENVIRONMENTAL LAW". "CERTIFICATE" shall have the meaning set forth in Section 10.4(a). "CLAIMS" shall have the meaning set forth in Section 6.10. "CLOSING" shall have the meaning set forth in Section 2.5. -2- "CLOSING DATE" shall have the meaning set forth in Section 2.5. "COBRA" shall have the meaning set forth in Section 5.2(b). "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and regulations promulgated thereunder. "CONTRACTS" shall mean all written agreements, contracts, insurance policies, licenses, leases of personal property, leases of real property, indentures, mortgages, instruments, security interests, purchase and sale orders and other similar arrangements, commitments or understandings. "DISPUTE NOTICE" shall have the meaning set forth in Section 6.11(d). "DIVISION" shall have the meaning set forth in the first recital. "EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section 3.8(a). "EMPLOYEE BENEFITS ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the assignment and assumption agreement to be executed by Buyer and Seller in substantially the form of Exhibit B. "ENCUMBRANCES" shall mean liens, security interests, options, rights of first refusal, easements, mortgages, pledges, charges, adverse claims, indentures, deeds of trust, rights-of-way, restrictions on the use of real property, encroachments, licenses to third parties, leases to third parties, security agreements, or any other encumbrances and other restrictions or limitations on use of real or personal property. "ENVIRONMENTAL LAW" shall mean any Federal, state or local statute, law or regulation relating to the protection of public health and welfare and the environment or to Hazardous Substances, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq. ("CERCLA"); the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and analogous state and local laws. "ENVIRONMENTAL LIABILITIES" shall mean any and all Liabilities arising in connection with the Business or the Purchased Assets that arise under or relate to any Environmental Law. "ERISA" shall have the meaning set forth in Section 3.8(a). "ERISA AFFILIATE" shall have the meaning set forth in Section 5.3(a). "EXCLUDED ASSETS" shall mean (i) cash and cash equivalents held by the Division as of the Closing Date; (ii) all intercompany receivables payable to the Division by Seller or any -3- of its Affiliates as of the Closing Date; (iii) all refunds, rebates or similar payments relating to Taxes attributable to the Purchased Assets, the Business or the Division, but only to the extent such Taxes were previously paid by Seller or any of its Affiliates; provided, however, that the term Excluded Assets shall not include any refunds, rebates or similar payments relating to any Assumed Taxes attributable to taxable periods ending prior to December 31, 2002; (iv) all Returns of Seller except that Buyer shall have access to any Returns of Seller relating to the Assumed Taxes, as provided herein; (v) any Books and Records referred to in Section 2.1(f) that Seller is required by law to retain; (vi) all insurance policies or insurance coverage (or assumed or self-insurance coverage) of Seller or its Affiliates not related exclusively to or used exclusively in the Business (subject to the parties' rights and obligations set forth in Section 6.11); (vii) any rights of Seller or any of its Affiliates under this Agreement; (viii) all claims, causes of action or rights of recovery for reimbursement, contribution, refunds, indemnity or other similar payment recoverable by Seller from or against any third party with respect to any Retained Liabilities or any Losses for which an indemnification payment is made to Buyer by Seller under this Agreement (including rights of set-off, rights to refunds and rights of recoupment from or against any such third party), but only to the extent of such indemnification payment; and (ix) all other properties, assets, rights, claims and Contracts of Seller not included as Purchased Assets or otherwise excluded herein. "GOVERNMENTAL ENTITY" shall mean any Federal, state, municipal or other government, or any department, commission, board, bureau, agency, public authority, or instrumentality thereof, or any court or arbitrator. "HAZARDOUS SUBSTANCES" shall have the meaning set forth in CERCLA and shall also include "pollutant or contaminant" and "petroleum products" as those terms are defined or used in CERCLA, urea formaldehyde insulation, polychlorinated biphenyls, asbestos, asbestos-containing materials, radioactive materials and municipal solid waste. "INDEMNIFIED PARTY" shall have the meaning set forth in Section 10.4(a). "INDEMNIFYING PARTY" shall have the meaning set forth in Section 10.4(a). "INDEPENDENT INSURANCE EXPERT" shall have the meaning set forth in Section 6.11(d). "INTELLECTUAL PROPERTY" shall mean all fictitious business names, trade names, trade dress, service marks, brand names, patents, patent applications, trade secrets and know how, trademarks, trademark registrations and applications therefor, copyrights, proprietary and technical information, domain names and data, methods, designs, processes, software, procedures, improvements thereon, refinements thereof and all agreements relating to intellectual property. "INVENTORY" shall mean all inventory held for sale (directly or by consignment) and all raw materials, packaging and supply materials, purchased parts, component parts, spare parts, finished goods and products and work in process. -4- "KNOWLEDGE" (i) when referring to Seller, shall mean the actual knowledge of Michael Caporale or Keith LaVanway and (ii) when referring to Buyer, shall mean the actual knowledge of Robert Hogan, Chad Archer, Rodney Cole or David Nasky. "LEASED REAL PROPERTY" shall have the meaning set forth in Section 2.1(a). "LETTER OF INTENT" shall have the meaning set forth in Section 6.2(b). "LIABILITY" shall mean any liabilities, obligations, responsibilities, commitments and expenses of any nature or kind, whether known or unknown, accrued or unaccrued, absolute, contingent or otherwise, and whether due or to become due. "LOSSES" shall mean any penalties, fines, costs, amounts paid in settlement, damages, losses, obligations, claims of any kind, interest or expenses (including reasonable attorneys' fees and expenses), whether or not involving a third party claim. "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" shall mean (i) when used with respect to the Business, any materially adverse change in or effect on the Purchased Assets, operations, financial condition or results of operations of the Business as a whole, except for any such change or effect resulting from or arising out of (a) changes or developments in United States or global economic conditions generally, (b) changes or developments in the industry in which the Division operates, (c) changes or developments in financial or securities markets or (d) changes or developments caused by acts of terrorism or war (whether or not declared) or (ii) when used with respect to Buyer or Seller, any materially adverse change in or effect on the ability of Buyer or Seller, as the case may be, to perform its obligations under this Agreement. "OVERLAP PERIOD" shall mean any taxable year or other taxable period beginning on or before the Closing Date and ending after the Closing Date. "PERMITS" shall mean governmental permits, franchises, approvals, licenses, certificates, registrations and authorizations. "PERMITTED ENCUMBRANCES" shall mean (i) those encumbrances set forth on Schedule 1.1, (ii) statutory liens of landlords and liens of carriers, warehousemen, mechanics materialmen and other similar Encumbrances arising or incurred in the ordinary course of business, (iii) liens for Taxes, assessments or other governmental charges not yet due and payable, or due but not yet delinquent, or which are being contested in good faith, (iv) liens incurred or deposits made in connection with worker's compensation, unemployment insurance or other types of social security and (v) minor defects of title, easements, rights-of-way, restrictions and other similar charges or Encumbrances which, in the case of each of clauses (i) through (iv) do not materially detract from the value, or impair the use or transfer, of the Business. "PERSON" shall mean and include any individual, partnership, firm, limited liability company, joint venture, corporation, trust, unincorporated organization and Governmental Entity. -5- "PRE-CLOSING INSURANCE POLICIES" shall have the meaning set forth in Schedule 6.11. "PRE-CLOSING PERIOD" shall mean any taxable year or other taxable period that ends on or before the Closing Date and, with respect to the Overlap Period, the portion of such taxable year or other taxable period ending on and including the Closing Date. "PURCHASE PRICE" shall have the meaning set forth in Section 2.4. "PURCHASED ASSETS" shall have the meaning set forth in Section 2.1. "REPRESENTATIVES" shall have the meaning set forth in Section 6.4(a). "RETAINED LIABILITIES" shall mean (i) all Liabilities related to Taxes attributable to the Purchased Assets, the Business or the Division for taxable periods or portions thereof ending on or prior to the Closing Date, other than those Taxes assumed by Buyer pursuant to Sections 2.2(e) and 2.2(f), (ii) all Liabilities related to accounts payable by the Division to Seller or any of its Affiliates as of the Closing Date, (iii) all Liabilities relating to any Employee Benefit Plan subject to Title IV of ERISA or Section 412 of the Code, including any "multiemployer plans" as defined by Section 3(37) of ERISA, even if such plans benefited the Transferred Employees or any former employee of the Division; (iv) all Liabilities relating to any post-retirement plans, arrangements or agreements with respect to Earl R. Karges, Edwin J. Kazanovicz, Donald A. Vickers or George L. Marchand, or any of the beneficiaries of such individuals, (v) all Liabilities relating to or arising out of any of Seller's contracts, agreements or commitments not included in the Purchased Assets, (vi) all Liabilities of Seller under or in connection with this Agreement or any of the transactions contemplated hereby, including all Liabilities with respect to which Seller is obligated to indemnify Buyer under this Agreement, and (vii) all Liabilities of Seller not specifically assumed by Buyer hereunder. "RETIREMENT PLAN" shall have the meaning set forth in Section 5.3(b). "RETURN" shall mean any return, declaration, report, statement or other document required to be filed in respect of Taxes. "SELLER" shall have the meaning set forth in the preamble to this Agreement. "SELLER INDEMNIFIED PARTY" shall have the meaning set forth in Section 10.3(a). "SELLER NAMES" shall have the meaning set forth in Section 6.8. "SELLER PRORATED TAXES" shall have the meaning set forth in Section 11.5. "SELLER'S MEDICAL PLAN" shall have the meaning set forth in Section 5.2(a). "TAXES" shall mean all taxes, assessments, charges, duties, fees, levies or other governmental charges, including all Federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, gift, estate, death, inheritance, generation-skipping, sales, use, occupation, property, excise, severance, windfall profits, stamp, license, payroll, -6- employment, unemployment, ad valorem, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person. "TRANSFERRED EMPLOYEE" shall have the meaning set forth in Section 5.1(a). "UNASSIGNED CONTRACTS" shall have the meaning set forth in Section 6.6. "WARN" shall have the meaning set forth in Section 5.3(d). 1.2 Construction. In this Agreement, unless the context otherwise requires: (a) any reference to "writing" or comparable expressions includes a reference to facsimile transmission or comparable means of communication; (b) words expressed in the singular number shall include the plural and vice versa, words expressed in the masculine shall include the feminine and neuter gender and vice versa; (c) references to Articles, Sections, Exhibits, Schedules and Recitals are references to articles, sections, exhibits, schedules and recitals of this Agreement; (d) reference to "day" or "days" are to calendar days; (e) this "Agreement" or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; and (f) "include," "includes," and "including" are deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of similar import. 1.3 Schedules and Exhibits. The Schedules and Exhibits to this Agreement are incorporated into and form an integral part of this Agreement. If an Exhibit is a form of agreement, such agreement, when executed and delivered by the parties thereto, shall constitute a document independent of this Agreement. ARTICLE II PURCHASE AND SALE OF ASSETS 2.1 Purchase and Sale of Assets. Upon the terms and subject to the conditions, limitations and exclusions set forth in this Agreement, Seller shall sell, convey, transfer, assign and deliver to Buyer on the Closing Date, and Buyer shall purchase, acquire and -7- accept from Seller, all of Seller's right, title (to the extent Seller has such title) and interest in, to and under the properties, assets, rights, claims and Contracts related exclusively to or used exclusively or held for use exclusively in the Business, other than the Excluded Assets (collectively, the "PURCHASED ASSETS"), including the following: (a) the leased real property listed on Schedule 2.1(a) (the "LEASED REAL PROPERTY"), together with all improvements thereon (collectively, the "ACQUIRED LEASED REAL PROPERTY"); (b) all tangible personal property, including machinery, equipment, furniture, furnishings, vehicles, tools, dies, parts, supplies and other tangible personal property related exclusively to or used exclusively or held for use exclusively in the Business, including the items of the type set forth on Schedule 2.1(b) (collectively, the "ACQUIRED TANGIBLE PERSONAL PROPERTY"), which Schedule sets forth the tangible personal property of the Division as of June 21, 2002; (c) the Inventory related exclusively to or used exclusively or held for use exclusively in the Business, including the items of the type set forth on Schedule 2.1(c) (collectively, the "ACQUIRED INVENTORY"), which Schedule sets forth the Inventory of the Division as of June 21, 2002; (d) subject to the receipt of any consents that are required, all rights and interest in and under Contracts related exclusively to or used exclusively or held for use exclusively in the Business, including all rights to sell and receive goods and services pursuant to such Contracts and to assert claims and take other actions in respect of breaches or other violations thereof, including the Contracts set forth on Schedule 2.1(d) (collectively, the "ACQUIRED CONTRACTS") (it being understood that the Unassigned Contracts shall be treated as provided for in Section 6.6); (e) the Intellectual Property used exclusively or held for use exclusively in the Business, including the Intellectual Property set forth on Schedule 2.1(e); (f) the Books and Records used exclusively or held for use exclusively in the Business; (g) to the extent transferable, all rights under express or implied warranties from suppliers to the Division to the extent such warranties relate exclusively to the Business or the Purchased Assets (it being understood that any such warranties that are not transferable or that do not relate exclusively to the Business shall be treated as provided for in Section 6.9); (h) to the extent transferable, and subject to the receipt of any Required Governmental Consent, the Permits related exclusively to or used exclusively or held for use exclusively in connection with the use, operation or ownership of the Purchased Assets or the conduct of the Business; (i) all prepaid assets, expenses, security deposits and other current assets related exclusively to the Business, including those set forth on Schedule 2.1(i) (collectively, the "ACQUIRED CURRENT ITEMS"), but excluding current assets that are Excluded Assets; -8- (j) all accounts receivable, notes or other evidences of indebtedness (in favor of the Business) related exclusively to the Business, including those of the type set forth on Schedule 2.1(j) (collectively, the "ACQUIRED ACCOUNTS RECEIVABLE"), which Schedule sets forth all accounts receivable, notes or other evidences of indebtedness as of June 21, 2002, to the extent payment with respect thereto shall not have been received by Seller prior to the Closing Date, but excluding any intercompany receivables that are Excluded Assets; (k) the Assumed Employee Benefit Plans to be transferred to Buyer pursuant to Section 5.3(b); (l) all customer and supplier lists used exclusively or held for use exclusively in the Business; (m) the goodwill related exclusively to the Business; (n) all causes of action, claims, settlements, rights of recovery, insurance proceeds (from policies held by third parties relating to any Purchased Assets or Assumed Liabilities) and set-off of every kind pertaining exclusively or relating exclusively to the Business or the Purchased Assets, or to the extent the related Liability, if any, is an Assumed Liability, including all insurance, warranty and condemnation proceeds, judgments and awards received after the Closing Date with respect to damage, destruction or loss of any Purchased Assets, any third party claims or otherwise (it being understood that any such causes of action, claims, settlements, rights of recovery, insurance proceeds and set-offs that (i) relate exclusively to the Business or the Purchased Assets, but are not (for any reason whatsoever) transferable to, assignable to or enforceable by Buyer, or (ii) do not relate exclusively to the Business, but do relate directly to a Purchased Asset or an Assumed Liability and have a value in excess of $100,000, shall be treated as provided in Section 6.10); (o) all of Seller's rights to the telephone numbers used exclusively by the Division; and (p) all other assets of Seller not specifically set forth in this Section 2.1 if such asset is used exclusively or held for use exclusively in the Business. In connection with the foregoing (but without affecting the interpretation of any other provision of this Agreement), there shall be a rebuttable presumption that (a) any tangible asset that is (i) normally located at the Division's facilities in El Dorado, Arkansas or Houston, Texas, (ii) held on consignment at any location set forth on Schedule 2.1(q), (iii) held at any vendor location set forth on Schedule 2.1(q) for further processing, (iv) a laptop computer or printer in the possession of the Division's field sales personnel or (v) in transit to or from any of the above locations where legal title and risk of ownership is retained or has been assumed by the Division shall be deemed a Purchased Asset, (b) any Contract executed by or in the name of the Division (including Offshore/Marine Cable Specialists) shall be deemed a Purchased Asset and (c) any account receivable previously invoiced in the name of the Division (including Offshore/Marine Cable Specialists) shall be deemed a Purchased Asset. -9- It is acknowledged that Schedules 2.1(b), 2.1(c) and 2.1(j) set forth lists of assets, rights, claims and Contracts as of a certain date and that such lists are subject to change in the ordinary course of business. 2.2 Assumption of Liabilities. Upon the terms and subject to the conditions and exclusions set forth in this Agreement, Buyer shall assume and discharge or perform when due, and shall assume pursuant to the Assignment and Assumption Agreement and the Employee Benefits Assignment and Assumption Agreement, all Liabilities (other than the Retained Liabilities) related exclusively to, arising exclusively out of, or incurred exclusively in connection with the Business or the operation thereof, currently or as hereafter conducted, and whether accrued before, on or after the Closing Date (unless otherwise specified) (collectively, the "ASSUMED LIABILITIES"), including the following: (a) all Liabilities relating to accounts payable of the Business and the Division, other than Retained Liabilities; (b) all Liabilities relating to, arising out of or incurred in connection with any Acquired Contract; (c) all Liabilities arising out of or in connection with any warranties relating to the sale or disposition of any product or service by the Business or the Division; (d) all Liabilities arising out of or in connection with any product-liability claims or Losses that involve the use of any product manufactured, designed, sold or otherwise disposed of exclusively by the Business or the Division, whether before, on or after the Closing Date; (e) all Liabilities for sales, transfer, documentary, use, filing and similar Taxes and fees arising solely in connection with the transactions contemplated by this Agreement, whether levied on Buyer or Seller; (f) all Liabilities for Taxes attributable to the Purchased Assets, the Business or the Division that relate to taxable periods, or portions thereof, ending on or prior to the Closing Date, but only to the extent that (i) the preparation of Returns relating to, or the payment of, such Taxes is or has been the direct responsibility of the Division (including the management, employees or agents thereof) prior to or on the Closing Date or (ii) such Taxes arise out of or in connection with untrue or inaccurate information provided to Seller by the Division (including the management, employees or agents thereof) prior to the Closing Date (all Liabilities referred to in this Section 2.2(f), together with all Liabilities referred to in Section 2.2(e), the "ASSUMED TAXES"); (g) all Liabilities assumed by Buyer pursuant to Article V; (h) all Environmental Liabilities; and (i) all Liabilities relating to, arising out of or incurred in connection with those certain Severance Agreements dated as of December 27, 2001, by and between Seller and each of William Reisdorf, Robert Hogan, Chad Archer, Rodney Cole and David Nasky. -10- 2.3 Retained Liabilities. Notwithstanding the foregoing, Buyer shall not assume and shall not discharge, perform or otherwise be liable for, and Seller shall retain, perform and discharge, any of the Retained Liabilities no matter how or when they may have arisen or arise. Without limiting the foregoing, the Retained Liabilities shall remain the sole and exclusive responsibility of Seller. 2.4 Payment of Purchase Price. Upon the terms and subject to the conditions of this Agreement, Buyer shall deliver to Seller at the Closing, in payment for the Purchased Assets, Twenty Eight Million Three Hundred Thirty Two Thousand Five Hundred Fifty Dollars ($28,332,550) (the "PURCHASE PRICE") and shall assume the Assumed Liabilities. 2.5 Closing. Subject to the terms and conditions of this Agreement, the closing of the sale referred to in Section 2.1 (the "CLOSING") shall take place at the offices of Haynes and Boone, LLP, located at 901 Main Street, Suite 3100, Dallas, Texas 75202, at 10:00 a.m., local time, on June 24, 2002, or such later date as may be mutually agreed upon by Buyer and Seller (the "CLOSING DATE"). 2.6 Seller's Deliveries at Closing. At the Closing, Seller shall execute and deliver or cause to be delivered to Buyer the following items: (a) Bill of Sale. Seller shall deliver to Buyer a bill of sale in substantially the form of Exhibit C. (b) Lease Assignments. For the Leased Real Property, Seller shall deliver to Buyer a recordable lease assignment in form and substance reasonably satisfactory to Buyer that transfers, assigns and conveys to Buyer all of Seller's right, title and interest in the Leased Real Property. (c) Articles, Resolutions, and Incumbency. Seller shall deliver to Buyer (i) copies of its organizational documents, certified by its secretary; (ii) copies of the resolutions of the Board of Directors and stockholders (if required) authorizing and approving this Agreement and the consummation of the transactions contemplated by this Agreement certified by its secretary; and (iii) an incumbency certificate relating to each Person executing on behalf of Seller any document executed and delivered to Buyer by Seller pursuant to the terms hereof. (d) Copies of Books and Records. Seller shall deliver to Buyer photocopies of such Books and Records referred to in Section 2.1(f) which Seller is required by law to retain. (e) FIRPTA Compliance. Seller shall deliver to Buyer a nonforeign person affidavit, as required by Section 1445(a) of the Code. (f) Trademark Assignment. Seller shall execute and deliver a trademark assignment in substantially the form of Exhibit D evidencing the assignment of any trademarks, trademark registrations and applications for registration and the domain names, together with the goodwill associated with and symbolized thereby, used exclusively or held for use exclusively in the Business to Buyer. -11- (g) Patent Assignment. Seller shall execute and deliver a patent assignment in substantially the form of Exhibit E evidencing the assignment of any patents, patent applications and inventions used exclusively or held for use exclusively in the Business to Buyer. (h) Release. Seller shall deliver to Buyer a release in substantially the form of Exhibit F relating to the release by Seller of the members of management of the Division set forth on Schedule 5.6 hereto with respect to compliance with the Amended and Restated Corporate Directive of Seller issued on May 14, 2002. (i) Other Instruments. Seller shall execute and deliver to Buyer such other instruments as Buyer or its counsel may reasonably request to effect or evidence the consummation of the transactions contemplated by this Agreement. 2.7 Buyer's Deliveries at Closing. At the Closing, Buyer shall execute and deliver or cause to be delivered to Seller the following items: (a) Purchase Price. Buyer shall make payment of the Purchase Price to Seller by wire transfer of immediately available funds, to an account designated by Seller. Seller shall provide written notice to Buyer of such account information at least two (2) Business Days prior to the Closing Date. (b) Articles, Resolutions, and Incumbency. Buyer shall deliver to Seller (i) copies of its organizational documents, certified by its secretary; (ii) copies of the resolutions of its Board of Directors and stockholders authorizing and approving this Agreement and the consummation of the transactions contemplated by this Agreement certified by its secretary; and (iii) an incumbency certificate relating to each Person executing on behalf of Seller any document executed and delivered to Buyer by Seller pursuant to the terms hereof. (c) Other Instruments. Buyer shall execute and deliver to Seller such other instruments as Seller or its counsel may reasonably request to effect or evidence the consummation of the transactions contemplated by this Agreement. 2.8 Buyer's and Seller's Joint Deliveries at Closing. At the Closing, both Buyer and Seller shall execute and deliver the following items: (a) Assignment and Assumption Agreement. Buyer and Seller shall execute and deliver the Assignment and Assumption Agreement, pursuant to which Seller assigns to Buyer the Assumed Liabilities and Seller's rights and interests in the Acquired Contracts and Buyer assumes the Assumed Contracts and agrees to assume and discharge or perform when due the Assumed Liabilities. (b) Employee Benefits Assignment and Assumption Agreement. Buyer and Seller shall execute and deliver the Employee Benefits Assignment and Assumption Agreement evidencing the assignment of the Assumed Employee Benefit Plans to be transferred to Buyer pursuant to Sections 5.3(a) and 5.3(b). (c) Lockbox Agreement. Buyer and Seller shall execute and deliver a lockbox agreement in substantially the form of Exhibit G. -12- ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 3. Representations and Warranties. Seller hereby represents and warrants to Buyer as follows: 3.1 Organization; Good Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and it has all requisite corporate power to carry on the Business as currently conducted and to execute and deliver this Agreement, and any other instruments or agreements to be executed by Seller pursuant to this Agreement, perform its obligations hereunder and thereunder and enter into the transactions contemplated hereby and thereby. Seller is licensed or qualified to do business and is in good standing as a foreign corporation in each jurisdiction set forth on Schedule 3.1. 3.2 Authorization. The execution, delivery and performance by Seller of this Agreement and any other instruments or agreements to be executed by Seller pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of Seller and no other corporate action on the part of Seller or its stockholders is necessary to authorize the execution, delivery and performance by Seller of this Agreement or any other instruments or agreements to be executed by Seller pursuant to this Agreement and the consummation of the transactions contemplated hereby and thereby. This Agreement and any other instruments or agreements to be executed by Seller pursuant to this Agreement, when delivered in accordance with the terms hereof and thereof, assuming the due execution and delivery of this Agreement or each such other instrument or agreement by the other parties hereto and thereto, have been duly executed and delivered by Seller and constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except to the extent that such enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. 3.3 No Violation or Conflict. The execution, delivery and performance by Seller of this Agreement and any other instruments or agreements to be executed by Seller pursuant to this Agreement, and the consummation by Seller of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the lapse of time or both (i) violate, conflict with, or result in a breach or default under any provision of the certificate of incorporation or by-laws of Seller, (ii) violate any statute, ordinance, rule, regulation, order, judgment or decree of any Governmental Entity applicable to Seller or the Business, or (iii) subject to obtaining the consents set forth on Schedule 3.3, constitute a violation or breach by Seller of, conflict with, constitute a default by Seller (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Encumbrance, except for Permitted Encumbrances, upon any of the Purchased Assets under, any of the terms, conditions or provisions of any Contract, Permit or other instrument or obligation to which Seller is a party or by which Seller is bound (other than any Contract, Permit, instrument or obligation that is a Purchased Asset (x) that is not set forth on Schedule 3.3 or (y) that Buyer has knowledge of on the Closing Date), except, in the case of clause (ii) or (iii), for such violations, conflicts, -13- breaches, defaults, terminations, cancellations, payments, accelerations or Encumbrances as would not reasonably be expected to have a Material Adverse Effect on the Business. In connection with the foregoing (but without affecting the interpretation of any other provision of this Agreement), there shall be a rebuttable presumption that Buyer has knowledge of any Contract, Permit, instrument or obligation executed by or in the name of the Division (including Offshore/Marine Cable Specialists). 3.4 Title to Assets. Subject to any Encumbrances and such other imperfections to and diminutions of title that have resulted from actions taken by the Division (including the management, employees or agents thereof) outside the ordinary course of business and without the express written authorization or knowledge of Seller, Seller has good and marketable title, free and clear of all Encumbrances (except for Permitted Encumbrances), to each of the following Purchased Assets: (a) the Acquired Current Items set forth on Schedule 2.1(i); (b) the Acquired Inventory (i) located at the Division's facilities in El Dorado, Arkansas and Houston, Texas, (ii) held on consignment at any location set forth on Schedule 2.1(q), (iii) held at any vendor location set forth on Schedule 2.1(q) for further processing, and (iv) in transit to or from any of the above locations where legal title and risk of ownership is retained or has been assumed by the Division; (c) the Intellectual Property set forth on Schedule 3.4(c); and (d) the Acquired Tangible Personal Property located at the Division's facilities in El Dorado, Arkansas and Houston, Texas, or the laptops and printers in the possession of the Division's field sales personnel. Subject to any Encumbrances and such other imperfections to and diminutions of title that have resulted from actions taken by the Division (including the management, employees or agents thereof) outside the ordinary course of business and without the express written authorization or knowledge of Seller, to the knowledge of Seller, (a) Seller has good and marketable title to the Acquired Accounts Receivable, and (b) no Acquired Contract has been assigned, transferred or otherwise conveyed by Seller to any other party prior to the consummation of this Agreement. 3.5 No Encumbrances. Subject to any Encumbrances that have resulted from actions taken by the Division (including the management, employees or agents thereof) outside the ordinary course of business and without the express written authorization or knowledge of Seller, Seller's right, title (to the extent Seller has such title) and interest in each of the following Purchased Assets is free and clear of all Encumbrances, except for Permitted Encumbrances: (a) the Acquired Leased Real Property; (b) the Acquired Accounts Receivable, as invoiced by or in the name of the Division (including Offshore/Marine Cable Specialists); -14- (c) (i) the Acquired Contracts set forth on Schedule 2.1(d) and (ii) the Acquired Contracts executed by Seller in the name of the Division (including Offshore/Marine Cable Specialists) without Buyer's knowledge; (d) the Intellectual Property set forth on Schedule 3.5(d); and (e) the software set forth on Schedule 2.1(e)(iii). In connection with Section 3.5(c) (but without affecting the interpretation of any other provision of this Agreement), there shall be a rebuttable presumption that Buyer has knowledge of any Acquired Contract executed by or in the name of the Division (including Offshore/Marine Cable Specialists). 3.6 Consents of Governmental Entities. No consent, approval or authorization of, or exemption by, or filing with, any Governmental Entity is required to be obtained or made by Seller in connection with the execution and delivery of this Agreement or the transfer, sale or assignment of the Purchased Assets as contemplated hereby, except, in each case, where the failure to obtain such consents, approvals, authorizations, exemptions or filings would not reasonably be expected to have a Material Adverse Effect on the Business. 3.7 Taxes. Except with respect to (i) Returns relating to, or (ii) the payment of, the Assumed Taxes: (a) Seller has filed all material Returns that it was required to file pursuant to applicable law with respect to the Division or the Purchased Assets; (b) all such Returns were correct and complete in all material respects; (c) all material Taxes due and owing by Seller with respect to the Division or the Purchased Assets (whether or not shown on any Return) have been paid; (d) Seller has an adequate reserve for all material Taxes payable by Seller with respect to the Division or the Purchased Assets for all taxable periods and portions thereof through the Closing Date; (e) Seller has not waived any statute of limitations in respect of material Taxes with respect to the Division or the Purchased Assets or agreed to any extension of time with respect to a material Tax assessment or deficiency or the collection of a material amount of Taxes, in each case with respect to the Division or the Purchased Assets; (f) no deficiencies, adjustments or claims for any material amount of Taxes have been proposed, asserted or assessed against Seller with respect to the Division or the Purchased Assets; (g) there are no Encumbrances for a material amount of Taxes other than for current Taxes not yet due upon any assets of Seller with respect to the Division or the Purchased Assets. -15- (h) none of the Returns of Seller with respect to the Division or the Purchased Assets are now under audit or examination by any tax authority or other Governmental Entity, and there are no suits, actions, proceedings or investigations pending or, to the knowledge of Seller, threatened against Seller with respect to any Taxes with respect to the Division or the Purchased Assets; and (i) all material Taxes that are required by law to be withheld or collected by Seller with respect to the Division or the Purchased Assets have been duly withheld and collected and, to the extent required by applicable law, have been paid to the proper tax authority or other Governmental Entity or properly segregated or deposited. 3.8 Employee Benefit Plans. (a) Schedule 3.8 sets forth a true and complete list of all "employee benefit plans" as defined by Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), all specified material fringe benefit plans as defined in Section 6039D of the Code, and all other material bonus, incentive compensation, deferred compensation, profit sharing, stock option, stock appreciation right, stock bonus, stock purchase, employee stock ownership, savings, severance, supplemental unemployment, layoff, salary continuation, retirement, pension, health, life insurance, dental, disability, accident, group insurance, vacation, holiday, sick leave, fringe benefit or welfare plan, and any other material employee compensation or benefit plan, agreement, policy, or contract (whether qualified or nonqualified), and any trust, escrow or other funding arrangement related thereto, which currently is sponsored, established, maintained or contributed to or required to be contributed to by Seller or for which Seller has any liability, contingent or otherwise, under which employees of the Division participate or are entitled to receive benefits (collectively, the "EMPLOYEE BENEFIT PLANS"). (b) Except as set forth on Schedule 3.8, Seller does not maintain and is not obligated to provide benefits under any life, medical, or health plan (other than as an incidental benefit under any Employee Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of the Code ("QUALIFIED PLAN")) which provides benefits to retirees of the Division or other terminated employees of the Division other than benefit continuation rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (c) Except as set forth in Schedule 3.8, neither Seller nor any Person that currently would be treated as a "single employer" with Seller under Section 414(b), (c), (m), or (o) of the Code ("ERISA AFFILIATE") currently maintains or contributes to or at any time within the six (6) year period preceding the date of this Agreement was required to maintain or contribute to or had any liability with respect to any "multiemployer plan," as that term is defined in Section 4001 of ERISA or an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code. Neither Seller nor any other ERISA Affiliate has at any time within the six (6) year period preceding the date of this Agreement, incurred any unsatisfied liability under Sections 4062, 4063, or 4064 of ERISA or Section 412 of the Code with respect to any Employee Benefit Plan that is subject to Title IV of ERISA or Section 412 of the Code or incurred any unsatisfied withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA to any multiemployer plan, as defined in Section 3(37) of -16- ERISA with respect to which Buyer would have any Loss or that could result in an Encumbrance on the Purchased Assets. (d) With respect to any Employee Benefit Plans that are not administered or maintained by the Division, to the knowledge of Seller or the actual knowledge of John Haumesser, there are no pending or threatened material claims by or on behalf of any such Employee Benefit Plan, or by any Person covered thereby, other than ordinary claims for benefits submitted by participants or beneficiaries, or any pending or, to the knowledge of Seller or the actual knowledge of John Haumesser, threatened material claims regarding breaches of fiduciary duty under ERISA and, to the knowledge of Seller or or the actual knowledge of John Haumesser, there is no basis for any such claim. (e) To the extent any Employee Benefit Plans are not administered or maintained by the Division, Seller has delivered or made available to Buyer: (i) copies of the current Employee Benefit Plan documents and any amendments thereto for each Employee Benefit Plan and copies of any related trusts, and (A) the most recent summary plan descriptions of such Employee Benefit Plans for which Seller is required to prepare, file, and distribute summary plan descriptions, and (B) the most recent copy of any material written summaries and descriptions furnished to participants and beneficiaries regarding Employee Benefit Plans for which a plan description or summary plan description is not required; (ii) the Form 5500 filed in each of the most recent three (3) plan years with respect to each Employee Benefit Plan, including all schedules thereto and any opinions of independent accountants relating thereto; (iii) all insurance policies or agreements regarding other funding arrangements that are currently in force which were purchased by or that provide benefits under any Employee Benefit Plan or otherwise reimburse for benefits paid under Employee Benefit Plans; (iv) all material written agreements that are currently in force with third party administrators, investments managers, consultants and service providers relating to any Employee Benefit Plan and any and all material written reports, including discrimination testing, submitted to Seller by such third party administrators, investment managers, consultants and service providers within the two (2) years preceding the date hereof; and (v) with respect to Employee Benefit Plans that are Qualified Plans, the most recent determination letter for each such Employee Benefit Plan. (f) Except as set forth on Schedule 3.8(f), Seller has not filed or been required to file any notices, forms or reports with the IRS, the PBGC or the Department of Labor ("DOL"), with respect to any Employee Benefit Plan not administered or maintained by the Division, pursuant to statute, other than annual reports, any PBGC Form 1, or any other filings -17- made in the ordinary course of plan administration, within the two (2) years preceding the date hereof. (g) Seller has not received any notice from the IRS, the PBGC, or the DOL relating to any Employee Benefit Plan not administered or maintained by the Division regarding an audit of any Employee Benefit Plan or the assessment of a material penalty within the two (2) years preceding the date hereof. 3.9 Brokers' or Finders' Fees. No agent, broker, Person or firm acting on behalf of Seller is, or will be, entitled to any commission or brokers' or finders' fees from Buyer or any of its Affiliates in connection with any of the transactions contemplated by this Agreement. 3.10 No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED IN THIS ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT, (I) BUYER ACKNOWLEDGES AND AGREES THAT NONE OF SELLER OR ANY OF ITS AFFILIATES, AGENTS OR REPRESENTATIVES IS MAKING, WHETHER CONTAINED, OR REFERRED TO, IN ANY DUE DILIGENCE MATERIALS THAT HAVE BEEN PROVIDED TO BUYER OR ANY OF ITS AFFILIATES, AGENTS OR REPRESENTATIVES ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO THE VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE PURCHASED ASSETS) BEYOND THOSE EXPRESSLY GIVEN BY SELLER IN THIS ARTICLE III AND (II) IT IS UNDERSTOOD THAT EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III, BUYER TAKES THE BUSINESS AND THE PURCHASED ASSETS "AS IS AND WHERE IS". ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 4. Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows: 4.1 Organization; Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and it has all requisite corporate power to execute and deliver this Agreement, and any other instruments or agreements to be executed by Buyer pursuant to this Agreement, perform its obligations hereunder and thereunder and enter into the transactions contemplated hereby and thereby including the purchase of the Purchased Assets and the assumption of the Assumed Liabilities. 4.2 Authorization. The execution, delivery and performance by Buyer of this Agreement and any other instruments or agreements to be executed by Buyer pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of Buyer and no other corporate action on the part of Buyer or its stockholders is necessary to authorize the execution, delivery and -18- performance by Buyer of this Agreement or any other instruments or agreements to be executed by Buyer pursuant to this Agreement and the consummation of the transactions contemplated hereby and thereby. This Agreement and any other instruments or agreements to be executed by Buyer pursuant to this Agreement, when delivered in accordance with the terms hereof and thereof, assuming the due execution and delivery of this Agreement and each such other instrument or agreement by the other parties hereto and thereto, have been duly executed and delivered by Buyer and constitute the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms, except to the extent that such enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. 4.3 No Violations or Conflict; Consents. The execution, delivery and performance by Buyer of this Agreement, and any other instruments or agreements to be executed by Buyer pursuant to this Agreement and the consummation by Buyer of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the lapse of time or both (i) violate, conflict with, or result in a breach or default under any provision of the certificate of incorporation or by-laws of Buyer, (ii) violate any statute, ordinance, rule, regulation, order, judgment or decree of any Governmental Entity applicable to Buyer or by which any of its properties or assets may be bound, (iii) require any filing by Buyer, or require Buyer to obtain any Permit, consent or approval of, or require Buyer to give any notice to, any Governmental Entity applicable to Buyer, or (iv) constitute a violation or breach by Buyer of, conflict with, constitute a default by Buyer (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Encumbrance upon any of the properties or assets of Buyer under, any of the terms, conditions or provisions of any Contract, Permit or other instrument or obligation to which Buyer is a party or by which Buyer is bound, except (x) in the case of the creation of any Encumbrances, with respect to its financing arrangements with Fleet Capital Corporation and, (y) in the case of clause (ii), (iii) or (iv), for such violations, conflicts, breaches, defaults, terminations, cancellations, payments, accelerations or Encumbrances as would not reasonably be expected to have a Material Adverse Effect on Buyer. 4.4 Brokers' or Finders' Fees. Except with respect to the fees payable to Morgan Keegan, Inc. (whose fees and expenses shall be paid by Buyer), no agent, broker, Person or firm acting on behalf of Buyer is, or will be, entitled to any commission or brokers' or finders' fees from Seller or any of its Affiliates in connection with any of the transactions contemplated by this Agreement. ARTICLE V EMPLOYEE BENEFITS 5.1 Transfer of Employees. (a) Within a reasonable period of time prior to the Closing Date, Buyer shall offer employment on an "at will" basis, commencing as of the Closing Date, to all of the employees of the Division as of the date hereof (and still employed by Seller on the date of such -19- offer of employment) and any former employees of the Division on long term disability as of the Closing Date. Buyer's offer of employment shall be for a job or position substantially identical to the employee's job or position as of the date hereof and shall provide for a base salary or wages and bonus, incentive compensation or commission which, at a minimum, is at least as favorable in the aggregate to the employee's base salary or wages and bonus, incentive compensation or commission with Seller in effect on the date hereof and employee benefits and other terms and conditions of employment at least as favorable in the aggregate as those provided to the employee by Seller as of the date hereof. Each such employee or former employee who accepts such offer of employment is referred to hereinafter as a "TRANSFERRED EMPLOYEE." No provision in this Article V constitutes any commitment, contract, or understanding (expressed or implied) of any obligation on the part of Buyer to a post-Closing employment relationship of any fixed term or duration or upon any terms or conditions other than those that Buyer may establish pursuant to individual offers of employment in accordance with this Agreement. Nothing in this Agreement shall be deemed to prevent or restrict in any way the right of Buyer to terminate, reassign, promote, or demote any of the Transferred Employees after the Closing Date or to change adversely or favorably the title, powers, duties, responsibilities, functions, locations, salaries, other compensation or terms or conditions of employment of such employees. (b) Buyer shall have the right prior to the Closing Date to meet with employees of Seller to arrange the transition of ownership of the Division; provided, however, that such meetings shall be held at times and dates reasonably satisfactory to Seller, and shall be held at such times and in such a manner (including, at the request of Seller, the presence of a representative of Seller) as not to adversely interfere with Seller's normal business operations. (c) Seller shall make available to Buyer all personnel records, including names, Social Security numbers, performance ratings and evaluations (if available), dates of hire by Seller, dates of birth, numbers of hours worked each fiscal year and compensation histories (if available) for all Transferred Employees; provided, however, that Seller shall not make available to Buyer prior to Closing medical and other records relating to Transferred Employees that Seller is obligated by law, regulation, rule or agreement to keep confidential. Seller may retain copies of any records relating to the Transferred Employees so long as Seller provides Buyer the original, if available, or at least one copy of such records, at Buyer's cost, in accordance with the immediately preceding sentence. -20- 5.2 Provision of Health Benefits (a) On the Closing Date, Buyer shall (i) assume sponsorship of the Seller's medical plan that provides coverage to the Transferred Employees ("SELLER'S MEDICAL PLAN") and the liabilities thereunder, with respect to all persons entitled to benefits under the provisions of the Seller's Medical Plan and (ii) be substituted for Seller as the plan sponsor under the Seller's Medical Plan. On or as soon as practicable following the Closing Date, but in any event not later than thirty (30) days following the Closing Date, Seller shall cause all right, title, interest, authorities, obligations, duties, liabilities, and assets of Seller in, to and under the Seller's Medical Plan and the bank account related thereto (the "AMERCABLE EMPLOYEE HEALTH BENEFIT ACCOUNT") to be transferred to Buyer. On or as soon as practicable following the Closing Date, but in any event not later than thirty (30) days following the Closing Date, the parties shall execute and deliver such documents and instruments as may be required to effect the assumption and transfer of the Seller's Medical Plan and the AmerCable Employee Health Benefit Account, by and to Buyer and to ensure that all assets, contracts, and agreements associated with the Seller's Medical Plan and the AmerCable Employee Health Benefit Account, as the same exist immediately prior to the Closing Date, shall be transferred with the Seller's Medical Plan to the extent provided herein. Immediately following the assumption and transfer of the Seller's Medical Plan to Buyer, Seller shall deliver all medical and other records of the Transferred Employees created, maintained, or associated with the Seller's Medical Plan to Buyer. (b) After the Closing Date, Buyer shall be solely responsible for compliance with the requirements of Section 4980B of the Code and part 6 of subtitle B of Title I of ERISA ("COBRA"), including the provision of continuation coverage, with respect to all employees of the Division (whether or not any such employee accepts Buyer's offer of employment and/or becomes a Transferred Employee), and their spouses and dependents, for whom a qualifying event occurs prior to, on or after the Closing Date. For purposes of this Section 5.2(b), the terms "continuation coverage" and "qualifying event" shall have the meanings ascribed to them in COBRA. 5.3 Assumption of Liabilities. (a) From and after the Closing Date, Buyer shall assume and shall honor, pay, perform, and satisfy when due any and all liabilities, obligations and responsibilities (whether known or unknown on the Closing Date) solely with respect to the Transferred Employees or any former employees of the Division, and any of their beneficiaries, arising under the terms of, or in connection with, or with respect to any Employee Benefit Plan or any other employee benefit or fringe benefit, retention, bonus, short-term or long-term disability, vacation, sick or other paid time off plan, policy, arrangement or agreement that benefits or benefited any Transferred Employee or former employee of the Division with respect to claims or events arising at any time; provided, however, that such liabilities, obligations and responsibilities shall not include any Retained Liabilities (collectively referred to herein as the "ASSUMED EMPLOYEE BENEFIT PLANS"). Except as otherwise provided for by this Agreement, Buyer shall assume and be solely responsible for any obligations and Liabilities relating to claims made by any of the Transferred Employees and each former employee of the Division, for their compensation, severance, or termination pay, benefits or notice under any Federal, state or local law or under any plan, -21- policy, practice or agreement which arises as a result of their employment or separation from employment with Seller or Buyer or their respective Affiliates at any time. Notwithstanding any other provisions of this Agreement to the contrary, on and after the Closing Date, Buyer shall reimburse Seller for fifty percent (50%) of all Liabilities relating to any post-retirement plans, arrangements or agreements (other than any Liabilities associated with the Alside Retirement Plan) with respect to Earl R. Karges, Edwin J. Kazanovicz, Donald A. Vickers or George L. Marchand, or any of the beneficiaries of such individuals. (b) On the Closing Date, Buyer shall assume sponsorship of and be substituted for Seller as the plan sponsor of (i) the AmerCable Retirement Plan (the "RETIREMENT PLAN") and the related trust, and the liabilities thereunder, with respect to all persons entitled to benefits under the provisions of the Retirement Plan (including, for the avoidance of doubt Stephanie Johnson, Robert Winspear, and Lisa Curry) and (ii) all other Assumed Employee Benefit Plans, excluding any Assumed Employee Benefit Plans in which both employees of the Division and employees of any division of Seller other than the Division participate. On or as soon as practicable following the Closing Date, but in any event not later than thirty (30) days following the Closing Date, Seller shall cause all right, title, interest, authorities, obligations, duties, liabilities and assets of Seller in, to and under the Retirement Plan and the related trust and the other Assumed Employee Benefit Plans to be transferred to Buyer and any successor trustee, where applicable, and Buyer shall assume all authorities, obligations, duties and liabilities under the Retirement Plan, in accordance with applicable law. On or as soon as practicable following the Closing Date, but in any event not later than thirty (30) days following the Closing Date, the parties shall execute and deliver such documents and instruments as may be required to effect the assumption and transfer of the Retirement Plan and of all other Assumed Employee Benefit Plans to be transferred to Buyer by and to Buyer and to ensure that all assets, contracts and agreements of or associated with the Retirement Plan and any other Assumed Employee Benefit Plans to be transferred to Buyer, as the same exist immediately prior to the Closing Date, shall be transferred with the Retirement Plan and such Assumed Employee Benefit Plans to the extent provided herein. (c) Nothing in this Agreement shall be deemed to prevent or restrict Buyer from amending, merging or terminating the Retirement Plan or any Assumed Employee Benefit Plan in accordance with the respective terms and conditions thereof or from transferring the Transferred Employees or former employees of the Division to another employee plan or program that is maintained by Buyer or one of its subsidiaries. The parties agree and understand that Buyer assumes no responsibility and makes no commitment for the maintenance and continuation after the Closing Date of any Assumed Employee Benefit Plan or the provisions of any particular benefits for any Transferred Employee or former employee of the Division after the Closing Date, subject to the applicable terms and conditions of each relevant Assumed Employee Benefit Plan. (d) In the event of any "plant closing" or "mass layoff" by Buyer, as defined by the Federal Worker Adjustment Retraining Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), or any state law equivalent, which shall occur after the Closing Date, Buyer shall comply with all of the requirements of WARN and any applicable state law equivalent. -22- (e) On and after the Closing Date, Seller shall reimburse Buyer for (i) any Liabilities incurred by Buyer relating to any other employee benefit or fringe benefit, retention, bonus, short-term or long-term disability, vacation, sick or other paid time off, plan, policy, arrangement or agreement not maintained, administered, or established by the Division regarding which Buyer has no knowledge as of the Closing Date and (ii) any Liabilities incurred by Buyer relating to or arising from any actions taken by Seller prior to Closing with respect to any Assumed Employee Benefit Plans without Buyer's knowledge. 5.4 Participation and Crediting of Service Under Employee Benefit Plans and Practices. (a) Following the Closing Date, (i) Buyer shall ensure that no limitations or exclusions as to pre-existing conditions, proof of insurability or waiting periods or other limitations or restrictions on coverage are applicable to any Transferred Employees under any employee welfare benefit plans of Buyer or its subsidiaries in which the Transferred Employees may be eligible to participate, except to the extent that such limitations, restrictions, or exclusions applied to the Transferred Employees under any employee welfare benefit plans of Seller prior to the Closing Date;, and (ii) Buyer shall provide or cause to be provided that any costs or expenses incurred by the Transferred Employees or any other former employee of the Division provided COBRA continuation coverage under such benefit plans (and their dependents) up to and including the Closing Date shall be taken into account for purposes of satisfying applicable co-payment, deductible, maximum out-of-pocket provisions and like adjustments or limitations on coverage under such benefit plans of Buyer or its subsidiaries. Following the Closing, each employee benefit plan or arrangement and employee compensation policy or practice (including vacation, floating holiday, sickness, paid time off, retirement, severance and welfare benefit plans, of Buyer or its Affiliates) shall credit, for all purposes, all service of the Transferred Employees, and other employees of the Division, with Seller and its predecessors. (b) No provision in this Article V shall create any third-party beneficiary rights in any employee or former employee (including any beneficiary or dependent thereof) of Buyer, Seller, or any ERISA Affiliate. 5.5 Employment Taxes. Seller hereby acknowledges that Buyer qualifies as a successor employer for FICA and FUTA tax purposes with respect to the Transferred Employees. In connection with the foregoing, the parties agree to follow the "Alternative Procedures" set forth in Section 5 of Revenue Procedure 96-60, 1996-2 C.B. 399. In connection with the application of the "Alternative Procedures," (i) Seller and Buyer each shall report on a predecessor-successor basis as set forth in such Revenue Procedure;, (ii) subject to Seller providing Buyer with all necessary payroll records for the calendar year that includes the Closing Date, Seller shall be relieved from furnishing Forms W-2 to the Transferred Employees for the full calendar year in which the Closing Date occurs, and (iii) subject to Seller providing Buyer with all necessary payroll records for the calendar year that includes the Closing Date, Buyer shall assume the obligations of Seller to furnish such Forms W-2 to such employees for the full calendar year in which the Closing Date occurs. -23- 5.6 Grant of Stock Options. As of the Closing Date, Buyer shall grant replacement stock options to each member of management of the Division set forth on Schedule 5.6, which options shall be immediately fully exercisable and have equivalent economic value as the options of such member of management to purchase preferred stock of Associated Materials Holdings Inc. immediately prior to the Closing Date. ARTICLE VI PRE-CLOSING AND POST-CLOSING MATTERS 6. Agreements of the Parties. Buyer and Seller agree as follows: 6.1 Conduct of the Business. During the period from the date of this Agreement up to and including the earlier of (a) the date upon which this Agreement is terminated and (b) the Closing Date, unless Buyer otherwise consents (i) Seller shall operate and conduct the Business with respect to the Purchased Assets and the Division as currently operated and only in the ordinary course, (ii) Seller shall, in a manner consistent with such operation, use commercially reasonable efforts to preserve intact the Business and its relationships with employees and persons having dealings with it, (iii) Seller shall inform Buyer of any operational matters relating to the Business that are of a material nature, (iv) Seller shall otherwise promptly respond to the requests of Buyer regarding information concerning the status of the Business and the operations and finances of the Division, and (v) Seller shall not enter into any transactions with its Affiliates relating to or affecting the Business or the Division other than in the ordinary course of business consistent with past practice. 6.2 Review of the Business. (a) Buyer may, prior to the Closing Date, directly or through its representatives, review the properties, the Books and Records and the financial and legal condition of the Business to the extent it deems necessary or advisable to familiarize itself with such properties and other matters. Subject to applicable law, Seller agrees to permit Buyer and its representatives to have, after the date of execution of this Agreement, reasonable access during normal business hours and upon reasonable notice to the premises of the Business located at the Leased Real Property and to all the assets, personnel, properties, Contracts and Books and Records and to use commercially reasonable efforts to cause the officers of the Division to furnish Buyer and its representatives with such financial and operating data and other information with respect to the Business as Buyer and its representatives shall from time to time reasonably request. (b) Any information obtained by Buyer pursuant to this Section 6.2 shall be subject to paragraph 2 of Part Two of that certain letter agreement, dated May 8, 2002, from Wingate Partners III, L.P. to Seller, as amended by Amendment No. 1 thereto, dated as of June 7, 2002 (the "LETTER OF INTENT"). Effective upon, and only upon, the Closing, Buyer's obligation under this Section 6.2(b) shall terminate with respect to information relating to the Business or the Division; provided that Buyer acknowledges and agrees that any and all other confidential information provided to it by Seller or its representatives concerning Seller but that does not -24- relate exclusively to the Business or the Division shall remain subject to the terms and conditions of the Letter of Intent after the Closing Date. (c) After the Closing, Buyer shall permit Seller, its attorneys and accountants to have reasonable access during normal business hours and upon reasonable notice to the Books and Records of the Division to the extent such access is reasonably required in connection with (i) the preparation of Seller's Tax returns or any Tax audits or (ii) any proceedings, investigations or actions brought against Seller in connection with the Division, the Business or the Purchased Assets. Unless otherwise consented to in writing by Seller, Buyer shall not, for a period of seven (7) years following the date hereof, destroy, alter or otherwise dispose of the Books and Records of the Division without first offering to surrender to Seller such Books and Records or any portion thereof that Buyer intends to destroy, alter or dispose of. 6.3 Commercially Reasonable Efforts. Buyer and Seller agree to cooperate and use commercially reasonable efforts to take all appropriate action and in making all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including commercially reasonable efforts to obtain, prior to the Closing Date, all licenses, Permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to Contracts with the Division as are necessary for the complete consummation of the transactions contemplated by this Agreement. 6.4 Exclusive Dealing. (a) Seller agrees, and agrees to use commercially reasonable efforts to cause its stockholders, officers, directors, advisors and agents (collectively, "REPRESENTATIVES"), to immediately terminate all other discussions, direct and indirect, and without regard to the party initiating such discussions, with third parties or their Representatives regarding any transaction involving the acquisition of any significant portion of the Business, the Division or the Purchased Assets (including by means of a recapitalization) and Seller agrees that it shall not, and shall use commercially reasonable efforts so that its Representatives shall not, initiate, solicit or participate in any such discussions. (b) During the period from the date of this Agreement up to and including the earlier of (i) the date upon which this Agreement is terminated and (ii) the Closing Date, Seller shall, and shall use commercially reasonable efforts so that its Representatives shall, promptly notify Buyer (but in any event within two (2) Business Days) if it becomes aware of any contact between Seller or its Representatives and any other person regarding any such discussions, offers, proposals or any related inquiries. 6.5 Further Assurances. (a) On or after the Closing Date and without further consideration, Seller shall, from time to time at Buyer's request, execute and deliver such further instruments of conveyance, assignment and transfer and shall take, or cause to be taken, such other action as Buyer may reasonably request for the more effective conveyance, assignment and transfer to Buyer of any of the Purchased Assets. Additionally, if any of the Purchased Assets are owned indirectly by Seller through a subsidiary of Seller, Seller shall take, or cause to be taken, all action necessary to convey, transfer, assign and deliver to Buyer such Purchased Assets, as if such Purchased Assets had been held directly by Seller immediately prior to Closing. -25- (b) Seller shall, as promptly as practical but in no event later than five (5) Business Days after receipt, deliver to Buyer any cash, checks, amounts received by wire transfer, mail, packages, notices and other similar communications it receives pertaining to the Business, the Purchased Assets, the Acquired Contracts and any other matter belonging to Buyer as a result of the transactions consummated pursuant to this Agreement or related transactions. Buyer shall, as promptly as practical but in no event later than five (5) Business Days after receipt, deliver to Seller any cash, checks, amounts received by wire transfer, mail, packages, notices and other similar communications pertaining to the Excluded Assets, the Retained Liabilities and any other matter belonging to the Seller after the transactions consummated pursuant to this Agreement or the related transactions. Seller shall endorse in favor of Buyer any checks or other instruments of payment payable to Seller but acquired by Buyer hereunder, and Buyer shall endorse in favor of Seller any checks or other instruments of payment payable to Buyer but retained by Seller hereunder. 6.6 Unassigned Contracts. Notwithstanding anything to the contrary contained in this Agreement, this Agreement shall not constitute an agreement to transfer, sell or otherwise assign any Contract or Permit which would otherwise be a Purchased Asset but which is not permitted to be assigned in connection with a transaction of the type contemplated by this Agreement (the "UNASSIGNED CONTRACTS"). If a consent to the assignment of a Contract is not obtained or if an attempted assignment of a Contract is ineffective for any other reason, Seller shall cooperate with Buyer in continuing to attempt to obtain such consent or otherwise procure an effective assignment of such Unassigned Contract and, pending the obtaining of such consent or the procurement of such assignment, shall use commercially reasonable efforts to implement any reasonable arrangement (including, without limitation, entering into additional agreements on terms reasonably satisfactory to the parties thereto, including an agreement to deliver to Buyer no later than five (5) Business Days after receipt any cash, checks, amounts received by wire transfer, packages, notices and other similar communications with respect to such Unassigned Contract) to provide to Buyer all benefits (including any economic benefits) under any such Unassigned Contracts; provided, however, that Buyer shall (i) reimburse Seller for any reasonable out-of-pocket expenses incurred in connection with any such arrangement and (ii) accept the burdens and discharge and perform and indemnify Seller for all Liabilities and obligations under such Unassigned Contract as a subcontractor of Seller. If, with respect to any such Unassigned Contract, the consent to the assignment is obtained or an effective assignment can otherwise be made following the Closing, Seller shall promptly assign to Buyer all of its right and interest in and to such Unassigned Contract and shall, at Buyer's request, execute and deliver any further instruments of conveyance, assignment and transfer with respect to such Unassigned Contract. Buyer shall thereupon agree to assume and perform all Liabilities and obligations arising under such Unassigned Contract after the date of such consent, at which time such Unassigned Contract shall be deemed an Acquired Contract, without payment or further consideration, and the obligations so assumed thereunder shall be deemed Assumed Liabilities. If (i) a consent to the assignment of an Unassigned Contract is not obtained or if an attempted assignment is ineffective for any other reason and (ii) (x) Buyer requests that it not receive the benefits thereof or (y) an arrangement to provide such benefits is not feasible, Seller, in consultation with Buyer, shall terminate or wind-up such Unassigned Contract and Buyer shall reimburse Seller for all reasonable costs and expenses incurred by Seller as a result thereof. Subject to its compliance with this Section 6.6, Seller shall not have any liability whatsoever to Buyer arising out of or relating to the failure to obtain any consents or waivers that may be -26- required in connection with the transactions contemplated by this Agreement or because of the termination of any Contract as a result thereof. 6.7 Use of Division Names and Trademarks. Promptly, but not later than thirty (30) days after the Closing Date, Seller shall cease and refrain from using the names "AmerCable" and "Offshore/ Marine Cable Specialists" and all trade names, service marks, brand names and trademarks set forth on Schedules 2.1(e)(i) and 2.1(e)(ii), and any similar names used by Seller exclusively in the conduct of the Business, including the use or display thereof on all buildings, vehicles, business cards, web sites, stationery, displays, signs, promotional materials, manuals, forms, invoices, and other materials. Not later than thirty (30) Business Days after Closing, Seller shall file the necessary documents with the Secretary of State of the State of Texas and the County Clerk of Dallas County, Texas releasing its use of the assumed name "Offshore/ Marine Cable Specialists." Seller shall promptly furnish Buyer with evidence of such filings. 6.8 Seller Name Use. Buyer acknowledges that, from and after the Closing Date, Seller and its Affiliates have the absolute and exclusive proprietary right to all names, marks, trade names, service marks and trademarks incorporating either "Associated Materials Incorporated" or "AMI," by itself or in combination with any other name (collectively "SELLER NAMES"), and that none of the rights thereto or goodwill represented thereby or pertaining thereto are being transferred hereby or in connection herewith. Buyer agrees that from and after the Closing Date it will not, and will cause its Affiliates not to, use any name, phrase or logo incorporating any of the Seller Names in or on any of its literature, buildings, vehicles, business cards, web sites, stationery, displays, signs, promotional materials, manuals, forms, invoices, sales materials or products or otherwise in connection with the sale of any products or services; provided, however, that Buyer may continue to use any business cards, web sites under the domain names that are Purchased Assets, stationery, manuals, forms, invoices, printed literature, sales materials, purchase orders and sales, maintenance or license agreements, and sell any products or services, that are included in the Purchased Assets on the Closing Date and that bear a name, phrase or logo incorporating either of the Seller Names on the Closing Date, until the supplies thereof existing on the Closing Date have been exhausted (and the web sites under domain names that are Purchased Assets have been modified), but in any event for not longer than ninety (90) days from the Closing Date; provided, further, that Buyer shall have thirty (30) days following the Closing Date to replace any signs located on the Leased Real Property displaying the Seller Names. With respect to the printed purchase orders and sales, maintenance or license agreements referred to in the preceding sentence, from and after the Closing Date Buyer shall cover or otherwise mark such documents as necessary in order to indicate clearly that neither Seller nor any of its Affiliates is a party to such documents. 6.9 Non-Assignable Warranties. To the extent any third-party product warranties exist as of the Closing Date that (i) relate exclusively to the Business but are not (for any reason whatsoever) transferable to, assignable to or enforceable by Buyer, or (ii) do not relate exclusively to the Business but relate directly to any of the Purchased Assets, Seller shall at Buyer's request and expense cooperate with Buyer and use commercially reasonable efforts to attempt to enforce any warranty claims thereunder on Buyer's behalf and shall promptly forward to Buyer the benefits (including economic benefits) realized from any such action; provided, however, that Seller shall not be obligated to file suit to enforce such warranty claims. -27- 6.10 Non-Assignable Claims. To the extent any causes of action, claims, settlements, rights of recovery, insurance proceeds (from policies held by third parties relating to any Purchased Assets or Assumed Liabilities) or set-offs related directly to a Purchased Asset or an Assumed Liability ("CLAIMS") arise after the Closing Date that (i) relate exclusively to the Business or the Purchased Assets, but are not (for any reason whatsoever) transferable to, assignable to or enforceable by Buyer, or (ii) do not relate exclusively to the Business, but have a value in excess of $100,000, Seller shall at Buyer's request and expense cooperate with Buyer and use commercially reasonable efforts to attempt to enforce any such Claims on Buyer's behalf and shall promptly forward to Buyer the benefits (including economic benefits) realized from any such action. 6.11 Insurance. (a) The parties acknowledge that, contemporaneously with the Closing, the Seller's insurance policies described on Schedule 6.11 (the "PRE-CLOSING INSURANCE POLICIES") have been endorsed to name Buyer (and its related parties, as provided pursuant to the applicable policies) as named insureds with respect to the insurance coverage provided therein. Seller hereby agrees that it shall take no action with respect to the Pre-Closing Policies after Closing to cause Buyer (or its related parties) to be removed as a named insured under such Pre-Closing Policies. (b) To the extent that either the Buyer or the Seller (or their respective related parties) makes any claim under any of the Pre-Closing Insurance Policies following the Closing, the parties further agree as follows: (i) the party making such claim shall pay and discharge any remaining deductible in connection with any such claim that is payable pursuant to the applicable Pre-Closing Insurance Policy; (ii) Seller shall not make claims in the aggregate in excess of $30,000,000 in any policy year under any such Pre-Closing Insurance Policy; and (iii) Buyer shall not make any claims in the aggregate in excess of $10,000,000 in any policy year under any such Pre-Closing Insurance Policy. (c) Seller shall cooperate with and provide to Buyer copies of all Books and Records of Seller concerning the Pre-Closing Insurance Policies and shall make available to Buyer during normal business hours the Books and Records regarding any other insurance policies covering Assumed Liabilities, all to the extent that Buyer may reasonably request. (d) Without limiting the foregoing, for a period of five (5) years after Closing, Buyer agrees to reimburse Seller in an amount equal to any increase in Seller's general liability insurance premiums that is directly attributable to any post-Closing claims made by Buyer under any of the Pre-Closing Insurance Policies. Within sixty (60) days following its receipt of notice of any such increase in its premiums, Seller shall give written notice to Buyer stating the amount of any requested reimbursement pursuant to this Section 6.11(d) and Seller's position regarding the reason for such increase. Upon receipt of such notice, Buyer shall within thirty (30) days -28- deliver a response to Seller setting forth either (i) its agreement to reimburse Seller in such amount, in which case the requested reimbursement shall be paid by Buyer together with such response, or (ii) any dispute of such amount, together with an explanation of such dispute (a "DISPUTE NOTICE"). In the event of a dispute, the parties shall, within ten (10) days of receipt by Seller of such Dispute Notice, select an insurance expert to review the facts and circumstances of the premium increase and Seller's claim for reimbursement under this Section 6.11(d). The insurance experts shall jointly select a third independent insurance expert (the "INDEPENDENT INSURANCE EXPERT") to assist in this review and analysis. The Independent Insurance Expert shall be instructed to deliver to Buyer and Seller, within thirty (30) days following Buyer's delivery to Seller of a Dispute Notice, a written determination as to the extent of any increase in Seller's general liability insurance premiums that it determines to be directly attributable to any post-Closing claims made by Buyer under any of the Pre-Closing Insurance Policies. Any such determination by the Independent Insurance Expert shall be non-appealable and binding upon Buyer and Seller for purposes of this Section 6.11. To the extent that the Independent Insurance Expert determines that Seller is entitled to any reimbursement by Buyer under this Section 6.11(d), Buyer shall deliver payment of such amount to Seller within ten (10) Business Days of such determination. Buyer and Seller shall each pay one-half of the Independent Insurance Expert's fees and expenses. (e) Buyer shall be permitted to engage in discussions after the Closing with the insurance carrier for each of Seller's insurance policies set forth on Schedule 6.11(e) to amend such policies to list Buyer (and its related parties, as provided pursuant to the applicable policy) as named insureds with respect to the insurance coverage provided therein and Seller shall permit Buyer and its Representatives to have access to such insurance carriers for such purpose; provided, however, that prior to finalizing any such arrangement, Buyer shall provide Seller with written documentation, in form and substance reasonably satisfactory to Seller, evidencing that the addition of Buyer (and its related parties, as provided pursuant to the applicable policy) as named insureds on any such policies of insurance shall not increase Seller's costs, fees or expenses in connection with any such policy of insurance (other than any costs, fees or expenses contemplated in Section 6.11(d)). Seller shall have no liability to Buyer under this Section 6.11(e) in the event that any such insurance carriers refuse to provide such endorsement to Buyer for any reason. Subject to the foregoing, to the extent that Buyer is added after the Closing as a named insured on any insurance policy listed on Schedule 6.11(e), such insurance policy shall thereafter be deemed a Pre-Closing Insurance Policy for purposes of this Agreement. ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE 7. Conditions. The obligation of Buyer to purchase the Purchased Assets under this Agreement is subject to the satisfaction or waiver, at or prior to Closing, of the following conditions set forth in this Article VII: -29- 7.1 Accuracy of Representations. Each representation and warranty of Seller shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date as though made at that time, except to the extent that such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date) and except to the extent any untruth or inaccuracy would not reasonably be expected to have a Material Adverse Effect on the Business. 7.2 Performance of Seller. Seller shall have performed in all material respects the covenants and agreements required to be performed by it pursuant to this Agreement on or before the Closing Date. 7.3 Consents. As of the Closing Date, Seller shall have received the consents set forth on Schedule 3.3. 7.4 No Material Adverse Change. During the period commencing on the date hereof and ending on the date immediately preceding the Closing Date, there shall not have been any Material Adverse Change to the Business. 7.5 Officer's Certificate. Buyer shall have received a certificate from the president of Seller stating that the conditions set forth in Sections 7.1, 7.2 and 7.4 have been satisfied. 7.6 Good Standing Certificates. Buyer shall have received certificates (i) from the Secretary of State of the State of Delaware, evidencing that Seller is existing and in good standing under the laws of the State of Delaware and (ii) from each state set forth on Schedule 3.1 evidencing that Seller is qualified to do business and is in good standing as a foreign entity in such states. 7.7 Release of Liens. All Encumbrances on or affecting the Purchased Assets created by Seller (other than Permitted Encumbrances or any Encumbrance created by the Division (including the management, employees or agents thereof)) shall have been released and evidence thereof reasonably satisfactory to Buyer shall have been delivered by Seller to Buyer. 7.8 Opinion of Seller's Counsel. Buyer shall have received an opinion of White & Case LLP, counsel to Seller, dated as of the Closing Date, in form and substance reasonably satisfactory to Buyer. 7.9 Certificates of No Tax Due. Buyer shall have received tax clearance certificates from the State of Delaware and each state set forth on Schedule 7.9. 7.10 Orders. No order or injunction of any kind shall have been entered, promulgated or enforced by any court or Governmental Entity which would prohibit or materially delay the consummation of the transactions contemplated by this Agreement. 7.11 Landlord Estoppel Letters. Seller shall have delivered to Buyer estoppel letters duly executed by the landlords of the Leased Real Property in form and substance reasonably satisfactory to Buyer on or prior to the Closing Date. -30- 7.12 Seller's Closing Deliveries. Buyer shall have received all of the closing deliveries set forth in Sections 2.6 and 2.8. ARTICLE VIII CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE 8. Conditions. The obligation of Seller to sell the Purchased Assets pursuant to this Agreement is subject to the satisfaction or waiver, at or prior to the Closing Date, of the following conditions set forth in this Article VIII: 8.1 Accuracy of Representations. Each representation and warranty of Buyer shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date as though made at that time, except to the extent that such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date) and except to the extent any untruth or inaccuracy would not reasonably be expected to have a Material Adverse Effect on Buyer. 8.2 Performance of Buyer. Buyer shall have performed in all material respects the covenants and agreements required to be performed by it pursuant to this Agreement on or before the Closing Date. 8.3 Officer's Certificate. Seller shall have received a certificate from the president of Buyer stating, in such detail as Seller or its counsel may reasonably request, that the conditions set forth in Sections 8.1 and 8.2 have been satisfied. 8.4 Opinion of Buyer's Counsel. Seller shall have received an opinion of Haynes and Boone, LLP, counsel to Buyer, dated as of the Closing Date, in form and substance reasonably satisfactory to Seller. 8.5 Management Releases. Seller shall have received releases in the form of Exhibit H from the members of management of the Division set forth on Schedule 5.6 on or before the Closing Date. 8.6 Buyer's Closing Deliveries. Seller shall have received all of the closing deliveries set forth in Sections 2.7 and 2.8. ARTICLE IX TERMINATION 9.1 Termination. Anything contained in this Agreement other than in this Section 9.1 to the contrary notwithstanding, this Agreement may be terminated in writing at any time before the Closing: (a) by mutual consent of Buyer and Seller; -31- (b) by either Buyer or Seller, if the Closing shall not have occurred on or before June 28, 2002 (or such later date as may be agreed upon in writing by the parties hereto); or (c) by either Buyer or Seller if a court of competent jurisdiction shall have issued an order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable. 9.2 Effect of Termination. In the event that this Agreement is terminated pursuant to Section 9.1 (i) all obligations of the parties hereto under this Agreement (other than pursuant to this Section 9.2) shall terminate and (ii) there shall be no liability of any party hereto to any other party except (x) the obligations of the parties under Sections 6.2 (Review of the Business), 12.1 (Expenses), 12.2 (Notices), 12.4 (Entire Agreement), 12.6 (Governing Law), 12.7 (Submission to Jurisdiction; Venue; Waiver of Jury Trial), 12.12 (Publicity; Non-Disclosure) and this Section 9.2 (Effect of Termination), which shall survive the termination of this Agreement, and (y) that nothing herein shall relieve any party from liability hereunder for a willful breach of any representation, warranty or obligation under this Agreement. ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 Survival of Representations; Covenants. (a) Except as set forth in paragraph (b) of this Section 10.1, the respective representations and warranties of Buyer and Seller set forth in this Agreement or in any Schedule, Exhibit, agreement, certificate or document delivered pursuant to this Agreement shall survive the purchase and sale of the Purchased Assets pursuant to this Agreement for a period of one (1) year after the Closing Date. Covenants shall survive in accordance with their respective terms. (b) The representations and warranties set forth in Sections 3.7 (Taxes) and 3.8 (Employee Benefit Plans) shall survive until the expiration of the applicable statute of limitations period. (c) No indemnification claim with respect to a representation or warranty shall be valid if made for the first time after the date such representation or warranty expires. Notwithstanding the foregoing, any such representation or warranty shall survive such expiration date for purposes of that claim (i) if prior to such expiration date, Buyer or Seller, as applicable, shall have been advised of such claim by such other party in writing pursuant to Section 10.4 (Indemnification Procedures) or (ii) if the party making such representation or warranty made a fraudulent or intentional misrepresentation in connection with such representation or warranty. (d) The right to indemnification, payment of Losses or other remedy based on such representations, warranties and covenants shall not be affected by any investigation conducted by Buyer with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty or covenant. -32- 10.2 Indemnification by Seller. (a) Subject to Section 10.1, Seller shall at all times after the Closing indemnify and hold harmless Buyer and its officers, directors, stockholders, accountants, agents and employees, Affiliates and its heirs, successors and permitted assigns (each a "BUYER INDEMNIFIED PARTY") from and against any and all Losses which any Buyer Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) the failure of any representation or warranty made by Seller in this Agreement or in any Schedule, Exhibit, agreement, certificate or document delivered by Seller pursuant to this Agreement to be true and correct as of the date hereof and the Closing Date (without giving effect to any "materiality," "Material Adverse Change," "Material Adverse Effect" or similar qualifications); (ii) any failure by Seller to perform, satisfy and discharge any of its covenants under this Agreement or any other agreement delivered by Seller pursuant to this Agreement; (iii) the failure by Seller to comply with the laws relating to bulk transfers or bulk sales with respect to the transactions contemplated by this Agreement; or (iv) the Retained Liabilities. (b) The amounts for which Seller shall be liable to any Buyer Indemnified Party under Section 10.2(a) shall be net of any tax benefit actually realized (by reason of a deduction, basis adjustment, credit or otherwise) by such Buyer Indemnified Party, or any insurance benefit actually realized by such Buyer Indemnified Party in connection with the Losses or facts giving rise to the right of indemnification. (c) Notwithstanding any other provision of this Agreement to the contrary: (i) Seller shall not be required to indemnify and hold harmless any Buyer Indemnified Party pursuant to Section 10.2(a)(i) for the inaccuracy of any representation or warranty set forth in Sections 3.3 (No Violation or Conflict) (but only with respect to those Contracts, Permits or other instruments or obligations that are Purchased Assets (x) that are not set forth on Schedule 3.3 and (y) that Buyer has no knowledge of on the Closing Date), 3.4 (Title to Assets), 3.5 (No Encumbrances), 3.6 (Consents of Governmental Entities), 3.7 (Taxes) or 3.8 (Employee Benefit Plans) until the aggregate amount of the Buyer Indemnified Parties' Losses as a result of or in connection with such inaccuracy or inaccuracies, as the case may be (without giving effect to any "materiality," "Material Adverse Change," "Material Adverse Effect" or similar qualifications), exceeds $500,000, after which Seller shall be required to indemnify and hold harmless any Buyer Indemnified Party for all Losses of such Buyer Indemnified Party as a result of or in connection with such inaccuracy or inaccuracies, as the case may be (without giving effect to any "materiality," "Material Adverse Change," "Material Adverse Effect" or similar qualifications), in excess of $500,000 only; provided, however, that the aggregate indemnification obligation of Seller pursuant to -33- Section 10.2(a)(i) for the inaccuracy of any representation or warranty set forth in Sections 3.3 (No Violation or Conflict) (but only with respect to those Contracts, Permits or other instruments or obligations that are Purchased Assets (x) that are not set forth on Schedule 3.3 and (y) that Buyer has no knowledge of on the Closing Date), 3.4 (Title to Assets), 3.5 (No Encumbrances), 3.6 (Consents of Governmental Entities), 3.7 (Taxes) or 3.8 (Employee Benefit Plans) (without giving effect to any "materiality," "Material Adverse Change," "Material Adverse Effect" or similar qualifications) shall in no event exceed $5,000,000; (ii) the aggregate indemnification obligation of Seller (x) pursuant to Section 10.2(a)(i) for the inaccuracy of any representation or warranty set forth in Sections 3.3 (No Violation or Conflict) (but only with respect to those Contracts, Permits or other instruments or obligations that are Purchased Assets (A) that are not set forth on Schedule 3.3 and (B) that Buyer has no knowledge of on the Closing Date), 3.4 (Title to Assets), 3.5 (No Encumbrances), 3.6 (Consents of Governmental Entities), 3.7 (Taxes) or 3.8 (Employee Benefit Plans) (without giving effect to any "materiality," "Material Adverse Change," "Material Adverse Effect" or similar qualifications) and (y) pursuant to Section 10.2(a)(ii), solely for the failure by Seller to perform, satisfy and discharge its covenant set forth in Section 5.3(e), shall in no event exceed $10,000,000; and (iii) the indemnification obligation of Seller shall in no event exceed the Purchase Price. (d) Notwithstanding any other provision of this Agreement to the contrary, to the extent a Buyer Indemnified Party may seek indemnification from Seller pursuant to Section 10.2(a)(i) for the inaccuracy of any representation or warranty set forth in Section 3.8 and pursuant to Section 10.2(a)(ii) for the failure by Seller to perform, satisfy and discharge its covenant set forth in Section 5.3(e) as a result of the same claim, the Buyer Indemnified Party shall only seek indemnification pursuant to Section 10.2(a)(ii). 10.3 Indemnification by Buyer. (a) Subject to Section 10.1, Buyer shall at all times after the Closing indemnify and hold harmless Seller and its officers, directors, stockholders, accountants, agents and employees, Affiliates and its heirs, successors and permitted assigns (each a "SELLER INDEMNIFIED PARTY") from and against any and all Losses which such Seller Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) the failure of any representation or warranty made by Buyer in this Agreement or in any Schedule, Exhibit, agreement, certificate or document delivered by Buyer pursuant to this Agreement to be true and correct as of the date hereof and the Closing Date; (ii) any failure by Buyer to perform, satisfy and discharge any of its covenants under this Agreement or any other agreement delivered by Buyer pursuant to this Agreement; or (iii) the Assumed Liabilities. -34- (b) The amounts for which Buyer shall be liable to any Seller Indemnified Party under Section 10.3(a) shall be net of any tax benefit actually realized (by reason of a deduction, basis adjustment, credit or otherwise) by such Seller Indemnified Party, or any insurance benefit actually realized by such Seller Indemnified Party in connection with the Losses or facts giving rise to the right of indemnification. (c) Notwithstanding any other provision of this Agreement to the contrary, the indemnification obligation of Buyer with respect to Section 10.3(a)(ii) for the failure by Buyer to perform, satisfy and discharge its covenant set forth in the last sentence of Section 5.3(a) shall in no event exceed $10,000,000. 10.4 Indemnification Procedure. (a) Within a reasonable period of time after the determination or incurrence of Losses by any Buyer Indemnified Party or Seller Indemnified Party seeking indemnification (the "INDEMNIFIED PARTY") which might give rise to indemnification hereunder, the Indemnified Party shall deliver to the party from which indemnification is sought (the "INDEMNIFYING PARTY") a certificate in the form of Exhibit I (the "CERTIFICATE"), which Certificate shall: (i) state that the Indemnified Party has incurred Losses for which such Indemnified Party is entitled to indemnification pursuant to this Agreement; and (ii) specify in reasonable detail each individual item of the Losses included in the Certificate, the date such item arose or was identified, the nature of the misrepresentation, breach of warranty, breach of covenant or claim to which each such item is related and the computation of the amount to which such Indemnified Party claims to be entitled hereunder. Without prejudice to the first sentence of Section 10.1(c), the failure to deliver the Certificate to the Indemnifying Party within a reasonable period of time will not relieve the Indemnifying Party of any indemnification obligation hereunder, except to the extent the Indemnifying Party establishes that the defense of the claim for which indemnification is sought is prejudiced by the Indemnified Party's failure to give such notice within a reasonable period of time. (b) In case the Indemnifying Party shall object to the indemnification of an Indemnified Party in respect of any claim or claims specified in any Certificate, the Indemnifying Party shall, within ten (10) days after receipt by the Indemnifying Party of such Certificate, deliver to the Indemnified Party a notice to such effect and the Indemnifying Party and the Indemnified Party shall, within the 30-day period beginning on the date of receipt by the Indemnified Party of such objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims to which the Indemnifying Party shall have so objected. If the Indemnified Party and the Indemnifying Party shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnified Party and the Indemnifying Party shall promptly prepare and sign a memorandum setting forth such agreement. Should the Indemnified Party and the Indemnifying Party be unable to agree as to any particular item or items or amount or amounts, then the Indemnified Party and the Indemnifying Party shall submit such dispute to a court of competent jurisdiction. The party that receives a -35- final judgment in its favor in such dispute shall be indemnified and held harmless for all reasonable attorney and consultant's fees or expenses incurred in obtaining such judgment by the other party. (c) Promptly after the assertion by any third party of any claim against any Indemnified Party that, in the judgment of such Indemnified Party, may result in the incurrence by such Indemnified Party of Losses for which such Indemnified Party would be entitled to indemnification pursuant to this Agreement (other than any such claims which are a result of or are in connection with the untruth or inaccuracy of any representation or warranty of Seller made in Section 3.7 (Taxes) (which shall be governed by Section 11.3)), such Indemnified Party shall deliver to the Indemnifying Party a notice describing in reasonable detail such claim. The failure to promptly deliver such notice to the Indemnifying Party will not relieve the Indemnifying Party of any indemnification obligation hereunder, except to the extent the Indemnifying Party establishes that the defense of the claim for which indemnification is sought is prejudiced by the Indemnified Party's failure to give such notice within a reasonable period of time. The Indemnifying Party may, at its option by notice to the Indemnified Party within thirty (30) days after having been notified by the Indemnified Party of the existence of such claim, assume and conduct the defense and/or settlement of the Indemnified Party against such claim (including the employment of counsel, who shall be reasonably satisfactory to such Indemnified Party), and the payment of expenses so long as the Indemnifying Party pursues the claim diligently and in good faith. Any Indemnified Party shall have the right to employ separate counsel in any such action or claim and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (x) the Indemnifying Party shall have failed, within such 30-day period after having been notified by the Indemnified Party of the existence of such claim as provided in the preceding sentence, to assume and conduct the defense and/or settlement of such claim, (y) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party, or (z) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised in writing by such counsel that there may be one or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or available to the Indemnifying Party, the assertion of which would be adverse to the interests of the Indemnified Party. Neither the Indemnified Party nor the Indemnifying Party may enter into a settlement without the consent of the other party, which consent shall not be unreasonably withheld. (d) Claims for Losses specified in any Certificate to which an Indemnifying Party shall not object in writing within ten (10) days of receipt of such Certificate, claims for Losses covered by a memorandum of agreement of the nature described in paragraph (b), claims for Losses the validity and amount of which have been the subject of judicial determination as described in paragraph (b) and claims for Losses the validity and amount of which shall have been the subject of a final judicial determination, or shall have been settled with the consent of the Indemnifying Party or, as the case may be, the Indemnified Party, as described in paragraph (c), are hereinafter referred to, collectively, as "AGREED CLAIMS." Within ten (10) days of the determination of the amount of any Agreed Claims, the Indemnifying Party shall pay to the Indemnified Party an amount equal to the Agreed Claim by wire transfer of immediately available funds, to a bank account or accounts designated by the Indemnified Party. The Indemnified -36- Party shall provide written notice to the Indemnifying Party of such account information at least two (2) Business Days prior to such payment. 10.5 Exclusive Remedy. After the Closing, the right of Buyer and Seller (and their respective officers, directors, stockholders, accountants, agents and employees, Affiliates and heirs, successors and permitted assigns) to indemnification pursuant to Sections 10.2 and 10.3 shall be the sole and exclusive right and remedy exercisable against any other party to this Agreement regardless of the legal theory advanced in support of such claims, including claims for contributions or other rights of recovery arising out of alleged fraud, intentional misrepresentation or negligent misrepresentation or relating to any Environmental Laws; provided, however, that this Section 10.5 shall not apply with respect to claims relating to Sections 3.1, 3.2, 3.4 and 3.5 only, in cases of fraud or intentional misrepresentation. ARTICLE XI TAX MATTERS 11.1 Allocation of Purchase Price. (a) Seller and Buyer agree to allocate the aggregate purchase price to be paid for the Purchased Assets in accordance with Section 1060 of the Code and to reduce such allocation to writing on or prior to the Closing Date. Such allocation shall be adjusted after the Closing Date if Seller and Buyer mutually agree that an adjustment to the allocation is necessary to reflect the fair market value of the Purchased Assets as of the Closing Date. Seller and Buyer agree to resolve any disagreement with respect to such allocation, or any adjustment thereof, in good faith. (b) In addition, Seller and Buyer hereby undertake and agree to file timely any information that may be required to be filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant to this Section 11.1 in connection with the preparation of IRS Form 8594 and any similar state or local Tax forms as such forms relate to the transactions contemplated by this Agreement. Neither Seller nor Buyer shall file any Return or other document or otherwise take any position that is inconsistent with the allocation determined pursuant to this Section 11.1 except as may be adjusted by subsequent agreement following an audit by the IRS or state or local taxing authority or by court decision. 11.2 Returns. Seller shall have the exclusive obligation and authority to file or cause to be filed all Returns that are required to be filed by or with respect to Seller for all taxable years or periods, and, with respect to the Division, the Business and the Purchased Assets, for all taxable years or periods (or portions thereof) ending on or prior to the Closing Date, and Buyer shall have the exclusive obligation and authority to file or cause to be filed all Returns that are required to be filed with respect to the Taxes imposed upon or by reference to the Purchased Assets or the conduct of the operation of the Division and the Business for any taxable year or other taxable period ending after the Closing Date; provided, however, that items set forth on such Returns shall be treated in a manner consistent with the past practices of Seller (taking into account any amended Returns and the submission of any IRS Forms 3115) with respect to such items unless otherwise required by law or except to the extent such -37- inconsistencies would not, or would not reasonably be expected to, adversely affect the Tax liability of Seller for any post-Closing period. 11.3 Controversies. Buyer shall timely forward to Seller all written notifications and other communications that Buyer receives from any taxing authority relating to any Tax audit or other proceeding relating to the Tax liability of Seller with respect to the Purchased Assets (with respect to a taxable year or period (or portion thereof) ending on or prior to the Closing Date). The failure of Buyer to give Seller such written notice shall excuse Seller from its obligations under Section 10.2 with respect to any increased Tax liability directly attributable to any such notification or other communication if the failure to provide such written notice adversely affects the ability of Seller to timely contest any claim arising from such Tax audit or other proceeding. Seller and its duly appointed representatives shall have the exclusive authority to control any audit or examination by any taxing authority, initiate any claim for refund, amend any Return, and contest, resolve and defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of or relating to any liability of Seller for all Pre-Closing Periods, and Seller shall be entitled to any Tax refund relating to any such taxable period; provided, however, that Seller shall not settle or compromise any issue relating to Assumed Taxes without Buyer's consent, which consent shall not be unreasonably withheld, conditioned, or delayed. Buyer shall have the exclusive authority to control any audit or examination by any taxing authority, initiate any claim for refund, amend any Return, and contest, resolve and defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of or relating to any liability for Taxes that are imposed upon or by reference to the Purchased Assets or the conduct of the operation of the Division or the Business for all taxable periods after the Closing Date; provided, however, that neither Buyer nor its duly appointed representatives shall, without the prior written consent of Seller which consent shall not be unreasonably withheld, conditioned or delayed, enter into any settlement of any contest or otherwise compromise any issue that materially affects or may materially affect the Tax liability of Seller or any of its Affiliates for any taxable year or period (or portion thereof) ending on or prior to the Closing Date or require payment by Seller of any amount under Section 10.2 unless Buyer shall have waived or caused to be waived for itself any right to indemnification for any such amounts from Seller. 11.4 Sales and Transfer Fees and Taxes. Except as set forth in Section 10.2(a)(iii), Buyer shall be responsible for and pay all applicable sales, transfers, documentary, use, filing and other similar taxes and fees that may become due or payable as a result of the sale, conveyance, assignment, transfer or delivery of the Purchased Assets and the consummation of the transactions contemplated by this Agreement, whether levied on Buyer or Seller. 11.5 Prorations. Ad valorem and similar Taxes and assessments relating to the Purchased Assets shall be prorated on a per diem basis between Seller, on the one hand, and Buyer, on the other hand, as of the Closing Date based upon estimates of the amount of such taxes and assessments that are due and payable on the Purchased Assets during the taxable year during which the Closing Date occurs. As soon as the amount of actual Taxes and assessments is known, Seller and Buyer shall reassess the amounts to be paid by each party with the result that Seller shall be liable for those Taxes and assessments attributable to the time period up to and including the Closing Date (the "SELLER PRORATED TAXES") and Buyer shall pay for those Taxes and assessments attributable to the period thereafter. Buyer shall be responsible for preparing -38- and filing the Returns for ad valorem and similar Taxes that were not filed prior to the Closing Date. 11.6 Cooperation on Tax Matters. Seller shall cooperate with and provide to Buyer copies of all Returns of Seller together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by any taxing authority and records concerning the ownership and Tax basis of property, that Seller may possess to the extent such Returns, schedules, workpapers, documents and records are related to the Assumed Taxes. ARTICLE XII MISCELLANEOUS 12.1 Expenses. Each of Sellers and Buyer shall pay its own expenses incident to the negotiation, preparation, and carrying out of this Agreement (and any documents entered into incident thereto) and the consummation of the transactions contemplated hereby, including the fees and expenses of their respective counsel and accountants. 12.2 Notices. All notices, requests, consents, approvals, objections and other communications required or permitted hereunder shall be in writing and shall be sufficiently given if delivered in person or if sent by telecopy, by nationally recognized courier or by certified or registered mail, postage prepaid, deemed to have been delivered on the date personally delivered or on the date telecopied or three days after the date mailed, if addressed as follows: (a) If to Seller, to: Associated Materials Incorporated c/o Harvest Partners, Inc. 280 Park Avenue, 33rd Floor New York, New York 10017 Facsimile: (212) 812-0100 Attn: Ira D. Kleinman Jonathan Angrist with a copy (which shall not constitute notice) to: Associated Materials Incorporated 3773 State Road Cuyahoga Falls, Ohio 44223 Facsimile: (330) 922-2312 Attn: Keith LaVanway -39- with a copy (which shall not constitute notice) to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036-2787 Facsimile: (212) 354-8113 Attn: John M. Reiss, Esq. Oliver C. Brahmst, Esq. (b) If to Buyer, to: AmerCable Incorporated c/o Wingate Partners III, L.P. 750 N. St. Paul Street Suite 1200 Dallas, Texas 75201 Facsimile: (214) 871-8799 Attn: James A. Johnson with a copy (which shall not constitute notice) to: AmerCable Incorporated 350 Bailey Road El Dorado, Arkansas 71730 Facsimile: (870) 862-8659 Attn: Robert F. Hogan, Jr. with a copy (which shall not constitute notice) to: Haynes and Boone, LLP 901 Main Street Suite 3100 Dallas, Texas 75202 Facsimile: (214) 200-0617 Attn: Taylor H. Wilson, Esq. Any party may change its address for purposes of this Section 12.2 by giving the other parties written notice of the new address in the manner set forth above. 12.3 Amendment. This Agreement may be amended only by an instrument in writing executed by each of the parties hereto. 12.4 Entire Agreement. This Agreement, the Exhibits, Schedules, certificates, and documents referred to herein constitute the entire agreement of the parties hereto, and supersede all prior understandings between the parties hereto with respect to the subject matter hereof, including the Letter of Intent. -40- 12.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 12.6 Governing Law. This Agreement is to be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of laws. 12.7 Submission to Jurisdiction; Venue; Waiver of Jury Trial. (a) Any judicial proceeding brought against any of the parties to this Agreement with respect to any dispute arising out of, under or in connection with this Agreement may be brought in the courts of the State of Delaware or in the United States District Court for the District of Delaware, and, by the execution and delivery of this Agreement, each of the parties hereto accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. (b) Each of the parties to this Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any proceeding arising out of, under or in connection with this Agreement in any of the courts referred to in Section 12.7(a) and hereby further irrevocably waives and agrees not to plead or claim that any such court is not a convenient forum for any such proceeding. (c) Each of the parties to this Agreement hereby irrevocably waives any right it may have to a trial by jury in respect of any litigation as between the parties directly or indirectly arising out of, under or in connection with this Agreement. Each of Buyer and Seller (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 12.7. 12.8 Headings. The headings of the several paragraphs of this Agreement are inserted solely for convenience of reference and are not a part of this Agreement and are not intended to govern, limit or aid in the construction of any of the terms or provisions of this Agreement. 12.9 Benefit and Assignment. (a) Nothing in this Agreement, whether expressed or implied, is intended and shall not be construed to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns (except Sections 10.2 and 10.3, as such Sections relate to the respective officers, directors, stockholders, accountants, agents and employees, Affiliates and heirs, successors and permitted assigns of Buyer and Seller), nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision contained herein give any third party any right of subrogation or action over or against any party to this Agreement. (b) This Agreement shall be binding on, and accrue to the benefit of, the parties hereto and their respective successors and permitted assigns. This Agreement may not be -41- assigned by any of the parties hereto; provided, however, that Seller hereby consents to the assignment by Buyer of its rights hereunder to its financing sources as security for any borrowings. 12.10 Waiver. The waiver by a party of the performance of any covenant, condition or promise herein shall not invalidate this Agreement nor shall it be considered a waiver by such party of any other covenant, condition or promise herein, nor shall any such waiver be construed as a waiver or relinquishment for the future of the time for the performance of any other act or identical act, covenant, condition or promise herein. 12.11 Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby; provided that the invalidity, illegality or unenforceability of such provision is not materially adverse to the interest of any party hereto. 12.12 Publicity; Non-Disclosure. Except as otherwise required by law, none of the parties hereto shall make any public disclosure of any part or all of the terms and conditions of this Agreement or issue any press release or make any other public statement of the terms and conditions of this Agreement without obtaining the prior written approval of Seller and Buyer to the contents and manner of presentation and publication thereof. To the extent that any such disclosure is required by law, the disclosing party shall provide Buyer or, as the case may be, Seller with written notice of such required disclosure prior to such disclosure and Buyer or, as the case may be, Seller shall review and approve the proposed disclosure, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, the parties agree and acknowledge that neither party shall be restricted following the Closing Date from disclosing without the consent of the other party the fact that the transactions contemplated by this Agreement have been consummated. [The remainder of this page is intentionally left blank.] -42- IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day, month and year first above written. ASSOCIATED MATERIALS INCORPORATED By: /s/ D. Keith LaVanway ------------------------------------- Title: Vice President and Chief Financial Officer AMERCABLE INCORPORATED By: /s/ James A. Johnson ------------------------------------- Title: President -43- EXHIBIT A to Asset Purchase Agreement FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "AGREEMENT"), dated as of June 24, 2002, is entered into by and between Associated Materials Incorporated, a Delaware corporation ("ASSIGNOR"), and AmerCable Incorporated, a Delaware corporation ("ASSIGNEE"). Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in the Asset Purchase Agreement (as defined below). W I T N E S S E T H : WHEREAS, Assignor and Assignee have entered into that certain Asset Purchase Agreement (the "ASSET PURCHASE AGREEMENT"), dated as of June 24, 2002, pursuant to which Assignee has agreed (i) subject to Section 6.6 of the Asset Purchase Agreement, to purchase and take assignment of Assignor's right and interest in, to and under the Acquired Contracts and (ii) to assume and discharge or perform the Assumed Liabilities; and WHEREAS, pursuant to the Asset Purchase Agreement, Assignor has agreed to sell, convey, transfer, assign and deliver to Assignee all of Assignor's right and interest in, to and under the Acquired Contracts. NOW, THEREFORE, in consideration of the terms and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee, intending to be legally bound, hereby agree as follows: 1. Assignor hereby irrevocably assigns, conveys and transfers to Assignee, its successors and permitted assigns, all of Assignor's right and interest in, to and under the Acquired Contracts. 2. Assignee hereby accepts the foregoing assignment of the Acquired Contracts. 3. Assignor hereby irrevocably assigns, conveys and transfers to Assignee, its successors and permitted assigns, the Assumed Liabilities. 4. Assignee hereby accepts and assumes the Assumed Liabilities and agrees to assume and discharge or perform when due the Assumed Liabilities. 5. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 6. This Agreement may be amended only by an instrument in writing executed by each of the parties hereto. Page 2 7. (a) Nothing in this Agreement, whether express or implied, is intended and shall not be construed to confer any rights or remedies under or by reason of this Agreement on any Persons other than the parties to it and the parties to the Contracts being assigned hereby and their respective successors and permitted assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any party to this Agreement, nor shall any provision contained herein give any third party any right of subrogation or action over or against any party to this Agreement. (b) This Agreement shall be binding on, and accrue to the benefit of, the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by any of the parties hereto; provided, however, that Assignor hereby consents to the assignment by Assignee of its rights hereunder to its financing sources as security for any borrowings. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of laws. Each Acquired Contract shall continue to be governed and construed in accordance with the laws of the jurisdiction specified therein. 9. In case any provision in this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby; provided that the invalidity, illegality or unenforceability of such provision is not materially adverse to the interest of any party hereto. 10. On or after the date hereof and without further consideration, Assignor shall, from time to time at Assignee's request, execute and deliver such further instruments of conveyance, assignment and transfer and shall take, or cause to be taken, such other action as Assignee may reasonably request for the more effective conveyance, assignment and transfer to Assignee of the Acquired Contracts. 11. Assignor and Assignee hereby agree and acknowledge that this Agreement is being entered into and delivered pursuant to and subject to the terms and conditions set forth in the Asset Purchase Agreement, that additional rights and obligations of Assignor and Assignee are expressly provided for therein, and that the execution and delivery of this Agreement shall not impair or diminish any of the rights or obligations of any of the parties to the Asset Purchase Agreement, as set forth therein. In the event of any conflict between the provisions of the Asset Purchase Agreement and this Agreement, the provisions of the Asset Purchase Agreement will prevail and control. Page 3 IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day, month and year first written above. ASSOCIATED MATERIALS INCORPORATED By ________________________________ Name: Title: AMERCABLE INCORPORATED By ________________________________ Name: Title: EXHIBIT B to Asset Purchase Agreement FORM OF AGREEMENT OF TRANSFER AND ASSUMPTION OF SPONSORSHIP OF BENEFIT PLANS This AGREEMENT OF TRANSFER AND ASSUMPTION OF SPONSORSHIP OF BENEFIT PLANS (the "AGREEMENT") is entered into as of June 24, 2002, by and between Associated Materials Incorporated, a Delaware corporation ("AMI") and AmerCable Incorporated, a Delaware corporation ("AMERCABLE"). WHEREAS, pursuant to the Asset Purchase Agreement, dated June 24, 2002, by and among AMI and AmerCable (the "PURCHASE AGREEMENT"), AmerCable will purchase substantially all of the assets, and assume certain liabilities, of the AmerCable division (the "DIVISION") of AMI; WHEREAS, AMI sponsors and maintains for the benefit of the Division's eligible employees (i) the AmerCable Retirement Plan amended and restated effective January 1, 1997, as further amended by the First Amendment to the AmerCable Retirement Plan effective January 1, 2001 (the "RETIREMENT PLAN") and the trust related thereto as evidenced by the Trust Agreement by and between AMI and Fidelity Management Trust Company dated effective as of January 1, 1997; (ii) the AmerCable Employee Health Care Plan originally effective February 1, 1998 and revised effective February 1, 2001 (the "HEALTH PLAN") and account #80-1019-6402 at Regions Bank, El Dorado, Arkansas relating thereto which is commonly referred to as the "AmerCable Employee Health Benefit Account"; and (iii) any other Assumed Employee Benefit Plans (as such term is defined by the Purchase Agreement) (subparagraphs (i), (ii), and (iii) above are collectively referred to herein as the "PLANS"); WHEREAS, AmerCable desires, in connection with transactions contemplated in the Purchase Agreement, to assume the sponsorship and maintenance of the Plans, effective as of the Closing Date, as that term is defined in the Purchase Agreement; and WHEREAS, AMI desires, in connection with transactions contemplated in the Purchase Agreement, to transfer sponsorship and maintenance to AmerCable of the Plans, effective as of the Closing Date. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. AMI, as sponsor of the Plans, hereby assigns and transfers to AmerCable the sponsorship and maintenance of the Plans and all the rights, obligations, responsibilities and liabilities of AMI thereunder. AMI hereby approves and consents to AmerCable's adoption and assumption of the sponsorship and maintenance of the Plans, including, without limitation, all rights, obligations, responsibilities and liabilities of AMI thereunder and agrees that AmerCable shall be solely responsible for each such plan (including, without limitation, the administration and payment of benefits thereunder) 2. AmerCable hereby adopts and assumes the sponsorship of the Plans, including, without limitation, all rights, obligations, responsibilities and liabilities of AMI thereunder and agrees that it shall be solely responsible for each such plan (including, without limitation, the administration and payment of benefits thereunder) and shall promptly discharge any obligations of the sponsors thereunder. 3. AMI and AmerCable agree to take any and all actions required to perfect and complete the transfer of sponsorship and maintenance of each of the Plans from AMI to AmerCable. AMI and AmerCable shall promptly amend the Retirement Plan, any other Plans, as necessary, to reflect such transfers. 4. AMI shall notify Fidelity Management Trust Company, as the trustee of the Retirement Plan, that effective as of the Closing Date, AmerCable is the plan sponsor of the Retirement Plan, and shall take all steps necessary to transfer bank account #80-1019-6402 at Regions Bank in El Dorado, Arkansas for the Health Plan to AmerCable effective as of the Closing Date. 5. Notwithstanding the foregoing, for purposes of transferring sponsorship of Assumed Employee Benefit Plans pursuant to this Agreement, the term "Assumed Employee Benefit Plans" shall not include any plan in which both employees of the Division and employees of any division of AMI other than the Division participate. 6. This Agreement is not intended, nor shall it be construed, to confer upon any person or entity, other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement. This Agreement and the rights and obligations of AmerCable or AMI hereunder may not be assigned by any party hereto without the prior written consent of the other parties, which consent shall not be unreasonably withheld. This Agreement may be modified only by an instrument executed by the parties hereto. This Agreement is being entered into in connection with the Purchase Agreement, but does not otherwise modify or affect in any respect, the provisions of the Purchase Agreement or the indemnification obligations thereunder, including, without limitation, the obligations of the parties under Section 5.3(a) of the Purchase Agreement. In the event of any conflict between the provisions of the Purchase Agreement and this Agreement, the provisions of the Purchase Agreement will prevail and control. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, this Agreement of Transfer and Assumption of Sponsorship of the Plans has been executed as of the date first above written. ASSOCIATED MATERIALS INCORPORATED By: ______________________________ Its:______________________________ AMERCABLE INCORPORATED By: ______________________________ Its:______________________________ EXHIBIT C to Asset Purchase Agreement FORM OF BILL OF SALE Associated Materials Incorporated ("SELLER"), a Delaware corporation, pursuant to that certain Asset Purchase Agreement (the "AGREEMENT"), dated as of June 24, 2002, entered into by and between Seller and AmerCable Incorporated ("BUYER"), a Delaware corporation, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby grant, sell, convey, assign, transfer and deliver to Buyer and its successors and permitted assigns forever all of Seller's right, Seller's title (to the extent Seller has such title) and Seller's interest in, to and under all of the Purchased Assets (as such term is defined in the Agreement) upon the terms and as more particularly described and set forth in the Agreement, TO HAVE AND TO HOLD the same unto Buyer, its successors and permitted assigns, to or for its use forever. There shall be excluded from this Bill of Sale any personal and real property, tangible and intangible, which are part of the Purchased Assets but which are the specific subject of a separate instrument of conveyance. On or after the date hereof and without further consideration, Seller shall, from time to time at Buyer's request, execute and deliver such further instruments of conveyance, assignment and transfer and shall take, or cause to be taken, such other action as Buyer may reasonably request for the more effective conveyance, assignment and transfer to Buyer of the Purchased Assets. Seller hereby agrees and acknowledges that this Bill of Sale is being entered into and delivered pursuant to and subject to the terms and conditions set forth in the Agreement, that additional rights and obligations of Seller and Buyer are expressly provided for therein, and that the execution and delivery of this Bill of Sale shall not impair or diminish any of the rights or obligations of any of the parties to the Agreement, as set forth therein. In the event of any conflict between the provisions of the Agreement and this Bill of Sale, the provisions of the Agreement will prevail and control. Nothing in this Bill of Sale, whether express or implied, is intended and shall not be construed to confer any rights or remedies under or by reason of this Bill of Sale on any persons other than Buyer and its respective successors and permitted assigns, nor is anything in this Bill of Sale intended to relieve or discharge the obligation or liability of any third persons to Seller or Buyer, nor shall any provision contained herein give any third party any right of subrogation or action over or against Seller or Buyer. This Bill of Sale shall be binding on Seller and its successors and assigns, and shall accrue to the benefit of Buyer and its successors and permitted assigns. This Bill of Sale may not be assigned by Seller or Buyer; provided, however, that Seller hereby consents to the assignment by Buyer of its rights hereunder to its financing sources as security for any borrowings. This Bill of Sale shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of law. IN WITNESS WHEREOF, Seller has caused this instrument to be duly executed by its duly authorized officer this 24th day of June, 2002. ASSOCIATED MATERIALS INCORPORATED By ___________________________ Name: Title: EXHIBIT D to Asset Purchase Agreement FORM OF TRADEMARK ASSIGNMENT This Trademark Assignment (the "ASSIGNMENT") is pursuant to that certain Asset Purchase Agreement by and between Associated Materials Incorporated, a Delaware corporation ("ASSIGNOR"), and AmerCable Incorporated, a Delaware corporation ("ASSIGNEE"), dated June 24, 2002 (the "AGREEMENT"). WHEREAS, pursuant to the Agreement, Assignor has agreed to sell, convey, transfer, assign and deliver to Assignee all of Assignor's right, title (to the extent Assignor has such title) and interest in, to and under certain intellectual property assets used exclusively or held for use exclusively in the Business (as defined in the Agreement), including the trademarks, trademark registrations and applications for registration and the domain names set forth on attached SCHEDULE A (the "MARKS"); and WHEREAS, Assignee is desirous of acquiring the Marks and the goodwill associated with and symbolized by the marks. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged: 1. Assignor hereby irrevocably assigns, transfers, conveys, and delivers to Assignee and its successors and permitted assigns, all of its right, title (to the extent Assignor has such title), and interest in and to the Marks, in the United States and elsewhere, together with the goodwill associated with and symbolized by the Marks, and the right to sue for past infringement. 2. On or after the date hereof and without further consideration, Assignor shall, from time to time at Assignee's request, execute and deliver such further instruments of conveyance, assignment and transfer and shall take, or cause to be taken, such other action as Assignee may reasonably request for the more effective conveyance, assignment and transfer to Assignee of any of the Marks. 3. Assignor hereby agrees and acknowledges that this Assignment is being entered into and delivered pursuant to and subject to the terms and conditions set forth in the Agreement, that additional rights and obligations of Assignor and Assignee are expressly provided for therein, and that the execution and delivery of this Assignment shall not impair or diminish any of the rights or obligations of any of the parties to the Agreement, as set forth therein. In the event of any conflict between the provisions of the Agreement and this Assignment, the provisions of the Agreement will prevail and control. 4. Nothing in this Assignment, whether express or implied, is intended and shall not be construed to confer any rights or remedies under or by reason of this Assignment on any persons other than Assignee and its respective successors and permitted assigns, nor is anything in this Assignment intended to relieve or discharge the obligation or liability of any third persons to Assignor or Assignee, nor shall any provision contained herein give any third party any right of subrogation or action over or against Assignor or Assignee. 5. This Assignment shall be binding on Assignor and its successors and assigns, and shall accrue to the benefit of Assignee and its successors and permitted assigns. This Assignment may not be assigned by Assignor or Assignee; provided, however, that Assignor hereby consents to the assignment by Assignee of its rights hereunder to its financing sources as security for any borrowings. 6. This Assignment shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of law. ASSOCIATED MATERIALS INCORPORATED Date: ______________ By: ________________________________ Name: ________________________________ Title: ________________________________ State: ) ) ss: County: ) On this ___ day of June, 2002, the above signed officer of Associated Materials Incorporated, the above named Assignor, personally appeared before me, and acknowledged that he executed the foregoing Trademark Assignment on behalf of said Assignor pursuant to authority duly received. ___________________________________ Notary Public Signature EXHIBIT E to Asset Purchase Agreement FORM OF PATENT ASSIGNMENT This Patent Assignment (the "ASSIGNMENT") is pursuant to that certain Asset Purchase Agreement by and between Associated Materials Incorporated, a Delaware corporation ("ASSIGNOR"), and AmerCable Incorporated, a Delaware corporation ("ASSIGNEE"), dated June 24, 2002 (the "AGREEMENT"). WHEREAS, pursuant to the Agreement, Assignor has agreed to sell, convey, transfer, assign and deliver to Assignee all of Assignor's right, title (to the extent Assignor has such title) and interest in, to and under certain intellectual property assets used exclusively or held for use exclusively in the Business (as defined in the Agreement), including the patents, patent applications and inventions set forth on the attached SCHEDULE A (the "PROPERTIES"); and WHEREAS, Assignee is desirous of acquiring the Properties. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged: 1. Assignor hereby irrevocably assigns, transfers, conveys, and delivers to Assignee and its successors and permitted assigns, all of its right, title (to the extent Assignor has such title), and interest in and to the Properties, in the United States and elsewhere, together with all divisionals, renewals, and continuing applications thereof, and the right to sue for past infringement. 2. On or after the date hereof and without further consideration, Assignor shall, from time to time at Assignee's request, execute and deliver such further instruments of conveyance, assignment and transfer and shall take, or cause to be taken, such other action as Assignee may reasonably request for the more effective conveyance, assignment and transfer to Assignee of any of the Properties. 3. Assignor hereby agrees and acknowledges that this Assignment is being entered into and delivered pursuant to and subject to the terms and conditions set forth in the Agreement, that additional rights and obligations of Assignor and Assignee are expressly provided for therein, and that the execution and delivery of this Assignment shall not impair or diminish any of the rights or obligations of any of the parties to the Agreement, as set forth therein. In the event of any conflict between the provisions of the Agreement and this Assignment, the provisions of the Agreement will prevail and control. 4. Nothing in this Assignment, whether express or implied, is intended and shall not be construed to confer any rights or remedies under or by reason of this Assignment on any persons other than Assignee and its respective successors and permitted assigns, nor is anything in this Assignment intended to relieve or discharge the obligation or liability of any third persons to Assignor or Assignee, nor shall any provision contained herein give any third party any right of subrogation or action over or against Assignor or Assignee. 5. This Assignment shall be binding on Assignor and its successors and assigns, and shall accrue to the benefit of Assignee and its successors and permitted assigns. This Assignment may not be assigned by Assignor or Assignee; provided, however, that Assignor hereby consents to the assignment by Assignee of its rights hereunder to its financing sources as security for any borrowings. 6. This Assignment shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of law. ASSOCIATED MATERIALS INCORPORATED Date: ______________ By: ________________________________ Name: ________________________________ Title: ________________________________ State: ) ) ss: County: ) On this ___ day of _____, 2002, the above signed officer of Associated Materials Incorporated, the above named Assignor, personally appeared before me, and acknowledged that he executed the foregoing Patent Assignment on behalf of said Assignor pursuant to authority duly received. ___________________________________ Notary Public Signature EXHIBIT F to Asset Purchase Agreement FORM OF RELEASE AGREEMENT This RELEASE AGREEMENT (this "AGREEMENT"), dated as of June 24, 2002 is entered into by and among Associated Materials Incorporated, a Delaware corporation ("AMI"), and Robert F. Hogan, Chad E. Archer, Rodney Cole and David Nasky (collectively, "MANAGEMENT"). RECITALS WHEREAS, AMI has previously delivered to Management that certain Corporate Directive, dated May 8, 2002, and that certain Amended and Restated Corporate Directive, dated May 14, 2002 (collectively, the "CORPORATE DIRECTIVE"); and WHEREAS, in connection with and in consideration of the closing of the transactions contemplated by that certain Asset Purchase Agreement by and between AMI and AmerCable Incorporated, a Delaware corporation, dated June 24, 2002 (the "PURCHASE AGREEMENT"), AMI wishes to release Management from any claims that could be made against Management by AMI in connection with the Corporate Directive. AGREEMENT In consideration of the premises and of the agreements contained herein and in the Purchase Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, AMI and Management hereto agree as follows: 1. RELEASE OF CLAIMS. AMI, for itself and on behalf of its affiliates, associates, employees, agents, representatives, directors, officers, shareholders, partners, principals, and their respective successors, heirs, and assigns (each an "AMI RELEASOR") and all persons claiming by or through them, does hereby generally release and forever discharge, and covenant not to sue or assist anyone in any claim against, each member of Management of and from any and all causes of action, claims, liabilities, damages, or demands of any kind, whether presently known or unknown, suspected or unsuspected, whether based in contract, tort, or any other recovery theory (including, without limitation, costs of investigation, defense, settlement and attorneys' fees) ("CLAIMS"), which each AMI Releasor or any person claiming by or through any of them, has, had, or may have, directly in indirectly, arising out of or relating to the compliance by Management with the Corporate Directive. AMI agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. 2. ADDITIONAL RIGHTS AND OBLIGATIONS. The parties hereby agree and acknowledge that this Agreement is being entered into and delivered pursuant to and subject to the terms and conditions set forth in the Purchase Agreement, that additional rights and obligations of the parties are expressly provided for therein, and that the execution and delivery of this Agreement shall not impair or diminish any of the rights or obligations of any of the parties to the Purchase Agreement, as set forth therein. 3. BINDING EFFECT. This Agreement, and all the terms and provisions hereof, shall be binding upon and shall inure to the benefit of Management and AMI, and their respective successors and permitted assigns. 4. SEVERABILITY. In case any provision in this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby; provided that the invalidity, illegality or unenforceability of such provision is not materially adverse to the interest of any party hereto. 5. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the law that might be applied under applicable principles of conflicts of laws. 6. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 7. SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS 2 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date above written. ASSOCIATED MATERIALS INCORPORATED By:___________________________________ Name:_________________________________ Title:________________________________ ROBERT F. HOGAN ______________________________________ CHAD E. ARCHER ______________________________________ RODNEY COLE ______________________________________ DAVID NASKY ______________________________________ EXHIBIT G to Asset Purchase Agreement FORM OF LOCKBOX AGREEMENT Associated Materials Incorporated June 21, 2002 c/o Harvest Partners, Inc. 280 Park Avenue 33rd Floor New York, New York 10017 Associated Materials Incorporated 3773 State Road Cuyhoga Falls, Ohio 44223 Re: AMERCABLE DIV. OF ASSOCIATED MATERIALS, Lockbox No. 70649 AMERCABLE/OFFSHORE MARINE, Lockbox No. 270649 AMERCABLE DISBURSEMENT ACCOUNT, No. 319010000036 OMCS DISBURSEMENT ACCOUNT, No. 70021048 OFFSHORE MARINE CABLE SPECIALISTS, No. 720993500506 Ladies and Gentlemen: In connection with the proposed sale (the "SALE") of the assets of the AmerCable Division of Associated Materials Incorporated, a Delaware corporation ("AMI"), to AmerCable Incorporated, a Delaware corporation ("AMERCABLE"), AMI and AmerCable hereby agree to the terms and obligations of this letter agreement (the "AGREEMENT"). This Agreement will confirm our arrangements regarding the transfer of funds in AMERCABLE DIV. OF ASSOCIATED MATERIALS, Lockbox No. 70649 depositing into account number 1102514500 and AMERCABLE/OFFSHORE MARINE, Lockbox No. 270649 (together, the "LOCKBOX ACCOUNTS") which Key Bank (the "BANK") currently maintains for the AmerCable Division of AMI. In connection with the closing of the Sale, the Bank shall be instructed to make all necessary arrangements to transfer all funds in the Lockbox Accounts to AMI's primary account at the Bank at the close of business on June 21, 2002 in accordance with the existing instructions for such Lockbox Accounts. The Bank shall be further instructed to make all necessary arrangements to transfer and convey the Lockbox Accounts to AmerCable, effective as of 10:00 a.m. Central Daylight Time, on June 24, 2002. The Bank shall be instructed to suspend processing of the Lockbox Accounts on June 24, 2002, and to resume processing of the Lockbox Accounts on June 25, 2002. This Agreement will also confirm our arrangements regarding the transfer of funds in AMERCABLE DISBURSEMENT ACCOUNT, No. 319010000036, OMCS DISBURSEMENT ACCOUNT, No. 70021048 and OFFSHORE MARINE CABLE SPECIALISTS, No. 720993500506 (collectively, the "CASH DISBURSEMENT ACCOUNTS") which the Bank currently maintains for the AmerCable Division of AMI. In connection with the closing of the Sale, the Bank shall be instructed to make all necessary arrangements to transfer the Cash Disbursement Accounts to AmerCable, effective as of the open of business, 8:00 a.m. Central Daylight Time, on June 24, 2002. The Bank shall be instructed to settle all open items in the Cash Disbursement Accounts at the close of business on June 21, 2002 prior to such transfer. New funds will be transferred into the Cash Disbursement Accounts by AmerCable for purposes of settling Cash Disbursement Account transactions later in the day on June 24, 2002 pursuant to separate instructions. Following the closing of the Sale, AmerCable shall be the new signatory on the Lockbox Accounts and the Cash Disbursement Accounts. Further, all AMI personnel shall no longer have any access to the Lockbox Accounts or the Cash Disbursement Accounts for any purposes whatsoever. AMI and AmerCable shall jointly deliver instructions to the Bank with respect to the transfer of the Lockbox Accounts and the Cash Disbursement Accounts, as described above, immediately prior to the closing of the Sale on June 24, 2002. Such instructions are to be sent via email to Beth Horseman at beth_a_horseman@keybank.com. Diana Vance, Bernie Avondet and Dawn Mullee are to be copied on such email at diana_vance@keybank.com, bernie_m_avondet@keybank.com and dawn_mullee@keybank.com. In the event that such closing does not occur at such time, either AMI or AmerCable may deliver notice to the Bank to such effect, whereupon this Agreement shall be revoked and of no further force or effect. This Agreement is binding upon AMI and AmerCable and their successors and assigns and is enforceable by AMI and AmerCable. It supersedes all prior agreements relating to the Lockbox Accounts and the Cash Disbursement Accounts, and it may not be modified or terminated except upon the written consent of AMI and AmerCable. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and same agreement. AMERCABLE INCORPORATED By:________________________________ Name:______________________________ Title:_____________________________ Page 2 Acknowledged and agreed to this 21st day of June, 2002. ASSOCIATED MATERIALS INCORPORATED By:___________________________ Name:_________________________ Title:________________________ Page 3 EXHIBIT H to Asset Purchase Agreement FORM OF MANAGEMENT RELEASE June 24, 2002 [____________] (the "RELEASOR") for himself, his heirs, assigns, successors, executors, and administrators, in consideration of the terms and conditions set forth in that certain Option Conversion Agreement, dated as of the date hereof, by and among Holdings (as defined below), the Company (as defined below) and the Releasor, intending to be legally bound, hereby fully releases and discharges ASSOCIATED MATERIALS INCORPORATED (the "COMPANY"), a Delaware corporation, and ASSOCIATED MATERIALS HOLDINGS INC. ("HOLDINGS"), a Delaware corporation, and their respective predecessors, successors, subsidiaries, affiliated and parent companies, and all of the present and former officers, directors, agents, employees, and representatives, respectively, of the Company and Holdings (collectively, the "RELEASEES") forever and unconditionally from any and all manner of action, claim, demand, damages, cause of action, debt, sum of money, contract, covenant, controversy, agreement, promise, judgment, and demand whatsoever, in law or equity, known or unknown, existing or claimed to exist, relating to or arising out of his employment and/or separation from employment with the Company, including, without limitation, (i) the stock option (the "STOCK OPTION") granted to the Releasor pursuant to the Associated Materials Holdings Inc. 2002 Stock Option Plan and the Stock Option Award Agreement, dated as of the date hereof, between Holdings and the Releasor, to purchase [__] shares of preferred stock of Holdings, including, without limitation, the cancellation of such stock option; (ii) the stock options (the "AMI OPTIONS") granted to the Releasor pursuant to the Associated Materials Incorporated 1994 Stock Incentive Plan and any and all Nonqualified Stock Option Award Agreements by and between the Company and the Releasor, including, without limitation, the cancellation of such stock option, EXHIBIT H Page 2 and any other stock options or rights granted by the Company to the Releasor; (iii) the letter agreement, dated April 18, 2002, between Holdings and the Releasor, relating to the Stock Option and surrender of the AMI Option; and (iv) any discrimination claim based on sex, sexual orientation or preference, race, religion, color, national origin, age or disability, retaliation, or any cause of action under the following in each case as amended: the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Equal Pay Act of 1963, the American with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974 (except any valid claim to recover vested benefits, if applicable), any applicable Executive Order program, and their state or local counterparts or any other federal, state or local law, rule, regulation, constitution or ordinance, or under any public policy or common law or arising under any practices or procedure of the Company, and/or any claim for wrongful termination, back pay, future wage loss, injury subject to relief under the Workers' Compensation Act, any other claim, whether in tort, contract or otherwise, or any claim for costs, fees or other expenses, including attorneys' fees, incurred in these matters, against any one or more of the Releasees. Notwithstanding anything otherwise set forth in the foregoing paragraph, Releasees shall not be deemed to have released or discharged any action, claim, demand, damages, cause of action, debt, sum of money, contract, covenant, controversy, agreement, promise, judgment, and demand whatsoever, in law or equity, known or unknown, existing or claimed to exist, that Releasees, or any of them, might be entitled to assert by counterclaim, cross complaint, affirmative defense, or any other form of defense to any action, claim or demand EXHIBIT H Page 3 asserted by the Company, Holdings or any affiliate (as defined in the Securities Exchange Act of 1934, as amended) thereof. By signing this Release, the Releasor acknowledges that: (i) he has read and fully understands the terms of this Release and had the opportunity to negotiate its terms; (ii) he has been advised and urged to consult with his attorneys, concerning the terms this Release, and that he has done so to the extent he deems necessary; (iii) he has had ample opportunity to negotiate through his attorneys concerning this Release; (iv) he has agreed to this Release knowingly, voluntarily, with such advice from his attorneys as he deemed appropriate, and was not subjected to any undue influence or coercion in agreeing to the terms of this Release; and (v) he has been given at least 21 days to consider this Release, and acknowledges that in the event that he executes this Release prior to the expiration of the 21 day period, he hereby waives the balance of said period. _____________________________ Releasor Sworn to before me this ___ day of June, 2002. _____________________________ Notary Public EXHIBIT I to Asset Purchase Agreement FORM OF LOSS CLAIM CERTIFICATE [LETTERHEAD OF INDEMNIFIED PARTY] [Address of Indemnifying Party] Attention: [__________] __________ __, 20__ Dear Sirs: With reference to that certain Asset Purchase Agreement (the "ASSET PURCHASE AGREEMENT"), dated as of June [__], 2002, entered into by and between Associated Materials Incorporated and AmerCable Incorporated, we hereby claim the following Losses (as defined in the Asset Purchase Agreement): [INSERT THE NATURE OF THE CLAIM INCLUDING THE FOLLOWING: - STATE THAT THE INDEMNIFIED PARTY (AS DEFINED IN THE ASSET PURCHASE AGREEMENT) HAS INCURRED LOSSES FOR WHICH IT IS ENTITLED TO BE INDEMNIFIED UNDER SECTION [10.2/10.3] OF THE ASSET PURCHASE AGREEMENT - A DETAILED DESCRIPTION OF EACH INDIVIDUAL ITEM OF THE LOSSES - THE DATE, IF ANY, ON WHICH EACH INDIVIDUAL ITEM AROSE OR WAS IDENTIFIED - THE NATURE OF THE MISREPRESENTATION, BREACH OF WARRANTY, BREACH OF COVENANT OR CLAIM TO WHICH EACH INDIVIDUAL ITEM IS RELATED - THE COMPUTATION OF THE AMOUNT TO WHICH THE INDEMNIFIED PARTY CLAIMS TO BE ENTITLED] Very truly yours, [The Indemnified Party] By ___________________________ Name: Title: cc: [__________] EX-10.13 17 y61690exv10w13.txt 2002 STOCK OPTION PLAN Exhibit 10.13 ASSOCIATED MATERIALS HOLDINGS INC. 2002 STOCK OPTION PLAN 1. Purposes. The purposes of the Associated Materials Holdings Inc. 2002 Stock Option Plan are: (a) To further the growth, development and success of the Company and its Affiliates by enabling the executive and other employees and directors of, and consultants to, the Company and its Affiliates to acquire a continuing equity interest in the Company, thereby increasing their personal interests in such growth, development and success and motivating such employees, directors and consultants to exert their best efforts on behalf of the Company and its Affiliates; and (b) To maintain the ability of the Company and its Affiliates to attract and retain employees, directors and consultants of outstanding ability by offering them an opportunity to acquire a continuing equity interest in the Company and its Affiliates which will reflect the growth, development and success of the Company and its Affiliates. Toward these objectives, the Committee may grant Options to such employees, directors and consultants, all pursuant to the terms and conditions of the Plan. 2. Definitions. As used in the Plan, the following capitalized terms shall have the meanings set forth below: (a) "AFFILIATE" - other than the Company, (i) any corporation or limited liability company in an unbroken chain of corporations or limited liability companies ending with the Company if each corporation or limited liability company owns stock or membership interests (as applicable) possessing more than fifty percent (50%) of the total combined voting power of all classes of stock in one of the other corporations or limited liability companies in such chain; (ii) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is more than fifty percent (50%) controlled (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; or (iii) any other entity, approved by the Committee as an Affiliate under the Plan, in which the Company or any of its Affiliates has a material equity interest. (b) "AGREEMENT" - a written stock option award agreement evidencing an Option, as described in Section 3(e). (c) "BOARD" - the Board of Directors of the Company. (d) "CHANGE IN CONTROL" - an event described in clause (i), (ii) or (iii) of Section 10(c). (e) "CODE" - the Internal Revenue Code of 1986, as it may be amended from time to time, including regulations and rules thereunder and successor provisions and regulations and rules thereto. (f) "COMMITTEE" - the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan. (g) "COMMON STOCK" - the common stock, $0.01 par value per share, of the Company. (h) "COMPANY" - Associated Materials Holdings Inc., a Delaware corporation, or any successor entity. (i) "DISABILITY" - the meaning given the term "total disability" in the Company's long-term disability plan, or, in the absence thereof, an inability to perform duties and services as an employee, director or consultant, as the case may be, of the Company or an Affiliate by reason of a medically determinable physical or mental impairment, supported by medical evidence, which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than six (6) months, as determined by the Committee in its good faith discretion; provided, however, that for purposes of Incentive Stock Options granted under the Plan, "Disability" shall mean "permanent and total disability" as set forth in Section 22(e)(3) of the Code which is defined as an inability to perform the duties and services as an employee of the Company by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for at least a continuous twelve (12)-month period. (j) "FAIR MARKET VALUE" - of a share of Stock as of a given date shall be: (i) the mean of the highest and lowest reported sale prices for a share of Stock, on the principal exchange on which the Stock is then listed or admitted to trading, for such date, or, if no such prices are reported for such date, the most recent day for which such prices are available shall be used; (ii) if the Stock is not then listed or admitted to trading on a stock exchange, the mean of the closing representative bid and asked prices for the Stock on such date as reported by Nasdaq National Market (or any successor or similar quotation system regularly reporting the market value of the Stock in the over-the-counter market), or, if no such prices are reported for such date, the most recent day for which such prices are available shall be used; or (iii) in the event neither of the valuation methods provided for in clauses (i) and (ii) above are practicable, the fair market value determined by such other reasonable valuation method as the Committee shall, in its discretion, select and apply in good faith as of the given date; provided, however, that for purposes of paragraphs (a) and (h) of Section 6, such fair market value shall be determined subject to Section 422(c)(7) of the Code. (k) "ISO" or "INCENTIVE STOCK OPTION" - a right to purchase Stock granted to an Optionee under the Plan in accordance with the terms and conditions set forth in Section 6 and which conforms to the applicable provisions of Section 422 of the Code. (l) "NOTICE" - written notice actually received by the Company at its executive offices on the day of such receipt, if received on or before 1:30 p.m., on a day when -2- the Company's executive offices are open for business, or, if received after such time, such notice shall be deemed received on the next such day, which notice may be delivered in person to the Company's Assistant Treasurer, c/o Harvest Partners, Inc., 280 Park Avenue, 33rd Floor, New York, NY 10017, attention: Jonathan Angrist, or sent to the Company at the address indicated on the Agreement. (m) "OPTION" - a right to purchase Stock granted to an Optionee under the Plan in accordance with the terms and conditions set forth in Section 6. Options may be either ISOs or stock options other than ISOs. (n) "OPTIONEE" - an individual who is eligible, pursuant to Section 5, and who has been selected, pursuant to Section 3(c), to participate in the Plan, and who holds an outstanding Option granted to such individual under the Plan in accordance with the terms and conditions set forth in Section 6. (o) "PLAN" - this Associated Materials Holdings Inc. 2002 Stock Option Plan. (p) "PREFERRED STOCK" - the 8% cumulative redeemable preferred stock, $0.01 par value per share, of the Company. (q) "SECURITIES ACT" - the Securities Act of 1933, as it may be amended from time to time, including the regulations and rules promulgated thereunder and successor provisions and regulations and rules thereto. (r) "STOCK" - the Common Stock or Preferred Stock. (s) "SUBSIDIARY" - any present or future corporation which is or would be a "subsidiary corporation" of the Company as the term is defined in Section 424(f) of the Code. 3. Administration of the Plan. (a) The Committee shall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan, including, but not limited to, establishing procedures to be followed by the Committee, except with respect to matters which under any applicable law, regulation or rule, are required to be determined in the sole discretion of the Committee. If and to the extent that no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board. (b) The Committee shall be appointed from time to time by the Board, and the Committee shall consist of not less than two members of the Board. Appointment of Committee members shall be effective upon their acceptance of such appointment. Committee members may be removed by the Board at any time either with or without cause, and such members may resign at any time by delivering notice thereof to the Board. Any vacancy on the Committee, whether due to action of the Board or any other reason, shall be filled by the Board. (c) The Committee shall have full authority to grant, pursuant to the terms of the Plan, Options to those individuals who are eligible to receive Options under the Plan. In -3- particular, the Committee shall have discretionary authority, in accordance with the terms of the Plan, to: determine eligibility for participation in the Plan; select, from time to time, from among those eligible, the employees, directors and consultants to whom Options shall be granted under the Plan, which selection may be based upon information furnished to the Committee by the Company's or an Affiliate's management; determine whether an Option shall take the form of an ISO or an Option other than an ISO; determine the number of shares of Stock to be included in any Option, and whether such shares shall be Common Stock, Preferred Stock or any combination thereof, and the periods for which Options will be outstanding; establish and administer any terms, conditions, performance criteria, restrictions, limitations, forfeiture, vesting or exercise schedule, and other provisions of or relating to any Option; grant waivers of terms, conditions, restrictions and limitations under the Plan or applicable to any Option, or accelerate the vesting or exercisability of any Option; amend or adjust the terms and conditions of any outstanding Option and/or adjust the number and/or class of shares of Stock subject to any outstanding Option; at any time and from time to time after the granting of an Option, specify such additional terms, conditions and restrictions with respect to any such Option as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws or rules, including, but not limited to, terms, restrictions and conditions for compliance with applicable securities laws, regarding an Optionee's exercise of Options by tendering shares of Stock or under any "cashless exercise" program established by the Committee, and methods of withholding or providing for the payment of required taxes; offer to buy out an Option previously granted, based on such terms and conditions as the Committee shall establish with and communicate to the Optionee at the time such offer is made; and, to the extent permitted under the applicable Agreement, permit the transfer of an Option or the exercise of an Option by one other than the Optionee who received the grant of such Option (other than any such transfer or exercise which would cause any ISO to fail to qualify as an "incentive stock option" under Section 422 of the Code). (d) The Committee shall have all authority that may be necessary or helpful to enable it to discharge its responsibilities with respect to the Plan. Without limiting the generality of the foregoing sentence or Section 3(a), and in addition to the powers otherwise expressly designated to the Committee in the Plan, the Committee shall have the exclusive right and discretionary authority to interpret the Plan and the Agreements; construe any ambiguous provision of the Plan and/or the Agreements and decide all questions concerning eligibility for and the amount of Options granted under the Plan. The Committee may establish, amend, waive and/or rescind rules and regulations and administrative guidelines for carrying out the Plan and may correct any errors, supply any omissions or reconcile any inconsistencies in the Plan and/or any Agreement or any other instrument relating to any Options. The Committee shall have the authority to adopt such procedures and subplans and grant Options on such terms and conditions as the Committee determines necessary or appropriate to permit participation in the Plan by individuals otherwise eligible to so participate who are foreign nationals or employed outside of the United States, or otherwise to conform to applicable requirements or practices of jurisdictions outside of the United States; and take any and all such other actions it deems necessary or advisable for the proper operation and/or administration of the Plan. The Committee shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan. Decisions and actions by the Committee with respect to the Plan and any Agreement shall be final, conclusive and binding on all persons having or claiming to have any right or interest in or under the Plan and/or any Agreement. -4- (e) Each Option shall be evidenced by an Agreement, which shall be executed by the Company and the Optionee to whom such Option has been granted, unless the Agreement provides otherwise; two or more Options granted to a single Optionee may, however, be combined in a single Agreement. An Agreement shall not be a precondition to the granting of an Option; no person shall have any rights under any Option, however, unless and until the Optionee to whom the Option shall have been granted (i) shall have executed and delivered to the Company an Agreement or other instrument evidencing the Option, unless such Agreement provides otherwise, and (ii) has otherwise complied with the applicable terms and conditions of the Option. The Committee shall prescribe the form of all Agreements, and, subject to the terms and conditions of the Plan, shall determine the content of all Agreements. Any Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions of any such Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. (f) A majority of the members of the entire Committee shall constitute a quorum and the actions of a majority of the members of the Committee in attendance at a meeting at which a quorum is present, or actions by a written instrument signed by all members of the Committee, shall be the actions of the Committee. (g) The Committee may consult with counsel who may be counsel to the Company. The Committee may, with the approval of the Board, employ such other attorneys and/or consultants, accountants, appraisers, brokers and other persons as it deems necessary or appropriate. In accordance with Section 12, the Committee shall not incur any liability for any action taken in good faith in reliance upon the advice of such counsel or other persons. (h) In serving on the Committee, the members thereof shall be entitled to indemnification as directors of the Company, and to any limitation of liability and reimbursement as directors with respect to their services as members of the Committee. (i) Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may, in its discretion, allocate all or any portion of its responsibilities and powers under this Section 3 to any one or more of its members and/or delegate all or any part of its responsibilities and powers under this Section 3 to any person or persons selected by it; provided, however, that the Committee may not delegate its authority to correct errors, omissions or inconsistencies in the Plan. Any such authority delegated or allocated by the Committee under this paragraph (i) of Section 3 shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrative guidelines that may from time to time be established by the Committee, and any such allocation or delegation may be revoked by the Committee at any time. 4. Shares of Stock Subject to the Plan. (a) The shares of stock subject to Options granted under the Plan shall be shares of Stock. Such shares of Stock subject to the Plan may be either authorized and unissued shares (which will not be subject to preemptive rights) or previously issued shares acquired by the Company or any Subsidiary. The total number of shares of Stock that may be delivered pursuant to Options granted under the Plan is 566,675 shares, comprising of 477,519 shares of Common Stock and 89,156 shares of Preferred Stock. -5- (b) Notwithstanding any of the foregoing limitations set forth in this Section 4, the number of shares of Stock specified in this Section 4 shall be adjusted as provided in Section 10. (c) Any shares of Stock subject to an Option which for any reason expires or is terminated or forfeited without having been fully exercised may again be granted pursuant to an Option under the Plan, subject to the limitations of this Section 4. (d) Any shares of Stock purchased under an Option which are forfeited or reacquired by the Company at the option exercise price thereof pursuant to the applicable Agreement, may again be granted pursuant to an Option under the Plan, subject to the limitations of this Section 4. (e) Any shares of Stock described in paragraph (c) or (d) of this Section 4 may, in lieu of being granted pursuant to a new Option, be issued to the Company's stockholders, other than any employee or director stockholders, pro-rata to their then-current ownership of the outstanding Stock, if, and in the manner, determined by the Committee. (f) Any shares of Stock delivered under the Plan in assumption or substitution of outstanding stock options, or obligations to grant future stock options, under plans or arrangements of an entity other than the Company or an Affiliate in connection with the Company or an Affiliate acquiring such another entity, or an interest in such an entity, or a transaction otherwise described in Section 6(j), shall not reduce the maximum number of shares of Stock available for delivery under the Plan; provided, however, that the maximum number of shares of Stock that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be the number of shares set forth in paragraph (a) of this Section 4, as adjusted pursuant to paragraphs (b) and (c) of this Section 4. 5. Eligibility. Executive employees and other employees, including officers, of the Company and the Affiliates, directors (whether or not also employees), and consultants of the Company and the Affiliates, shall be eligible to become Optionees and receive Options in accordance with the terms and conditions of the Plan, subject to the limitations on the granting of ISOs set forth in Section 6(h). 6. Terms and Conditions of Stock Options. All Options to purchase Stock granted under the Plan shall be either ISOs or Options other than ISOs. To the extent that any Option does not qualify as an ISO (whether because of its provisions or the time or manner of its exercise or otherwise), such Option, or the portion thereof which does not so qualify, shall constitute a separate Option other than an ISO. Each Option shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine and which are set forth in the applicable Agreement. Options need not be uniform as to all grants and recipients thereof. (a) The option exercise price per share of shares of Stock subject to each Option shall be determined by the Committee and stated in the Agreement; provided, however, that, subject to paragraph (h)(C) and/or (j) of this Section 6, if applicable, such option exercise -6- price applicable to any ISO shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Stock subject to such Option at the time that the Option is granted. (b) Each Option shall be exercisable in whole or in such installments, at such times and under such conditions, as may be determined by the Committee in its discretion in accordance with the Plan and stated in the Agreement, and, in any event, over a period of time ending not later than ten (10) years from the date such Option was granted, subject to paragraph (h)(C) of this Section 6. (c) An Option shall not be exercisable with respect to a fractional share of Stock or the lesser of one hundred (100) shares and the full number of shares of Stock then subject to the Option. No fractional shares of Stock shall be issued upon the exercise of an Option. (d) Each Option may be exercised by giving Notice to the Company specifying the number and type of shares of Stock to be purchased, which shall be accompanied by payment in full including applicable taxes, if any, in accordance with Section 9. Payment shall be in any manner permitted by applicable law and prescribed by the Committee, in its discretion, and set forth in the Agreement, including, in the Committee's discretion, and subject to such terms, conditions and limitations as the Committee may prescribe, payment in accordance with a "cashless exercise" program (through broker accommodation) established by the Committee and/or in Stock owned by the Optionee or by the Optionee and his or her spouse jointly. (e) No Optionee or other person shall become the beneficial owner of any shares of Stock subject to an Option, nor have any rights to dividends or other rights of a shareholder with respect to any such shares until he or she has exercised his or her Option in accordance with the provisions of the Plan and the applicable Agreement. (f) An Option may be exercised only if at all times during the period beginning with the date of the granting of the Option and ending on the date of such exercise, the Optionee was an employee, director or consultant of the Company or an Affiliate, as applicable. Notwithstanding the preceding sentence, the Committee may determine in its discretion that an Option may be exercised prior to expiration of such Option following termination of such continuous employment, directorship or consultancy, whether or not exercisable at the time of such termination, to the extent provided in the applicable Agreement. (g) Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of outstanding Options (up to the extent not theretofore exercised) and authorize the granting of new Options in substitution therefor (to the extent not theretofore exercised). (h) (A) Each Agreement relating to an Option shall state whether such Option will or will not be treated as an ISO. No ISO shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. No ISO shall be granted to any individual otherwise eligible to participate in the Plan who is not an employee of the -7- Company or a Subsidiary on the date of granting of such Option. Any ISO granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to qualify such Option as an "incentive stock option" under Section 422 of the Code. Any ISO granted under the Plan may be modified by the Committee to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. (B) Notwithstanding any intent to grant ISOs, an Option granted under the Plan will not be considered an ISO to the extent that it, together with any other "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to subsection (d) of such Section) under the Plan and any other "incentive stock option" plans of the Company, any Subsidiary and any "parent corporation" of the Company within the meaning of Section 424(e) of the Code, are exercisable for the first time by any Optionee during any calendar year with respect to Stock having an aggregate Fair Market Value in excess of $100,000 (or such other limit as may be required by the Code) as of the time the Option with respect to such Stock is granted. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. (C) No ISO shall be granted to an individual otherwise eligible to participate in the Plan who owns (within the meaning of Section 424(d) of the Code), at the time the Option is granted, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or a Subsidiary or any "parent corporation" of the Company within the meaning of Section 424(e) of the Code. This restriction does not apply if at the time such ISO is granted the option exercise price per share of Stock subject to the Option is at least 110% of the Fair Market Value of a share of such Stock on the date such ISO is granted, and the ISO by its terms is not exercisable after the expiration of five years from such date of grant. (i) The Committee may determine and reflect in the Agreement applicable to any Option the nature and extent of any restrictions to be imposed on the shares of Stock which may be purchased thereunder, including, but not limited to, restrictions on the transferability of such shares acquired through the exercise of such Option for such period as the Committee may determine and, further, that in the event an Optionee's employment by the Company or an Affiliate terminates or any conditions prescribed by the Committee and set forth in such Agreement fail to be satisfied during the period in which such shares are nontransferable, the Optionee shall be required to sell such shares back to the Company at such prices as the Committee may specify in such Agreement. Without limiting the foregoing, an Option and any shares of Stock received upon the exercise of an Option shall be subject to such other transfer and/or ownership restrictions and/or legending requirements as the Committee may establish in its discretion and which are specified in the Agreement and may be referred to on the certificates evidencing such shares of Stock. The Committee may require an Optionee to give prompt Notice to the Company concerning any disposition of shares of Stock received upon the exercise of an ISO within: (i) two (2) years from the date of granting such ISO to such Optionee or (ii) one (1) year from the transfer of such shares of Stock to such Optionee or (iii) such other period as the Committee may from time to time determine. The Committee may direct that an Optionee -8- with respect to an ISO undertake in the applicable Agreement to give such Notice described in the preceding sentence, at such time and containing such information as the Committee may prescribe, and/or that the certificates evidencing shares of Stock acquired by exercise of an ISO refer to such requirement to give such Notice. (j) In the event that a transaction described in Section 424(a) of the Code involving the Company or a Subsidiary is consummated, such as the acquisition of property or stock from an unrelated corporation, individuals who become eligible to participate in the Plan in connection with such transaction, as determined by the Committee, may be granted Options in substitution for options granted by another corporation that is a party to such transaction. If such substitute Options are granted, the Committee, in its discretion and consistent with Section 424(a) of the Code, if applicable, and the terms of the Plan, though notwithstanding paragraph (a) of this Section 6, shall determine the option exercise price and other terms and conditions of such substitute Options. (k) An Option may include a right entitling the Optionee to receive credits for additional shares of Preferred Stock based on the amount of cash dividends that would be paid or accrued on the shares of Preferred Stock (including shares previously so credited) subject to the Optionee's outstanding but unexercised Option if such shares were held by such Optionee. Such right shall be distributed and settled in shares of Preferred Stock upon exercise of the related Option and shall expire under the same conditions as such Option. The terms and conditions of any such rights shall be specified by the Committee and stated in the Agreement. 7. Transfer, Leave of Absence. A transfer of an employee from the Company to an Affiliate (or, for purposes of any ISO granted under the Plan, a Subsidiary), or vice versa, or from one Affiliate to another (or in the case of an ISO, from one Subsidiary to another), and a leave of absence, duly authorized in writing by the Company or a Subsidiary or Affiliate, shall not be deemed a termination of employment of the employee for purposes of the Plan or with respect to any Option (in the case of ISOs, to the extent permitted by the Code). 8. Rights of Employees and Other Persons. (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable Agreement. (b) Nothing contained in the Plan or in any Agreement shall be deemed to (i) give any employee or director the right to be retained in the service of the Company or any Affiliate nor restrict in any way the right of the Company or any Affiliate to terminate any employee's employment or any director's directorship at any time with or without cause or (ii) confer on any consultant any right of continued relationship with the Company or any Affiliate, or alter any relationship between them, including any right of the Company or an Affiliate to terminate its relationship with such consultant. (c) The adoption of the Plan shall not be deemed to give any employee of the Company or any Affiliate or any other person any right to be selected to participate in the Plan or to be granted an Option. -9- (d) Nothing contained in the Plan or in any Agreement shall be deemed to give any employee the right to receive any bonus, whether payable in cash or in Stock, or in any combination thereof, from the Company or any Affiliate, nor be construed as limiting in any way the right of the Company or any Affiliate to determine, in its sole discretion, whether or not it shall pay any employee bonuses, and, if so paid, the amount thereof and the manner of such payment. 9. Tax Withholding Obligations. (a) The Company and/or any Affiliate are authorized to take whatever actions are necessary and proper to satisfy all obligations of Optionees (including, for purposes of this Section 9, any other person entitled to exercise an Option pursuant to the Plan or an Agreement) for the payment of all Federal, state, local and foreign taxes in connection with any Options (including, but not limited to, actions pursuant to the following paragraph (b) of this Section 9). (b) Each Optionee shall (and in no event shall Stock be delivered to such Optionee with respect to an Option until), no later than the date as of which the value of the Option first becomes includible in the gross income of the Optionee for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, regarding payment to the Company of, any taxes of any kind required by law to be withheld with respect to the Stock or other property subject to such Option, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Optionee. Notwithstanding the above, the Committee may, in its discretion and pursuant to procedures approved by the Committee, permit the Optionee to (i) elect withholding by the Company of Stock otherwise deliverable to such Optionee pursuant to his or her Option (provided, however, that the amount of any Stock so withheld shall not exceed the amount necessary to satisfy the Company's or any Affiliate's required Federal, state, local and foreign withholding obligations using the minimum statutory withholding rates for Federal, state and/or local tax purposes, including payroll taxes, that are applicable to supplemental taxable income) and/or (ii) tender to the Company Stock owned by such Optionee (or by such Optionee and his or her spouse jointly), and purchased or held for the requisite period of time as necessary to avoid a charge to the Company's or any Affiliate's earnings for financial reporting purposes, in full or partial satisfaction of such tax obligations, based, in each case, on the Fair Market Value of the Stock on the payment date as determined by the Committee. 10. Changes in Capital. (a) The existence of the Plan and any Options granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company or an Affiliate, any issue of debt, preferred or prior preference stock ahead of or affecting Stock, the authorization or issuance of additional shares of Stock, the dissolution or liquidation of the Company or its Affiliates, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding. (b) (i) Upon changes in the outstanding Stock by reason of a stock dividend, stock split, reverse stock split, subdivision, recapitalization, reclassification, merger, consolidation (whether or not the Company is a surviving corporation), combination or exchange -10- of shares of Stock, separation, or reorganization, or in the event of an extraordinary dividend, "spin-off," liquidation, other substantial distribution of assets of the Company or acquisition of property or stock or other change in capital of the Company, or the issuance by the Company of shares of its capital stock without receipt of full consideration therefor, or rights or securities exercisable, convertible or exchangeable for shares of such capital stock, or any similar change affecting the Company's capital structure, the aggregate number, class and kind of shares of stock available under the Plan as to which Options may be granted and the number, class and kind of shares under each outstanding Option and the exercise price per share applicable to any such Options shall be appropriately adjusted by the Committee in its discretion to preserve the benefits or potential benefits intended to be made available under the Plan or with respect to any outstanding Options or otherwise necessary to reflect any such change. (ii) Without limiting the generality of Section 10(b)(i), in its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Agreement applicable to any Option or by resolution adopted prior to the occurrence of a "spin-off," reorganization, partial liquidation, or other distribution of assets of the Company or any Subsidiary, that any outstanding Option shall be accelerated as described in Section 10(c)(1) or adjusted or converted as described in Section 10(c)(2) or (3) with respect to stock or other securities of any entity that is a party, direct or indirect, to such transaction. (iii) Fractional shares of Stock resulting from any adjustment in Options pursuant to this Section 10(b) shall be aggregated until, and eliminated at, the time of exercise of the affected Options. Notice of any adjustment shall be given by the Committee to each Optionee whose Option has been adjusted and such adjustment (whether or not such Notice is given) shall be effective and binding for all purposes of the Plan. (c) In the event of (i) a stock sale, merger, consolidation, combination, reorganization or other transaction resulting in less than fifty percent (50%) of the combined voting power of the surviving or resulting entity being owned by the shareholders of the Company immediately prior to such transaction, or (ii) the liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets or business of the Company (other than, in the case of either clause (i) or (ii) above, in connection with any employee benefit plan of the Company or an Affiliate): (1) In its discretion and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Agreement applicable to any Option or by a resolution adopted prior to the occurrence of the Change in Control, that any outstanding Option shall be accelerated and become immediately exercisable as to all or a portion of the shares of Stock covered thereby, notwithstanding anything to the contrary in the Plan or the Agreement. (2) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Agreement applicable to any Option or by resolution adopted prior to the occurrence of the Change in Control, that any outstanding Option shall be adjusted by substituting for each share of Stock -11- subject to such Option immediately prior to the transaction resulting in the Change in Control the consideration (whether stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or subsidiary thereof, or that may be issuable by another corporation that is a party to the transaction resulting in the Change in Control, or other property) received in such transaction by holders of such Stock for each share of such Stock held on the closing or effective date of such transaction, in which event, the aggregate exercise price of the Option shall remain the same; provided, however, that if such consideration received in the transaction is not solely stock of a successor, surviving or other corporation, the Committee may provide for the consideration to be received upon exercise of the Option, for each share of Stock subject to the Option, to be solely stock of the successor, surviving or other corporation, as applicable, equal in fair market value, as determined by the Committee, to the per share consideration received by holders of such Stock in the Change in Control transaction. (3) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Agreement applicable to any Option or by resolution adopted prior to the occurrence of the Change in Control, that any outstanding Option shall be converted into a right to receive cash on or following the closing date or expiration date of the transaction resulting in the Change in Control in an amount equal to the highest value of the consideration to be received in connection with such transaction for one share of the Stock subject to such Option, or, if higher, the highest Fair Market Value of such Stock during the thirty (30) consecutive business days immediately prior to the closing date or expiration date of such transaction, less the per share exercise price of such Option, multiplied by the number of shares of Stock subject to such Option, or a portion thereof. (4) The Committee may, in its discretion, provide that an Option cannot be exercised after such a Change in Control, to the extent that such Option is or becomes fully exercisable on or before such Change in Control or is subject to any acceleration, adjustment or conversion in accordance with the foregoing paragraphs (1), (2) or (3) of this subsection 10(c). No Optionee shall have any right to prevent the consummation of any of the foregoing acts affecting the number of shares of Stock available to such Optionee. Any actions or determinations of the Committee under this subsection 10(c) need not be uniform as to all outstanding Options, nor treat all Optionees identically. Notwithstanding the foregoing adjustments, in no event may any Option be exercised after ten (10) years from the date it was originally granted, and any changes to ISOs pursuant to this Section 10 shall, unless the Committee determines otherwise, only be effective to the extent such adjustments or changes do not cause a "modification" (within the meaning of Section 424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such ISOs. 11. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares of Stock or the payment of cash upon exercise or payment -12- of any Option. Proceeds from the sale of shares of Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. (b) Except as otherwise provided in this paragraph (b) of Section 11 or by the Committee, an Option by its terms shall be personal and may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise than by will or by the laws of descent and distribution and shall be exercisable during the lifetime of an Optionee only by him or her. An Agreement may permit the exercise or payment of an Optionee's Option (or any portion thereof) after his or her death by or to the beneficiary most recently named by such Optionee in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, as designated by the Optionee by will or by the laws of descent and distribution. In the event any Option is exercised by the executors, administrators, heirs or distributees of the estate of a deceased Optionee, or such an Optionee's beneficiary, or the transferee of an Option, in any such case pursuant to the terms and conditions of the Plan and the applicable Agreement and in accordance with such terms and conditions as may be specified from time to time by the Committee, the Company shall be under no obligation to issue Stock thereunder unless and until the Committee is satisfied that the person or persons exercising such Option is the duly appointed legal representative of the deceased Optionee's estate or the proper legatee or distributee thereof or the named beneficiary of such Optionee, or the valid transferee of such Option, as applicable. (c) (i) If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of shares of Stock upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares of Stock hereunder, no Option may be granted, exercised or paid in whole or in part unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee. (ii) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Stock pursuant to an Option is or may be in the circumstances unlawful or result in the imposition of excise taxes on the Company or any Affiliate under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act, or otherwise with respect to shares of Stock or Options and the right to exercise any Option shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company or any Affiliate. (iii) Upon termination of any period of suspension under this Section 11(c), any Option affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to the shares which would otherwise have become available during the period of such suspension, but no suspension shall extend the term of any Option. (d) The Committee may require each person receiving Stock in connection with any Option under the Plan to represent and agree with the Company in writing that such -13- person is acquiring the shares of Stock for investment without a view to the distribution thereof. The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the shares of Stock purchasable or otherwise receivable by any person under any Option as it deems appropriate. Any such restrictions shall be set forth in the applicable Agreement, and the certificates evidencing such shares may include any legend that the Committee deems appropriate to reflect any such restrictions. (e) By accepting any benefit under the Plan, each Optionee and each person claiming under or through such Optionee shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Company or the Board, in any case in accordance with the terms and conditions of the Plan. (f) In the discretion of the Committee, an Optionee may elect irrevocably (at a time and in a manner determined by the Committee) prior to exercising an Option that delivery of shares of Stock upon such exercise shall be deferred until a future date and/or the occurrence of a future event or events, specified in such election. Upon the exercise of any such Option and until the delivery of any deferred shares under this paragraph (f) of Section 11, the number of shares otherwise issuable to the Optionee shall be credited to a memorandum account in the records of the Company or its designee and any dividends or other distributions payable on such shares shall be deemed reinvested in additional shares of Stock, in a manner determined by the Committee, until all shares of Stock credited to such Optionee's memorandum account shall become issuable pursuant to the Optionee's election. (g) The Committee may, in its discretion, extend one or more loans to Optionees who are directors, key employees or consultants of the Company or an Affiliate in connection with the exercise or receipt of an Option granted to any such individual. The terms and conditions of any such loan shall be established by the Committee. (h) Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or any Affiliate, or prevent or limit the right of the Company or any Affiliate to establish any other forms of incentives or compensation for their directors, employees or consultants or grant or assume options or other rights otherwise than under the Plan. (i) The Plan shall be governed by and construed in accordance with the laws of the State of New York, without regard to such state's conflict of law provisions, and, in any event, except as superseded by applicable Federal law. (j) The words "Section," "subsection" and "paragraph" herein shall refer to provisions of the Plan, unless expressly indicated otherwise. Wherever any words are used in the Plan or any Agreement in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. -14- (k) The Company shall bear all costs and expenses incurred in administering the Plan, including expenses of issuing Stock pursuant to any Options granted hereunder. 12. Limits of Liability. (a) Any liability of the Company or an Affiliate to any Optionee with respect to any Option shall be based solely upon contractual obligations created by the Plan and the Agreement. (b) None of the Company, any Affiliate, any member of the Committee or the Board or any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute. 13. Amendments and Termination. The Board may, at any time and with or without prior notice, amend, alter, suspend or terminate the Plan, retroactively or otherwise; provided, however, unless otherwise required by law or specifically provided herein, no such amendment, alteration, suspension or termination shall be made which would impair the previously accrued rights of any holder of an Option theretofore granted without his or her written consent, or which, without first obtaining approval of the stockholders of the Company (where such approval is necessary to satisfy (i) with regard to ISOs, any requirements under the Code relating to ISOs or (ii) any applicable law, regulation or rule), would: (a) except as is provided in Section 10, increase the maximum number of shares of Stock which may be sold or awarded under the Plan; (b) except as is provided in Section 10, decrease the minimum option exercise price requirements of Section 6(a); (c) change the class of persons eligible to receive Options under the Plan; or (d) extend the duration of the Plan or the period during which Options may be exercised under Section 6(b). The Committee may amend the terms of any Option theretofore granted, including any Agreement, retroactively or prospectively, but no such amendment shall materially impair the previously accrued rights of any Optionee without his or her written consent. 14. Duration. The Plan shall become effective as of the date the Plan is adopted by the Board, provided that the Plan is approved by the holders of a majority of the Company's outstanding Stock which is present and voted at a meeting, or by written consent in lieu of a meeting, which approval must occur within the period ending twelve (12) months after the date the Plan is adopted by the Board. The Plan shall terminate upon the earliest to occur of: (a) the effective date of a resolution adopted by the Board terminating the Plan; -15- (b) the date all shares of Stock subject to the Plan are delivered pursuant to the Plan's provisions; or (c) ten (10) years from the date the Plan is adopted by the Board. No Option may be granted under the Plan after the earliest to occur of the events or dates described in the foregoing paragraphs (a) through (c) of this Section 14; however, Options theretofore granted may extend beyond such date. No such termination of the Plan shall materially impair the previously accrued rights of any Optionee hereunder without his or her consent, and all Options previously granted hereunder shall continue in force and in operation after the termination of the Plan, except as they may be otherwise terminated in accordance with the terms of the Plan or the Agreement. -16- EX-12.1 18 y61690exv12w1.txt STATEMENT OF COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12.1 ASSOCIATED MATERIALS INCORPORATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT RATIOS)
Twelve Months Ended December 31, Three Months Ended March 31, ------------------------------------------------------- ---------------------------- 1997 1998 1999 2000 2001 2001 (a) 2002 (a) ------- ------- ------- ------- ------- -------- -------- Income (loss) before income tax expense $22,613 $24,438 $33,528 $40,110 $41,320 (4,902) (2,470) Fixed Charges: Interest expense $ 9,795 $ 7,978 $ 7,108 $ 7,177 $ 7,172 1,754 1,754 Portion of rents representative of interest factor 3,904 4,016 4,337 4,842 5,893 1,353 1,586 Amortization of debt 398 295 275 274 274 68 68 ------- ------- ------- ------- ------- ------- ------- Total fixed charges $14,097 $12,289 $11,720 $12,293 $13,339 $ 3,175 $ 3,408 ======= ======= ======= ======= ======= ======= ======= Earnings/(losses): $36,710 $36,727 $45,248 $52,403 $54,659 $(1,727) $ 938 Ratio of earnings to fixed charges 2.6 3.0 3.9 4.3 4.1 -- -- ======= ======= ======= ======= ======= ======= =======
(a) The deficiency in the ratio of earnings to fixed charges is approximately $4.9 million and $2.5 million for the three months ended March 31, 2001 and 2002, respectively. EX-21.1 19 y61690exv21w1.txt SUBSIDIARIES EXHIBIT 21.1 ASSOCIATED MATERIALS INCORPORATED SUBSIDIARIES OF THE REGISTRANT Name of Subsidiary State of Jurisdiction - ------------------ --------------------- Alside, Inc. Delaware EX-23.1 20 y61690exv23w1.txt INDEPENDENT AUDITORS CONSENT Exhibit 23.1 INDEPENDENT AUDITOR'S CONSENT We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 8, 2002, in the Registration Statement (Form S-4) and related Prospectus of Associated Materials Incorporated for the registration of $165,000,000 of 9 3/4% Senior Subordinated Notes due 2012. /s/ Ernst & Young LLP Dallas, Texas June 28, 2002 EX-99.1 21 y61690exv99w1.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 This Letter of Transmittal is being used with respect to the outstanding 9 3/4% Senior Subordinated Notes due 2012 (the "Outstanding Notes") of Associated Materials Incorporated, a Delaware corporation (the "Company"). ASSOCIATED MATERIALS INCORPORATED LETTER OF TRANSMITTAL OFFER TO EXCHANGE 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR ALL ISSUED AND OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 PURSUANT TO THE PROSPECTUS DATED , 2002 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. If you desire to tender your Outstanding Notes in the Exchange Offer (as defined below), this Letter of Transmittal (the "Letter of Transmittal") should be completed, signed and submitted to the Exchange Agent at the following address or by facsimile: EXCHANGE AGENT: WILMINGTON TRUST COMPANY By Facsimile: By Registered or Certified Mail: By Hand/Overnight Delivery: (Eligible Institutions Only) Wilmington Trust Company Wilmington Trust Company (302) 636-4145 DC-1615 Reorganization Services Corporate Trust Confirm by Telephone: PO Box 8861 Reorganization Services (302) 636-6472 Wilmington, DE 19899-8861 Rodney Square North 1100 North Market Street Wilmington, DE 19890-1615
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE IT IS COMPLETED AND RETURNED TO THE EXCHANGE AGENT. For any questions or additional information regarding this Letter of Transmittal, you may contact the Exchange Agent. The undersigned acknowledges that he or she has received and reviewed the Company's Prospectus, dated , 2002 (the "Prospectus") and this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange up to $165,000,000 aggregate principal amount of the Company's 9 3/4% Senior Subordinated Notes due 2012 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Company's Outstanding Notes. For each $1,000 principal amount of Outstanding Notes accepted for exchange, the registered holder of such Outstanding Notes (collectively with all other registered holders of Outstanding Notes, the "Holders," and individually, a "Holder") will receive $1,000 principal amount of Exchange Notes and integral multiples of $1,000. Registered holders of Exchange Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing at the rate of 9 3/4% per year, payable semiannually in arrears on April 15 and October 15, commencing on October 15, 2002. Interest on these Exchange Notes will accrue from the last interest payment date on which interest was paid on the Outstanding Notes. Outstanding Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Accordingly, Holders whose Outstanding Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Outstanding Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter of Transmittal is to be completed by a Holder of Outstanding Notes either if certificates are to be forwarded herewith or if a tender of certificates for Outstanding Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" section of the Prospectus. Holders of Outstanding Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1 herein. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned with respect to the tendered Outstanding Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the tendered Outstanding Notes to the Company or cause ownership of the tendered Outstanding Notes to be transferred to, or upon the order of, the Company, on the books of the registrar for the Outstanding Notes and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon acceptance by the Company of the tendered Outstanding Notes pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the tendered Outstanding Notes, all in accordance with the terms of the Exchange Offer. The undersigned hereby tenders the Outstanding Notes described in the box entitled "Description of Outstanding Notes Tendered" herein, has completed the appropriate boxes below and has signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. 2 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Outstanding Notes indicated below. Subject to, and effective upon, the acceptance for exchange of the Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Outstanding Notes as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Outstanding Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that (i) any Exchange Notes acquired in exchange for Outstanding Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, (ii) neither the Holder nor any other person acting on the Holder's behalf is engaging in or intends to engage in a distribution of such Exchange Notes, (iii) neither the Holder of such Outstanding Notes nor any other person acting on the Holder's behalf has an arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes, (iv) neither the Holder of such Outstanding Notes nor any other person acting on the Holder's behalf is an "affiliate" of the Company or any of its subsidiaries, as that term is defined in Rule 405 of the Securities Act and (v) if the Holder or any other person acting on behalf the Holder is a broker-dealer, the Holder will receive Exchange Notes for its own account in exchange for its Outstanding Notes that were acquired as a result of market-making activities or other trading activities, and the Holder acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "Commission"), as set forth in no-action letters issued to third parties, that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Outstanding Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holder has no arrangement with any person to participate in a distribution of such Exchange Notes. However, the Commission has not considered the Exchange Offer in the context of a no-action letter, and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes and has no arrangement or understanding to participate in a distribution of Exchange Notes. If any Holder is an affiliate of the Company, is engaged in or intends to engage in, or has any arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such Holder could not rely on the applicable interpretations of the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it may be a statutory underwriter and it acknowledges that it must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. However, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Outstanding Notes tendered hereby. The undersigned understands that tenders of Outstanding Notes pursuant to the procedures described under the caption "The Exchange Offer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal Rights." All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the 3 death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" herein, please issue the Exchange Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Outstanding Notes, please credit the account indicated below maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" herein, please send the Exchange Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) to the undersigned at the address shown in the box herein entitled "Description of Outstanding Notes Delivered." 4 THE UNDERSIGNED, BY COMPLETING THE BOX BELOW ENTITLED "DESCRIPTION OF OUTSTANDING NOTES DELIVERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED OUTSTANDING NOTES AS SET FORTH IN SUCH BOX. List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Outstanding Notes should be listed on a separate signed schedule affixed hereto.
- ------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OUTSTANDING NOTES TENDERED - ------------------------------------------------------------------------------------------------------------------------------ AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) AMOUNT PRINCIPAL AMOUNT EXACTLY AS NAME(S) APPEAR(S) ON NOTE(S) CERTIFICATE(S) CERTIFICATE REPRESENTED BY TENDERED (IF LESS (PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) THAN ALL)** - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Totals: - ------------------------------------------------------------------------------------------------------------------------------
* Need not be completed if Outstanding Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a Holder will be deemed to have tendered ALL of the Outstanding Notes represented by the listed certificates. See Instruction 3. Outstanding Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple of $1,000. See Instruction 1. - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution DTC Account Number Transaction Code Number [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holder Window Ticket Number (if any) Date of Execution of Notice of Guaranteed Delivery Name of Institution Which Guaranteed Delivery If Delivered by Book-Entry Transfer, Complete the Following: DTC Account Number Transaction Code Number [ ] CHECK HERE IF OUTSTANDING NOTES ARE TENDERED BY BOOK-ENTRY AND UN- EXCHANGED OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO (UNLESS OTHERWISE SPECIFIED, 10 ADDITIONAL COPIES WILL BE FURNISHED.) Name Address 5 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTION 5) To be completed ONLY if certificates for Outstanding Notes not exchanged and/or Exchange Notes are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal below or if Outstanding Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue Exchange Notes and/or Outstanding Notes to: Name: - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (ZIP CODE) - -------------------------------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) [ ] Credit unexchanged Outstanding Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. - -------------------------------------------------------------------------------- (BOOK-ENTRY TRANSFER FACILITY ACCOUNT) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 5) To be completed ONLY if certificates for Outstanding Notes not exchanged and/or Exchange Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal below or to such person or persons at an address other than shown in the box entitled "Description of Outstanding Notes Delivered" on this Letter of Transmittal above. Mail Exchange Notes and/or Outstanding Notes to: Name: - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (ZIP CODE) - -------------------------------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE 6 HOLDERS PLEASE SIGN HERE (Please Complete the Accompanying Substitute Form W-9) x - -------------------------------------------------------------------------------- x - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDERS OR AUTHORIZED SIGNATORY) Dated: ____________________ , 2002 If a Holder is tendering any Outstanding Notes, this Letter of Transmittal must be signed by the Holder(s) as the name(s) appear(s) on the certificate(s) for the Outstanding Notes or by any person(s) authorized to become Holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 4. Name: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- SIGNATURE GUARANTEE (If required by Instruction 4) Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: - -------------------------------------------------------------------------------- Dated: ____________________ , 2002 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE COMPANY'S OFFER TO EXCHANGE THE 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ALL OF THE COMPANY'S ISSUED AND OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012. 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by Holders of Outstanding Notes either if certificates representing the Outstanding Notes are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering" section of the Prospectus. Certificates for all physically tendered Outstanding Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile hereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Outstanding Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple of $1,000. Holders whose certificates for Outstanding Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Outstanding Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) on or prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, overnight carrier, mail or hand delivery), setting forth the name and address of the Holder of Outstanding Notes and the amount of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Outstanding Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and any other documents required by this Letter of Transmittal, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter of Transmittal, the Outstanding Notes and all other required documents is at the election and risk of the tendering Holders, but delivery will be deemed made only upon actual receipt or confirmation by the Exchange Agent. Instead of delivery by mail, the Company recommends that you use an overnight or hand delivery service. If Outstanding Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured with return receipt requested, and made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a Holder in whose name appears on a DTC security position listing as a Holder of Outstanding Notes, or the legal representative or attorney-in-fact of such registered Holder, may execute and deliver this Letter of Transmittal. Any beneficial owner of tendered Outstanding Notes who is not the registered holder must arrange promptly with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and delivery to the registered holder of the Instructions of Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner form accompanying this Letter of Transmittal. 8 3. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). Tenders of Outstanding Notes will be accepted only in principal amounts of $1,000 or integral multiples of $1,000. If less than all of the Outstanding Notes evidenced by a submitted certificate are to be tendered, the tendering Holder(s) should fill in the aggregate principal amount of Outstanding Notes to be tendered in the box above entitled "Description of Outstanding Notes Delivered -- Principal Amount Tendered." A reissued certificate representing the balance of non-tendered Outstanding Notes will be sent to such tendering Holder, unless otherwise provided in the appropriate box of this Letter of Transmittal, promptly after the Expiration Date. See Instruction 5. All of the Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 4. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS, GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the Holder of the Outstanding Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Outstanding Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. If any tendered Outstanding Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates. When this Letter of Transmittal is signed by the Holder or Holders of the Outstanding Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If however, the Exchange Notes are to be issued, or any untendered Outstanding Notes are to be reissued, to a person other than the Holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificates(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the Holder or Holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the Holder or Holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or other persons acting in a fiduciary or representative capacity, such persons should indicate their capacity when signing, and, unless waived by the Company, submit proper evidence satisfactory to the Company demonstrating their authority to act on your behalf. ENDORSEMENTS ON CERTIFICATES FOR OUTSTANDING NOTES OR SIGNATURES ON BOND POWERS REQUIRED BY THIS INSTRUCTION 4 MUST BE GUARANTEED BY A FINANCIAL INSTITUTION (INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE HOUSES) THAT IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM, THE NEW YORK STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM, THE STOCK EXCHANGE MEDALLION PROGRAM OR AN "ELIGIBLE GUARANTOR INSTITUTION" WITHIN THE MEANING OF RULE 17Ad-15 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (EACH, AN "ELIGIBLE INSTITUTION"). SIGNATURES ON THIS LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION, PROVIDED THE OUTSTANDING NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OUTSTANDING NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OUTSTANDING NOTES) WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OF TRANSMITTAL, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. 9 5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders of Outstanding Notes should indicate in the applicable box the name and address to which Exchange Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Outstanding Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that Outstanding Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such Holder may designate hereon. If no such instructions are given, such Outstanding Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal. 6. TRANSFER TAXES. Except as set forth in this Instruction 6, the Company will pay all transfer taxes, if any, applicable to the transfer of Outstanding Notes to it or its order pursuant to the Exchange Offer. If, however, Exchange Notes and/or substitute Outstanding Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the Holder of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Outstanding Notes to the Company or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed to such tendering Holder and the Exchange Agent will retain possession of an amount of Exchange Notes with a face amount equal to the amount of such transfer taxes due by such tendering Holder pending receipt by the Exchange Agent of the amount of such taxes. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Notes specified in this Letter of Transmittal. 7. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend or waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS. No alternative, conditional or contingent tenders will be accepted. All tendering Holders of Outstanding Notes, by execution of this Letter of Transmittal, or facsimile thereof, shall waive any right to receive notice of the acceptance of their Outstanding Notes for exchange. Although the Company intends to notify Holders of defects or irregularities with respect to tenders of Outstanding Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give any notification. 9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any Holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF OUTSTANDING NOTES. Subject to the terms and conditions of the Exchange Offer, the acceptance for exchange of Outstanding Notes validly tendered and not properly withdrawn and the delivery of Exchange Notes and the payment of any accrued and unpaid interest on the Outstanding Notes will be made as promptly as practicable after the Expiration Date. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Outstanding Notes and not properly withdrawn Outstanding Notes when, as and if the Company has given written or oral notice (immediately followed in writing) thereof to the Exchange Agent. If any tendered Outstanding Notes are not 10 accepted for exchange pursuant to the Exchange Offer for any reason, then such unexchanged Outstanding Notes will be returned, at the Company's expense, to the undersigned at the address shown in the Box entitled "Description of Outstanding Notes Delivered" or at a different address as may be indicated herein under "Special Delivery Instructions" as promptly as practicable after the Expiration Date or the termination of the applicable Exchange Offer therefor. 11. WITHDRAWAL OF TENDERS. Tenders of Outstanding Notes may be withdrawn at any time before 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, an electronic transmission through DTC's Automated Tender Offer Program, or, for non-DTC participants, a written notice of withdrawal must be received by the Exchange Agent at one of the addresses set forth above before 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must specify the name of the person having tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes to be withdrawn (including the certificate number or numbers, if any, and the principal amount of such Outstanding Notes), be signed by the Holder in the same manner as the original signature on this Letter of Transmittal by which such Outstanding Notes were tendered or be accompanied by documents of transfer sufficient to have the trustee of such Outstanding Notes register the transfer of such Outstanding Notes into the name of the Holder, and specify the name in which such Outstanding Notes are registered, if different from that of the withdrawing Holder. If certificates for Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the withdrawing Holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Holder is an Eligible Institution in which case such guarantee will not be required. If Outstanding Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Outstanding Notes and otherwise comply with the procedures of such facility. The Company will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices, and our determination will be final and binding on all parties. Any Outstanding Notes so withdrawn will not be considered to have been validly tendered for exchange for purposes of the Exchange Offer. The Company will return to the Holder any Outstanding Notes which have been tendered for exchange but which are not exchanged for any reason without cost to such Holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Outstanding Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures set forth in "The Exchange Offer -- Procedures for Tendering" section of the Prospectus at any time on or prior to the Expiration Date. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, this Letter of Transmittal and other related documents may be directed to the Exchange Agent at the address indicated above. 11 IMPORTANT TAX INFORMATION Under current United States federal income tax law, a Holder of Outstanding Notes whose tendered Notes are accepted for exchange may be subject to backup withholding tax unless the Holder provides the Company (as payor), through the Exchange Agent, with Substitute Form W-9, as described below in "Purpose of Substitute Form W-9" or otherwise establishes a basis for exemption. Accordingly, each prospective Holder of Exchange Notes to be issued pursuant to Special Issuance Instructions should complete the attached Substitute Form W-9. The Substitute Form W-9 need not be completed if the box entitled Special Issuance Instructions has not been completed. Certain Holders of Exchange Notes (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding tax and information reporting requirements. Exempt prospective Holders of Exchange Notes should indicate their exempt status on Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Company, through the Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the Holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding tax applies, the Company is required to withhold 30% of any payment made to the Holder of Exchange Notes or other payee. Backup withholding tax is not an additional United States federal income tax. Rather, the United States federal income tax liability of persons subject to backup withholding tax will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding tax on any Exchange Notes delivered pursuant to the Exchange Offer and any payments received in respect of the Exchange Notes, each prospective Holder of Exchange Notes to be issued pursuant to Special Issuance Instructions should provide the Company, through the Exchange Agent, with either: (i) (a) such prospective Holder's correct TIN on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such prospective Holder has applied for and is awaiting a TIN); (b) certification that (A) such prospective Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding tax as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified such prospective Holder that he or she is no longer subject to backup withholding tax and (c) certification that the Holder is a United States person; or (ii) an adequate basis for exemption from backup withholding tax. If such Holder is an individual, the TIN is such Holder's social security number. If the Exchange Agent is not provided with the correct TIN, the Holder of the Exchange Notes may be subject to certain penalties imposed by the Internal Revenue Service unless such failure is due to reasonable cause and not to willful neglect. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The prospective Holder of Exchange Notes to be issued pursuant to Special Issuance Instructions is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the prospective record owner of the Exchange Notes. If the Exchange Notes will be held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance regarding which number to report. 12 TO BE COMPLETED BY CERTAIN TENDERING HOLDERS (SEE IMPORTANT TAX INFORMATION) - -------------------------------------------------------------------------------- PAYOR'S NAME: WILMINGTON TRUST COMPANY - -------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT TIN: ---------------------------------- FORM W-9 OR INDICATE THAT YOU APPLIED FOR A TIN AND CERTIFY Social Security Number BY SIGNING AND DATING BELOW. --------------------------------- DEPARTMENT OF THE Employer Identification Number TREASURY INTERNAL REVENUE SERVICE TIN Applied for [ ] ------------------------------------------------------------------------------------------------ PART 2 -- CERTIFICATION -- UNDER PENALTY OF PERJURY, I CERTIFY THAT: PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting NUMBER ("TIN") AND for a number to be issued to me); CERTIFICATION (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and (3) I am a United States person (including a United States resident alien). ------------------------------------------------------------------------------------------------ Signature ----------------------------------------------------- Date----------------, 2002 - -------------------------------------------------------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are currently subject to backup withholding tax because you have failed to report all interest and dividends on your tax return. - --------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF EXCHANGE NOTES TO BE ISSUED PURSUANT TO THE SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING TAX OF 30% OF THE EXCHANGE NOTES DELIVERED TO YOU PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU IN RESPECT OF THE EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 1 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 30% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature: ______________________________________ Date: ________________, 2002 13 EX-99.2 22 y61690exv99w2.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 ASSOCIATED MATERIALS INCORPORATED NOTICE OF GUARANTEED DELIVERY OFFER TO EXCHANGE 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR ALL ISSUED AND OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 PURSUANT TO THE PROSPECTUS DATED , 2002 THIS NOTICE OF GUARANTEED DELIVERY, OR ONE SUBSTANTIALLY EQUIVALENT TO THIS FORM, MUST BE USED TO ACCEPT THE EXCHANGE OFFER (AS DEFINED BELOW) IF (I) CERTIFICATES FOR THE OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 (THE "OUTSTANDING NOTES") OF ASSOCIATED MATERIALS INCORPORATED, A DELAWARE CORPORATION (THE "COMPANY") ARE NOT IMMEDIATELY AVAILABLE, (II) OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS CANNOT BE DELIVERED TO WILMINGTON TRUST COMPANY (THE "EXCHANGE AGENT") ON OR PRIOR TO THE EXPIRATION DATE OR (III) THE PROCEDURES FOR DELIVERY BY BOOK-ENTRY TRANSFER CANNOT BE COMPLETED ON A TIMELY BASIS. THIS NOTICE OF GUARANTEED DELIVERY MAY BE DELIVERED BY REGISTERED OR CERTIFIED MAIL OR BY HAND OR OVERNIGHT DELIVERY, OR TRANSMITTED BY FACSIMILE TRANSMISSION, TO THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER -- PROCEDURES FOR TENDERING" IN THE PROSPECTUS. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS ASSIGNED TO THEM IN THE PROSPECTUS. EXCHANGE AGENT: WILMINGTON TRUST COMPANY By Facsimile: By Registered or Certified By Hand/Overnight Delivery: (Eligible Institutions Only) Mail: Wilmington Trust Company Wilmington Trust Company (302) 636-4145 DC-1615 Reorganization Corporate Trust Services Reorganization Services Confirm by Telephone: PO Box 8861 Rodney Square North Wilmington, DE 19899-8861 1100 North Market Street (302) 636-6472 Wilmington, DE 19890-1615
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" in the Company's Prospectus dated , 2002 (the "Prospectus") and in Instruction 1 of the related Letter of Transmittal (the "Letter of Transmittal"), this form must be used to accept the Company's offer to exchange (the "Exchange Offer") the Company's 9 3/4% Senior Subordinated Notes due 2012 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for its Outstanding Notes if time will not permit the Letter of Transmittal, certificates representing the Outstanding Notes and other required documents to reach the Exchange Agent, or the procedures for book-entry transfer cannot be completed, on or prior to the Expiration Date. For each $1,000 principal amount of Outstanding Notes accepted for exchange, the registered holder of such Outstanding Notes will receive $1,000 principal amount of Exchange Notes. This form must be delivered by an Eligible Institution by registered or certified mail, or hand delivery or overnight courier, or transmitted via fax to the Exchange Agent as set forth above. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions to the Letter of Transmittal, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tender(s) for exchange to the Company, upon the terms and subject to the conditions set forth in the Prospectus dated , 2002 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal") that together constitute the Company's offer (the "Exchange Offer") receipt of which is hereby acknowledged, the principal amount of the Outstanding Notes specified below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." The undersigned understand(s) that delivery of Exchange Notes by the Exchange Agent for Outstanding Notes tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such Outstanding Notes (or Book-Entry Confirmation of the transfer of such Outstanding Notes into the Exchange Agent's account at DTC) and Letter of Transmittal (or a copy thereof) with respect to such Outstanding Notes properly completed and duly executed with any required signature guarantees and any other documents required by the Letter of Transmittal or a properly transmitted Agent's Message. All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall not be affected by, and shall survive, the death or incapacity of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, executors, administrators, trustees in bankruptcy, personal and legal representatives, successors and assigns of the undersigned. 2 PLEASE SIGN AND COMPLETE Signature(s) of Registered Holder(s) or Authorized Date: ------------------, 2002 Signatory: - --------------------------------------------------- Address: ----------------------------------------- ----------------------------------------- ----------------------------------------- ----------------------------------------- (ZIP CODE) Name(s) of Registered Holder(s): Area Code And Telephone No.: - --------------------------------------------------- --------------------------------------------------- If Outstanding Notes will be delivered by book- entry transfer to DTC, check the box: [ ] Principal Amount of Outstanding Notes Tendered: - --------------------------------------------------- DTC Account No.: ----------------------------- Certificate No.(s) of the Outstanding Notes (if available): - ---------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the tendering holder(s) exactly as their name(s) appear(s) on certificate(s) representing the Outstanding Notes or, if tendered by a participant in DTC, exactly as such participant's name appears on a security listing as the owner of the Outstanding Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): - --------------------------------------------------- Capacity: ---------------------------------------- Address: ----------------------------------------- --------------------------------------------------- - ----------------------------------------- --------------------------------------------------- - ----------------------------------------- --------------------------------------------------- (ZIP CODE) (ZIP CODE) DO NOT SEND CERTIFICATES REPRESENTING OUTSTANDING NOTES WITH THIS FORM. CERTIFICATES REPRESENTING OUTSTANDING NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a recognized member of the Medallion Signature Guarantee Program or any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (each, an "Eligible Institution"), hereby (i) represents that the above- named persons are deemed to own the Outstanding Notes tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act ("Rule 14e-4"), (ii) represents that such tender of the Outstanding Notes complies with Rule 14e-4 and (iii) guarantees that the Outstanding Notes tendered hereby in proper form for transfer or confirmation of the book-entry transfer of such Outstanding Notes to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures," in either case together with one or more properly completed and duly executed Letter(s) of Transmittal (or a copy thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal or a properly transmitted Agent's Message, will be received by the Exchange Agent at its address set forth above within three NYSE trading days (as defined in the Prospectus) after the date of execution hereof. The Eligible Institution that completes this form must communicate the guarantee to the Exchange Agent and must deliver the Letter of Transmittal or Agent's Message, and the Outstanding Notes to the Exchange Agent within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: - -------------------------------------------------------------------------------- Authorized Signature: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (ZIP CODE) Area Code and Telephone Number: - --------------------------------------------------------------------- Date: - ------------------------------, 2002 4 -----END PRIVACY-ENHANCED MESSAGE-----