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Exhibit (b)
July 18, 1997
Nortek, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Ladies and Gentlemen:
We understand that NTK Sub, Inc. ("Merger Sub"), a Delaware
corporation formed and wholly owned by Nortek, Inc. ("Parent"), intends to
acquire all of the outstanding common stock of Ply Gem Industries, Inc., a
Delaware corporation (the "Company"), pursuant to a tender offer and merger
agreement (the "Acquisition Agreement") to be entered into among Parent, Merger
Sub and the Company (such tender offer transaction, the "Acquisition"). After
consummation of the Acquisition, Merger Sub would be merged with and into the
Company (the "Merger"), with the Company being the surviving corporation. (The
Acquisition and the Merger are sometimes referred to as the "Transaction".) We
understand that Parent, Merger Sub and the Company will enter into certain
arrangements in connection with the Acquisition and the Merger as follows:
(i) Parent proposes to issue and sell, if necessary, on the
date on which the Acquisition is consummated (the "Closing Date") and,
if necessary, on the date on which the Merger is consummated (the
"Merger Date") senior bridge notes (the "Bridge Notes") having
substantially the terms (including guarantees) set forth in Exhibit A
hereto (such Exhibit, together with Exhibit B hereto referred to below,
being the "Term Sheet"), such that the aggregate cash proceeds from the
issuance and sale of the Bridge Notes will be approximately
$300,000,000, less fees and expenses payable to the Purchasers (as
defined below);
(ii) Parent or the Company or both would issue and sell as
soon as practicable following the Acquisition, in one or more public
offerings or private placements, debt or equity securities, the
proceeds of which will be used to redeem the Bridge Notes purchased
hereunder. In order to finance the redemption of the Bridge Notes,
Parent, the Company, Merger Sub and their subsidiaries and affiliates
will, prior to the Acquisition and within one year following its
consummation, offer on a first and last refusal basis Xxxxxxxxxxx
Xxxxxxx & Co., Inc., Xxxxxxxxxxx Xxxxxxx Securities, Inc. and their
affiliates (together, "WP&Co.") the opportunity to act as (i) exclusive
agents or sole underwriters for any debt securities to be issued by
Parent, Merger Sub or the Company (excluding any facility for borrowing
commercial loans from one or
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more commercial banks (a "Bank Credit Facility")), (ii) co-manager with
respect to any public offerings of equity securities to be issued by
Parent, Merger Sub or the Company, and (iii) sole or lead agent, or
co-agent of any private placements of equity securities to be issued by
Parent, Merger Sub or the Company. (All debt and equity financings and
any Bank Credit Facilities contemplated by the foregoing are referred
to as "Permanent Financings".) In addition, if by the maturity date of
the Bridge Notes, the Permanent Financing shall not have been issued or
obtained, or shall not have been issued or obtained in an aggregate
amount sufficient to repay the principal of and accrued and unpaid
interest on the Bridge Notes, such unpaid interest will be paid in cash
and such unpaid principal will be satisfied by the issuance to the
holders of the Bridge Notes of debt securities of the Company having
substantially those terms set forth in Exhibit B hereto (the "Rollover
Notes"); and
(iii) (a) Parent would continue to own all of the outstanding
capital stock of Merger Sub; (b) Merger Sub will make a tender offer
for any and all outstanding common stock of the Company; (c) Merger Sub
would own at least 51% of the outstanding capital stock of the Company
after consummation of the Acquisition and (d) as soon as practicable
after consummation of the Acquisition, Merger Sub will merge with and
into the Company, with the Company surviving the Merger.
We understand that cash currently available to Parent
(approximately $200,000,000) ("Available Cash"), together with the net cash
proceeds from the issuance and sale of the Bridge Notes, will provide funds
sufficient to (i) consummate the Acquisition and the Merger, (ii) refinance
concurrently with the Acquisition or the Merger, as the case may be, outstanding
debt of the Company and the Company's accounts receivable securitization program
in an aggregate amount up to approximately $165,000,000, and (iii) pay the fees
and expenses incurred in connection with the consummation of the Transaction
(all of the foregoing, the "Transaction Costs"). We understand that the
Transaction Costs will be approximately $500,000,000 in the aggregate.
We further understand that the Transaction Costs will be
funded as follows:
FIRST, on or immediately prior to the Closing Date, Parent
will contribute the Available Cash to the capital of Merger Sub and such
Available Cash will be utilized on the Closing Date to fund all or a portion of
the purchase price of the Acquisition;
SECOND, on the Closing Date, Parent will (A) issue and sell
such amount of Bridge Notes such that the net cash proceeds thereof will be
sufficient to (i) fund the
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remaining portion, if any, of the purchase price of the Acquisition, (ii)
refinance concurrently with the Acquisition approximately $165,000,000 of the
outstanding debt of the Company and the Company's accounts receivable
securitization program and (iii) pay fees and expenses incurred in connection
with the consummation of the Acquisition and (B) contribute the net cash
proceeds of the Bridge Notes described in clause (A) to the capital of Merger
Sub; and
THIRD, if necessary, on the Merger Date, Parent will (x) issue
and sell such amount of Bridge Notes such that the net cash proceeds thereof
will be sufficient to fund any remaining Transaction Costs and (y) contribute
the net cash proceeds of the Bridge Notes described in clause (x) to the capital
of Merger Sub.
Based upon and subject to the foregoing and subject to the
conditions set forth below and in the Term Sheet, WP Bridge Finance, Inc. ("WP
Bridge Finance") hereby commits to purchase, or to cause one or more of its
respective affiliates, to purchase, if necessary, on the Closing Date and on the
Merger Date up to an aggregate amount equal to $300,000,000 of the Bridge Notes,
in each case on the terms and subject to the conditions set forth in the Term
Sheet. The term "Purchasers" as used in this Commitment Letter shall mean WP
Bridge Finance and one or more other persons (including, without limitation, any
assignee of WP Bridge Finance) who actually purchase or undertake the commitment
to purchase the Bridge Notes referred to herein. You agree to continue to
provide or cause to be provided to the Purchasers all of the information
received by you or on your behalf or of which you become aware that is related
to or affects Merger Sub or the Company or any of its subsidiaries or any aspect
of the Transaction or that is material regarding Parent or its subsidiaries in
the context of the Transaction or the commitment contained herein. Please note,
however, that the terms and conditions of this Commitment Letter are not limited
to those set forth herein or in the Term Sheet. Those matters that are not
covered or made clear herein or in the Term Sheet are subject to mutual
agreement of the parties. Neither the Purchasers nor you shall be liable or
responsible for any consequential damages that may be alleged as a result of any
failure to issue or purchase the Bridge Notes.
Each of Parent and Merger Sub hereby agree to pay WP Bridge
Finance, on its own behalf and on behalf of each Purchaser, the fees set forth
in the fee letter dated the date hereof between WP Bridge Finance, Parent and
Merger Sub (the "FEE LETTER").
In partial consideration for our commitment hereunder, each of
Parent and Xxxxxx Sub hereby agrees, jointly and severally, to indemnify and
hold harmless the Purchasers, each of the members or shareholders or other
investors or holders of interests in, or other transferees of the Purchasers
(collectively, "Additional Investors"), any affiliates of the Purchasers
(including without limitation WP&Co. and the Additional Investors, and each
other person, if any, controlling the Purchasers or
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any Additional Investors and any of their respective affiliates, and any of the
directors, officers, agents and employees of any of the foregoing (each, an
"Indemnified Person") from and against any losses, claims, damages or
liabilities related to, arising out of or in connection with the matters which
are the subject of the commitment made hereunder (including, but without
limitation, any use made or proposed to be made by Parent, Merger Sub or the
Company of the proceeds from the transactions referred to above) or in
connection with any aspect of the Transaction (collectively, the "Subject
Matter"), and will reimburse any Indemnified Person for all expenses (including
fees, charges and disbursements of counsel) as they are incurred in connection
with investigating, preparing, pursuing or defending any action, claim, suit,
investigation or proceedings related to, arising out of or in connection with
the Subject Matter, whether or not pending or threatened and whether or not such
action, claim, suit or proceedings is brought by you, your subsidiaries,
creditors, shareholders or an Indemnified Person, or any Indemnified Person is
otherwise a party thereto, and whether or not the Transaction is consummated.
Parent and Merger Sub will not, however, be responsible for any losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
any Indemnified Person. Parent and Xxxxxx Sub also agree that no Indemnified
Person shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to Parent and Merger Sub, or any of their respective affiliates
for or in connection with the Subject Matter, except for any such liability for
losses, claim, damages or liabilities incurred by Parent or Merger Sub that are
finally judicially determined to have resulted from the bad faith or gross
negligence of such Indemnified Person.
Neither Parent nor Merger Sub will, without the prior written
consent of the Purchasers (which consent shall not be unreasonably withheld),
settle, compromise, consent to the entry of any judgment in or otherwise seek to
terminate any action, claim, suit or proceedings in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is a party thereto) unless such settlement, compromise, consent or termination
includes a full and unconditional release of each Indemnified Person from any
liabilities arising out of such action, claim, suit or proceedings.
If the indemnification provided for in the second preceding
paragraph of this Commitment Letter is judicially determined to be unavailable
(other than in accordance with the terms hereof) to an Indemnified Person in
respect of any losses, claims, damages or liabilities referred to herein, then,
in lieu of indemnifying such Indemnified Person hereunder, Xxxxxx and Xxxxxx Sub
agree to contribute to the amount paid or payable by such Indemnified Person as
a result of such losses, claims, damages or liabilities (and expenses relating
thereto) (i) in such proportion as is appropriate to reflect the relative
benefits to you on the one hand, and the Purchasers, on the other hand, of the
Transaction or (ii) if the allocation provided by clause (i) is not available,
in such proportion as is appropriate to reflect not only the relative
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benefits referred to in such clause (i) but also the relative fault of each of
you and the Purchasers, as well as any other relevant equitable considerations;
PROVIDED that in no event shall the Purchasers' aggregate contribution to the
amount paid or payable exceed the aggregate amount of fees actually received by
us under the Fee Letter.
Except as otherwise provided in the second sentence of the
third preceding paragraph, each of Parent and Xxxxxx Sub agrees to pay as
incurred all legal and other out-of-pocket expenses of the Purchasers in
connection with the matters referred to herein, including travel costs, document
production and other expenses of this type, and the fees, disbursements and
charges of outside counsel and fees and expenses of other professional advisors
retained with your consent, whether or not the Acquisition or the Merger is
consummated or any Bridge Notes are actually issued.
This commitment will expire at 6:00 p.m. New York City time on
July 18, 1997 unless accepted prior to such time and, if accepted prior to such
time, shall expire at the earliest of (i) consummation of the Merger, (ii)
termination of the Merger Agreement and (iii) 5:00 p.m. New York City time on
October 31, 1997 or, at the option of Parent and Merger Sub and subject to the
payment in full of the Additional Commitment Fee (as defined in the Fee Letter),
December 31, 1997, if the closing of the Merger shall not have occurred by such
time. No such termination shall affect your obligations under (x) the Fee Letter
and (y) each of the four immediately preceding paragraphs, which Fee Letter and
paragraphs shall remain in full force and effect regardless of any termination
or the completion of the transactions referred to herein, except your obligation
under the immediately preceding paragraph shall only apply to expenses accruing
prior to such termination. Notwithstanding the execution and acceptance of this
Commitment Letter, this Commitment Letter shall not have any legal force or
effect until the date on which it is released to Parent and WP Bridge Finance
from the escrow established pursuant to that certain Escrow Letter, dated as of
the date hereof, from you and WP Bridge Finance to the escrow agent named
therein (the "Escrow Letter") in accordance with Section 2(i) of the Escrow
Letter.
This Commitment Letter shall be governed by and construed in
accordance with the internal laws of the State of New York. Any right to trial
by jury with respect to any claim, action, suit or proceedings arising out of or
contemplated by this letter is hereby waived and the parties hereto hereby
submit to the non-exclusive jurisdiction of the federal and New York State
courts located in the city of New York in connection with any dispute related to
this Commitment Letter or any matters contemplated hereby. This Commitment
Letter is not assignable by you to any other person. WP Bridge Finance may
assign all or any portion of its obligations pursuant hereto to any financial
institution, bank, mutual fund or other person, in each case experienced in
acquisition financing with available capital, financial resources or a net worth
of not less than $100,000,000 subject to your prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. To the
extent of
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any assignment made pursuant to the immediately preceding sentence, WP Bridge
Finance shall be relieved of its obligations hereunder and the assignee shall
have, to the extent of such assignment, the same obligations hereunder as it
would if it were WP Bridge Finance. In addition, WP Bridge Finance may, without
your consent, sell to one or more entities participating interests in all or any
portion of its obligations hereunder; PROVIDED, THAT, WP Bridge Finance shall
not be relieved of its obligations hereunder as a result of any such sale.
Without our prior written consent, this Commitment Letter and the Term Sheet
(and the contents thereof) may not be disclosed by you to any other person
except your accountants, attorneys and other advisors and to the Company and its
accountants, attorneys and other advisors in connection with the Acquisition and
then only on a confidential basis and in connection with the Transaction, except
as otherwise required by law or the rules and regulations of the Securities and
Exchange Commission.
This letter may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page of this letter by telecopier shall be effective as delivery
of a manually executed counterpart of this letter.
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Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us an executed duplicate of this
letter. Upon your acceptance hereof, this letter will constitute a binding
agreement between us, subject, however, to the terms and conditions of the
Escrow Letter.
WP BRIDGE FINANCE, INC.
By /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
Title: Treasurer
AGREED TO AND ACCEPTED:
NORTEK, INC.
By /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Vice President and General Counsel
NTK SUB, INC.
By /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Secretary
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EXHIBIT A
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SENIOR BRIDGE NOTES:
SUMMARY OF TERMS AND CONDITIONS(1)
Issuer:
Agent/ Parent
Initial Purchaser: WP Bridge Finance, Inc.
Issue: Senior Bridge Notes (the "Bridge Notes") issued
pursuant to a Securities Purchase Agreement (the
"Securities Purchase Agreement").
Use of Proceeds: The proceeds of the Bridge Notes will be contributed
to the capital of Merger Sub in order for it to (i)
finance, in part, the purchase price of the
Acquisition, (ii) refinance, in part, certain
outstanding debt of the Company and the Company's
accounts receivable securitization program, and (iii)
pay costs and expenses in connection with the
Transaction.
Principal Amount: $300,000,000, to be funded in one or two issuances.
Price: 100% of the principal amount.
Interest Rate: Interest on the Bridge Notes shall be paid at the
Applicable Interest Rate (as defined below) and
payable quarterly in arrears. "Applicable Interest
Rate" means the highest of the following, as
determined as of the beginning of each three-month
period: (i) the base rate (as announced from time to
time by Citibank, N.A.) plus 325 basis points, (ii)
three-month U.S. Dollar LIBOR (as determined from
specified sources) plus 600 basis points and (iii)
the highest yield on any of the 1, 3, 5 and 10-year
direct obligations issued by the United States plus
500 basis points.
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(1)Capitalized terms used but not defined herein are used as defined in the
Commitment Letter (the "Commitment Letter") to which this Summary of Terms and
Conditions is attached.
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Maturity: Six months from the date of first issuance of any
Bridge Notes; PROVIDED, HOWEVER, that the Company may
extend the maturity to nine months from the date of
such first issuance by the payment on or prior to the
six month maturity date of an extension fee of $2.50
per $1,000 of principal amount of Bridge Notes to be
so extended; and PROVIDED FURTHER that the maturity
may be extended to twelve months from the date of
such first issuance by the payment on or prior to the
nine month maturity date of an extension fee of $3.75
per $1,000 of principal amount of Bridge Notes to be
so extended.
Ranking: The Bridge Notes will rank (i) PARI PASSU with
Parent's 9-1/4% Senior Notes due March 15, 2007 (the
"Senior Notes"), Parent's senior credit facilities,
mortgage notes payable and with all other senior
indebtedness of Parent and (ii) senior to Parent's
9-7/8% Senior Subordinated Notes due March 1, 2004
and to all other subordinated indebtedness of the
Parent.
Security: Parent will grant Purchasers a first priority
security interest in all of Parent's right, title and
interest in and to all of its properties and assets
to the extent so permitted under Section 4.09 of the
Indenture relating to the Senior Notes ("Section
4.09").
Guarantees: Merger Sub, the Company and each subsidiary of Parent
and the Company will issue a senior guarantee of the
Bridge Notes and the Rollover Notes and the
obligations of Parent and Merger Sub under the
Securities Purchase Agreement. The foregoing
guarantees will be collateralized with a first
priority security interest in all of the properties
and assets of such entities to the extent so
permitted by Section 4.09.
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Mandatory Redemption: Parent will redeem the Bridge Notes at par plus
accrued interest at or prior to maturity, as such
maturity may be extended as provided herein, with,
subject to certain agreed exceptions, (i) the net
proceeds from the issuance of any debt securities,
(ii) the net proceeds from the issuance of any equity
securities, and (iii) the net proceeds from any Bank
Credit Facility; PROVIDED that the redemption price
shall be 103% of par plus accrued interest if the
Bridge Notes are redeemed with or in anticipation of
funds raised by any means other than (a) a Bank
Credit Facility, (b) a debt financing in which
WP&Co., together with such other parties, if any,
approved by WP&Co., have acted as exclusive agents or
sole underwriters, or (c) a public or private
offering of equity securities, in which WP&Co. has
acted as sole or lead agent or as co-agent or
co-manager.
Change-of-Control: Parent will redeem the Bridge Notes upon any
change-of-control (to be defined in a mutually
acceptable manner) of Parent at a redemption price of
101% of par plus accrued interest. Any redemption or
other acquisition of Bridge Notes, whether optional
(as set forth below), mandatory (as set forth above)
or upon a change of control, will be made pro rata
among the Purchasers based on the principal amount of
Bridge Notes held by each of them.
Interest Payment: Quarterly in arrears.
Optional Redemption: The Bridge Notes will be callable, in whole or in
part, upon not less than 10 days written notice, at
the option of Parent, at any time at a redemption
price at par plus accrued interest to the redemption
date; PROVIDED that the redemption price shall be
103% of par plus accrued interest if the Bridge Notes
are redeemed with or in anticipation of funds raised
by any means other than (a) a Bank Credit Facility,
(b) a debt financing in which WP&Co., together with
such other parties, if any, approved by WP&Co., have
acted as exclusive agents or sole underwriters, or
(c) a public or private offering of equity
securities, in which WP&Co. has acted as sole or lead
agent or as co-agent or co-manager.
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Mandatory Exchange: If the Bridge Notes have not been previously redeemed
in full for cash on or prior to maturity, as the
maturity may be extended as provided herein, the
principal of the Bridge Notes outstanding at
maturity, as so extended, may, subject to certain
conditions precedent, be satisfied at such maturity
through the issuance and delivery of the Rollover
Notes described in the attached term sheet (Exhibit
B). The Rollover Notes will be issued at the same
time as the Bridge Notes and held in escrow pending
such mandatory exchange.
Right to Resell The Purchasers shall have the absolute and
Bridge Notes: unconditional right to resell the Bridge Notes to one
or more third parties, whether by assignment or
participation.
Conditions to Funding: The execution and closing of the Securities Purchase
Agreement and the funding of the Bridge Notes will be
subject to satisfaction of conditions precedent,
including but not limited to the following:
1. The Acquisition shall have been consummated in
accordance with the Acquisition Agreement, and
the Acquisition Agreement, tender offer and
other documentation shall be satisfactory in
form and substance to the Purchasers in their
reasonable judgment, without any material (as
determined by the Purchasers in their
reasonable judgment) amendment, modification
or waiver of any of the terms or conditions
thereof without the prior written consent of
the Purchasers; PROVIDED, that, if the
definitive Acquisition Agreement is
substantially similar in all material respects
to the form of Acquisition Agreement, a copy
of which is attached to the Escrow Letter,
such definitive Acquisition Agreement will be
satisfactory to the Purchasers. The structure
of the Transaction, including the tax, federal
margin regulation, ERISA, accounting and other
consequences thereof, and corporate and legal
structure shall be satisfactory to the
Purchasers in their reasonable judgment;
PROVIDED, THAT, if the structure of the
Transaction is substantially similar in all
material respects to the structure set forth
in the Draft Acquisition Agreement, such
structure will be satisfactory to the
Purchasers.
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2. The other transactions contemplated to be
consummated on the Closing Date shall have
been consummated on terms satisfactory to the
Purchasers in their reasonable judgment,
including without limitation the capital
contribution by Parent to Merger Sub of the
Available Cash, which shall be in aggregate
amount of no less than $200,000,000, and such
Available Cash shall have been utilized to
fund, in whole or in part, the Acquisition.
3. Reasonably satisfactory completion of all loan
documentation and other documentation relating
to the Bridge Notes and the Rollover Notes in
form and substance satisfactory to the
Purchasers in their reasonable judgment,
including issuance of appropriate Parent,
Company and subsidiary guarantees, and receipt
by the Purchasers of satisfactory customary
opinions of counsel as to the transactions
contemplated thereby (including without
limitation with respect to compliance with all
applicable securities laws).
4. The Purchasers shall have received (i) a
reasonably satisfactory pro forma consolidated
balance sheet of Parent and its subsidiaries,
as at the Closing Date and after giving effect
to the Acquisition and the financings
contemplated hereby; (ii) audited, unaudited
interim and pro forma financial statements of
the Parent and its subsidiaries which are
reasonably satisfactory to the Purchasers;
(iii) unaudited interim consolidated financial
statements of each of Company and its
subsidiaries and Parent and its subsidiaries,
for each quarterly period ended subsequent to
the date of the latest audited consolidated
financial statements of Company and its
subsidiaries and of Parent and its
subsidiaries as to which such financial
statements are available, and such financial
statements shall not, in the reasonable
judgment of the Purchasers, reflect any
material adverse change in the consolidated
financial condition of Company and its
subsidiaries or Parent and its subsidiaries,
as reflected in the financial information
previously furnished to the Purchasers.
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5. The Purchasers shall have received the results
of a recent lien, tax and judgment search in
each of the jurisdictions and offices where
assets of the Parent and its subsidiaries and
the Company and its subsidiaries are located
or recorded, and such search shall reveal no
material liens on any of their respective
assets except for liens permitted by the
documentation relating to the Bridge Notes and
the Rollover Notes.
6. The Purchasers shall have determined that
reasonably satisfactory insurance relating to
the Parent and its subsidiaries will be in
place after the Acquisition.
7. The Parent and its subsidiaries shall not be
in breach in any material respect of any of
its obligations under the documentation
relating to the Transaction or the financing
thereof.
8. Receipt of all material governmental,
shareholder and third party consents and
approvals necessary or reasonably desirable in
connection with any aspect of the Transaction
or any other transactions contemplated hereby
and satisfactory expiration of all applicable
waiting periods without any actions to
materially affect any material aspect of the
Transaction.
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9. Absence of any material adverse change in the
business, condition (financial or otherwise),
operations, performance, properties or
prospects of Parent and its subsidiaries,
taken as a whole, or of the Company and its
subsidiaries, taken as a whole, since December
31, 1996. No additional facts or information
(including the occurrence of any events or
circumstances) shall have come to the
attention of Purchasers that are inconsistent
with the information disclosed to the
Purchasers by or on behalf of Parent or Merger
Sub prior to the date of the Commitment Letter
and that, either individually or in the
aggregate, could reasonably be expected to
have a material adverse effect on (a) the
condition (financial or otherwise), business,
assets, liabilities (contingent or otherwise),
properties, value, operations, results of
operations or prospects of (i) Parent and its
subsidiaries, taken as a whole, or (ii) the
Company and its subsidiaries, taken as a
whole, or (b) any aspect of the Transaction or
the refinancing of the Bridge Notes. From and
after the date hereof, neither Parent nor
Merger Sub shall have incurred any material
contractual obligations other than (i) the
execution of the Acquisition Agreement, the
Commitment Letter and one or more other
commitment letters for Permanent Financing
comprising part of the Transaction and the
execution of the documentation thereunder and
(ii) such other obligations as are acceptable
to the Purchasers.
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10. Absence of any action, suit, investigation,
litigation or proceeding pending or threatened
in any court or before any arbitrator or
governmental instrumentality that (i) seeks to
enjoin the Transaction or seeks damages as a
result of the Transaction and in the good
faith judgment of the Purchasers such action,
suit, investigation, litigation or proceeding
could reasonably be expected to prevail, (ii)
in the good faith judgment of the Purchasers
could reasonably be expected to have a
material adverse effect on the business,
condition (financial or otherwise),
operations, properties or prospects of Parent
and its subsidiaries, taken as a whole, or of
the Company and its subsidiaries taken as a
whole or on the Acquisition or the Merger or
(iii) in the good faith judgment of the
Purchasers could reasonably be expected to
materially adversely affect the Purchasers,
the Bridge Notes or the ability of Parent or
the Company to perform its obligations
thereunder or to refinance the Bridge Notes.
11. Absence of any disruption or change in
financial, banking or capital markets or in
the regulatory environment that in the good
faith judgment of the Purchasers could
materially and adversely affect the sale of
the Bridge Notes or the refinancing thereof.
12. Absence of any material default or any
material breach of any representation or
warranty set forth in the documentation for
the Bridge Notes.
13. Upon consummation of the Acquisition, (i) none
of Merger Sub, the Company or any of the
Company's subsidiaries will have any
outstanding debt (other than (x) arrangements
satisfactory to the Purchasers relating to
refinancing outstanding debt and (y) certain
industrial development bond obligations and
capital lease obligations in the aggregate
amount of $20,000,000) in excess of $500,000
and (ii) Parent and its subsidiaries other
than the Company and its subsidiaries will not
have aggregate outstanding debt (without
taking into account the Bridge Notes)
exceeding $446,000,000.
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Representations and The Securities Purchase Agreement will contain
Warranties: representations and warranties which are usual and
customary for transactions of this nature or which
the Purchasers reasonably determine to be appropriate
in light of the business or operations of Parent, the
Company or any of their subsidiaries (with the scope,
exceptions and qualifications, to be agreed upon),
including but not limited to the following:
1. Corporate existence.
2. Corporate and governmental authorizations;
non-contravention; binding and enforceable
agreements.
3. Financial information.
4. No material adverse change.
5. Environmental matters.
6. Compliance with laws, including ERISA and
environmental laws.
7. No material litigation.
8. Existence, incorporation, etc., of
subsidiaries.
9. Payment of taxes and other material
obligations.
10. Full disclosure.
11. After consummation of the Transaction, Parent
is in compliance with the terms of its
material debt obligations.
Covenants: The Securities Purchase Agreement will contain usual
and customary covenants for transactions of this
nature or which the Purchasers reasonably determine
to be appropriate in light of the business or
operations of the Parent, Company or any of their
subsidiaries (with the scope and exceptions to be
agreed upon), including without limitation the
following:
1. Furnishing of information (including annual
and quarterly financial and operating
reports).
2. Maintenance of property; insurance coverage.
3. Compliance with laws; conduct of business.
4. Use of proceeds.
5. Restrictions on indebtedness.
6. Negative pledge and restrictions on
sale-leasebacks.
7. Restrictions on dividends and other restricted
payments by Parent (including redemptions and
prepayment of junior or PARI PASSU
indebtedness).
8. Restrictions on asset sales.
9. Restrictions on transactions with affiliates.
10. Restrictions on mergers and consolidations.
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11. Use best efforts to effect refinancing of
Bridge Notes through the Permanent Financing
as soon as practicable.
12. Limitation on investments.
13. Sales of subsidiaries' stock and absence of
limitations on the ability of subsidiaries to
upstream assets to Merger Sub.
14. Limitation on capital expenditures and
acquisitions.
15. Availability of management to meet with
holders of Bridge Notes or Rollover Notes upon
request.
16. Maintenance of minimum net worth.
Events of Default: The Securities Purchase Agreement will contain usual
and customary events of default for transactions of
this nature or which the Purchasers reasonably
determine to be appropriate in light of the business
or operations of the Parent, Company or any of their
subsidiaries, including without limitation the
following:
1. Failure to pay any principal when due or any
interest or fees payable within five days of
when due.
2. Failure to meet covenants, with grace periods
where appropriate.
3. Representations or warranties false in any
material respect when made or repeated.
4. Cross default to other debt of Parent, Merger
Sub, the Company and their subsidiaries (with
minimum dollar amounts to be agreed upon).
5. Judgment defaults (with minimum dollar amounts
to be agreed upon).
6. Other usual defaults, including without
limitation, insolvency, bankruptcy and ERISA.
Indemnification: Parent and Merger Sub will indemnify the Purchasers,
their affiliates and related persons against all
losses, liabilities, claims, damages or expenses
relating to the Bridge Notes, the Securities Purchase
Agreement and the use of the Bridge Note proceeds or
the commitments, including but not limited to, fees,
charges and disbursements of counsel and settlement
costs, substantially on the terms set forth in the
Commitment Letter.
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Expenses: Parent and Merger Sub will pay all legal and other
out-of-pocket expenses of the Purchasers as incurred,
including travel costs, document production and other
expenses of this type, and the fees, charges and
disbursements of outside counsel and fees of other
professional advisors engaged with Xxxxxx's consent.
Governing Law: State of New York.
Amendments and Waivers: After the first issuance of the Bridge Notes,
amendments and waivers will require the consent of
persons holding in the aggregate at least 51% of
the principal amount of the Bridge Notes
outstanding, PROVIDED, that any such amendment will
require the approval of WP Bridge Finance and
PROVIDED, FURTHER, that changes to certain economic
provisions will require unanimous consent.
Miscellaneous: The provisions of the Commitment Letter and Term
Sheet will be replaced by the provisions of any
definitive documentation executed in connection with
the Bridge Notes.
Standard yield protection (including payments free
and clear of withholding taxes and interest period
breakage indemnities), eurodollar illegality and
similar provisions will apply.
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EXHIBIT B
---------
SENIOR ROLLOVER NOTES:
SUMMARY OF TERMS AND CONDITIONS
Issuer: Parent.
Issue: Senior Rollover Notes (the "Rollover Notes").
Principal Amount: Up to the outstanding principal amount of the Bridge
Notes plus an amount equal to 3% of such principal
amount, representing a funding fee payable to the
Purchasers, to be paid to the Purchasers pro rata
based on their respective shares of Bridge Notes
held.
Purpose: The Rollover Notes will be used in their entirety to
redeem 100% of the outstanding (and unredeemed)
principal amount of the Bridge Notes.(1)
Maturity: 7 years after the issuance date of the Rollover
Notes.
Interest Rate: Interest on the Rollover Notes shall be paid at the
Applicable Interest Rate (as defined below) and
payable quarterly in arrears. "Applicable Interest
Rate" means the sum of (A) 200 basis points (the
"Incremental Spread") as of the date of the issuance
of the Rollover Notes, which Incremental Spread shall
(for so long as the Rollover Notes are held by the
Purchasers) increase by an additional 50 basis points
at the end of each three-month period for so long as
the Rollover Notes are outstanding, PLUS (B) the
highest of the following, as determined as of the
beginning of each three-month period: (i) the base
rate (as announced from time to time by Citibank,
N.A.) plus 325 basis points, (ii) three months U.S.
Dollar LIBOR (as determined from specified sources)
plus 600 basis points and (iii) the highest yield on
any of the 1, 3, 5 and 10-year direct obligations
issued by the United States plus 500 basis points;
and PROVIDED, FURTHER, that (A) in no event shall the
Applicable Interest Rate exceed 17% and (B) the
amount of cash interest paid will be subject to a cap
of 15%, with the excess (if any) of the Applicable
Interest Rate over such interest rate cap to be paid
in additional Rollover Notes.
--------
(1)Accrued interest to be paid in cash on the Bridge Notes at the time of
exchange for Rollover Notes.
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Optional Redemption: For so long as they are held by the Purchasers, the
Rollover Notes will be redeemable at the option of
Parent, in whole or in part, at any time at par plus
accrued and unpaid interest to the redemption date,
PROVIDED, HOWEVER, that if the Rollover Notes are
sold to third party purchasers on a fixed rate basis
no less favorable to Parent than the then applicable
rate of interest (it being understood that the
Purchasers shall have the right unilaterally to fix
the Interest Rate on the Rollover Notes in
conjunction with such third party sales and it also
being understood that no such third party sales shall
take place unless Parent has been given 10 days'
prior notice), the Rollover Notes will be
non-callable for 4 years from the date of issuance
and will be callable thereafter at par plus accrued
interest plus a premium equal to 50% of the coupon in
effect on the date of issuance of the Rollover Notes,
declining ratably on each yearly anniversary to par
one year prior to the maturity of the Rollover Notes.
Mandatory Redemption: Same as Bridge Notes, except that the redemption
price shall be at par plus accrued interest.
Change-of-Control: Parent will redeem the Rollover Notes upon any
change-of- control of Parent at a redemption price of
101% of par plus accrued interest. Any redemption or
other acquisition of Rollover Notes, whether optional
(as set forth above), mandatory (as set forth above)
or upon a change of control, will be made pro rata
among the Purchasers based on the principal amount of
Rollover Notes held by each of them.
Ranking: Same as Bridge Notes.
Guarantees: Same as Bridge Notes.
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Registration Rights: Parent will file, and will use its best efforts to
cause to become effective, a "shelf" registration
statement with respect to the Rollover Notes as soon
as practicable after the issuance of the Rollover
Notes. Parent will keep the registration statement
for the Rollover Notes effective until all of the
Rollover Notes shall have been redeemed or are
saleable in accordance with Rule 144(k) under the
Securities Act. If a "shelf" registration statement
for the Rollover Notes has either (i) not been filed
within 60 days from the date of issuance of the
Rollover Notes, or (ii) not been declared effective
within 120 days from the date of issuance of the
Rollover Notes, Parent will pay liquidated damages of
$.192 per week per $1,000 principal amount of
Rollover Notes until such time as such registration
statement has been filed or become effective, as the
case may be. Parent will also pay such liquidated
damages for any period of time following the
effectiveness of such registration statement that the
registration statement is not available for resales
thereunder.
Right to Resell The Purchasers shall have the absolute and
Rollover Notes: unconditional right to resell Rollover Notes in
compliance with applicable law to any third parties.
Conditions to Issuance: The right to issue the Rollover Notes will be subject
to satisfaction of the following conditions
precedent: (i) at the time of issuance, there shall
exist no material default under the Securities
Purchase Agreement, (ii) all fees and other amounts
owing to the Purchasers shall have been paid in full
and (iii) no injunction, decree, order or judgment
enjoining such issuance shall be in effect.
Representation As in the Securities Purchase Agreement
Warranties, (see Exhibit A).
Covenants, Events
of Default,
Indemnities and
Expenses:
Governing Law: State of New York.
22
WP BRIDGE FINANCE, INC.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
July 25, 1997
Nortek, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Re: $300,000,000 Bridge Commitment Letter
-------------------------------------
Gentlemen:
Reference is made to the (i) Letter Agreement, dated as of July 18,
1997 (the "COMMITMENT LETTER"), between WP Bridge Finance, Inc. ("WP BRIDGE
FINANCE") and you with respect to the proposed sale of $300,000,000 of bridge
notes (the "Bridge Notes") and (ii) the Summary of Terms and Conditions attached
thereto as Exhibits A and B (such Summary of Terms and Conditions shall
hereinafter be collectively referred to as the "TERM SHEET", such Exhibit A
included therein shall hereinafter be referred to as "TERM SHEET EXHIBIT A" and
such Exhibit B included therein shall hereinafter be referred to as "TERM SHEET
EXHIBIT B"). Unless otherwise defined herein, capitalized terms which are used
herein shall have the respective meanings ascribed to them in the Commitment
Letter and the Term Sheet.
This letter shall confirm our agreement that the Term Sheet shall
hereby be amended as follows:
1. The paragraph set forth opposite the heading "Interest Rate" in Term Sheet
Exhibit A is hereby deleted in its entirety and replaced with the
following:
"Interest on the Bridge Notes shall be paid at the Applicable Interest
Rate (as defined below) and payable quarterly in arrears. "Applicable
Interest Rate" means the highest of the following, as determined as of
the beginning of each three-month period: (i) the base rate (as
announced from time to time by Citibank, N.A.) plus 225 basis points,
(ii) three-month U.S. Dollar LIBOR (as determined from specified
sources) plus 500 basis points and (iii) the highest yield on any of
the 1,
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3, 5 and 10-year direct obligations issued by the United States plus
400 basis points."
2. The paragraph set forth opposite the heading "Maturity" in Term Sheet
Exhibit A is hereby deleted in its entirety and replaced with the
following:
"Three months from the date of first issuance of any Bridge Notes;
PROVIDED, HOWEVER, that (i) the Company may extend the maturity to six
months from the date of such first issuance by the payment on or prior
to the three month maturity date of an extension fee of $2.50 per
$1,000 of principal amount of Bridge Notes to be so extended, (ii) the
Company may extend the maturity to nine months from the date of such
first issuance by the payment on or prior to the six month maturity
date of an extension fee of $5.00 per $1,000 of principal amount of
Bridge Notes to be so extended and (iii) the Company may extend the
maturity to twelve months from the date of such first issuance by the
payment on or prior to the nine month maturity date of an extension
fee of $6.25 per $1,000 of principal amount of Bridge Notes to be so
extended.
3. The paragraph set forth opposite the heading "Interest Rate" in Term Sheet
Exhibit B is hereby deleted in its entirety and replaced with the
following:
"Interest on the Rollover Notes shall be paid at the Applicable
Interest Rate (as defined below) and payable quarterly in arrears.
"Applicable Interest Rate" means the sum of (A) 300 basis points (the
"Incremental Spread") as of the date of the issuance of the Rollover
Notes, which Incremental Spread shall (for so long as the Rollover
Notes are held by the Purchasers) increase by an additional 50 basis
points at the end of each three-month period for so long as the
Rollover Notes are outstanding, plus (B) the highest of the following,
as determined as of the beginning of each three-month period: (i) the
base rate (as announced from time to time by Citibank, N.A.) plus 225
basis points, (ii) three-month U.S. Dollar LIBOR (as determined from
specified sources) plus 500 basis points and (iii) the highest yield
on any of the 1, 3, 5 and 10-year direct obligations issued by the
United States plus 400 basis points; and PROVIDED, FURTHER, that (A)
in no event shall the Applicable Interest Rate exceed 17% and (B) the
amount of cash interest paid will be subject to a cap of 15%, with the
excess (if any) of the Applicable Interest Rate over such interest
rate cap to be paid in additional Rollover Notes."
Except as specifically amended hereby, all of the terms and provisions
of each of the Commitment Letter, the Exhibit A Term Sheet and the Exhibit B
Term
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Sheet shall remain unamended and in full force and effect in accordance with the
provisions thereof, and the terms "Commitment Letter" and "Term Sheet" and words
of like import shall be deemed to refer to the Commitment Letter and the Term
Sheet as amended by this letter.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. ANY RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
CONTEMPLATED BY THIS LETTER IS HEREBY WAIVED AND THE PARTIES HEREBY SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED
IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS LETTER OR
ANY MATTERS CONTEMPLATED HEREBY.
Without our prior written consent, this letter (and the contents
hereof) may not be disclosed by you to any other person except your accountants,
attorneys and other advisors and to the Company and its accountants, attorneys
and other advisors in connection with the Acquisition and then only, in each
case, on a confidential basis and in connection with the Transaction, except as
otherwise required by law or the rules and regulations of the Securities and
Exchange Commission.
This letter may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page of this letter by telecopier shall be effective at delivery
of a manually executed counterpart of this letter.
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Please acknowledge your agreement with the foregoing by signing where
indicated below and by returning this letter to WP Bridge Finance. Upon your
acceptance hereof, this letter will constitute a binding agreement between us.
Very truly yours,
WP BRIDGE FINANCE, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Treasurer
Accepted and agreed to as of the
date first above written:
NORTEK, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President General Counsel
NTK SUB, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
